Brussels, 22/05/2002 (Agence Europe) - On Wednesday, the European Commission decided to initiate a detailed investigation earmarked for the Volkswagens' plant in Pamplona. Indeed, at the current stage, the Commission has not been able to establish that the planed aid meets the criteria of the Community's framework for state aid to the motor vehicles industry and has asked Spain to forward any comments within one month.
In February 2001, Spain notified plans to grant around € 61 million, at 2001 prices, in regional aid to investments carried out by the Spanish subsidiary of German car maker Volkswagen AG its car plant in Pamplona, in Spain's northern region of Navarra. The project concerns production of an upgraded version of the Polo model which will have several types of engines all fully compliant with the European Union's environmental rules. Production of the new model will primarily take place at the Pamplona plant with a smaller amount also due for production at the VW plant in Bratislava, Slovakia. Under the current EU rules on state aid to the car industry, the Commission must assess whether an investment project is mobile, i.e. whether there is more than one alternative investment site, in order to decide whether the subsidies can be approved. The rationale of the rules is to compensate any chosen site for the cost disadvantages it may present vis a vis the alternative investment location. According to Spain, the competing sites of Pamplona and Bratislava have been considered for the notified project which, nevertheless assumes that the investment will go to Spain. The project involves investments amounting to € 335 million and relates to a new press shop to manufacture the sides, roofs and wings of the new car, a second body work production line, a new paint shop, and adjustment of the second assembly line.
Spain has asserted that Pamplona would have constituted an economically realistic alternative location for the VW investment. Under the cost-benefit analysis carried out by Spain, the costs of investing in Pamplona shows a comparative disadvantage of 18.20% which would justify a regional aid intensity of 18.45%. Pamplona has been recognised by the Commission as a regionally assisted area, in the sense of article 87.3(c) of the EU treaty, under the regional aid map for the period 20002006, with a regional ceiling of 20%.
At this stage of the procedure, the Commission has doubts whether Bratislava was indeed viewed as a viable alternative to Pamplona for at least part of the production. Furthermore, the Commission has doubts whether the Bratislava location was still an open option at the time the decision was taken to locate the project in Pamplona, i.e. in November 2000, given that the Bratislava site was chosen in September 1999 by VW for another project, namely the production of the SUV "Tuareg" model. Moreover, at this stage the cost benefit analysis does not clearly establish the cost disadvantage of Pamplona compared to Bratislava. Among the Commission's main doubts are: the composition of eligible costs, the proportionality of the aid and the potential redundancy costs in Pamplona if the project would not have gone ahead in Spain.
European Parliament Plenary Session