The Europeans are playing hardball with GE, frustrating CEO Jack Welch's $40 billion-plus Honeywell merger. European Commission regulators fear that the union would give the new entity undue market power. GE, they argue, could bundle its jet engines and Honeywell's avionics, hurting Rolls Royce and other engine suppliers.
GE told U.S. regulators last month that it was willing to sell Honeywell units--including those making regional jet engines, air-turbine starters and other aerospace products--worth about $2.2 billion in annual revenue. The E.U., though, is demanding divestitures amounting to more than $3 billion. GE says the Commission is exacting too much, undermining the rationale for the deal.
--By Bernard Baumohl