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U.S.-EU relations strained

Veto of Honeywell, GE merger triggers call for cooperation

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STRASBOURG, France — On the heels of the European Union's rejection of General Electric Co.'s proposed $41 billion purchase of Honeywell International Inc., Europe's antitrust chief said EU and U.S. regulators need to work closer to prevent future disagreements over mergers.

"GE-Honeywell is a rare case where the trans-Atlantic competition authorities have disagreed. I am determined to strengthen our bilateral cooperation in the future to try to reduce this risk further," EU Competition Commission Mario Monti said Tuesday.

The EU veto of a GE-Honeywell merger marked the first time a proposed merger between two U.S. companies was blocked solely by European regulators.

The measure was approved May 2 by the U.S. Department of Justice.

Monti criticized political pressure on the EU to ensure the GE-Honeywell linkup received the go-ahead. He also spoke of "unprecedented" comments by U.S. Treasury Secretary Paul O'Neill questioning the EU executive Commission's authority to judge merger cases.

U.S. senators have accused EU regulators of protectionism. Before the EU veto was announced, President Bush also expressed his concern.

Monti insisted the European veto was judged solely on its anticipated impact on fair competition, not political grounds.

"The nationality of companies was totally irrelevant for us," he told a news conference, pointing out that competitors that complained about the deal included both Americans and Europeans.

Monti said U.S. and European regulators regularly consult on their respective investigations of corporate linkups. While the they usually come to similar verdicts, the "risk of dissenting views . . . can never be totally excluded," he said.

While the White House refused comment on the GE decision, Charles A. James, assistant attorney general for antitrust, said in a statement, "Clear and longstanding U.S. antitrust policy holds that antitrust laws protect competition, not competitors. Today's EU decision reflects a significant point of divergence."

The failed merger also claimed the position of one Honeywell executive.

Michael R. Bonsignore resigned as chairman and chief executive of Honeywell following the Commission's rejection vote.

Bonsignore, 60, will be replaced by Lawrence A. Bossidy, the former chairman and chief executive of AlliedSignal Corp., which in 1999 acquired Honeywell and adopted the Honeywell name, the company announced Tuesday.

Bossidy, 66, said Honeywell's board wants him to focus on turning the company as a standalone operation, instead of breaking it up, as some analysts had speculated.

The merger agreement with GE is still in effect, but Bossidy said "the Honeywell board is looking at all its options."

"The idea is to stay independent, to get this company back on its feet," Bossidy said, adding that the merger process has been a major distraction for Honeywell and its 120,000 workers.

Some Honeywell assets will probably be sold and jobs cuts are likely, but Bossidy said a more pressing task is to convince employees thinking about leaving the company that they should stay on.