Bonn Endorses Daimler Merger With Arms Firm

The Economics Ministry today endorsed the proposed $859-million merger of auto-making giant Daimler-Benz with a major arms conglomerate, overriding monopoly concerns with claims that it would reduce taxes and improve U.S. trade ties.

Economics Minister Helmut Haussmann had long indicated he would conditionally approve Daimler’s 1.7-billion-mark bid to take over aerospace and armaments giant Messerschmitt-Boelkow-Blohm.

At a news conference today, Haussmann said he chose to override a Federal Cartel Office ruling that the takeover could give unfair competitive advantages to the combined corporations because of the “considerable economic advantages” of the takeover.

Opponents of the merger had claimed that it would create the largest defense contractor in the nation, making it hard for smaller West German firms to compete for federal contracts.

Daimler Action Needed

Daimler, already the largest industrial firm in West Germany, still must approve the conditions outlined by Haussmann.

The Stuttgart-based auto maker issued a statement saying the Economics Ministry’s conditions will be reviewed carefully by company President Edzard Reuter, who will disclose his decision at a press conference Monday.

The merger would create the third-largest industrial concern in Europe with sales of $40 billion annually.

Among the economic advantages of the merger, Haussmann said, is that Daimler would eventually be assuming the government’s 37% share of the European Airbus Industrie consortium, which currently needs large subsidies from the Bonn treasury to compete with such other major aerospace manufacturers as Boeing and McDonnell Douglas.

Would Assume Risks Earlier

One of the stipulations attached to the takeover plan by Haussmann is that the combined enterprises assume the Airbus risks three years earlier than offered under the original proposal.

That would mean that MBB would take over the government’s 20% stake in Deutsche Airbus AG by Dec. 31, 1996.

Haussmann said the privatization of West Germany’s share in Airbus would save the government $2.5 billion by the year 2000, which would be passed on to taxpayers or added to pension funds.

“This would also put us on the road to resolving one of the issues raised by the United States” in discussion of West German-U.S. trade relations, Haussmann told reporters.

American aerospace giants like Boeing have contended that government subsidies for Airbus give the consortium unfair competitive advantages.