98/664/EC: Commission Decision of 16 December 1997 on State aid granted by the Land of Thuringia to Thüringer Motorenwerke GmbH [notified under document number C(1997) 4341] (Only the German text is authentic) (Text with EEA relevance)
Date: 1997-12-16
Institutions: European Commission
Subjects: State aid, Thuringia, common market, loan, motor vehicle industry, regional aid

L 316/20

EN

Official  Journal  of  the  European  Communities

25.11.98

COMMISSION  DECISION

of  16  December  1997

on  State  aid  granted  by  the Land of  Thuringia  to  Thüringer  Motorenwerke  GmbH

(notified  under  document  number  C(1997)  4341)

(Only  the  German  text  is  authentic)

(Text  with  EEA  relevance)

(98/664/EC)

THE  COMMISSION  OF  THE  EUROPEAN  COMUNITIES

Having  regard  to  the  Treaty  establishing  the  European
Community,  and  in  particular  the  first  subparagraph  of
Article  93(2)  thereof,

Having  regard 
European 
Article  62(1)(a)  thereof,

to 

Economic  Area, 

the  Agreement  establishing 
and 

the
particular

in 

Having  given  the  other  Member  States  and  other  parties
concerned  notice 
in
submit 
accordance  with  Article  93(2)  of  the  EC  Treaty,

their  comments, 

to 

Whereas:

I

aid 

State 
for  Thüringer  Motorenwerke  GmbH
(hereinafter  referred  to  as  ‘TMW’)  was  notified  by
Germany  to  the  Commission  by  letter  dated  8  August
1996,  received  on  12  August  1996.  The  notification
concerned  rescue  aid  provided  under  a  scheme  known  as
the  Consolidation  Fund  of  the  Land  of  Thuringia
(Konsolidierungsfonds des Landes Thüringen), authorised
by  the  Commission  on  20  December  1995 (1).

Several  loans  totalling  DEM  4,8  million  had  been  made
to  the  company  under  the  scheme  in  1995  and  1996
without  awaiting  the  Commission’s  decision.  The  case
was  therefore  registered  as  non-notified  aid  under  the
reference  NN  99/96.

TMW’s  main  business  is  the  production  of  engines  for
motor  vehicles.

letter  dated  8  November  1996, 

By 
the  German
authorities  informed  the  Commission  that  Gesamtvoll-
streckungsverfahren  proceedings  (insolvency  proceedings
prior  to  a  takeover  or  the  winding-up  of  the  company)
had  been  initiated  on  30  September  1996.

The  Commission  informed  Germany,  by  letter  dated
23  January  1997,  that  it  was  initiating  Article  93(2)
proceedings  in  respect  of  the  whole  of  the  rescue  aid

measures in the form of subsidised loans (with a nominal
value  of  DEM  4,8  million),  on  the  following  grounds:

— doubts  as  to  the  compatibility  of  the  loans  with  the
common  market,  in  view  of  the  period  they  covered,
which  was  more  than  six  months,

— doubts  as  to  the  compatibility  with  the  common
market,  of  the  loans  granted  in  1996,  since  the
principle  that  the  aid  should  be  a  one-off  operation
did  not  seem  to  have  been  complied  with;  also,
doubts  as  to  the  nature  of  the  aid  and  whether  the
respite  obtained  through  the  granting  of  the  loans
had  actually  been  used  to  draw  up  a  coherent
restructuring  plan  aimed  at  restoring  the  company’s
long-term viability,

— doubts  whether  various  commitments  entered  into
when  the  company  IFA  Motorenwerke  Nordhausen
GmbH was privatised by the Treuhandanstalt (‘THA’)
had  been  adhered  to  in  the  business  plans  presented.

letter  also  stated  that  the  business  prospects
The 
described  by  Germany  took  no  account  whatever  of
TMW’s insolvency.

By  a  notice  published  in  the  Official  Journal  of  the
European  Communities (2),  the  Commission  gave  the
other  Member  States  and 
the
opportunity  to  submit  any  comments  on  the  measures  in
question  within  one  month  of  its  publication.

interested  parties 

II

Having  requested  on  24  February  1997  a  one-month
extension  of  the  period  initially  set  for  presenting  their
comments,  a  request  which  the  Commission  granted,  the
German  authorities  submitted  their  comments  by  letter
dated  1  April  1997.  Since  in  the  Commission’s  view  the
answers  provided  were  not  complete,  it  asked  additional
questions  on  7  May  1997  and  6  August  1997.  Germany
then  provided  additional  information  by  letters  dated
26  June  1997,  10  October  1997  and  6  November
1997.

(1) OJ  C  215,  25.7.1996,  p.  6.

(2) OJ  C  104,  3.4.1997,  p.  6.

25.11.98

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L 316/21

(a) Germany pointed out that the three loans granted in
July  1995  (DEM  2  million),  February  1996  (DEM
0,8  million)  and  April  1996  (DEM  2  million)  by
the  public-law  Thüringer  Aufbaubank  (‘TAB’)  are
subject  to  Commission  approval  and  that,  in  the
event  of  a  negative  decision,  they  would  have  to  be
recovered.

III

No  comments  from  third  parties  were  received  by  the
Commission.

(b)

In  addition,  Germany  noted  that  the  first  loan
to
had  been  granted  when  ZMW  belonged 
Antriebstechnik  Weimar-Amberg  GmbH  (‘AWA’).
Following  the  insolvency  of  AWA,  the  failure  of
what  the  German  authorities  described  as  the  ‘first
restructuring’  of  TMW  and  the  intervention  of  the
company  Rebag,  which  envisaged  injecting  DEM
2 million in new capital, it became apparent that the
first  loan  was  not  sufficient  to  carry  out  successfully
a  new  restructuring  plan.  A  commercial  bank  had
then  stated  that  it  was  prepared  to  grant  a  DEM
6  million  loan  if  it  obtained  a  guarantee  from  the
Land  of  Thuringia.  The  guarantee  was  not  given,
however,  because,  according,  to  the  information
provided  by  the  German  authorities  on  6  November
1997,  the  regional  authorities  had  doubts  as  to  the
effectiveness  of  the  restructuring  plan,  the  stability
of 
the
balance-sheet  situation,  which  was  deteriorating.  In
the 
the
conditions  to  be  re-established  for  the  granting  of
the  loan  by  the  private  bank,  the  TAB  granted  a
third 
liquidity.  This
arrangement,  described  by  Germany  as  the  ‘second
restructuring  plan’  also  proved  to  be  a  failure.
Following the insolvency of TMW, repayment of the
loans  was  requested  by  the  TAB,  which  instituted
legal  proceedings  to  recover  its  claims.

the  company’s  management 

loan  to  safeguard  TMW’s 

intervening  period 

team  and 

to  allow 

intended 

(c) Germany maintains its view that the loans granted to
TMW  were  in  the  nature  of  ‘restructuring’  aid.

(d) The  information  communicated  by  Germany  shows

the  following  picture:

(in  DEM  million)

1993

1994

1995

30  June  1996

Workforce

Turnover

115

11

85

15

87

6

87

7

Profit  or  loss

− 3,3

− 7,9

− 6,9

− 2,2

The  net  position  at  30  June  1996  showed  debt  of
DEM  16,1  million.  Production  was  halted  as  from
September  1996.

IV

(a) The Land of Thuringia granted three successive loans
to  TMW  through  the  intermediary  of  the  TAB.  It
seems  certain  that,  in  view  of  its  financial  situation,
TMW could not have obtained any loan to maintain
its  solvency  and  creditworthiness  from  a  commercial
bank.  The  preferential  terms  on  which  the  loans
were  granted  to  TMW  distort  or  threaten  to  distort
competition.  Furthermore,  the  market  in  engines  for
motor  vehicles,  on  which  TMW  operates,  involves
significant intra-Community trade. There is therefore
evidence  of  State  aid  within 
the  meaning  of
Article  92(1)  of  the  EC  Treaty  and  Article  61(1)  of
the  EEA  Agreement.

(b) The  Consolidation  Fund  of  the  Land  of  Thuringia
authorised  by  the  Commission  on  20  December
1995 (3),  under  which  the 
loans  were  granted,
provides  rescue  and  restructuring  aid  within  the
meaning  of  the  Community  Guidelines  on  State  aid
for  rescuing  and  restructuring  firms  in  difficulty  ‘the
Guidelines’) (4).  It  requires  individual  notification
where  aid  is  granted  in  sensitive  sectors,  including
the  motor  vehicle  industry.  Furthermore,  the  first
loan,  amounting  to  DEM  2  million,  was  granted  in
July 1995, before the Commission had approved the
scheme.  The  German  authorities  should  therefore
have notified this first loan to the Commission as ad
hoc  aid,  which  they  failed  to  do.

that  Germany  had  agreed 

In  its  letter  of  6  February  1996,  the  Commission
to  notify
noted 
individually all cases in which rescue or restructuring
aid was repeatedly granted to one and the same firm
and  in  which  the  amount  of  restructuring  aid
previously  granted  exceeded  ECU  1  million  (some
DEM 1,9 million). Since it considers all the aid to be
restructuring  aid,  Germany  should  therefore  have
notified  individually  the  second  and  third  loans;  this
was  not  done.

The  Commission  concludes  from  the  above  that  the
three loans were notifiable under Article 93(3) of the

(e) By letter dated 10 October 1997, Germany informed
the  Commission  that  TMW  no  longer  existed  as  a
commercial undertaking.

(3) See  footnote  1.
(4) OJ  C  368,  23.12.1994,  p.  12.

L 316/22

EN

Official  Journal  of  the  European  Communities

25.11.98

EC  Treaty.  Since,  moreover,  the  German  authorities
did  not  comply  with  the  suspensory  effect  of
Article  93(3)  by  granting  the  three  loans  before  the
Commission  had  taken  a  final  decision,  the  aid
provided  through  each  of  the  loans  is  illegal  in  its
form.

In  order  to  be  able  to  ascertain  the  compatibility  of
the  aid  with  the  common  market  under  one  of  the
derogations provided for in Article 93(3)(a) or (c) of
the  EC  Treaty,  the  Commission  must  examine,
respectively, whether the aid promotes the long-term
development  of  the  relevant  region  or  whether  the
conditions  laid  down  in  the  Community  Framework
on State aid to the motor vehicle industry (5) and the
Community Guidelines on State aid for rescuing and
restructuring  firms  in  difficulty  are  complied  with.

(c) The  aid  element  contained  in  such  loans  depends  on
the financial situation of the company. If its financial
situation  is  not  too  unfavourable,  the  aid  consists  of
the difference between the rate which the firm would
obtain  from  a  commercial  bank,  on  the  basis  of  the
risk  which  it  represents,  and  the  rate  on  the  loan
granted  through  State  assistance.  However,  if  the
company  is  in  too  precarious  a  financial  situation,
no  commercial  bank  would  grant  a  loan.  The
Commission’s  practice  is  then  to  consider  that  the
aid  element  corresponds  to  the  whole  of  the  loan.
On  the  basis  of  the  information  communicated
by 
such  as  TMW’s
balance-sheet  situation  in  1995  and  1996,  and
the
the  very  unfavourable 
Commission  considers  that,  in  1995  and  1996,
TMW  was  in  such  a  serious  financial  situation  as  to
make  it  unable  to  obtain  any  loan  whatsoever
without 
the
Commission considers that the amouont of aid is the
total  amount  of  the  loans,  i.e.  DEM  4,8  million.

assistance.  Consequently, 

the  German  authorities, 

trend  of 

turnover, 

State 

(d) Article  92(1)  of  the  EC  Treaty  lays  down  the
principle that aid corresponding to the circumstances
which  it  envisages  is  incompatible  with  the  common
market. However, Article 92(2) of the EC Treaty sets
out  a  number  of  exemptions  from  this  principle.
Given 
the  aid,
Article  92(2)(a)  and  (b)  are  not  applicable  here.
Nor  has  Germany  argued  or  shown  that  the  aid
intended  to  compensate  for  the  economic
was 
disadvantages  caused  by  the  division  of  Germany.
The  exemption  provided  for  in  Article  92(2)(c)  is
therefore  also  not  applicable  in  this  instance.

the  nature  and  purpose  of 

Article  92(3)  sets  out  the  types  of  aid  which  may  be
considered  to  be  compatible  with  the  common
market.  Compatibility  with  the  EC  Treaty  must  be
assessed in the context of the Community as a whole
and  not  in  a  purely  national  context.  In  order  to
safeguard  the  proper  functioning  of  the  common
market  and  in  view  of  the  principles  set  out  in
Article 3(g) of the EC Treaty, the derogation criteria
provided  for  in  Article  92(3)  must  be  interpreted
strictly.  As  regards  the  derogation  provided  for  in
Article  92(3)(b)  of  the  Treaty,  the  relevant  aid  is
clearly  not  intended  to  promote  the  execution  of  an
important  project  of  common  European  interest  or
to  remedy  a  serious  disturbance  in  the  German
economy.

V

Germany  claims  that  what  is  involved  is  three  successive
grants of restructuring aid. The Commission cannot agree
with  this  view.

(a) The documents submitted by Germany show that the
purpose  of  the  three  loans  is  to  secure  TMW’s
solvency  in  the  short  term  by  making  available
financial  resources  for  the  payment  of  salaries  and
outstanding  debts.  Furthermore,  even  if  the  limited
resources which Rebag would have made available to
TMW  are  included,  the  loans  cannot  at  the  same
time  secure  the  firm’s  short-term  solvency  and
finance a hypothetical restructuring programme. The
information  provided  by  Germany  following  the
initiation  of  Article  93(2)  proceedings  does  nothing
to rebut the Commission’s view. By their nature and
their  objective,  the  three  loans  are  therefore  rescue
aid.

(b) Even 

if 

it  had  accepted  Germany’s  mistaken
description  of  the  aid  as  restructuring  aid,  the
Commission  never  received  from  Germany  any
information  on  any  restructuring  plan,  within  the
meaning of the Guidelines, in respect of the granting
of  the  first  loan.  In  the  absence  of  any  such  plan,
the  Commission  is  unable  to  regard  such  alleged
restructuring  aid  as  being  compatible  with  the
Treaty.

(c) The  German  authorities  did  not  present  any
information  that  would  have  removed  the  doubts
expressed  by 
initiating
the  Commission 
proceedings  regarding  the  existence  of  a  coherent
restructuring  plan  for  restoring  TMW’s  long-term
viability  in  connection  with  the  second  and  third
loans.  In  addition,  the  Commission  considers  that
the  plan  for  reorientating  the  firm’s  acitivities,
described  briefly  in  the  notification  and  amplified,

in 

(5) OJ  C  284,  28.10.1995,  p.  3.

25.11.98

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Official  Journal  of  the  European  Communities

L 316/23

to 

the 

the 

real 

replies 

chances  of 

insufficiently, 

the
in 
albeit 
Commission’s  additional  questions  in  1996  and
following  the  initiation  of  Article  93(2)  proceedings,
was  not  capable  of  restoring  the  firm’s  long-term
viability.  The  DEM  6  million  bank  loan  referred  to
in  various  letters  from  Germany  was  ultimately  not
granted,  by  the  private  commercial  bank  because,
according  to  the  letter  of  6  November  1997,  the
Land  guarantee  was  not  given  in  view  of  doubts  as
to 
the
firm.
reorganisation  plan  presented  by 
Consequently,  it  is  apparent  that  both  the  regional
authorities,  which  refused  to  give  an  additional
guarantee  to  the  tune  of  DEM  6  million,  and  the
commercial  bank,  which  refused  to  grant  the  loan
without  a  guarantee  from  a  public  body,  took  the
view  that  the  ‘restructuring’  would  not  allow  TMW
to  restore  its  long-term  viability.  Another  conclusion
which  the  Commission  draws  from  examination  of
the  sequence  in  which  events  occurred  is  that  the
third  loan  was  granted  at  a  time  when  the  German
authorities  already  had  doubts  as  to  the  quality  of
the  restructuring  plan  and  the  company’s  viability.

implementing 

the 

The  essential  requirement  that  a  plan  for  restoring
the long-term viability of the firm must be drawn up
and  implemented  has  thus  not  been  met  as  regards
third  amounts  of
either 
therefore
‘restructuring’  aid.  The  Commission 
concludes 
loans  are  also
the 
that 
incompatible  with  the  Treaty.

second  or 

two 

last 

the 

the 

(d)

In  addition,  the  period  over  which  the  loans  were
granted  (nine  months)  and  the  breakdown  of  the
total  volume  of  aid  into  three  separate  agreements,
with  different  amounts  (DEM  2  million,  DEM
0,8  million  and  DEM  2  million),  show  clearly  that
three  successive  grants  of  aid  were  involved,  not  to
be  confused  with  the  payment  by  instalments  which
was  provided  for  in  the  various  loan  agreements.

The Guidelines stipulate that, like rescue aid, aid for
restructuring  should  normally  need  to  be  granted
only  once.  The  Guidelines  also  state  that  recurrent
injections  of  aid  in  an  assisted  area  will  not  be
viewed  any  more  leniently  than  in  non-assisted
areas.

(e) Consequently,  even  if  it  had  accepted  the  German
authorities’  unjustified  description  of  the  aid  as
restructuring  aid,  the  Commission  would  have  had
to  conclude  that  the  three  loans  were  incompatible
with  the  Treaty.

viability  on  the  basis  of  the  restructuring  plan
communicated  by  the  German  authorities.

VI

After  careful  scrutiny  of  the  documents  transmitted  by
the  German  authorities,  the  Commission  considers  that
what is in fact at issue is three successive grants of rescue
aid, as evidenced by the nature and purpose of the loans.
Their  compatibility  with  the  Treaty  should  therefore  be
examined  on  that  basis.

(a) The  Commission  notes  that  the  period  covered  by
the  first  loan  (from  July  1995  to  February  1996,
when  the  second  loan  was  granted)  amounts  to  a
little  over  six  months.  This  repayable  loan  clearly
constitutes  liquidity  help.  As  may  be  seen  from  the
contract  with  the  TAB,  the  loan  is  restricted  to  the
amount  needed  to  keep  the  firm  in  business,  and  in
particular  to  the  covering  of  its  social  security  costs
and  routine  operations.  Furthermore,  the  loan  is
warranted  on  the  grounds  of  the  risk  of  the
imminent  cessation  of  payments  by  the  firm  and
hence  the  unemployment  of  its  workforce.  Because
of  the  level  of  business  of  the  firm  as  illustrated,  for
example, by its turnover in 1995 and 1996, the scale
of  the  rescue  aid  is  not  such  as  to  have  any  undue
adverse  effects  on  the  industrial  situation  in  other
Member  States.

the  conditions  set  out 

The  first  rescue  aid,  namely  the  first  loan,  thus
complies  with 
the
Guidelines. Consequently, the Commission concludes
that,  although  illegal,  this  aid  is  compatible  with  the
Treaty,  since  it  qualifies  for  the  exemption  provided
for  in  Article  92(3)(c)  of  the  EC  Treaty.

in 

(b) The  Guidelines  stipulate  that  rescue  aid  should  be  a
one-off operation and that a series of rescues (in this
case,  the  loan  renewals)  that  merely  maintain  the
status  quo,  postponing  the  inevitable  and  in  the
mean  time  transferring  the  attendant  industrial  and
social  problems  to  other,  more  efficient  producers
and  other  Member  States  is  clearly  unacceptable.
Rescue  aid  should  therefore  be  a  one-off  holding
operation  mounted  over  a  limited  period  during
which  the  company’s  future  can  be  assessed.

(f) The Commission also notes that TMW’s bankruptcy
and  the  winding-up  of  its  business  confirm  that  it
long-term
was 

impossible  to  restore  the  firm’s 

The  period  during  which  the  aid  enabled  TMW
to  remain  in  business  was  from  July  1995  until
the  beginning  of  Gesamtvollstreckungsverfahren

L 316/24

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25.11.98

insolvency  proceedings,  at  the  end  of  September
1996,  giving  a  total  of  15  months,  whereas  the
Guidelines  stipulate  that  such  aid  may  be  granted
only for a period generally not exceeding six months.
Furthermore,  the  Commission  considers  that  no  real
restructuring  plan  under  which  the  firm’s  long-term
viability  could  be  restored  was  drawn  up  during  the
additional  period  in  which  the  firm  was  kept  in
business thanks to the second and third loans. Lastly,
the  German  authorities  do  not  cite  any  external
factors  which  the  firm  could  not  have  foreseen  in
order  to  justify  the  granting  of  the  last  two  loans.

In  conclusion,  the  aid  granted  illegally  through  the
second  and  third  loans  does  not  qualify  for  the
exemption provided for in Article 92(3)(a) of the EC
Treaty,  since  the  aid  covered  by  that  provision  must
help  to  promote  the  long-term  development  of  the
region,  which  is  not  the  case  in  this  instance,  given
the  fact  that  the  aid  is  intended  only  to  cover  the
firm’s operating costs and its losses without bringing
about  any  structural  improvement.  The  Commission
would  add  that  the  derogations  whereby  certain
operating aid in the assisted areas may be authorised
under  Article  92(3)(a)  of  the  EC  Treaty  are  not
applicable 
this  case,  notably  because  such
operating  aid  may  not  be  granted  in  breach  of  the
specific  rules  covering  aid  granted  to  firms 
in
difficulty,  and  because  the  aid  must  be  intended  to
promote 
lasting  and  balanced  development  of
economic activity, which is clearly not the case here.
Lastly,  the  aid  does  not  qualify  for  the  exemption
provided for in Article 92(3)(c) of the Treaty, since it
does  not  comply  with  the  principles  set  out  in  the
Guidelines.

in 

HAS  ADOPTED  THIS  DECISION:

Article  1

The  aid  granted  to  Thüringer  Motorenwerke  GmbH
under  the  first  loan  of  July  1995  amounting  to  DEM
2  million  is  illegal,  but  is  compatible  with  the  common
market  since  it  qualifies  for  the  exemption  provided  for
in  Article  92(3)(c)  of  the  EC  Treaty.

Article  2

The  aid  granted  to  Thüringer  Motorenwerke  GmbH
under  the  second  loan  of  February  1996  amounting  to
DEM  0,8  million  and  the  third  loan  of  April  1996
amounting  to  DEM  2  million  is  not  eligible  for  the
exemptions provided for in Article 92(3) and is therefore
incompatible  with  the  common  market.

Article  3

Germany  shall  recover  the  aid  provided  referred  to  in
Article  2.  Repayment  shall  be  made  in  accordance  with
the  procedures  and  provisions  of  German  law,  together
with  interest  as  from  the  date  on  which  the  aid  was
granted,  at  an  interest  rate  equal  to  the  percentage  value
on  such  date  of  the  reference  rate  used  to  calculate  the
net  grant  equivalent  of  regional  aid  in  Germany.

Article  4

VII

Germany  shall 
inform  the  Commission  within  two
months  from  the  date  of  notification  of  this  Decision  of
the  measures  it  has  taken  to  comply  therewith.

The  Guidelines  state  that  the  Commission  will  take
account of the special features of small and medium-sized
enterprises. Applying these specific criteria to TMW does
not  lead  to  any  change  in  the  assessment  of  the  aid.

Since  the  aid  provided  under  the  second  and  third  loans
is  illegal  and  incompatible  with  the  Treaty,  it  must  be
recovered by the German authorities. Repayment must be
made  in  accordance  with  the  procedures  and  provisions
of  German  law,  together  with  interest  running  from  the
date  on  which  the  aid  was  granted,  at  an  interest  rate
equal  to  the  percentage  value  on  such  date  of  the
reference rate used to calculate the net grant equivalent of
regional  aid  in  Germany,

Article  5

This  Decision  is  addressed  to  the  Federal  Republic  of
Germany.

Done  at  Brussels,  16  December  1997.

For  the  Commission

Karel  VAN  MIERT

Member  of  the  Commission