Michael R. Bonsignore resigned as chairman and chief executive of Honeywell International Tuesday after the European Commission rejected the company's planned $41 billion merger with General Electric Co.
Bonsignore, 60, will be replaced by Lawrence A. Bossidy, the former chairman and chief executive of AlliedSignal Corp., which in 1999 acquired Honeywell and adopted the Honeywell name.
Bonsignore's announcement followed the European Union's blocking of General Electric Co.'s $41 billion purchase of Honeywell International Inc. earlier Tuesday, the first time a proposed merger between two U.S. companies has been blocked solely by European regulators.
The veto of one of the world's largest industrial mergers by the EU became a foregone conclusion after the American companies failed to allay European fears the deal would create an unfairly dominant position in markets for jetliner engine and avionics.
It was only the 15th time in more than a decade that the 20-member executive Commission has blocked a merger -- and the first time it has ever blocked an all-American merger which had already been approved by U.S. regulators.
Bossidy, 66, said Honeywell's board wants him to focus on turning the company as a standalone operation, instead of breaking it up, as some analysts had speculated.
The merger agreement with GE is still in effect, but Bossidy said "the Honeywell board is looking at all its options."
"The idea is to stay independent, to get this company back on its feet," Bossidy said, adding that the merger process has been a major distraction for Honeywell and its 120,000 workers.
Some Honeywell assets will probably be sold and jobs cuts are likely, but Bossidy said a more pressing task is to convince employees thinking about leaving the company that they should stay on.
"One of the priorities is to retain people who were otherwise going to leave," he said.
Bossidy faces hefty challenges, however, as Honeywell copes with a new future without General Electric amid a struggling U.S. economy.
Honeywell, which saw first quarter profits fall 92 percent, also said Tuesday that second quarter ongoing earnings will only be 53 to 55 cents per share, below the consensus estimate of 60 cents a share from analysts surveyed by Thomson Financial/First Call.
With the apparent demise of the GE-Honeywell deal, analysts are looking at Hartford, Conn.-based United Technologies, the huge manufacturer of helicopters, as a likely Honeywell suitor.
Bossidy didn't rule out the possibility of Honeywell entering into another combination at some point, but said his task is to rebuild the company. He plans to stay on the job about a year.
"I have some heart and soul in this company. I hate to see it frankly in the condition it is in right now. ... I'm not here for a new career, but for a time I can restore stability," Bossidy said.
United Technologies, which makes jet engines and elevators and helped convince the EU to block the GE-Honeywell merger, had been in talks to merge with Honeywell when GE suddenly came courting and blocked that deal last fall.
A GE appeal of the European ruling could block any attempt by Honeywell to find another merger partner. GE hasn't ruled out an appeal.
Nicholas Heymann, an industry analyst with Prudential Securities in New York, said Bossidy would be more likely to sell individual units of the company, breaking it into as many as a dozen pieces. A GE appeal would not prevent Bossidy from doing that.
"You could end up getting more value from the parts, by a good margin, than you could for the whole mass," Heymann said.
Bossidy, however, said any divestitures Honeywell makes would not cut into its core aerospace business.
Honeywell is known for its technology and creativity, but Heymann said that Bonsignore had failed to execute the financial restructuring required after AlliedSignal acquired Honeywell for $14 billion in December 1999.
The combined company, which kept Honeywell's better-known name, makes equipment for aerospace systems, power generation, transportation and automated controls for homes, factories and other buildings, as well as specialty chemicals, plastics, fibers and other industrial materials.
Bossidy said he was first contacted about taking the top Honeywell job about three weeks ago. He declined comment when asked whether Bonsignore was pressured to resign by Honeywell's board.
"I wasn't involved in those discussions," Bossidy said.
He acknowledged talking with GE chairman and chief executive Jack Welch Tuesday morning, before his appointment was announced, but would not tell reporters what was said.
"We just had a general conversation and arranged a golf game," Bossidy quipped.
Bossidy was previously chairman of AlliedSignal and Honeywell after they merged, retiring in April 2000 and handing the reins to Bonsignore, who had been the Minneapolis-based Honeywell's chief executive.
Bonsignore then started an aggressive cost-cutting program and bolstered Honeywell's Internet business strategy.
But after a strong initial quarter, the new Honeywell International announced in June 2000 that second-quarter profits would fall below expectations. Bonsignore blamed surging raw material prices, a weakened euro and pockets of slow economic activity.
By this April, as the economic slowdown took hold, sales in key markets continued to slump. The company again cited higher costs, but also blamed decisions to halt some business activities and delay plans to sell its consumer automotive products and friction materials businesses because of its pending merger with General Electric.
Since spring, Honeywell has eliminated nearly 6,500 jobs, or about 5 percent of its work force.
Meanwhile, Standard & Poor's on Tuesday affirmed its "stable" ratings outlook for Honeywell, saying the company has "substantial operating diversity, solid competitive positions, a strong financial profile, and a moderate financial policy."
Honeywell shares closed up 99 cents at $35.10 on the New York Stock Exchange Tuesday.
-- Reuters and the Associated Press contributed to this report.