EN Official Journal of the European Union L 325/1

COMMISSION DECISION (EU) 2016/2068

of 29 July 2013

on State aid SA.35611 (13/C) that France plans to implement in favour of the PSA Peugeot Citroën SA Group

(notified under document C(2013) 4971)

(Only the French text is authentic)

(Text with EEA relevance)

THE EUROPEAN COMMISSION,

Having regard to the Treaty on the Functioning of the European Union, and in particular the first subparagraph of Article 108(2) thereof,

Having regard to the Agreement on the European Economic Area, and in particular Article 62(1)(a) thereof,

Having invited interested parties to submit their comments in accordance with the said articles (1), and having regard to those comments,

Whereas:

1. PROCEDURE

(1) On 5 November 2012, the Commission received a complaint from an enterprise which wished to remain anonymous (‘the anonymous complainant’).

(2) By decision of 11 February 2013 (‘the rescue decision’), the Commission temporarily approved, for reasons of financial stability, the guarantee by France of bond issues by Banque PSA Finance SA (‘BPF’) of a nominal amount of EUR 1,2 billion. In that context, the French authorities undertook to notify a restructuring plan for the PSA Peugeot Citroën SA Group (‘PSA’ or ‘the Group’ or ‘the PSA Group’) and a viability plan for BPF in the six months following the rescue decision.

(3) By letter dated 12 March 2013, France notified to the Commission restructuring aid in favour of the PSA Group.

(4) By letter dated 2 May 2013, the Commission informed France of its decision to initiate the procedure laid down in Article 108(2) of the Treaty on the Functioning of the European Union (‘TFEU’) in respect of this aid.

(5) The Commission's decision to open the procedure (‘the opening decision’) was published in the Official Journal of the European Union on 16 May 2013 (2). The Commission invited interested parties to submit their comments on the aid at issue. On 3 June 2013, the Commission sent a questionnaire to PSA's main competitors.

(6) The Commission received comments from five interested parties, namely: (i) the PSA Group, as beneficiary of the aid, which submitted comments by letter dated 13 June 2013; (ii) an enterprise which wished to remain anonymous (‘the anonymous third party’) which submitted comments by letter dated 14 June 2013; (iii) the competitors Fiat, General Motors (‘GM’) and Toyota, which submitted comments by letters dated 17, 18 and 21 June 2013.

(7) The Commission forwarded these comments to France by letters dated 19 and 21 June 2013.

(8) The French authorities transmitted their comments on the opening decision by letter dated 3 June 2013 and their comments on the comments of the interested third parties by letter dated 28 June 2013.

(9) At the request of the Commission, the French authorities furnished supplementary information on 1 and 2 July 2013.

(10) On 4 July 2013, the Commission's departments, the French authorities and the PSA Group took part in a telephone conference. There were two further meetings between the same parties on 11 and 12 July 2013, and a telephone conference on 15 July 2013. Following these meetings, the French authorities furnished information by letter dated 16 July 2013, amended by letter dated 23 July 2013.

2. DESCRIPTION

2.1. THE PSA GROUP

(11) The PSA Group is a company quoted on Euronext Paris. In 2011, the Group sold over 3,5 million vehicles and spare parts throughout the world (42 % outside Europe). With a commercial presence in 160 countries, the PSA Group has 11 ‘terminal’ plants (nine of which are in the European Union), in which vehicles are assembled, and 12 ‘mechanical’ plants specialising in the production of particular parts. The Group's activities also include automobile financing (BPF) and automotive equipment (Faurecia). Gefco (logistics) was also part of PSA until December 2012. The PSA Group had a turnover of EUR 55,4 billion in 2012. Table 1 below shows trends in the Group's turnover over the last five years. Table 1 Turnover of the PSA Group in EUR million 2008 2009 2010 2011 2012 Past turnover 54 356 48 417 56 061 59 912 55 446

(12) BPF is a captive bank 100 % controlled by PSA, which finances sales of Peugeot and Citroën brand vehicles, vehicle stocks and spare parts for distribution networks, and offers financing resources to the Group's customers. BPF trades in 23 countries. With an average penetration rate (3) of 29,8 % in 2012, BPF finances a large proportion of the demand for the vehicles produced by the Group and plays a crucial role in the financing of its trading activities. In 2012, its outstanding debt was approximately EUR 23 to 24 billion. In 2011, its net result was EUR 354 million.

(13) Faurecia is an automotive equipment supplier in which PSA had a 57,18 % holding on 31 December 2012. In essence, it produces vehicle seats, interior systems, emission control technologies and vehicle exteriors. In 2012, its turnover was approximately EUR 17,4 billion.

2.2. THE DIFFICULTIES EXPERIENCED BY THE PSA GROUP

(14) In 2012, the Group's turnover fell by 5,2 %, largely because of the poor performance of its automotive division (which fell by 10,3 % to EUR 38,3 billion). In terms of ordinary operating income, the Group posted a loss of EUR 576 million, in comparison with a positive result of EUR 1,093 billion in 2011. In the automotive division alone, the operating loss was EUR 1,5 billion in 2012, in comparison with a loss of EUR 92 million in 2011.

(15) The difficulties encountered are due to factors specific to the automotive market, the effects of the economic and financial recession in the Eurozone and the structural handicaps of the PSA Group.

2.2.1. ONGOING CONTRACTION OF THE EUROPEAN AUTOMOTIVE MARKET SINCE 2007

(16) The European market has continued to contract since 2007. Prior to 2007, the European automotive market represented some 18 million vehicles per year, against 14 million units sold in 2012, i.e. a decline of 15 %.

(17) Against this backdrop and in view of its European (and in particular southern European) focus, PSA's sales have fallen by 6,1 % in this market which accounts for 58 % of its sales. The PSA Group's market share has fallen to 13,3 %, in comparison with 14,2 % in 2010.

(18) The PSA Group is not offsetting the contraction of the European market by its sales outside Europe. In 2012, sales of cars and commercial vehicles in the rest of the world were not enough on their own to make up for the Group's poorer performance in the European market.

2.2.2. A COMPETITION STRUCTURE THAT DOES NOT FAVOUR GENERAL MANUFACTURERS

(19) According to the French authorities, PSA is in competition with: (a) all the other generalists: premium generalists (Renault, Nissan, Opel, Toyota, Volkswagen) and other generalists such as Ford, Fiat, Skoda, Seat and Honda; (b) all the specialists (Audi, BMW, Mercedes, etc.), which are increasingly tending to develop premium products in all segments, thereby encroaching on the core market of the generalists; (c) recent manufacturers, performing increasingly well in the mid-range segments in particular (Hyundai, Kia, etc.).

(20) To summarise, according to the French authorities, the generalists' natural market is being attacked from ‘above’, i.e. by specialist high-end manufacturers targeting new segments (for instance, the Audi A1, etc.) and from ‘below’, i.e. by low/mid-range manufacturers, (in particular Korean manufacturers such as Hyundai-Kia), keen to improve their range.

2.2.3. THE STRUCTURAL HANDICAPS OF THE PSA GROUP

(21) Over half (53 % in 2011) of the PSA Group's automotive production is located in western Europe where labour costs are higher than in the rest of the world. In total, the labour cost factor accounts for over [20-30] (*1) % of PSA's retail price. Moreover, most research and development (‘R&D’) staff and most of the Group's facilities are in France, entailing high staff costs.

(22) The Group is also lagging behind its competitors in the R&D field, especially as regards component standardisation.

(23) Lastly, PSA does not have the same image and reputation as the German premium manufacturers.

(24) The difficulties faced by the Group, especially by its automotive division, have immediate repercussions on BPF (and vice versa). The captive bank's difficulties can be largely attributed to the Group's problems because of the link between their financial ratings. If PSA's rating is downgraded, so is BPF's rating, making it difficult for BPF to access the markets to refinance itself. BPF nevertheless plays an extremely important supporting role as regards the PSA Group's automotive activities. In 2012, for instance, it financed 29,8 % of the manufacturer's sales and 100 % of its European dealers. The significant fall in BPF's financing capacities (and the resulting reduction of loan production) is therefore having a depressing effect on the automotive division's activity. The rating mechanism may therefore bring about a vicious circle, by further reducing BPF's sources of finance, which in turn affects PSA Group sales by restricting credit, and so on.

2.3. THE AID MEASURES

2.3.1. THE STATE GUARANTEE OF BPF'S BOND ISSUES

(25) To enable it to implement its restructuring plan, the French Government has decided to grant the PSA Group a guarantee covering BPF's long-term bond market issues made at the earliest on the date of the guarantee agreement or the European Commission's approval and at the latest on 31 December 2016 (‘the guarantee’). In this respect, an independent guarantee agreement is to be signed by the French State and the PSA Group, subject to approval by the European Commission pursuant to Articles 107 and 108 TFEU. After concluding an initial temporary guarantee agreement corresponding to a tranche of EUR 1,2 billion in principal pursuant to the Commission's decision of 11 February 2013 approving rescue aid, the French authorities are planning to conclude a second guarantee agreement with the PSA Group covering the remaining amount of financing capped at EUR 5,8 billion in principal.

(26) Under Article 85 of the 2012 Amending Finance Law No 2012-1510 of 29 December 2012, the Minister for the Economy may authorise, against remuneration, a State guarantee for the securities issued by BPF between 1 January 2013 and 31 December 2016. The guarantee covers BPF's new long-term bond market issues. It will therefore benefit the unsecured debt instruments issued by BPF after the date on which the Commission approves the implementation of the guarantee and at the latest on 31 December 2016. These instruments will have a contractual term of a maximum of 36 months from their issue date.

(27) The French authorities point out that the ceiling of the guarantee required by the PSA Group has been determined by analysing the current structure of BPF's balance sheet (and in particular BPF's financing structure) and 2013-16 forecasts of future financing needs which the French authorities have drawn up on the basis of the following assumptions: (a) a total outstanding debt assumed to be more or less constant at some EUR 24/25 billion, making it possible to continue to finance automotive sales by the PSA Group; (b) increased securitisation in BPF's financing, partially offsetting the reduction of commercial paper/deposit certificates (impact rating A-3/P-3); (c) the renewal of bank financing lines enabling BPF to confirm EUR 11,6 billion of medium-term bank credit in January 2013, in particular through the establishment of a new syndicated credit facility of EUR 4,1 billion maturing in five years, the renewal of most of its bilateral banking lines, the extension of a revolving credit line of EUR 1,2 billion with a maturity extended to January 2016 and the simultaneous extension of a credit line of EUR 1,8 billion to December 2015 (see the details given in recital 31 below); (d) recourse to deposits from 2013.

(28) According to the French authorities, the remuneration of the guarantee has been calculated at market price in accordance with the criteria laid down in the Community guidelines on State aid for rescuing and restructuring firms in difficulty (4) (‘the Rescue and Restructuring Guidelines’) and the Commission Notice on the application of Articles 87 and 88 of the EC Treaty (now Articles 107 and 108 TFEU) to State aid in the form of guarantees (5). The Guarantee Notice states that, if no corresponding guarantee premium benchmark can be found on the financial markets, the total financial cost of the guaranteed loan, including the interest rate of the loan and the guarantee premium, has to be compared with the market price of a similar non-guaranteed loan.

(29) The French authorities contend that, in order to calculate the rate of the remuneration of the State, the latter had to proceed in the same way as the banks taking part in the New Club Deal, an agreement between BPF and its creditor banks. For that purpose, the cost of the risk estimated by the banks was calculated from the total remuneration of the liquidity lines of the New Club Deal, reprocessed to take account in particular of the differences between a liquidity injection and a guarantee. The remuneration of the State guarantee has therefore been set at 260 basis points.

(30) BPF has issued bond securities in its own name, for which there is a secondary market. Table 2 below shows the median yields of BPF's existing bonds having a maturity of close to three years for a one-month period before the Group's aid measure was announced in the press (6). The yield of a hypothetical bond having a maturity of exactly three years was interpolated on the basis of the yields of BPF's bonds having the maturity closest to three years at each given date. Lastly, Table 2 also shows the yield levels of State bonds maturing in three years. Table 2 Yields on the secondary market (%) At 16.10.2012 Median 16.9-16.10 Bond maturing on 25.9.2015 5,04 5,52 Bond maturing on 24.6.2015 4,84 5,57 Bond maturing on 25.2.2016 5,37 6,23 Hypothetical three-year bond (interpolated yields) 5,09 5,54 Three-year fungible Treasury bond 0,34 0,39

(31) In late December 2012, BPF negotiated new credit facilities with a number of banks, which agreed to grant BPF: (a) liquidity through long-term loans of EUR 4 billion (‘the New Club Deal’); (b) bilateral credit lines of up to EUR 4,6 billion; (c) an extension of two ‘back-up’ lines (not intended to be drawn down) of EUR 3 billion. The total commitment of these banks was therefore EUR 11,6 billion. According to the information provided by France, drawings on the New Club Deal's credit lines would be conditional on the implementation of the State support measure (7).

(32) On 25 March 2013, BPF undertook a bond issue covered by a State guarantee for EUR 1,2 billion. This bond, bearing a coupon of 0,625 %, shows a yield of 0,664 %, i.e. an increase of 24 basis points over the three-year fungible Treasury bond (OAT).

(33) In recital 51 of the rescue decision, the Commission quantified the aid element as ranging between EUR 91,8 million and the nominal amount of the bonds issued of EUR 1,2 billion. The French authorities note that, on the basis of the methods used in the rescue decision, the results obtained for the aid element contained in the measure are: Table 3 Calculation of the aid element in the guaranteed bonds Interpolated three-year data State spread of 24 basis points Spot Median of bond yields 16.10.2012 12.7-16.10 16.9-16.10 Three-year fungible Treasury bond (OAT) 0,34 % 0,35 % 0,39 % Estimated State spread after guarantee 0,24 % 0,24 % 0,24 % BPSA interest rate after guarantee (a) 0,58 % 0,59 % 0,63 % Cost of the guarantee (b) 2,60 % 2,60 % 2,60 % Total estimated cost of the guaranteed issues (a) + (b) 3,18 % 3,19 % 3,23 % BPSA secondary market yield interpolated over three years 5,09 % 5,23 % 5,54 % Amount of State aid involved (EUR million) 401 429 486 Source: BNP Paribas Global Markets, Datastream.

(34) The French authorities consider that the Commission is using a particularly unfavourable reference period in the history of BPF's bond yields. The period from 12 July to 16 October 2012 (i.e. from the date on which PSA's difficulties became known through the announcement of its reorganisation plan) would, in the view of the French authorities, provide a better estimate of bond yield.

2.3.2. AID FOR THE ‘50CO2CARS’ PROJECT

(35) The public finance that France is planning to grant for the 50CO2Cars project is part of the ‘future investment’ programme established by the Amending Finance Law No 2010-237 of 9 March 2010. The Environment and Energy Management Agency (‘ADEME’) is one of the operators (8) commissioned by the State to manage the appropriations channelled into future investment. ADEME has a total budget of EUR 2,65 billion.

(36) Within the future investment programme, the 50CO2Cars project comes under the ‘Future Vehicle’ measure which is intended to try out and promote technologies and configurations consuming less energy and emitting less greenhouse gas. Under this measure, various technological building bricks have been chosen within two Calls for Expressions of Interest (‘CEI’): (a) the new family of highly energy-efficient diesel engines and the DCT gearbox were selected in the CEI: ‘Powertrain and auxiliaries of internal combustion engines’ (‘CEI No 1’); (b) the electric hybridisation technology was selected in the CEI: ‘Powertrains, auxiliaries and reversible energy storage systems for electric and hybrid vehicles’ (‘CEI No 2’).

(37) The Future Vehicle measure is covered in particular by the aid scheme SA.32466 (2011/X) (9) exempted from notification pursuant to the General Block Exemption Regulation (10) (‘the GBER’).

(38) The French authorities have provided details and the form of the public finance to be received by each of the project's listed partners. With the exception of the project leader PSA, the amounts of public finance involved in the conduct of the 50CO2Cars project are below the individual notification thresholds set out in Article 6(1)(e) of the GBER for all the other partners (Delphi, Mann & Hummel, Valeo, Rhodia, CTI, IRMA, IFPEN, LACCO, IRCELYON, and IC2MP). In so far as it constitutes State aid within the meaning of Article 107 TFEU (11), this public finance is therefore already covered by the exempted scheme SA.32466 (2011/X) mentioned above.

(39) In accordance with Article 1(6)(c), however, the GBER does not apply to aid to undertakings in difficulty, a definition which the PSA Group has certainly met since at least 17 October 2012, when the French authorities announced their intention to grant a guarantee to the PSA Group. The aid that the State is planning to grant to PSA to support the 50CO2Cars project cannot then be covered by the aid scheme SA.32466 (2011/X), nor be the subject matter of an individual notification on the basis of the Community Framework for State aid for research and development and innovation (12) (‘the R&D&I Framework’) (13).

(40) With a view to administrative simplification, the costs of PSA's 50CO2Cars project activities have been classified in the same way as for the other partners, i.e. using the categories set out in the GBER (which coincide with those of the R&D&I Framework).

(41) PSA is therefore undertaking activities characterised (14) as fundamental research (‘FR’), industrial research (‘IR’) and experimental development (‘ED’) for the eligible costs detailed in Table 4 below: Table 4 Costs of the 50CO2Cars project by type of R&D activity (EUR thousand) Costs Totals Eligible (15) FR IR ED CEI No 1 [260 -330]* 233 524,91 1 328,79 140 622,53 91 573,59 CEI No 2 [50 -110]* 71 068,57 34 945,01 36 123,56 Total [300 -400]* 304 593,48 1 328,79 175 567,54 127 697,15

(42) Totalling EUR 85,9 million, the aid that the State is intending to grant to the PSA Group for this strand of the restructuring plan is to take the form of grants (EUR 24,5 million) and repayable advances (EUR 61,4 million). In terms of intensity, they cover 100 % of the eligible costs of FR, 30 % of IT and 25 % of ED.

(43) As regards the repayable advances in particular, they will be discounted to the reference rate in force in January 2012, when the aid grant decision was made: 3,07 % for France. They are to be repaid by PSA using different methods for each of the CEIs.

(44) As regards the part of the project relating to CEI No 1, three hybridisation architectures are possible and are being evaluated in parallel: via the eDCT gearbox, via the engine accessory facade and via the accessory facade with freewheeling. The repayment scheme, which will ultimately depend on the architecture selected at one of the decision-making stages of the project, will take one of the following forms: (a) If hybridisation via the eDCT gearbox is chosen, the repayment will be based on two work units: — EUR [10-20]* per diesel engine of a power of 40/50 kW and 70 kW from the [500 000-600 000]*th unit produced, such that this part of the advance will be repaid to the nearest euro in four years, at a discounted value, on the basis of the nominal production scenario. Following this 100 % repayment of the discounted amount, the PSA Group will continue to pay a reduced amount of EUR [3-6] per engine produced for [1-3] years, — EUR [30-40]* per eDCT gearbox from the [50 000-60 000]*th unit produced, such that this part of the advance will be repaid to the nearest euro in five years, at a discounted value, on the basis of the nominal production scenario. Following this 100 % repayment of the discounted amount, the PSA Group will continue to pay a reduced amount of EUR [5-10]* per eDCT gearbox produced. (b) If hybridisation via the accessory facade is chosen, repayment will be based solely on the work unit of the diesel engine of a power of 40/50 kW and 70 kW, for which PSA will pay EUR [10-20]* per unit from the [500 000-600 000]*th unit produced until the discounted amount is repaid in full (some [0-5]* years in the nominal scenario), then EUR [5-10]* per unit. (c) If hybridisation via the accessory facade with freewheeling is chosen, the repayment will also be calculated from the work unit of the diesel engine of a power of 40/50 kW and 70 kW: PSA will pay EUR [20-30]* per unit from the [500 000-600 000]*th unit produced until the discounted amount is repaid in full (some [0-5]* years in the nominal scenario), then EUR [5-10]* per unit.

(45) As regards the part of the project relating to CEI No 2, the repayment will be based on the work unit of the electric powertrain: PSA will repay EUR [20-30]* per unit from the [500 000-600 000]*th unit produced until the discounted amount is repaid in full (some [5-10]* years in the nominal scenario), then EUR [5-10]* per unit.

(46) The French authorities consider that these methods are such that the advance will be repaid at discounted value in a scenario, based on prudent and reasonable assumptions, in which the project has a favourable outcome, and that in the case of partial failure, the repayment will be proportional to the project's degree of success.

2.4. THE PSA GROUP RESTRUCTURING PLAN

(47) The restructuring plan follows on from the cost reduction measures presented on 26 October 2011 (cost reduction of EUR 800 million, leading to 2 500 job cuts in Europe) and 15 February 2012 (supplementary measures totalling EUR 200 million).

(48) The restructuring plan contains three kinds of measure: industrial restructuring, downsizing of the Group's administrative structure and conduct of the 50CO2Cars R&D project. Although the PSA Group has a presence in many countries of the world, the restructuring measures relate largely to France where most of the Group's production resources are concentrated.

2.4.1. RESTRUCTURING MEASURES IN RELATION TO THE INDUSTRIAL PRODUCTION SYSTEM

(49) The main measures concern the French plants: closure of the Aulnay plant and a significant reduction of capacity at the Rennes plants, leading to 4 400 job cuts. These two measures are part and parcel of the general optimisation of PSA's production plants.

(50) As a result of its historical positioning in the small car/multi-purpose vehicle segment (‘segment B’), PSA has major production capacity in segment B: in France (Aulnay, Poissy and Mulhouse), in Spain (Madrid) and in Slovakia (Trnava). Despite ongoing streamlining measures since the early 2000s (closure of Ryton (United Kingdom) in 2006 and capacity reduction at Aulnay in 2008), it continues to have excess capacity in segment B. The closure of Aulnay will cut production of 208, C3 and DS3 models by 155 000 vehicles/year from the regime set in place in 2012, corresponding to a maximum capacity reduction of 232 000 vehicles/year, and the concentration of segment B production at the Poissy, Mulhouse and Trnava plants. According to the French authorities, this measure will sustainably reduce capacity in segment B and will bring about a substantial saving of overheads within the perimeter of the Group (estimated at EUR [100-200]* million per year).

(51) The Rennes plant currently focuses on the production of segment D and E vehicles (16). It is facing an ongoing fall in demand, especially for segment D saloons. Transition from 2,5 shifts to 2 and the discontinuation of a night shift and a production mini-line will make it possible, in the view of the French authorities, to limit production solely to the Peugeot 508 (saloon and estate) and C5 (saloon and estate).

(52) R&D activity is also to be scaled down (10 %) and teams will be limited to site support alone (development tasks benefiting the Group's activity in general are to be discontinued).

(53) PSA hopes that it can in this way make its European organisation more efficient, in particular by making better use of existing capacity and by the increased specialisation of plants which will produce only one or two segments. The aim of this reorganisation is to reduce the retail price of each vehicle by approximately EUR [200-300]* to [200-300]*.

2.4.2. MEASURES RELATING TO THE PSA GROUP'S ADMINISTRATIVE STRUCTURE

(54) The PSA Group is planning to reorganise administrative services at all levels of management. This reorganisation will entail a total of 3 586 job cuts.

(55) In parallel, and as a result of the restructuring measures, PSA has announced a plan to save EUR 1 billion in respect of purchases (EUR 400 million) and overheads (EUR 600 million) and is in particular planning to implement a range of measures connected with industrial activities, R&D and general costs through its alliance with GM.

2.4.3. THE 50CO2CARS R&D PROJECT

(56) As part of its industrial restructuring, the PSA Group is planning to develop new hybridisation technologies which will, in the view of the French authorities, help to restore the Group's viability. If successful, this R&D project should help the PSA Group to start mass production of diesel hybrid vehicles in segment B (weight of between 900 kg and 1,3 tonnes), and thus to diversify its production into a segment that promises to be profitable. Although diesel engines are preferred by European consumers, the main components of the hybridisation system (17) could subsequently be adapted to equivalent petrol-driven engines and marketed throughout the world.

(57) The purpose of this R&D project, called 50CO2Cars, is to design and produce a (non-rechargeable) hybrid powertrain for segment B, which should make it possible ultimately to limit the CO2 emissions of these vehicles to 50 grams per kilometre (‘g CO2/km’) and, by extension, to position family vehicles (segment C) around 65 g CO2/km. The aim of the project is to make this technology economically available to as many people as possible.

(58) In technical terms, the project will combine a new family of highly energy- efficient diesel engines with a motor-driven dual-clutch gearbox compatible with hybridisation (‘DCT’), and a low-cost electric hybridisation technology.

(59) PSA will lead the R&D consortium set up for the 50CO2Cars project.

(60) This consortium will also include industrial and academic partners: five large enterprises (Delphi, Mann & Hummel, Valeo and Rhodia), an SME (CTI), an association (IRMA) and four research organisations (IFPEN, LACCO, IRCELYON and IC2MP).

2.4.4. THE PSA GROUP BUSINESS PLAN

(61) The PSA Group business plan covers the period 2013-17. The French authorities have specified that the Group's ordinary operating income, in the median scenario, will be positive from 2014, at EUR [1 200-2 000]* million, i.e. [1-5]* % of turnover. Viability will be improved largely by the internal measures contained in the restructuring plan. These include both a major reduction of production costs and improved cash flow, and assume that PSA Group activities will have a fresh geographical focus. The target is for 50 % of Group sales to be made outside the European Union in 2015, thus making it possible to capture the growth potential in these parts of the world (in particular China, Brazil, etc.).

(62) The French authorities have submitted the PSA Group business plan to 2017. The plan is based on assumptions of the size of the European market and PSA's market shares. These assumptions draw on the estimates drawn up by IHS Global Insight.

(63) As regards the size of the European market, a downturn of 2,2 % is forecast in 2013, according to the French authorities, followed by a growth of 6 % per annum in 2014 and 2015, and a growth of 3 % per annum in 2016 and 2017. PSA's market shares will reach [12-15]* % in 2013, [13-16]* % in 2014 and [11-15]* % in 2015, 2016 and 2017.

(64) The business plan looks at various scenarios. In the ‘median’ scenario, the PSA Group's ordinary operating income is positive from 2014, at EUR [1 200-2 000]* billion, i.e. [1-5]* % of the Group's turnover. It is forecast to reach EUR [3 000-3 800] billion in 2017, i.e. [2-6]* % of PSA's turnover. According to the French authorities, this level of profitability will give the PSA Group a rating which is enough for it to refinance itself independently on the markets. An improved rating for the Group will automatically have an impact on BPF's rating.

(65) Alternative scenarios are also envisaged. In an ‘unfavourable’ scenario, PSA Group sales decline (in comparison with the median scenario) by a further 100 000 vehicles per annum in Europe from 2013. In a ‘favourable’ scenario, PSA Group sales in Europe increase by some 100 000 vehicles per annum from 2013. According to the business plan notified, the ordinary operating income of the PSA Group overall, in the unfavourable scenario as well, is positive from 2014 (some [1-5]* % of the PSA Group's turnover), and reaches [2-6]* % in 2017. It should nevertheless be borne in mind that the PSA Group forecasts show a high growth of turnover outside Europe, i.e. in growth markets. This assumption explains why, despite the pessimistic forecasts for the European market, the PSA Group is expecting its sales to grow: its target is to make 50 % of its sales outside Europe in 2015.

(66) As regards trends in the PSA Group's production capacity, the French authorities have produced two tables showing the Harbour usage rates (18) for each plant, before and after the Group's restructuring. With the exception of Poissy, these rates remain the same. The French authorities point out that the viability of each plant cannot be measured independently from that of the PSA Group. The PSA Group's automotive activity needs to be examined overall for each market segment. In the view of the French authorities, each plant has a portfolio of vehicles that it could potentially produce. If some plants have lower or higher usage rates, these are generally known variations which are managed in line with product life cycles. Table 5 Forecast turnover in three scenarios for the PSA Group (EUR million)* 2013 2014 2015 2016 2017 Median Scenario [55 000 -60 000 ] [60 000 -65 000 ] [60 000 -65 000 ] [60 000 -65 000 ] [65 000 -70 000 ] Unfavourable scenario (100 000 fewer vehicles per annum) [55 000 -60 000 ] [60 000 -65 000 ] [60 000 -65 000 ] [60 000 -65 000 ] [60 000 -65 000 ] Favourable Scenario (100 000 more vehicles per annum) [57 000 -62 000 ] [60 000 -65 000 ] [60 000 -65 000 ] [65 000 -70 000 ] [65 000 -70 000 ]

Table 6 Forecast turnover in three scenarios for the automotive division (EUR million)* 2013 2014 2015 2016 2017 Median scenario [40 000 -45 000 ] [45 000 - 50 000 ] [45 000 - 50 000 ] [45 000 - 50 000 ] [45 000 - 50 000 ] Unfavourable scenario (100 000 fewer vehicles per annum) [40 000 -45 000 ] [40 000 -45 000 ] [40 000 -45 000 ] [40 000 -45 000 ] [45 000 - 50 000 ] Favourable scenario (100 000 more vehicles per annum) [40 000 -45 000 ] [45 000 - 50 000 ] [45 000 - 50 000 ] [45 000 - 50 000 ] [45 000 - 50 000 ]

2.4.5. THE COMPENSATORY MEASURES INITIALLY NOTIFIED BY THE FRENCH AUTHORITIES

(67) The PSA Group has announced restructuring measures which will reduce its production capacity and market presence, in particular the closure of its Aulnay plant (which employs 3 000 people) and a significant capacity reduction at its Rennes plant, leading to some 1 400 job cuts. In parallel, disposals of viable assets are planned or have already taken place, in particular the opening up of GEFCO's capital, the disposal of some immovable assets and the disposal of the Citer car hire company. The PSA Group has also announced a reduction of its investment expenditure which will limit its production capacity to a level below that originally planned before the onset of its difficulties.

(68) The French authorities also proposed the following compensatory measures: — further reductions of CAPEX (‘capital expenditures’) (2.4.5.1), — transfer of capacity at the Sevelnord plant to a competitor (2.4.5.2), — discontinuing development and production of the hybrid plug-in technology (2.4.5.3), — setting a maximum penetration rate for BPF (2.4.5.4). These measures are additional to the restructuring measures planned in the initial 2012 medium-term plan (‘MTP’) (19).

2.4.5.1. Further reductions of PSA Group investment

(69) Further reductions (over and above the initial 2012 MTP) in CAPEX are planned: EUR 300 million in 2013 and EUR 500 million per year in 2014 and 2015. The 2013-2015 (CAPEX and R&D) plan has therefore been revised down from EUR 9,9 billion to EUR 8,6 billion, i.e. a reduction of 13 % from one plan to the other. This amount is 27 % down on the 2011-2012 average.

(70) PSA's investment will thus be reduced by EUR 3,3 billion per year to an average of EUR 2,86 billion per year. This reduction of EUR 1,3 billion will largely (over 80 %) concern the Group's automotive activity in Europe.

(71) According to the French authorities, reducing CAPEX will significantly curtail the Group's ability to be a competitive force in the market. The further reduction of certain R&D investment and CAPEX will also have other major adverse consequences for PSA. In particular, the PSA Group will be substantially penalised in terms of its ability to: (a) meet the expectations of customers who set particular store by the range effect and the technologies which will no longer be rolled out by the PSA Group; (b) react to competitors' developments; (c) itself industrialise certain attractive technologies which it will have to buy in from competitors, thereby reducing its margins; (d) benefit from certain tax incentives, such as those connected with CO2, etc.

(72) This reduction will in particular involve: — discontinuation of the production of the Citroën C6 model on 31 December 2012 and the non-renewal of the Peugeot 607 model (segment E) (a), — discontinuation in 2015, two years earlier than planned, of the Bipper/Nemo vehicles and the non-renewal of these vehicles (segment B LCV) (b), — discontinuation of diesel engines above two litres (segment D) (c).

(a) Discontinuation of production of the Citroën C6 — Peugeot 607 models

(73) This compensatory measure includes two aspects concerning segment E overall: — discontinuation of the Citroën C6, initially planned for 2016, from 2013, and — non-renewal of the Citroën C6/Peugeot 607.

(74) Looking at the first aspect on its own, the PSA Group estimates its impact at 3 000 vehicles (i.e. 1 000 vehicles per year), i.e. a loss of turnover of EUR 90 million over three years. The C6 is part of segment E, which is a ‘high-end’ segment. According to the PSA Group's own estimations, this segment is set to account for 5,7 % of the European automotive market in 2013.

(75) According to the French authorities, the non-renewal of the Group's high-end range will significantly reduce market coverage. Potential volumes for the latest Peugeot (607) model were in the order of 20 000 vehicles per year, representing a loss of turnover of some EUR 500 million. Potential volumes for the latest Citroën (C6) model were in the order of 7 000 vehicles per year, representing a loss of turnover of some EUR 200 million.

(76) The non-renewal commitment in relation to the Citroën C6/Peugeot 607 models covers the period 2016-18. The PSA Group estimates the impact of this strand of the measure at 40 500 vehicles, i.e. a turnover of EUR 1,05 billion. The non-renewal of these models will also enable PSA to discontinue its allied investment from 2013 (the normal period for the development of a new vehicle is generally three years).

(77) According to the French authorities, an indirect effect of this compensatory measure is its major adverse impact on the PSA Group's brand image. The lack of models in segment E (and/or powerful engines) would prevent it, for instance, from responding to certain calls for tender. Moreover, the PSA Group's exit from segment E would also mean that individuals interested in high-end models would be less likely to look to the PSA Group's network, which would do little to help the Group to move its brands upmarket, including in segment B (DS line). The PSA Group estimates that the negative impact on calls for tenders for vehicle fleets would be 2 000 vehicles per annum, representing an annual loss of turnover of EUR 30 million, i.e. a total of EUR 180 million for 12 000 vehicles.

(78) Overall, the PSA Group estimates that the impact of this compensatory measure would be a loss of turnover of EUR 1,32 billion.

(b) Discontinuation and non-renewal of the Bipper/Nemo model

(79) The Bipper/Nemo is a commercial vehicle marketed under two different names. The proposed measure has two strands: — the non-renewal (i.e. no launch of a new generation) of Bipper/Nemo vehicles from 2017, whose impact in terms of turnover is estimated by PSA to be EUR 1 billion, and — the early discontinuation from 2015 of current Bipper/Nemo vehicles, initially planned for 2017, whose impact in terms of turnover is estimated to be EUR 560 million.

(80) In 2012, PSA sold 35 650 Bipper/Nemo (16 678 Bipper passenger vehicles (‘PV’) and commercial vehicles (‘CV’) and 18 972 Nemo (PV and CV together) for an average unit turnover of EUR 8 950, i.e. a total annual turnover of EUR 319 million.

(81) The Bipper/Nemo CV models are part of segment B LCV (20): in 2012, this segment accounted for 3,7 % of the European LCV market. PSA's market share was 49 %. In 2012, the PSA Group marketed 26 674 Nemo/Bipper CVs in a total market of 54 514 units. In 2012, the PSA Group sold 8 976 PVs (representing a market share of 10 %).

(82) According to the French authorities, the marketing of these vehicles does not generate net profits during the vehicle's service life largely because models at the beginning of their lives are not immediately profitable. These vehicles therefore become profitable only after the first generation.

(83) The PSA Group considers the impact of this compensatory measure to be a loss of turnover of EUR 1,56 billion.

(c) diesel engines of more than two litres

(84) Under this proposed compensatory measure, production of engines of more than two litres is to be discontinued by the time of the EURO 6 standard. According to the French authorities, the PSA Group has the industrial resources to produce such engines, especially the EURO 6 version of the DW12 engine. In contrast to its competitors, it does not have petrol engines of more than two litres (its petrol engines are limited to 1,6 litre turbo). This measure will therefore affect segment D in particular.

(85) The PSA Group's sales of passenger vehicles in segment D accounted for 1 % of the European market in 2012 (i.e. 150 000 vehicles). In better years, sales of PSA Group vehicles of more than two litres peaked at 30 000 vehicles. The PSA Group has included 10 000 vehicles per year, representing approximately 20 % of segment D, in its estimations of the impact of the measure.

(86) On the basis of the historical registration data for 2011 and 2012 for diesel PV vehicles with an engine of more than two litres, PSA considers that the development of a hybrid plug-in diesel PV range would have increased the number of vehicles with engines of a capacity of more than two litres (or equivalent power) to 30 000-40 000 units for the PSA Group. According to the French authorities, this measure represents 10 000 vehicles per year, i.e. a loss of annual turnover of EUR 200 million.

2.4.5.2. Transferring capacity at the Sevelnord plant to a competitor

(87) Under this measure, the PSA Group is to transfer capacity at the Sevelnord plant to Toyota. The Sevelnord plant was built in 1988 as part of the extension of the activities of the Société Européenne de Véhicules Légers (‘Sevel’), jointly controlled (‘joint venture’ or ‘JV’) with the Fiat Group. In 2011, this plant had 2 700 employees and produced an average of 420 vehicles per day (Peugeot 807, Citroën C8, Peugeot Expert, Citroën Jumpy, Fiat Scudo). A total of 94 843 vehicles were produced there in 2011.

(88) When Fiat wanted to withdraw from the JV partnership with the PSA Group at the Sevelnord plant, PSA signed a cooperation agreement with Toyota under which the PSA Group was to manufacture light commercial vehicles which Toyota would market in Europe under its own brand name. This would enable Toyota to establish a substantial customer base at minimal cost.

(89) Under this agreement, the PSA Group was initially (from the second half of 2013) to supply light commercial vehicles from its existing Peugeot Expert and Citroën Jumpy ranges (‘G9’ supply). The agreement also provides for cooperation in respect of the next generation of vehicles to be produced by the PSA Group (‘K0’ supply).

(90) According to the French authorities, without the agreement with Toyota, the PSA Group considers that it could on its own keep its light commercial vehicle activities viable. The contract with Toyota is not therefore essential for continued operation at this plant.

(91) The French authorities point out that this measure helps to limit the PSA Group's market presence to the direct benefit of its competitors in so far as: (a) the PSA Group will transfer close on 30 % of production capacity at the Sevelnord plant to Toyota; (b) this agreement will enable a major competitor, Toyota, to gain access to a market in which it has not so far had a presence, and to extend its commercial vehicle range; (c) this agreement offers a direct and certain competitive advantage to Toyota, in so far as it enables it to gain a large proportion of the margin on the vehicles covered by the agreement, and to sign up customers and gain their loyalty in a market in which it has no presence; (d) this measure concerns one of the markets in which the PSA Group has a particularly large presence (21 % at European level in 2011).

(92) In terms of turnover, the impact of this measure is estimated at EUR 443 million.

2.4.5.3. Discontinuation of production and development of the hybrid plug-in technology

(93) The PSA Group will reduce its market presence by ending the agreement signed on 25 October 2011 with BMW for the creation of a JV to develop and produce a technology for hybrid and electric vehicles.

(94) The JV was developing and manufacturing all the electric components needed for an electric powertrain. The PSA Group and BMW have invested over EUR 100 million in this project, on which, in late 2011, 400 workers were employed at the Munich R&D centre. The end of this JV will mean the PSA Group's withdrawal from the hybrid plug-in vehicle segment as a result of the termination of the JV agreement with BMW (segment C).

(95) According to the French authorities, by ending the JV, the PSA Group will permanently withdraw from a segment considered to be promising and will lose access to around 6 % of the market by 2016. The PSA Group will also lose an agreement that is valuable in terms of the brand image that its status as a partner of BMW gives it.

(96) The withdrawal of the PSA Group from the JV with BMW will have two consequences: (a) first, announcing that the hybrid plug-in technology is to be discontinued will harm the Group's image in this segment and will have an impact from 2013 on PSA Group sales of diesel hybrids. The PSA Group estimates this impact (based on 10 % of volumes) at 3 000 vehicles per year, i.e. an annual loss of turnover of EUR 60 million; (b) second, discontinuing the development of the hybrid plug-in technology, whose launch was scheduled for 2016, will be reflected by a reduction of an average of 20 000 vehicles over three years, i.e. an annual loss of turnover averaging EUR 400 million.

(97) The PSA Group estimates the total impact of this measure to be a loss of turnover of EUR 1,56 billion.

2.4.5.4. Commitment to a maximum penetration rate for BPF

(98) The French authorities are planning to commit to a maximum penetration rate (21). According to the French authorities, this rate has risen sharply in recent years both for BPF and for its competitors, increasing, in the case of BPF, from 27,5 % in 2009 to 29,8 % in 2012; and, in the case of RCI Banque SA (22), from 30,0 % to 35,0 % over the same period, as shown in Table 7 below.

(99) The French authorities are in particular envisaging this commitment because they consider that the penetration rate can be readily monitored from public sources.

(100) The planned commitment is structured differently for 2013, and for 2014 and 2015. In 2013, it is proposed not to exceed, for each of the European countries (in the G10 perimeter (23)) in which BPF trades, the H2 2012 rate with a penetration rate flexibility of + 1.

(101) In the following periods, the French authorities consider that rapid developments in the sector make it necessary to forecast how BPF's commitment is to vary on the basis of these developments. It is therefore proposed to increase the penetration rate achieved by BPF in year ‘n-1’ by setting a maximum penetration rate for year ‘n’ on the basis of the changes in this rate in year ‘n-1’ among BPF's European competitors. This should help to prevent BPF from becoming disconnected from trends in its competitive environment.

(102) From 31 December 2013, therefore, BPF's maximum penetration rate commitment in the G10 perimeter for year ‘n’ will be equal to the rate achieved by BPF in this perimeter in year ‘n-1’ adjusted by the change in the penetration rate of comparable firms in year ‘n-1’, although the effect of this adjustment cannot be to reduce BPF's penetration rate below a minimum. The comparable firms proposed here are the ‘Western Europe’ division of RCI Banque SA and the ‘Europe’ division of Volkswagen Financial Services (‘VWFS’). In order to guard against erratic developments among competitors and keep BPF's penetration rate at a level that is actually below that of its competitors, the maximum penetration rate will be capped at 32,4 %, in line with the G10 penetration rate recorded in the second half of 2012. Table 7 BPF penetration rates for new vehicles by country and main geographical areas (as %) Ceiling rate H2 2012* Flexibility Proposed maximum rate* Germany […] + 1,0 […] Austria […] + 1,0 […] Belgium […] + 1,0 […] Italy […] + 1,0 […] Spain […] + 1,0 […] Netherlands […] + 1,0 […] Portugal […] + 1,0 […] Switzerland […] + 1,0 […] France […] + 1,0 […] United Kingdom […] + 1,0 […] G5 aggregate (24) 33,3 + 1,0 34,3 M5 aggregate (25) 27,3 + 1,0 28,3 G10 aggregate (26) 32,4 + 1,0 33,4

2.4.6. ESTIMATION OF RESTRUCTURING COSTS AND THEIR FINANCING

(103) Restructuring costs are estimated to be EUR 1 708,9 million. The following measures are planned: shutting down production at Aulnay, which has 3 000 employees, in 2014, transferring production in the Paris region to Poissy and regenerating the Aulnay site. These costs are estimated to be EUR [400-500]* million between 2012 and 2017. The costs of streamlining the industrial system at the Rennes plant, where 1 400 out of a total of 5 600 employees are to be redeployed, are estimated to be EUR [100-200]* million between 2012 and 2017. Streamlining the PSA Group's organisation, by means of the GPEC 1 and 2 plans (‘Gestion prévisionnelle de l'Emploi et des Compétences’ [Forward Management of Employment and Competences]), will generate total costs estimated to be EUR [500-600]* million in 2012 and 2013. It should be noted that there is no overlap between the GPEC 1 and 2 plans and the Aulnay and Rennes restructuring costs. The costs of other measures, in particular the restructuring of European trade and the reduction of staff at PCR (Peugeot Citroën Retail), which is the PSA's part of the dealer network, largely in southern Europe, are estimated to be EUR [100-200] million. Lastly, the costs of PSA activities in connection with the 50CO2Cars project are EUR [300-400]* million.

(104) In order to finance these restructuring costs, the PSA Group has, since early 2012, been implementing a programme of asset disposals, providing the PSA Group with the following resources: (a) disposal of Gefco in December 2012: EUR 878 million (27); (b) disposal of Citer in February 2012: EUR 449 million; (c) disposal of immovable assets (including the head office) during 2012: EUR 628,7 million.

(105) According to the French authorities, the PSA Group has already released EUR 1,956 billion of free cash flow which is to be reinvested in the restructuring of the PSA Group in order to restore its viability.

(106) In terms of liquidity, under the New Club Deal, private banks will inject EUR 11,6 billion into the Group's financing during the restructuring period.

2.5. BPF'S VIABILITY PLAN

(107) The plan submitted by the French authorities contains financial projections and a financing plan for BPF to the end of 2015. According to the French authorities, BPF's return on equity will be [5-10]* % from 2014 and [10-20]* % in 2016. They point out that, according to the Commission's decision-making practice, the return on equity considered acceptable to demonstrate the viability of a bank is in the range of 8 to 12 %.

2.5.1. FINANCING PLAN

(108) BPF plans to increase its long-term bank financing by EUR [0-5]* billion by the end of 2012 to EUR [5-10]* billion by the end of 2015. The bank has also launched a deposit product for individuals, which will provide financing of EUR [800-900]* million in 2015 according to the financial projections (in comparison with zero at the end of 2012). Financing obtained from securitisation and EMTN issues will fall over the same period. Table 8 Cash flow situation of BPF over the restructuring period* […]*

(109) It is forecast that the bank's total balance sheet and therefore its financing will increase gradually during the projection period, from EUR 27 186 million at the end of 2012 to EUR [>28 000] million at the end of 2015.

2.5.2. PROFITABILITY AND SOLVENCY

(110) BPF was profitable in the past, as can be seen from Graph 1 below. At the end of 2012, the capitalisation level measured by the ‘Core Tier 1’ (28) ratio was 13 %. Graph 1 History of BPF's profitability

(111) The bank considers that profits will continue to be made during the restructuring of the Group, as shown in Table 9 below. Table 9 Profitability forecasts for BPF (%) 2012 2013 2014 2015 2016 2017 Return on equity (RoE)* 8,0 [4-6] [6-8] [8-10] [10-12] [10-12]

(112) According to the information provided, creditors would not lose out if BPF were to be closed down. If placed in run-off management, there would, after three years, be a liquidity surplus ranging from EUR [1-3]* billion to EUR [2-4]* billion in a stress scenario, depending on the stress level applied.

(113) BPF's assets have a very short maturity and on average have a shorter maturity than its liabilities.

(114) The bank's risk cost increased from […]* in 2011 to […]* in 2012. Bad debts rose progressively from 3 % at the end of 2008 to 4,2 % at the end of 2012.

2.5.3. PENETRATION RATE

(115) According to the French authorities, BPF's penetration rate of approximately 29,8 % (in 2012) in the PSA Group's vehicle sales means that it finances a large proportion of the demand for vehicles produced by the PSA Group and is crucial to the financing of its trading activity, and the whole of the vehicle sector, including dealer networks and customers.

(116) They point out that the forecast plan assumes that the penetration rate will continue to increase slightly from 2011 up to 2017. This increase is based on a number of factors: (a) the partial and gradual withdrawal of traditional banks from this sector, because the financing and capital constraints linked in particular to the entry into force of Basel III are forcing them selectively to manage their balance sheets; (b) the growth in consumers' financing needs in a climate of strong contraction of purchasing power in Europe; (c) interest rate levels, currently at a historical low, which will encourage borrowing to finance purchases of vehicles; and lastly (d) the tendency for vehicles to become an everyday consumer good, along the lines of a commodity, which will be reflected by a growth of financing by borrowing and monthly payments.

(117) The development of BPF's penetration rate by geographical area and by segment (B, C, D, H and CV) is shown in Table 10 below (PV means ‘Peugeot vehicle’ and CV means ‘Citroën vehicle’). Table 10 BPF's penetration rate by geographical area, vehicle segment and brand (as %) PV CV % 2010 2011 2012 2010 2011 2012 France Segment B […] […] […] […] […] […] Segment C Segment D Segment H CV Total UK Segment B […] […] […] […] […] […] Segment C Segment D Segment H CV Total Germany Segment B […] […] […] […] […] […] Segment C Segment D Segment H CV Total Italy Segment B […] […] […] […] […] […] Segment C Segment D Segment H CV Total Spain Segment B […] […] […] […] […] […] Segment C Segment D Segment H CV Total Total G5 Segment B [28-33] [31,6-36,6] [33,1-38,1] [26,5-31,5] [29-34] [34,4-39,4] Segment C [20,4-25,4] [21,6-26,6] [22,7-27,7] [18,9-23,9] [25,5-30,5] [29,1-34,1] Segment D [20-25] [17,8-22,8] [18,5-23,5] [20,6-25,6] [20,9-25,9] [22,2-27,2] Segment H [12,4-17,4] [28,6-33,6] [0,0-2,5] [20,7-25,1] [19,2-24] [14,6-19,6] CV [24,6-29,6] [25,9-30,9] [24,9-29,9] [26,7-31,7] [28-33] [29,6-34,6] Total [25,1-30,1] [25,4-30,4] [26,8-31,8] [25,1-30,1] [26,7-31,7] [30,6-35,6] Segment B Ion, 107, 1007, 206+, 207, 208, Czero, C1, C3, DS3, C2, C3 Picasso Segment C 307, 308, 3008, 4008, 5008, RCZ, C4, C4 Picasso, C4 Aircross, DS4, Xsara Picasso Segment D 407, 4007, 508, 807, C5, DS5, C8, C Crosser Segment H 607, C6 CV Partner, Bipper, Expert, Boxer, Berlingo, Nemo, Jumper, Jumpy

2.5.4. THE GROUP'S DEPENDENCE

(118) According to the French authorities, BPF's rating is correlated with PSA's rating, as is shown by the close correlation between the bond yields of the Group and the bank.

(119) The rating agencies have, in their reports, linked the ratings of the PSA Group and BPF, setting a maximum difference of two notches between the Group's rating and the captive bank's rating (29). On 14 February 2013, BPF's rating was downgraded to ‘non-investment grade’.

2.6. THE COMPLAINT

(120) The anonymous complainant considers that the guarantee by the French State will make it possible for BPF to offer credit to PSA's dealers and customers on more attractive terms than those that can be offered by the captive banks of rival automotive manufacturers.

3. REASONS FOR INITIATING THE PROCEDURE

(121) In the opening decision, the Commission had the following doubts:

3.1. VIABILITY PLAN FOR BPF

(122) As regards the viability plan for BPF which has to be analysed in the light of the Banking Communication, the Commission had doubts because of the ongoing concerns about the viability of the PSA Group as a whole.

3.2. PSA GROUP RESTRUCTURING PLAN

(123) As regards the restructuring plan for the industrial group, which has to be analysed in the light of the Rescue and Restructuring Guidelines, the Commission had doubts about the following aspects:

3.2.1. DOUBTS ABOUT A RETURN TO VIABILITY

(124) The Commission asked third parties to comment on: (a) the assumptions made about the development of the automotive market in Europe and the rest of the world, and in particular whether these assumptions were conservative enough; (b) the restructuring measures planned to restore the PSA Group's viability; (c) the role that the 50CO2Cars project could play in restoring viability, and in particular whether this R&D investment launching a mild hybridisation research programme was consistent with the parallel announcement that a hybrid plug-in technology, which the Group was said to have successfully developed, was to be discontinued.

3.2.2. DOUBTS ABOUT THE COMPENSATORY MEASURES

(125) The Commission asked for comments from third parties on the characterisation, within the meaning of the ‘Rescue and Restructuring Guidelines’, of the proposed measures as compensatory measures, their quantification and their ability to offset the risks of distortions of competition brought about by the aid.

4. COMMENTS BY FRANCE ON THE OPENING DECISION

4.1. ON THE AMOUNT OF AID

(126) The French authorities consider that the amount of aid cannot correspond to the nominal amount of the guarantee, that BPF's issues will necessarily be made with a variable liquidity and risk premium, undoubtedly higher than the 24 basis points recorded during the issue carried out as a result of the rescue aid, and that the reference period to be taken into account for BPF's historical yields should be three months.

(127) According to the French authorities, the two cumulative conditions under which the amount of the aid can be considered to be as high as the amount of the guarantee, namely a very strong possibility that the borrower will not be able to repay the loan covered by the guarantee and the existence of exceptional circumstances, are not met in this case. The amount of the aid included in the State guarantee is therefore the difference between the total cost of financing resulting from the guarantee and the guarantee itself, and the total cost of the financing to be paid by the enterprise without the guarantee.

(128) Again according to the French authorities, the assumption of a surplus cost for BPF of some 40 basis points is founded. The issues by BPF on 25 March 2013 took place in particularly favourable market conditions. The spreads with respect to a fungible Treasury bond recorded at the time of this issue (24 basis points) are at historically low levels. The French authorities contend, for instance, that investors would normally require higher remuneration for a captive bank in the automotive sector than for public bodies such as UNEDIC (30) or CADES (31), especially as they would have lines available for subscribing to this type of CADES or UNEDIC transaction that they would not necessarily have for a transaction with BPF.

(129) Lastly, the reference period put forward by the French authorities (from 12 July to 16 October 2012) is best able to reflect BPF's real bond yields on the markets, as it takes account of the PSA Group's difficulties and not the announcement of the State guarantee.

4.2. ON BPF'S VIABILITY

(130) The French authorities take note of the Commission's view that BPF does not have a profitability or solvency problem and that its liquidity problem is due solely to its link with the PSA Group.

(131) They comment, however, as follows: (a) In the view of the French authorities, the increase in BPF's balance sheet size is moderate and in line with forecast inflation. This increase is to be attributed to the worsening macroeconomic situation and the fact that consumers are turning more often to borrowing to finance vehicle purchases. (b) In reply to the Commission's argument that BPF should be prevented from financing poor quality loans in order artificially to boost the PSA Group's turnover, the French authorities point out that: — the sole objective of the compensatory measure involving BPF is to make its competitive behaviour less intense and to limit its market share, — the rate of ‘non-performing loans’, of approximately 4 %, has undergone little change in the last three years, — BPF draws up its risk policy independently under the supervision of the Prudential Control Authority. In the view of the French authorities, as the bad debt level is closely monitored by the rating agencies and by the BPF audit committee, it would be impossible to change the bank's risk policy.

4.3. ON THE PSA GROUP'S RETURN TO VIABILITY

4.3.1. ON THE ASSUMPTIONS OF MARKET TRENDS

(132) First, the French authorities consider that the PSA Group's forecasts have not been disproven by market trends in the first quarter of 2013 or by the supposed discrepancy between the results forecast for 2012 and the results finally recorded for that year.

(133) According to the French authorities, the ongoing fall in sales in 2013 was predicted by the PSA Group, which estimated, as did IHS Global Insight, that the market would ultimately fall by 4 % between 2012 and 2013.

(134) The French authorities have submitted updated financial projections, based on less optimistic assumptions than the projections described in recitals 54 to 58 of the opening decision. The strategic policy described in those recitals of the opening decision remains unchanged.

(135) The amendments to the projections are based on the updated forecasts of trends in the ‘Europe 30’ market by IHS Global Insight and are reflected in the turnover of the automotive division which is not as high during the forecasting period.

(136) The ‘unfavourable’ scenario in which PSA Group sales contract (in comparison with the median scenario) by a further 100 000 vehicles per annum in Europe from 2013 has also been updated. Table 11 Size of the European market according to the IHS Global Insight forecasts and PSA's market share 2013 2014 2015 2016 2017 Size of the European market (Europe 30), forecast by IHS Global Insight in April 2013 (thousands of vehicles) 13 497 13 926 14 768 15 371 15 991 PSA's European market share* [10-14] % [10-14] % [10-14] % [9-13] % [9-13] %

Table 12 Forecast turnover of the PSA Group (EUR million) 2013 2014 2015 2016 2017 Median scenario in the opening decision* [55 000 -60 000 ] [60 000 -65 000 ] [60 000 -65 000 ] [60 000 -65 000 ] [65 000 -70 000 ] Updated median scenario* [55 000 -60 000 ] [60 000 -65 000 ] [60 000 -65 000 ] [59 000 -64 000 ] [60 000 -65 000 ] Updated unfavourable scenario (100 000 fewer vehicles per annum)* [55 000 -60 000 ] [60 000 -65 000 ] [60 000 -65 000 ] [60 000 -70 000 ] [60 000 -65 000 ]

Table 13 Forecast turnover of the automotive division (EUR million) 2013 2014 2015 2016 2017 Median scenario in the opening decision* [40 000 -45 000 ] [45 000 - 50 000 ] [45 000 - 50 000 ] [45 000 - 50 000 ] [45 000 - 50 000 ] Updated median scenario* [40 000 -45 000 ] [40 000 -45 000 ] [45 000 -50 000 ] [40 000 -45 000 ] [40 000 - 45 000 ] Updated unfavourable scenario (100 000 fewer vehicles per annum)* [35 000 -40 000 ] [40 000 - 45 000 ] [40 000 - 45 000 ] [40 000 - 45 000 ] [40 000 - 45 000 ]

(137) Cash flows have been updated to take account of reduced operation, while cash flows from investment activities remain unchanged. The forecast level of debt […]* is thus higher than forecast in the opening decision; the level of debt forecast in the median case is higher than the level previously forecast in the unfavourable case.

(138) PSA has also submitted projections of net indebtedness in a more stressed scenario in which PSA Group sales fall (in comparison with the median scenario) by a further 200 000 vehicles per annum in Europe from 2013. The net indebtedness levels in the various scenarios are presented in Table 14 below. According to the figures provided by PSA, a stress factor of 100 000 vehicles increases net indebtedness […]* by EUR [200-400]* million per annum. Table 14 Net indebtedness […]* in EUR million 2013 2014 2015 2016 2017 Median scenario in the opening decision […] […] […] […] […] Updated median scenario […] […] […] […] […] Updated unfavourable scenario (100 000 fewer vehicles per annum) […] […] […] […] […] Updated higher stress scenario (200 000 fewer vehicles per annum) […] […] […] […] […]

(139) The French authorities consider, moreover, that the relevant factor to be taken into account as a basis for the assumptions of the PSA Group's return to viability in the long term is not its turnover, but its ordinary operating result. At the Supervisory Board meeting of 6 November 2012, this was assessed as a loss of EUR [1 000-2 000]* million, and the final result was a loss of EUR 1 504 million (i.e. a difference of less than [0-3] %).

(140) The French authorities also consider that the market growth prospects taken as a basis by the PSA Group are particularly cautious, while the analysts' figures on which the Commission's argument is based are piecemeal and open to discussion.

(141) All the players concerned consider that the market has bottomed out and cannot but increase from now on. Generally speaking, macroeconomic conditions in Europe are set to improve in future years according to the latest analyses (32). This improvement will, in the view of the French authorities, necessarily be felt by the automotive sector.

(142) Lastly, the French authorities consider that the financial analysts' figures chosen by the Commission are not representative as they disregard those closest to the forecasts provided by the PSA Group. In any event, the French authorities dispute the use of financial analysts to evaluate a medium-term restructuring plan. They consider that the task of financial analysts is to advise on purchases or sales of securities in order to meet a particular financial target. Forecasting sales volumes or estimating turnover is not their main focus. These assessments are therefore very often unconnected with the underlying economic principles.

(143) As a result, the French authorities consider that, in order to implement the restructuring plan, they could legitimately take the forecasts of IHS Global Insight as a basis, applying a stress factor thereto, and disregard the financial analysts' assumptions.

(144) Lastly, the French authorities stress that the private sector believes that the PSA Group will become viable again. This belief is shown first by the alliance between PSA and GM which was bolstered by the signature on 20 December 2012 of final agreements on three vehicle projects and the creation of a joint venture for purchasing. The bank financing of EUR 11,6 billion obtained by BPF is proof, moreover, of market confidence that matters will improve. Lastly, the recent securitisation operations undertaken by BPF show that the market is not averse to the risk represented by automotive activity.

4.3.2. ON THE LEVELS OF USE OF THE PSA GROUP'S CAPACITY AND THE DIVERSIFICATION OF ITS SALES

(145) The French authorities consider that the Commission's doubts about levels of use are unfounded as it has not taken account of the closure of the Aulnay plant which will, in their view, offset the PSA Group's competitive deficit in segment B. In so far as the PSA Group faces very strong competition in this segment, this closure will be particularly significant in terms of restoring viability.

(146) The French authorities consider that the PSA Group has taken all the measures needed to achieve its target of 50 % of sales outside Europe in 2015: opening a third plant and new dealerships in China, renewing the range of vehicles marketed in Latin America, launching two models specifically to be sold outside Europe and lastly, as part of the alliance with GM, developing a joint platform for marketing segment B vehicles in Europe and jointly developing a new generation of small economical petrol engines and vehicle projects in Latin America, Russia and other growth markets.

4.3.3. ON THE ROLE PLAYED BY THE 50CO2CARS PROJECT IN RESTORING THE PSA GROUP'S VIABILITY

(a) On the coherence of the 50CO2Cars project with the PSA Group restructuring plan

(147) The French authorities stress that the major R&D efforts within the 50CO2Cars project are intended to get to grips with a technology that will make diesel more environmentally-friendly and energy-efficient. This R&D project will therefore help to implement a strategy to reverse the downward trend in sales of diesel vehicles.

(148) Diesel vehicles are at present an important source of revenue for the PSA Group: in 2012, [60-80]* % of the vehicles sold by PSA in Europe were fitted with this type of engine. PSA has an optimal industrial base, a good brand image and a substantial profit level for this type of vehicle, which is better than for its petrol engines. It is not, however, being helped by the current context: the ongoing worsening of the image of these engines in Europe, changes to the regulatory and normative framework (Euro VI) which could entail a surcharge on diesel, but not petrol, engines and thus deter people from buying diesel engines, especially as the strategy of downsizing (33) to comply with standards that has so far been implemented has gone as far as it can and some States or local authorities are planning to adopt a tax system that penalises diesel. PSA considers that the margin losses connected with the replacement of diesel sales by petrol sales in the European market would be some EUR [500-700]* million. At a time when the purchasing power of households is declining and consumers have growing ecological concerns, maintaining the competitiveness and brand image of diesel engines (in comparison with petrol engines) is a primary objective for the PSA Group. As the price levels of existing diesel hybrid vehicles are not compatible with mass marketing, major investment in R&D is needed to make this technology available as widely as possible. By making diesel fuel more competitive and providing it with a better image, the 50CO2Cars project could, in the view of the French authorities, play a positive part in restoring viability, by maintaining not just sales of diesel vehicles by the PSA Group, but also its margins. If the industrialisation plan were ultimately to be successful, the 50CO2Cars project technology would offer a major reservoir for growth in an emerging market by 2020. Grasping the opportunity to capitalise on the potential outlets for diesel mild-hybrid engines at the end of the restructuring plan would make it possible to secure turnover by diversifying into a promising segment which is part and parcel of the Group's core business (mass produced vehicles).

(149) On the need for investment, the French authorities draw a line between the proposed reduction of investment ‘as a compensatory measure’ to limit the extent of the distortions of competition linked to the State aid, and the continuation of the R&D investment that the enterprise needs to ‘restore its viability in the long term’. The French authorities stress that, in its decision-making practice, the Commission has accepted on a number of occasions that a firm's viability could be restored by launching new products in order to increase turnover (34).

(150) The authorities point out that PSA would be forced, if there were no specific State aid for the 50CO2Cars project in the restructuring plan, to implement a ‘counterfactual’ project. As it cannot on its own overcome the technological obstacles and would not be able to work on 50CO2Cars with its chosen partners, the Group would have to restrict its investment solely to the minimum necessary to ensure that its diesel engines comply with the regulatory changes. The French authorities stress in this respect that the intervention by the public authorities does not just provide the PSA Group with financial support for the successful completion of the 50CO2Cars project, but also makes it possible for the Group to rally together a consortium of partners (industrial firms, associations, research laboratories, etc.) whose coordinated efforts are needed to resolve the technological obstacles standing in the way of the development of a low-cost diesel hybrid engine. They contend that, in all likelihood, a failure to approve the State aid to the PSA Group as leader of 50CO2Cars would call this project into question not just for the Group, but also for all its partners. A counterfactual strategy of replacing diesel by petrol would entail additional costs and involve major industrial risks: expertise in diesel would have to be given up, sales would be lost during the transitional period and resources would have to be found to adapt and streamline the Group's production system for petrol engines by drawing on resources which are needed to restore viability.

(151) In short, the French authorities consider that the 50CO2Cars project is necessary both to keep the PSA Group's core industrial activity (diesel engines) profitable and to enable the PSA Group's viability to be restored by giving it the wherewithal for growth following restructuring (new range of innovative and profitable vehicles). This investment in R&D is therefore fully in line with the targets of the restructuring plan.

(b) On the Commission's doubts in its opening decision

(152) The French authorities understand from the opening decision that the Commission, taking the view that the PSA Group is allegedly lagging behind in the R&D field, considers that the 50CO2Cars project ‘is necessary to restore the viability of the PSA Group only in so far as it may help the Group to offset its backwardness in R&D in comparison with its competitors’. They contest the very principle of this finding. (a) First, the French authorities reiterate that the 50CO2Cars project can help to restore the Group's viability: restoring the environmental image of diesel vehicles; new consumer dynamic (concept of hybrid vehicles available as widely as possible); reservoir for growth at the end of the restructuring plan. (b) Second, the structural handicap in terms of R&D, which the notification cites as an explanation for some of the PSA Group's difficulties, lies in the fact that the Group is lagging behind in component standardisation, thereby reducing the productivity of R&D efforts in comparison with those of competitors (scale effect). The 50CO2Cars project should make it possible to remedy this situation, in so far as: — first, the 50CO2Cars project will improve the standardisation of some automotive components, in particular the powertrain, — second, the circumstances in which the 50CO2Cars project is being run will make the PSA Group's R&D efforts more productive, in particular as a result of the synergies offered by coordinated work with various partners, and also follow-up by the public authorities awarding the aid. (c) Third, and in particular, the French authorities object to the ‘legally new’ nature of the criterion that the Commission adduces in recital 169 of the opening decision, based on the PSA Group's backwardness in the R&D field. They consider that the arguments adduced so far are enough to prove the positive contribution that the 50CO2Cars project will make to restoring the Group's viability. It is only as a subsidiary issue that they therefore examine the question of whether such a criterion is met in the case at issue:

(i) Technological backwardness in hybridisation technologies

(153) According to the French authorities, this criterion of backwardness in the R&D field is met for the following three reasons: (a) first, they point out that the three technological building blocks of the 50CO2Cars project cover fields in which the PSA Group continues to lag behind: — in the case of diesel vehicles, the Group is lagging behind in technologies to limit engine consumption. This is precisely the field targeted by the 50CO2Cars project, — in the case of transmissions, the PSA Group is lagging behind in the field of dual clutch transmissions (DCT), largely because of a traditional preference for driven or automatic gearboxes (‘BVMP’), whereas this technology has proven to be less commercially successful than its rival. The 50CO2Cars project will therefore make it possible for the Group to catch up as regards both DCT and eDCT transmissions, — in the case of hybridisation systems, the PSA Group is lagging behind in the development of an affordable hybridisation technology which is generic enough to be mass produced. Rival manufacturers such as Toyota, Honda or VAG (35) have (or will soon have access to) generic hybridisation technologies which are therefore better suited to mass production. The French authorities agree in this respect with the Commission's initial comment (in recital 187 of the opening decision) that the existing Stop & Start micro-hybridisation technology (36) is not enough to place it at ‘the technological cutting-edge of CO2 gains’, which requires the successful development of a mild- or full-hybrid technology. Consequently, the aim of the 50CO2Cars project is to make up for the Group's technological backwardness in hybridisation systems; (b) second, they consider that the 50CO2Cars project will give the PSA Group the wherewithal to make up for its backwardness, by resolving a number of the technological problems raised by hybrid technology: — the diesel engines developed by the 50CO2Cars project will make it possible to achieve CO2 emissions of [50-70]* g/km in segment B (vehicles of a power of between 40 and 70 kW), even if sole use is made of the Stop & Start technology, so that PSA could have, by 2017-18, a low-consumption diesel range with an emission level comparable to that of its competitors in the European market, — the dual clutch eDCT intelligent transmission will make it possible to optimise the energy performance of the hybrid powertrain and will be compatible with a wide power range of different electrical machinery. Standardisation will enable the PSA Group to remedy its technological backwardness, — lastly, as regards the hybridisation system, the 50CO2Cars project will revolutionise costs because of both the minimal energy sizing (battery and power electronics) and the optimisation of the mechanical architecture (coupling between the electrical machinery and the powertrain). Similarly, the standardisation of the hybridisation system will make it possible to increase the volumes produced and thus make it more accessible in segment B; (c) lastly, the French authorities address the possible about-turn in strategy consisting in continuing the 50CO2Cars project while discontinuing the hybrid plug-in. In this respect, they stress that the two technologies (‘mild-hybrid’ and ‘plug-in’) do not have the same scope or the same commercial impact. While its price would limit the latter (37) to premium vehicles (with a major spin-off in terms of brand image, especially among corporate customers), the accessibility of the former makes it possible to target a wide range of social groups (low- to middle-income) and therefore to satisfy a wider proportion of the Group's customers. The French authorities stress that these two technologies are not mutually exclusive and that the PSA Group was initially keen to develop both of them in order to combine sales of premium hybrid plug-in vehicles with sales of affordable hybrid vehicles in segments B and C. Discontinuing the hybrid plug-in technology as a compensatory measure is not therefore an ‘about-turn in strategy’ but the discontinuation of a commercially viable activity that does not compromise the Group's return to viability. The 50CO2Cars project has a full part to play in the restructuring plan and the French authorities therefore consider that the strategy on hybridisation proposed in the restructuring plan is entirely coherent.

(ii) The coherence of the resources implemented for 50CO2Cars with the rest of the restructuring plan

(154) According to the French authorities, adapting the PSA Group's industrial base to implement the 50CO2Cars project is part and parcel of the restructuring plan's approach. Standardising the powertrains and transmissions of the Group's diesel vehicles should in particular make it possible to rationalise and optimise production resources: (a) in the area of diesel engines, an investment of EUR [100-200]* million has been made at the Trémery and Douvrin plants, i.e. [0-5]* % of the EUR [10-20]* billion of the investment for which the restructuring plan makes provision, a proportion which the French authorities consider to be ‘particularly modest, if not insignificant’. This financial impact has also been included in the PSA Group's MTP since November 2012, and is included in the updated version of the document, and the French authorities therefore consider that this investment is part and parcel of the approach taken by the restructuring plan as notified. In terms of industrial impact, the measures are intended to modify (38) existing diesel vehicle production capacity while keeping the perimeter the same: while there will be no increase in production capacity which is considered sufficient for the [100 000-200 000] vehicles anticipated at this stage at the end of the 50CO2Cars project, part of the production apparatus of a segment with excess capacity will be given over to a segment where capacity is potentially not being fully used because it is in development (internal arbitrage in favour of attractive products); (b) as regards transmissions, the French authorities endorse the line of reasoning in recital 202 of the opening decision: if the 50CO2Cars project is successful, production which is currently outsourced will take place in-house (39). The investment needed, already included in the restructuring plan as notified, is also included in the updated MTP. The French authorities consider that this strategy of in-house production is compatible with the Group's return to viability. Financially, the operation will mean that the margin is brought in-house and will free the Group from exchange risks with Japan (40) and logistical costs/delays, without curtailing the PSA Group's ability rapidly to adapt to demand; (c) lastly, the investment connected with the hybridisation systems is EUR [40-50] million during the term of the restructuring plan, i.e. less than [0-5] % of the planned total, a proportion that the French authorities consider to be very low. It also concerns an emerging market (for which there is therefore no excess capacity). It is therefore also part and parcel of the approach taken by the PSA Group's restructuring plan.

(iii) Positive impact on the Group's sales and profitability

(155) According to the French authorities, the 50CO2Cars project should help to make the PSA Group's sales and profitability more dynamic after the restructuring plan. (a) In reply to the questions raised by the Commission in recitals 210 and 211 of the opening decision (on the advisability of a strategy giving priority to diesel rather than petrol engines) and in recital 216 (on the business plan for the 50CO2Cars project and the reliability of its underlying assumptions), the French authorities consider that the strategy pursued is not only legitimate industrially but will have a positive impact on the Group's sales. Rather than developing a low-cost hybridisation technology for petrol engines, it is preferable first to invest in improving the ecological and energy-efficient image of diesel in order initially to ‘overcome consumers’ misgivings' and then to adapt (41) the results of the 50CO2Cars project to petrol engines which could then be distributed by component suppliers throughout the world, thereby making the investment more profitable as a result of economies of scale. The advisability of the strategy envisaged by PSA is also borne out by market research, all of which points (42) to a growth of diesel vehicle sales in future years. (b) As regards the financial impact of the 50CO2Cars project, the French authorities have supplied a business plan based on assumptions which are largely shared by various press articles and which include forecast flows up to 2026 (which is justified from the point of view of future updates and the replacement of the EURO VI standards around that date). The R&D work of the 50CO2Cars project will take place between 2013 and 2017, so that the first engines can be marketed between mid-2016 and early 2017 followed shortly thereafter by an economic hybridisation system. Two discount rates (respectively [10-13]* % and [13-15]* %) have been used to calculate profitability, the second taking greater account of the recent rise in the cost of financing. No revenue is included for the patenting of some of the results of the 50CO2Cars project. Lastly, the volumes and sales prices of new diesel engines and hybrid powertrains have been estimated for different scenarios: a scenario ‘A’ in which the 50CO2Cars project is run with State aid, in which the sale of a hybrid vehicle would generate an additional margin estimated to be between EUR [200-300]* and EUR [300-400]* depending on the technological option (over and above the margin of EUR [2 000-3 000]* generated for the manufacturer by the sale of a segment B vehicle); a scenario ‘B’ in which the 50CO2Cars project is run without State aid, in which the margins are the same as in scenario A. The authorities point out, however, that this is a fictitious scenario that could not be achieved by the PSA Group (and is given solely for theoretical comparison purposes); a counterfactual scenario ‘C’ in which, as the 50CO2Cars project is not being implemented, an alternative project is run in which the additional margins are smaller (between EUR [100-200]* and EUR [200-300]). On the basis of these assumptions, the differential net present values (‘NPV’) (43) calculated for the ‘eDCT’ and ‘accessory facade’ products are as follows: Table 15 Financial indicators for the 50CO2Cars project PSA Group (comparison with respect to ‘counterfactual’ scenario C) Scenario A (50CO2Cars with aid) Scenario B* (50CO2Cars without aid) eDCT NPV at [10-13]*% EUR [0-10] million – EUR [60-70] million NPV at [13-15]*% – EUR [50-60] million – EUR [90-100] million Accessory facade NPV at [10-13]*% + EUR [30-40] million – EUR [20-30] million NPV at [13-15]*% – EUR [20-30] million – EUR [60-70] million The French authorities conclude that, whatever the technological option chosen, the relative profitability of scenario B is always negative in comparison with scenario C, and therefore that, without public support, the 50CO2Cars project is ‘quite simply unachievable’. The very limited nature of the NPV obtained in scenario A (slightly positive in comparison with scenario C at a discount rate of [10-13]* %, negative at a discount rate of [13-15]* %) show that these levels of relative profitability are proportionate to the objective of developing a first generation of innovation. (c) Lastly, the ‘50CO2Cars project’ entails four types of risk which should be largely offset by the planned State aid: — regulatory risks connected with the new cycle of type approval of diesel vehicles, — technological risks involved in overcoming the technological problems raised by the development of an affordable mild hybridisation technology, — commercial risks connected with consumers' behaviour and their sensitivity to environmental problems, — financial risks, especially in the light of the constraints on the PSA Group's available liquidity.

4.4. ON THE COMPENSATORY MEASURES

4.4.1. GENERAL COMMENTS ON THE CHARACTERISATION OF THE PLANNED MEASURES AS GENERAL COMPENSATORY MEASURES AND THEIR EXTENT

(156) The French authorities consider that, in the opening decision, the Commission offers no precise evaluation of the alleged distortions of competition. The compensatory measures proposed by the PSA Group are therefore already more than adequate. Making them tougher would run counter to the requirement of proportionality set out in paragraph 47 of the Rescue and Restructuring Guidelines.

(157) They also consider that the planned compensatory measures cover segments B and C, contrary to the line taken in the opening decision. This is true of the measure to limit the penetration rate of BPF financing which concerns these two segments in particular. It is also true, from the point of view of calls for tender, of the early discontinuation of the Citroën C6 and the non-renewal of the C6 and Peugeot 607 models. Lastly, the measure to discontinue vehicles of more than two litres and the discontinuation of development and production of the hybrid plug-in technology will have a major impact in segment C.

(158) The French authorities point out that the compensatory measures proposed by PSA are substantial: they will ultimately lead to a drop in market share of [0-2]* %.

4.4.2. SPECIFIC COMMENTS ON THE VARIOUS COMPENSATORY MEASURES PROPOSED

(a) On the reduction of additional investment by the PSA Group

(i) The early discontinuation of the Citroën C6 model and the non-renewal of the Citroën C6 and Peugeot 607 models

(159) The French authorities consider that, although the volume of sales of these vehicles has fallen, the net margin obtained was greater than the margin obtained from the sale of other types of vehicle, especially the margin from sales of vehicles of segment B. While they accept that this programme was not profitable enough, the PSA Group had planned, in order to make up for this shortcoming, a partnership with DPCA in order to market the C6 and 607 in China.

(160) Lastly, the French authorities confirm that the PSA Group had never planned to discontinue its high-end range from 2009. PSA discontinued only the R&D project for a new vehicle which would have been added to the C6 and 607.

(ii) The early discontinuation and non-renewal of the Bipper/Nemo model

(161) The French authorities consider that this measure will prevent the PSA Group from capitalising on its prior investment and will substantially reduce its ability to compete in the light commercial vehicle segment.

(162) The Bipper/Nemo models have up to now been produced in partnership with Fiat and Tofaș. The stage that this partnership has reached has given PSA a better knowledge of the market, the product and the production capacity mobilised. If the Commission decides not to make this proposed compensatory measure binding, knowledge of all this information will give PSA a much broader negotiating margin for the sale prices of a second generation of these models, assumed to be more profitable. This profitability is likely to be improved by recent and future developments in urban transport organisation where priority is being given to light commercial vehicles.

(iii) The discontinuation of diesel vehicles of more than two litres

(163) The French authorities point out that this compensatory measure is particularly significant in so far as the PSA Group is the leader in the traditional diesel vehicle market.

(164) The French authorities consider that these vehicles are important for segments D and E, which play a key part in the manufacturer's brand image and its ability to respond to calls for tender.

(165) As regards the estimated impact of the development of a diesel hybrid plug-in range, especially on sales of its vehicles with engines of a cubic capacity of more than two litres, the PSA Group considers that this is borne out by recent trends in the hybrid plug-in market and in particular by Volvo's announcement that it has decided to double the production targets for the V60 diesel plug-in model to 10 000 units in 2014 in view of its commercial success.

(b) On the transfer of capacity at the Sevelnord plant to a competitor

(166) The French authorities point out first that this measure will help to limit the PSA Group's market presence to the direct benefit of its competitors as: — PSA is to transfer close on 30 % of production capacity at the Sevelnord plant to Toyota, — under this agreement, a major competitor, Toyota, will be able to gain a foothold in a market in which it has not up to now had a presence, and extend its commercial vehicle range, — this agreement gives Toyota a direct and certain competitive advantage in so far as it enables Toyota to capture a large proportion of the margin on the vehicles covered by the agreement and to sign up customers and gain their loyalty in a market in which it does not have a presence, — this measure concerns one of the markets in which the PSA Group has a particularly large presence (21 % in Europe 30 in 2011).

(167) The French authorities also note that, in the light of the economic appraisal of the project (positive ordinary operating margin of [0-5] %, in line with PSA's normal expectations), the Group was intending to run the project in a reference scenario with no partner. PSA therefore considers that the Sevelnord plant could be viably and profitably run without a partner.

(168) The French authorities point out that the press release of 31 August 2012 should be read with caution in view of the very tense social context at that time.

(c) On the discontinuation of development and production of the hybrid plug-in technology

(169) The French authorities consider first that any discussion of the time of implementation of this measure in order to characterise it as a compensatory measure or a measure needed to restore viability is irrelevant. In their view, what is important in characterising these measures is that they are actually able to limit any distortions of competition arising from the aid.

(170) The French authorities do not intend to reply to the Commission's questions as to the accuracy of the estimated impact of this measure as its criticisms on this matter are not explicit enough. In any case, they consider that the assumptions from which the estimated impact of this measure was calculated are in line with the most recent developments in the hybrid plug-in market.

(171) In the view of the French authorities, moreover, a manufacturer or component supplier will not be able to grant a licence to this technology, in view of the stage of development of the market and the importance of this technology as a differentiating factor in competition. Should such a situation arise, however, the PSA Group is willing to undertake not to acquire a licence from a third party during the implementation of the restructuring plan.

(172) Lastly, the French authorities consider that the effects of this measure are not cancelled out by the 50CO2Cars project given that the latter relates to a market and customer base (high-end) other than those concerned by the compensatory measure and provides CO2 gains differing from those provided by the hybrid plug-in technology.

(d) On setting a maximum penetration rate for BPF

(173) The French authorities point out first that this measure is the most targeted compensatory measure and the best able to remedy any distortions of competition resulting directly from the award of aid in the form of a guarantee for BPF.

(174) They contend that capping the penetration rate at the rate for the second half of 2012 with 1 % flexibility is necessary if BPF's penetration rate is to evolve in line with the Group's needs and if BPF is to be able to carry out its systemic role in relation to PSA's automotive activity. In so far as it is predicted that the upward trend in the penetration rate recorded between 2001 and 2012 will continue between 2012 and 2013, this cap will significantly limit BPF's competitive ability.

(175) In the view of the French authorities, the planned flexibility will not dilute the effectiveness and binding nature of the proposed compensatory measure. In the light of the foreseeable market trend, BPF's penetration rate will systematically be behind by one year and thus lower than that of its most comparable competitors.

(176) Moreover, in reply to a question from the Commission, the French authorities are willing to include the captive banks of the Fiat and Ford groups in the panel of banks chosen for the indexing of BPF's penetration rate.

(177) Lastly, in the view of the French authorities, the global nature of PSA's commitment (for the G10 countries and with no differentiation by segment) will not enable it to develop an aggressive trading policy in some countries and some segments, thereby cancelling out the effects of the compensatory measure. In addition to the fact that the PSA Group cannot force BPF to amend its risk policy, the measure to limit the penetration rate of BPF financing chiefly concerns segments B and C because of their relative weight in the weighted penetration mean (over […]* % of the finance granted by BPF in recent years and on average […]* % of the financing granted by BPF in 2012 in France, the United Kingdom, Germany, Spain and Italy).

5. COMMENTS FROM INTERESTED PARTIES

(178) Following the opening decision, the Commission received comments from five interested parties, namely the PSA Group, an enterprise which wished to remain anonymous (‘the anonymous third party’), Fiat, GM and Toyota.

5.1. COMMENTS FROM THE ANONYMOUS THIRD PARTY

(179) The anonymous third party informed the Commission of its concerns about certain of PSA's trading practices. It considers that PSA gives priority to French component suppliers to the detriment of non-French suppliers. PSA's behaviour in relation to the component supplier Agrati France is revealing, according to the anonymous third party: PSA helped it to avoid its imminent winding up by the courts by purchasing products from it at prices well above the market price. According to this anonymous third party, despite the damage that a breakdown in supplies caused it, PSA also decided not to make any claim against Agrati France, so as not to increase the financial difficulties of this already ailing firm.

(180) In its comments, the anonymous third party alleges that the relations between PSA and the French Government, and the public support forming the subject matter of these proceedings, infringe the rules of the internal market, especially those concerning the free movement of goods in Article 34 TFEU.

(181) In order to assist Agrati France, it considers that PSA used its participation in the Fonds de modernisation des équipementiers automobiles (‘FMEA’ [Modernisation Fund for Automotive Component Suppliers]), and thus indirectly granted it aid of EUR 17 million.

(182) By way of compensatory measure, the anonymous third party lastly calls for PSA to withdraw from the FMEA and to give up any financial holding in suppliers or distributors of automotive components for as long as it continues to receive public aid, for the recovery of the sums that it granted to Agrati France and for the implementation of a transparent and non-discriminatory system for selecting its suppliers.

5.2. COMMENTS FROM OPEL (AND THE GM GROUP)

(183) As regards market forecasts, GM stresses that most