Daimler-Benz Gets West German Permission to Buy Major Arms Maker

The government has cleared the way for giant auto maker Daimler-Benz AG to buy a major arms maker in what will create one of Europe’s largest companies, overriding an antitrust panel veto of the merger that’s been dubbed the “elephants’ wedding.”

Economics Minister Helmut Haussmann told a news conference Friday that he had agreed to endorse Daimler’s $859-million bid to take over the Messerschmitt-Boelkow-Blohm GmbH aerospace and technology firm with certain conditions.

His approval came despite a veto from the Cartel Office, an independent governmental advisory board, which had rejected the merger of the nation’s largest enterprise, Daimler-Benz, with the MBB firm that already controls a big share of the arms, technology and aerospace business in West Germany.

The Cartel Office had argued that the combined firms would be so powerful that they would distort competition among key domestic industries.

The takeover would create a corporation with sales of roughly $40 billion annually, or the third-largest industrial concern in Europe.

Foremost among the stipulations attached by Haussmann was that Daimler-MBB accelerate its plan to assume the West German government’s share of the troubled European Airbus Industrie consortium.

Daimler-MBB will have to take over Bonn’s 37% share of Airbus by Dec. 31, 1996--three years earlier than the corporations had proposed, Haussmann said.

He contended that about $2.5 billion would be saved by the Bonn government by the year 2000 if it divested itself of Airbus participation and that trade relations with the United States could benefit as well.

“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 said.

West German subsidies for Airbus have been criticized by American aviation giants such as Boeing Co. and McDonnell Douglas Corp., which say that they provide an unfair competitive advantage for the European aircraft manufacturer.

Without conceding that point, Haussmann said the Daimler-MBB merger would allow him to clear away a source of contention before negotiations scheduled here later this month with U.S. Trade Representative Carla A. Hills.

Daimler, which produces the luxury Mercedes automobile line, must approve the conditions outlined by Haussmann, but its endorsement is expected to be announced today.

Haussmann said the Cartel Office fears of creating a defense industry monopoly were outweighed by “considerable economic advantages” that would stem from the takeover.

Besides reducing government losses from the Airbus venture, Haussmann said the takeover would consolidate specialized expertise in the aerospace industry, giving West Germany a better competitive profile on the international market.

Must Sell Operations

Antitrust officials had advised last month that if Bonn were to override the Cartel Office veto, it should force Daimler-MBB to reduce its defense operations to avoid giving the merged firms an insurmountable advantage in competition for government contracts.

Haussmann said that besides the Airbus risk assumption, the takeover was contingent on Daimler and MBB selling interests in several naval, missile technology and tank companies within a specified time, as well as ridding themselves of interests in firms that give the government procurement advice.

West German media, which called the merger plan “the elephants’ wedding,” speculated earlier this week that Deutsche Bank AG, West Germany’s largest bank, would also be required to reduce its 28% share holding in Daimler-Benz to ease fears of the bank gaining a dominant position in national industry.

But Haussmann said the bank’s participation could not be part of his official ruling.