WRITTEN QUESTION E-2709/96 by Wolfgang Nußbaumer (NI) to the Commission (16 October 1996)

Subject: Approval of payments of ATS 1.59 bn in aid to the sports goods group HTM

On 30 July 1996 the Commission approved the payment of state aid in the sum of ATS 1.59 bn to the sports goods group HTM.

1. What conditions were imposed on HTM before the aid could be approved?

2. Is the Commission aware that the ski equipment firm 'Kästle', some 24 km away, as a competitor in the same sector, is having to relocate 60% of its ski production to Slovenia as from November 1996 for reasons of production cost?

Was the aid to HTM intended to prevent the loss of jobs at HEAD by dissuading it from relocating 60% of its production abroad?

If so, how should the decision be regarded in terms of competition policy in respect of the HTM's close neighbour and competitor Kästle?

3. If not, how many jobs will be lost, and what effects will this have, in spite of the aid given to HTM?

4. Is it certain that, in spite of the aid granted, HTM will not place its goods on the market at dumping prices, as has happened in the past?

Answer given by Mr Van Miert on behalf of the Commission (21 November 1996)

1. The aid was approved under the following conditions:

- implementation of the restructuring plan as submitted to the Commission;

- presentation of regular reports on progress made and the extent to which it was in line with the restructuring plan, and presentation of the annual accounts of the group undertakings up to and including 1999;

- implementation of the capacity reduction provided for in the restructuring plan;

- capital injection of ATS 25 million into HTM by Eliasch within one month of the Commission's decision;

- capital injection of ATS 275 million into HTM by Eliasch by 31 December 1998;

- provision of at least ATS 600 million in additional equity through an international public placing or measures having equivalent effect by the end of 1999;

- ban on the use of loss carryovers equivalent in amount to the aid in order to reduce taxable profits.

2. The Commission learned from a press report published on 26 September 1996 that Kästle intends to relocate parts of its production to Slovenia.

The restructuring aid for HTM approved by the Commission is intended to help restore the HTM group's long-term profitability and hence its viability. The restructuring plan on which the Commission's decision is based provides for production to be relocated and reduced and for jobs to be cut back, but the Commission did not exercise any influence on the relevant strategic business decisions.

One of the conditions which must be fulfilled if restructuring aid is to be approved is the avoidance of undue distortions of competition through the aid. So as to ensure that adverse effects on competitors are offset as far as possible, it is generally required that there must be an irreversible reduction or closure of capacity. HTM's restructuring plan provides for such reductions both in the case of skis, ski bindings and ski boots and in the case of tennis racquets.

3. The restructuring plan submitted to the Commission provides for reductions in the workforce both in the various plants and factories in Austria and in other European countries. The exact level of the planned reductions cannot unfortunately be specified as the figures are confidential.

4. According to the restructuring plan, HTM will concentrate on a number of core markets and products, mainly in the top quality and price segment. Total turnover will decline until 1996 and subsequently show a slight increase. The plan is not therefore based on an aggressive low-price marketing policy.