Trade tension over GE mounts as Boeing chief attacks Airbus

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The transatlantic war of words over Brussels' decision to block the $42bn (£30bn) merger of General Electric and Honeywell escalated yesterday, threatening to worsen trade tensions between Europe and the US.

On the opening day of the Paris Airshow the European aircraft manufacturer, Airbus Industrie, and its US rival Boeing clashed spectacularly over the politically sensitive decision.

Harry Stonecipher, the Boeing president, claimed that it was not GE's airline customers who were opposed to the takeover of Honeywell but Airbus. Mr Stonecipher also took the European Commission to task for blocking the deal saying: "I am particularly concerned by the position taken by the European authorities. If the Commission blocks this project there could be difficulties in the commercial arena. The US approved this merger but if Europe rejects it what will happen? We don't exactly become friends."

The Boeing executive's comments in an interview with French newspaper Le Monde prompted a blunt response from Airbus, which criticised the tone and content of Mr Stonecipher's remarks. Noel Forgeard, chief executive of Airbus, said: "I am very surprised to see him threatening the Commission and telling Brussels to do what he wants or we will no longer be friends." Mr Forgeard said the US should be "looking for solutions rather than trouble" and urged it to exercise "self control and moderation".

Brussels has refused to approve the GE-Honeywell deal unless the two companies agree to $4bn worth of asset disposals ­ a demand described as "extraordinary" by the chairman of General Electric, Jack Welch.

But what appears to have angered Airbus most were comments made by Mr Stonecipher about France's hostility towards US President Bush's National Missile Defence Shield.

Mr Stonecipher said Jacques Chirac, the French president, should remember that it was the inability to identify the threat posed by Germany that had led to the Second World War. He went on to recall Neville Chamberlain's fateful words after meeting Hitler that the Germans would do nothing. "Doesn't that sound familiar?" asked Mr Stonecipher.

Mr Forgeard said he was "extremely shocked" at the comments, particularly bearing in mind France's "painful memories" of the war.

There are fears that the stand-off over the GE-Honeywell deal will jeopardise future takeovers of US defence companies by their European counterparts. John Weston, the chief executive of BAE Systems, defended Brussels' tough stance over the merger and said that although it could hamper BAE's attempts to expand further into the US he thought it unlikely. "I don't see why it should do so," he said. "Anything we plan to do in the US will be based on industrial logic. The decks are clear if any future opportunities present themselves."

The United States now accounts for a third of BAE's turnover and 30 per cent of its shareholder base. BAE has 22,000 American employees spread across 30 states.

There has been persistent speculation that BAE will eventually seek to merge with Boeing but Mr Weston insisted there were "no plans whatsoever"' for such a move.

Boeing and Airbus are expected to announce about $15bn worth of orders at Paris this week. Airbus will kick off today with an order from Air France for 10 A380 superjumbos and a deal to sell A321s to Air Maroc. On Wednesday it is due to sign a deal with ILFC, the Californian aircraft leasing company, for up to 100 jets.

Mr Forgeard said there was no doubt the aircraft market was softening but he predicted a "soft landing" for Airbus with orders this year for between 350 and 400 jets against 520 last year.