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European Commission - Press release
State aid: decisions on regional investment aid for BMW, Volkswagen, Globalfoundries and CRS Reprocessing in Germany and AU Optronics in Slovakia
Brussels, 13 July 2011 - The European Commission has authorised investment aid by Germany to Globalfoundries and CRS Reprocessing. It also cleared Slovak aid to AU Optronics. In all three cases the Commission concluded that the aid complied with the regional aid rules. In two other cases involving projects by BMW and Volkswagen in Eastern Germany, the Commission opened a formal investigation to verify whether the subsidies complied with the said guidelines. The opening of an investigation gives interested third parties the opportunity to comment on the measures under assessment. It does not prejudge the final outcome.
EU Regional Aid Guidelines enable Member States to support investment projects in disadvantaged regions with a GDP per capita below the EU average (see IP/05/1653). For aid to large investment projects the Guidelines require the Commission to assess the market shares of the beneficiaries and the capacity increase brought about by the aided project. In case market shares and capacity increase thresholds set in the Guidelines are exceeded the Commission must verify the incentive effect and proportionality of the aid. It must also balance the benefits of the aid in terms of regional development and job creation against the negative effects it can have on competitors that have to operate without state support (see guidance paper on Regional Aid to Large Investment Projects, see IP/09/993).
Background on the cases
The Commission authorised a regional state aid package of €219 million for an investment project worth approximately €2 billion by Globalfoundries. The investment in the region of Dresden, Saxony, adapts the company's existing facilities to be able to produce all types of semiconductor processed wafers, as opposed to only computer microprocessors for Advanced Micro Devices (AMD) at present. Dresden is eligible for regional aid, according to Article 107(3)(a) of the TFEU, as a region with an abnormally low standard of living and high unemployment. The aid project respects the specific rules for large investment projects (i.e. maximum aid amount of € 219 million after scaling down of the applicable regional aid ceiling of 30 %) and the beneficiary does not exceed the applicable market-shares threshold (i.e. 25% before and after the investment). The capacity created also does not exceed the relevant threshold of 5%.
In this case, Germany notified a €700 000 regional investment aid to CRS Reprocessing Germany GmbH & Co. KG in order to obtain legal certainty. The aid goes toward the company's slurry reprocessing facilities, built on the solar wafer production site of Schott Solar Wafer GmbH, in Jena, Thuringia, also an area eligible for regional aid. The aid is below the applicable notification threshold but as aid had already been granted for previous investments on the same site started within three years, the investments could qualify as a 'single investment project'. The Commission found that the aid met the requirements of the guidelines without having to conclude on the single investment project issue.
AU Optronics Slovakia
The Commission also endorsed Slovak investment aid of € 34.9 million in favour of AU Optronics for setting up a new production plant for the manufacture of thin film transistor liquid crystal display (TFT-LCD) modules and TV sets. Annually, the facility will produce up to 6.3 million LCD modules and up to 2.4 million TV sets with a 26 to 58-inch screen. The total investment worth around €184 million will create 1300 jobs in Trenčín, Western Slovakia, which is also an area eligible for regional aid.
Here too, the market shares of the beneficiary remain below the 25% threshold on all plausible market definitions and these markets are fast growing.
The Commission had to launch a formal investigation into aid for a large investment project by BMW for the manufacturing of electric cars. The formal investigation will allow the Commission to gain an insight into the emerging market of electric cars, a market for which it has not examined regional investment aid before.
Germany plans to grant €46 million towards an investment project of €368 million at the company's plant in Leipzig, in Saxony. The project concerns the manufacture of two models of electric passenger cars: the 'i3' Mega City Vehicle model, a purely battery driven electric car for urban use, and the 'i8' sport model, a hybrid car with a combustion engine in addition to electric propulsion. The car bodies of both models will be made of carbon fibre reinforced plastic.
The Commission acknowledges the importance of the project from the environmental and energy policy point of view, but has to assess its compliance with the said EU provisions for large investment projects. As this is the first notification of regional investment aid to electric cars and on the basis of the available data, the Commission could not immediately decide whether the electric cars planned by BMW can be defined as new products, whether the electric car market creates a separate product market or is part of the all passenger car market without distinction of the propulsion mode, whether the segmentation used in the combustion engine car market could apply to electric cars, whether the relevant geographic market is global or EEA wide etc. It therefore invites interested third parties to submit their observations.
Finally, in another German regional aid case, the Commission also started a probe into a grant of € 83.7 million towards a €700 million investment project of Volkswagen Sachsen GmbH, a subsidiary of the Volkswagen group. The project aims at a fundamental change in the production process of cars in the small and medium sized segments at the plant in Zwickau, in the Chemnitz region (Saxony).
Here too, the applicable Regional Aid Guidelines require the Commission to look further into the project to check the incentive effect and the positive and negative effects of the aid. Volkswagen market share in the relevant product and geographic market (normally the EEA) exceeds 25% even before the investment and the new capacity created exceeds 5% of a market that is undergoing falling or at the best stagnant demand.
The Commission has doubts whether Germany's suggestions for the definition of the relevant market (either a combined segment ranging between the segments A0 to B in the EEA, or a geographic market that is larger than the EEA) can be accepted. In case the market definitions cannot be established, the Commission will evaluate the aid's incentive effect as well as its positive and negative effects on competition.
The non-confidential version of al five decisions approving or starting a formal probe will be published in the Official Journal of the EU and made available on DG Competition's State Aid Register website under the following numbers SA.30596 for Globalfoundries Group (Fab Booster Investment and Fab 1 Annex), Dresden , SA.32581 for Amendment to Wacker Schott project (N 773/2007) – Investment premium for CRS Reprocessing, SA.30099 for Aid to AU Optronics (Slovakia) s.r.o., SA.32009 for Aid to BMW Leipzig and SA.32169 for Aid to Volkswagen Sachsen GmbH. New publications of state aid decisions on the internet and in the Official Journal are also listed in the State Aid Weekly e-News.