Brussels, 13/12/2002 (Agence Europe) - As we already mentioned, on Wednesday the European Commission decided that Germany had to reduce regional aid to investment that is was planning granting to BMW for the construction of a new car plant in Leipzig, Saxony.
BMW plans to set up a completely new car plant in Leipzig, Saxony for the production of the new 3-series model. The total amount of eligible investments amounts to EUR 1204.9 million, with the planned aid amounting to EUR 418.6 million, or an aid intensity of 34.74%. The regional ceiling for Leipzig, which is considered as a "structurally stronger" region among the Laender of eastern Germany, is normally 28% for larger companies. Yet, the Commission authorised aid of up to 35% (gross) to large companies in these regions upon demand of a Land but with the approval of the relevant national regional aid committee.
Germany having declared that all these conditions were met, the regional ceiling is thus 35%. However, as the Commission had doubts as to the compatibility of the aid with the rules governing State aid in the car sector, and in order to give all interested third parties the opportunity to submit their objections, the Commission decided to open the formal examination procedure on 3 April 2001. It received comments from France, supporting the doubts of the Commission, especially as regards the proportionality of the aid.
At the end of the procedure, the Commission concluded that aid was necessary to attract investment to the assisted region. However, on the basis of the rules on State aid in the car sector, it considered that it could only approve aid intensity of 30.14% of the eligible investment, or some EUR 363 million. Aid that exceeds that amount, or EURO 55 million cannot thus be paid.
In a press release published on Wednesday, the Commission recalls that the existing aid framework for motor vehicles expires in December 2002. From 2004, this sector will be fully integrated into the new Multisectoral Framework on regional aid for large investment projects. The rules of this Multisectoral Framework become progressively stricter with the size of the investment. Very big projects will still be eligible for State aid, but the maximum allowable amount will be lower than it is today. Meanwhile, in 2003 very simple transition rules will apply to the sector, by which projects in the motor vehicle sector will be eligible for aid up to 30% of the maximum allowable for each region (compared to up to 100% under the existing rules).