GE's move raises questions for Boeing: Although CACC now focuses on regional aircraft, could it become a significant global competitor? If so, on what basis will CACC compete? Can CACC offer high quality aircraft at much lower prices? Is CACC able to provide maintenance and spare parts for its aircraft on a timely basis? How should Boeing alter its competitive strategy to protect its aircraft industry market share? Should Boeing retaliate against GE by buying aircraft engines from a GE competitor?

To help answer these questions, it's worth remembering that GE is both a supplier and customer of CACC -- the same relationships it has with Boeing -- though on a much smaller scale. But Boeing probably perceives GE's move as helping to create a big new competitor. Meanwhile, GE may see itself as trying to strengthen a customer of its Aviation and Finance units.

If the Chinese government is willing to support CACC with the substantial amount of capital it needs to get off the ground, then GE's decision may make sense. But China is entering a recession. That's right -- after posting 10% to 11% annual economic growth according to Chinese government statistics, a new survey of Chinese manufacturing activity -- the CLSA China Manufacturers Purchasing Managers Index (PMI) -- showed that China's factory activity contracted sharply during October, with the index falling to its lowest level since the surveys began in June 2004.

Does this slowdown affect CACC and GE? It could hurt both. Although CACC already has 100 orders for the ARJ21 jet which it plans to deliver in the third quarter of 2009, it is unclear how much capital it needs from the Chinese government. And if China indeed enters a recession, it may need to use its dwindling capital elsewhere. This could leave GE in the awkward position of providing financing to CACC during a time when its own financial situation is less than robust.

Meanwhile, the knife GE stuck in Boeing's back may spur Boeing to retaliate by giving more of its aircraft engine business to a GE competitor. As global growth slows, the survivors will be those who have the best relationships with their customers. I question whether the benefits to GE of helping its customer and Boeing competitor, CACC, exceed the damage GE's move may have caused in its relationship with Boeing.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. Portfolio will publish his book about Boeing, You Can't Order Change: Lessons From Jim McNerney's Turnaround at Boeing, in December 2008. He owns AIG and GE stock and has no financial interest in the other securities mentioned.