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Boeing Talking Merger With Mcdonnell Douglas Antitrust Challenge Would Seem Likely, But Pair May Join Forces On Some Projects

Boeing Co. and McDonnell Douglas Corp. reportedly are talking merger, a combination that could reshape the world’s aircraft industry.

Analysts said Thursday that a full-fledged merger of the two largest U.S. aircraft manufacturers is unlikely but that Boeing and McDonnell Douglas could end up working together on some projects. A merger also could face an antitrust challenge.

Merger talks are taking place in New York, The Wall Street Journal reported Thursday, quoting unidentified sources. It said the discussions also might lead instead to an exchange of major assets.

Boeing spokesman Harold Carr and McDonnell Douglas spokesman Tom Williams refused to comment.

Seattle-based Boeing is the world’s No. 1 maker of passenger planes. St. Louis-based McDonnell Douglas is the largest aircraft supplier to the Pentagon. About 70 percent of McDonnell Douglas’ business is with the government, while defense contracts account for about 20 percent of Boeing’s revenue.

They have combined sales of around $35 billion.

“I can’t imagine the government would allow that to happen,” said Bill Whitlow, an analyst for Pacific Crest Securities in Seattle. “Boeing already has 60 percent of the (worldwide) market and this would bring it to 70-plus. That just smacks in the face of antitrust.”

The new company would rival Lockheed Martin Corp., the current aerospace and defense leader, and such overseas competitors as Europe’s Airbus Industrie consortium, which has been gaining an increasing market share.

“I’m sure the Europeans would be alarmed,” said Steven Lewins of Gruntal & Co. in New York. “It would be more than an antitrust issue - it would become a diplomatic issue.”

Boeing stock was up 2.5 percent, or by $1.87-1/2 to close at $75.87-1/2 a share on the New York Stock Exchange, while McDonnell Douglas was up 5.1 percent, gaining $4.37-1/2 to $90.62-1/2.

Pentagon spokesman Kenneth Bacon seemed to signal support for a merger Thursday, at least for military aircraft.

“As a broad statement of policy we have said that we are in favor of consolidations in the defense industry that reduce overheads and increase efficiency,” he said.

About 32,000 Machinists have been on strike against Boeing since Oct. 6.

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