On the evening of Wednesday, June 13, Jack Welch, CEO of General Electric, retreated to his room at the Conrad Hilton hotel in Brussels and wrestled with an unfamiliar feeling--one of impending defeat. Just eight months before, he had, it seemed, pulled off a stunning coup. Welch had always coveted Honeywell International, whose business making advanced electronics for the aviation industry, he thought, made a perfect fit with GE, one of three leading global manufacturers of airplane engines. In October 2000, during a visit to the New York Stock Exchange, he had learned that United Technologies Corp.--whose Pratt & Whitney division is another huge enginemaker--planned to buy Honeywell. Within 45 minutes, on the phone from his car, Welch had lined up his board to make a counter-offer. Two days later he had Honeywell in the bag; it would be the largest ever merger between two industrial companies. Welch delayed his retirement to oversee the integration of GE and Honeywell--and to set the capstone on his legendary career.
And now, in the European capital, his last big deal was falling apart. On that day in June, Welch had met twice with Mario Monti, the European Union's Commissioner for Competition. Monti believed that the combination of Honeywell's cockpit controls with GE's engines and powerful aircraft financing division would stifle competition. In other words, he viewed with suspicion precisely those synergies that, for Welch, made the deal so attractive. Monti would approve the merger only if Welch made the kind of concessions that, from GE's standpoint, wrecked its whole point. The next morning Monti called Welch once more, to discuss how the apparent breakdown in talks should be handled. GE issued a statement saying that attempts at compromise fell "far short" of Monti's "extraordinary demands."
Welch placed a call to Andrew Card, chief of staff to President Bush, who was about to sit down with European leaders in Goteborg, Sweden. As the GE boss recounted the conversation to TIME, he told Card that he would appreciate "whatever help you can give us." In the formal meetings in Sweden, GE never came up. But on June 15, in Warsaw, Bush said he was "concerned" that the Europeans had rejected the merger. Monti was furious--not with Bush, he told TIME, but with those who had sought the President's help. Three days later Monti said he "deplore[d] attempts to...trigger political intervention." And though the case dragged on for two more weeks, the deal was dying a slow death.
Welcome to globalization. The collapse of the GE-Honeywell merger shows that companies that benefit from a global market can now be governed in all they do by any of the countries or regions in which they do business. There's no settled code of rules in the global marketplace, just a haphazard collection of local practices and habits. Still, the GE case is extraordinary. Never before have officials outside the U.S. nixed a merger between two giant American corporations already approved by the DOJ. Never before have U.S. companies lobbied so ferociously against their U.S. rivals in a foreign capital. And that's why, for any company that seeks to profit from globalization, there are abundant lessons in the story of how Jack fell down.