Brussels, 11th October 2007
State aid: Commission opens in-depth inquiry into €31 million subsidy to French domestic appliances manufacturer FagorBrandt
The European Commission has launched an in-depth investigation to establish whether a subsidy worth €31 million that the French authorities intend to grant to the domestic appliances manufacturer FagorBrandt is compatible with the EC Treaty rules on state aid to firms in difficulties, in particular as regards the return of the company to viability and the limitation of aid to the minimum necessary. The Commission is also concerned that the subsidy may be used to finance the repayment of €22.5 million of unlawful aid FagorBrandt received in 2002 (see IP/03/1738). The opening of an in-depth investigation allows interested parties to comment on the proposed measures. It does not prejudge the outcome of the procedure.
EU Competition Commissioner Neelie Kroes said: “We must make sure that the new aid is not used to finance the repayment of the old incompatible aid and that the restructuring of FagorBrandt does not harm other European firms in the market".
The FagorBrandt group is present in all segments of the market of large electric household appliances, including cleaning, refrigeration, and cooking appliances. In 2006 the Group had an annual turnover of around €780 million, and employed 4000 people.
From 2004 to 2006 FagorBrandt made increasing losses. These difficulties arose from more intense competition on the market, in particular as a result of the emergence of low cost companies from Asia and Turkey, and from the development of competition from retailers. Internal factors contributed to the difficulties, in particular the obligation to repay €22.5 million of illegal aid (plus interest), received in 2002 under the terms of Article 44 septies of the French General Tax Code and, subsequently declared incompatible with EU state aid rules by a Commission decision of December 2003 (see IP/03/1738).
On 6 August 2007, the French Authorities notified a project to the Commission to grant €31 million restructuring aid to FagorBrandt. According to the French authorities, in the absence of such aid FagorBrandt would be unable to cope with the losses expected for 2007 or to find additional financing on the market.
In its preliminary assessment, the Commission doubts that the aid would be compatible with the EU rules on restructuring aid, notably as regards the long term viability of the company and the limitation of aid to the minimum necessary. The Commission is also concerned that the notified aid would be used to finance the repayment of the illegal aid received in 2002. The Commission also has concerns about the likely negative impact of the aid on trade between Member States, since FagorBrandt is mainly competing with other European manufacturers. The aid might, therefore, support the company at the expense of its European competitors and their workers.