Approval of State aid pursuant to Articles 92 and 93 of the EC Treaty Cases where the Commission raises no objections N 475/96 - Austria
Date: 1998-01-16
Institutions: European Commission
Subjects: Austria, State aid, environmental protection, motor vehicle industry, research and development, vocational training

16.1.98

EN

Official  Journal  of  the  European  Communities

C  12/5

Approval  of  State  aid  pursuant  to  Articles  92  and  93  of  the  EC  Treaty

Cases  where  the  Commission  raises  no  objections

N(cid:216)475/96  -  Austria

(98/C  12/03)

(Text  with  EEA  relevance)

Summary  of  the  Commission’s  decision  not  to  oppose
the  aid  which  the  Austrian  Government 
intends  to
provide  to  BMW  Steyr  for  the  purpose  of  regional  devel(cid:220)
opment,  environmental  protection,  training  and  R&D.

"By  letter  dated  7  June  1996  the  Austrian  Government
informed  the  Commission  of  its  intention  to  grant  aid  to
BMW  Motoren  AG  for  its  engine  plant  (manufacture
and  assembly)  in  Steyr,  Upper  Austria,  for  the  purposes
of 
regional  development,  environmental  protection,
training  and  R&D.

By  letter  dated  17  July  1996  the  Commission  asked  for
further 
infomation.  The  Austrian  autorities  submitted
some  of  that  information  by  letter  dated  27  September
1996  and  provided  further  details  during  a  visit  to  the
Steyr  plant  on  23  October  1996.

By  letter  dated  5  November  1996  the  Commission  asked
for  further  information  so  that  it  could  continue  its  work
and  referred  the  Austrian  authorities  to  various  rules
governing  the  application  of  the  Community  guidelines.
The  Austrian  authorities  replied  on  9  December  1996.

The  Commission  asked  further  questions  by  letter  dated
21  January  1997.  On  7  March  1997  a  meeting  took  place
with  representatives  from  BMW,  the  Austrian  authorities
and  the  Commission.  Lastly,  the  Austrian  authorities
submitted  a  final  notification  on  22  April  1997.

The  Steyr(cid:220)Kirchdorf  area  in  Upper  Austria  forms  part  of
a  development  area  within 
the  meaning  of  Article
92(3)(c)  of  the  EC  Treaty;  regional  aid  may  be  granted
there  up  to  a  gross  grant  equivalent  of  23(cid:216)%  (or  a  net
grant  equivalent  of  up  to  15(cid:216)%).

The  aid  recipient 
is  BMW  Motoren  AG  Steyr,  a
wholly(cid:220)owned  subsidiary  of  BMW  ˆsterreich  Holding
GmbH,  which  is  in  turn  a  subsidiary  of  BMW  AG
M(cid:190)nchen.  In  1995  BMW  Motoren  AG  Steyr  achieved  a
turnover  of  ˆS  14(cid:216)400  million  and  employed  2(cid:216)272
permanent  and  temporary  staff.  At  the  end  of  1996  the
number  of  employees  was  2(cid:216)328.  According  to  BMW,
the  firm  contributes  indirectly  to  a  further  2(cid:216)500  jobs.  In
round  figures,  the  BMW  group  (including  Rover)  in
1995  produced  1,1  million  vehicles,  employed  116(cid:216)000
people  and  had  a  turnover  of  DM  46(cid:216)000  million.  The
object  of  BMW  Motoren  AG  Steyr  is  to  develop,  manu(cid:220)
facture  and  market  petrol  and  diesel  engines.  In  1995  it
manufactured  419(cid:216)000  engines,  comprising:  262(cid:216)000  four
and  137(cid:216)000  six(cid:220)cylinder;  315(cid:216)000  petrol  and  104(cid:216)000

In  1996 

series  of  measures 

in  Steyr  for  some  years  now,  and 

diesel.  This  represents  around  60(cid:216)%  of  the  BMW  group’s
total  production. 
the  plant  manufactured
440(cid:216)000  engines.  Therefore  the  sector  affected  by  the
proposed  aid  is  engine  manufacture  for  motor  vehicles.
The  project  in  question  is  entitled  ""Phase  V’’,  forms  part
that  BMW  has  been
of  a 
implementing 
is
intended  to  operate  over  the  period  1996  to  2000.  Phase
IV,  which  operated  over  the  period  1993  to  1996,  was
notified  in  1994  and  approved  by  the  EFTA  Surveillance
Authority  by  means  of  a  decision  published  in  Official
Journal  of 
the  European  Communities  C  250  of  8
September  1994.  While  there  may  therefore  be  a  certain
overlap  of  measures,  BMW’s  internal  accounting  is  such
as  to  exclude  confusion  of  the  projects  in  each  individual
phase.

The  purpose  of  the  plan  notified  is  to  enable  the  BMW
group  to  continue  to  build  up  a  development  centre  for
diesel  engines  at  the  Steyr  plant.  The  work  mainly
concerns 
the  reduction  of  environmentally  harmful
emissions  and  minimum  consumption  concepts.  BMW
also  wishes  to  modernize  and  extend  its  petrol  and
diesel(cid:220)engine  manufacture,  particularly  in  order  to  meet
the  growing  demand  of  its  assembly  plant  in  Spartanburg
(USA)  and  of  Rover.

According  to  the  notification,  the  objectives  set  are  to  be
achieved  with  the  help  of  the  following  investments  and
aid:

(in  ˆS  million)

R&D

Environmental  protection

Training

Innovation

Regional  investment

Project  costs

[.(cid:216).(cid:216).(cid:129)

18

89

229

2(cid:216)229

Total(cid:216)

[.(cid:216).(cid:216).(cid:129)

Aid

76,6

4,5

20,0

15,8

228,8

345,7

The  notified  aid  is  based  on  the  following  rules:  Article
the  General
the  Guarantee  Law  1977, 
1(cid:216)b(cid:216)(1)  of 

[.(cid:216).(cid:216).(cid:129)(cid:217)Business  secret.

C  12/6

EN

Official  Journal  of  the  European  Communities

16.1.98

from  Land 

Guidelines  on  assistance 
funds,  and  a
Decision  on  joint  funding  by  Steyr  Town  Gouncil.  In  the
above(cid:220)mentioned  letter  dated  9  December  1996  it  was
stated  that  the  local  authorities  had  not  yet  officially
decided  on  the  basis  for,  and  amount  of,  the  aid,
pending 
the
maximum  amount  that  the  town  could  allocate  was
notified.

the  Commission  decision.  Accordingly, 

the 

investment 

The  notification 
letter  dated
supplemented  by 
22  April  1997  provides  for  aid  for  industrial  research  and
precompetitive  development  as  well  as 
in
in  the  diesel(cid:220)engine  development
research  equipment 
centre.  The  Austrian  authorities  have  referred  repeatedly
to  the  fact  that  the  objectives  of  the  R&D  programme
should  make  it  possible  to  go  significantly  further  than
the  mandatory 
standards.
European 
in  each  phase  of  the
Furthermore,  the  only  work 
industrial 
research  and  precompetitive  development
which  would  qualify  for  support  would  be  that  satisfying
the  additionality  criterion  stipulated  in  the  Community
R&D  framework.

emission 

Description
Construction  of  new  production  and
assembly  lines  for  direct(cid:220)injection  diesel
M  47/57

Modernization  of  the  production  lines  for
crankshafts  and  connection  rods  for  the
four(cid:220)cylinder  petrol  engine;  preparation
for  the  EU(cid:220)3  standards

Modernization  of  production  of 
the
six(cid:220)cylinder  petrol  engine;  preparation  for
the  standards  EU(cid:220)3  and  LEV  (USA)

Various  structural  measures

Total

Investment

1(cid:216)703

144

343

39

2(cid:216)229

In  a 
letter  dated  9  December  1996  regarding  the
sub(cid:220)projects  concerned,  the  Austrian  authorities  made
the  following  distinction  (in  ˆS  million):

The 
industrial  research  concentrates  on  preparatory
work  for  the  successor  models  to  the  M(cid:216)47/57  diesel
engines,  themselves  the  subject  of  investment  in  Phase  V,
and  on 
the  development  of  minimum  consumption
concepts.

Non(cid:220)innovative  mobile  investment
Non(cid:220)innovative  immobile  investment
Total

1(cid:216)611
618
2(cid:216)229

The  applied  research  element  contained  in  the  precom(cid:220)
petitive  development  comprises  work  on  the  Lean  NOx
Catalyst  (LNC).  The  development  centre  for  diesel
engines,  the  only  one  of  its  kind  within  the  BMW  group,
will  receive  new,  higher(cid:220)performance  test  beds,  which
will  enable  dynamic  test  technology  to  be  employed  for
emissions  and  cold(cid:220)starting.  The  requisite  investment  is
directly  connected  to  the  research  work;  but  the  only
aspect  qualifying 
the  depreciations
for  support  are 
carried  out  during  the  projects  undertaken  by  the  manu(cid:220)
facturer  in  Phase  V.

Taking  everything  into  consideration,  the  Austrian  auth(cid:220)
orities  regard  part  of  the  product  development  notified
as  not  receiving  support  as  being  precompetitive  devel(cid:220)
opment.  For  budgetary  reasons  no  aid  was  applied  for,
since  the  project  as  notified  already  used  up  all  the
available  funds.

Phase  V  provides  for  various  training  measures.  The
notified  aid  covers  part  of 
for
apprentices  at  the  plant,  subsidized  at  50(cid:216)%,  and  part  of
the  practical  training  for  approximately  1(cid:216)500  employees
at  the  plant  (25(cid:216)%  aid  intensity).  Wage  and  salary  costs
for  apprentices  are  not  supported.

training  costs 

the 

None  of  the  investment  is  both  mobile  and  innovative.
The  elements  concerning  modernization  were  excluded
from  the  mobile  portion.

The  aid  notified  in  the  letter  dated  22  April  1997  totals
ˆS  228,8  million.  Since  only  the  mobile  investment  may
be  supported  by  regional  aid,  the  gross  grant  equivalent
is  14,2(cid:216)%

The  total  costs  of  the  projects  for  innovative  investment
are  ˆS  229  million,  of  which  (according  to  the  Austrian
authorities’  assessment)  apparently  only  ˆS  130  million
(plus  engineering  costs  of  ˆS  28  million)  represent
genuine  technical  innovations  at  European  level.

includes  measures 

The  project  also 
improved
environmental  protection.  Investment  for  the  planned
period  totals  ˆS  18  million,  but  results  in  savings  of
ˆS  3  million.  The  bulk  of  the  investment  is  for  a
non(cid:220)chemical  deburring  process.

for 

Since  the  planned  allocations  in  favour  of  a  particular
firm  are  to  be  financed  by  the  State  or  through  State
resources,  State  aid  is  involved.

Regional  investment  under  Phase  V  totals  ˆS  2(cid:216)229
million,  divided  among  the  following  four  categories  (in
ˆS  million):

The  aid  is  intended  for  a  firm  that  manufactures  motor
vehicle  engines  and  thus  operates  in  the  motor  industry
within  the  meaning  of  the  Community  framework  on

16.1.98

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C  12/7

State  aid  to  the  motor  vehicle  industry(cid:216)(˛).  In  addition,
the  total  costs  of  the  assisted  project  is  ECU  17  million
(ˆS  [.(cid:216).(cid:216).(cid:129)  million  are  equivalent  to  approximately  ECU
[.(cid:216).(cid:216).(cid:129)  million  under  the  monthly  ECU  exchange  rate
applicable  at  the  time  of  notification  [June  1996(cid:129)).

The  programme  of  support  within  the  meaning  of  Article
1(cid:216)b(cid:216)(1)  of  the  1977  Guarantee  Law  was  approved  by
EFTA  on  28  December  1994,  on  condition  that  each
project  for  which  aid  was  proposed  had  to  be  notified;
this  condition  has  been  complied  with  in  the  present
case.  Aid  granted  in  accordance  with  the  Land  of  Upper
Austria’s  General  Guidelines  on  assistance  from  Land
funds  has  to  be  notified  on  an  ad  hoc  basis.  The  allo(cid:220)
cation  which  according  to  the  Austrian  authorities,  has
been  earmarked  by  the  Steyr  local  authority  is  likewise
aid  requiring  ad  hoc  notification.

The  Austrian  authorities  complied  with  Article  93(cid:216)(3)  of
the  EC  Treaty  by  notifying  the  planned  aid  for  the
EMW  project 
the
Community  framework  in  State  aid  to  the  motor  vehicle
industry.

in  accordance  with 

in  Steyr 

For  the  notified  research  and  development  work  the
industrial
intensities  apply:  50(cid:216)% 
following  aid 
research  and  an  average  (weighted)  27,7(cid:216)%  for  precom(cid:220)
petitive  development.  No  aid 
for
product  development.

is  being  granted 

for 

The  aid  for  BMW  planned  by  the  Austrian  authorities
satisfies  the  criteria  laid  down  in  Article  92(cid:216)(1)  of  the  EC
Treaty  and  Article  61(cid:216)(1)  of  the  EEA  Agreement.  The
notified  aid,  which  constitutes  a  not  inconsiderable  part
of  the  project  funding,  threatens  to  distort  competition  in
the  EU  by  granting  BMW  more  favourable  treatment
than  other  firms  not  receiving  aid.  In  addition,  there  is
extensive  trade  between  the  Member  States  on  the
market  for  motor  vehicle  engines.

Article  92(cid:216)(2)  stipulates  certain  types  of  aid  that  are
compatible  with 
the  nature,
the  EC  Treaty. 
geographical  location  and  objectives  of  the  aid  are  taken
into  consideration,  none  of  the  subparagraphs  of  that
Article  can  be  applied  to  the  project.

If 

In  order  to  be  able  to  assess  whether  the  planned  aid  is
compatible  with  the  common  market  on  the  basis  of  one
of  the  derogations  contained  in  Article  92(cid:216)(3),  the  notifi(cid:220)
cation  must  be  examined 
the
Community  framework  on  State  aid  to  the  motor  vehicle
industry  and  with  the  Commission’s  assessment  criteria
depending  on  the  objectives  being  pursued,  i.e.:

in  accordance  with 

-(cid:217)as  regards  research  and  development,  in  accordance
with  the  Community  framework  for  State  aid  for
research  and  development(cid:216)(ˇ),

-(cid:217)as 

regards 

training, 

the
Community  framework  on  State  aid  to  the  motor
vehicle  industry,

in  accordance  with 

The  planned  aid  for  training  totals  an  eligible  amount  of
ˆS  59  million  excluding  wage  and  salary  costs  for
apprentices,  which  may  not 
support.  The
proposed  intensity  is  50(cid:216)%  for  the  training  of  apprentices
and  25(cid:216)%  for  the  training  of  existing  staff 
in  new
applications.  The  weighted  intensity  is  33,9(cid:216)%.

receive 

for 

-(cid:217)as  regards  regional  assistance,  in  accordance  with  the
criteria 
the  mobile
regional  aid,  whereby 
investment  is  examined,  on  the  basis  of  a  cost(cid:220)benefit
analysis,  to  see  whether  the  proposed  aid  intensity  is
in  proportion  to  the  disadvantages  of  the  recipient’s
location,

The  Austrian  authorities  planned  aid  with  10(cid:216)%  intensity
for  innovative  investment.

-(cid:217)as  regards  innovative  investment,  in  accordance  with
the  Community  framework  on  State  aid  to  the  motor
vehicle  industry,

The  Austrian  authorities’  stated  regional  aid  intensity  is
14,2(cid:216)%  gross  grant  equivalent.  The  Commission  has
based  its  assessment  on  the  discounted  value  of  the  aid  to
be  paid,  i.e.  ˆS  202,8  million  at  a  nominal  value  of
ˆS  228,8  million.  Taking  into  account  the  investment
eligible  for  regional  aid,  the  discounted  aid  intensity  is
13,3(cid:216)% 
the  original
maximum  aid  intensity  is  23(cid:216)%  gge.

in  an  assisted  area 

in  which 

environmental(cid:220)protection 

enables
The 
significant 
in  fields  where
there  are  no  legal  standards.  The  nominal  intensity  of  the
aid  was  set  at  30(cid:216)%.

in  protection 

improvement 

investment 

-(cid:217)as  regards  environmental  protection,  in  accordance
with  the  Community  guidelines  on  State  aid  for
environmental  protection(cid:216)(—).

In  the  Community  framework  on  State  aid  to  the  motor
vehicle  industry  the  Commission  declares  that  it  will
adopt  a  positive  attitude  towards  R&D  aid.  Within  the
meaning  of  the  Community  framework  for  State  aid  for
research  and  development,  it  is  above  all  essential  to
industrial  research
distinguish  between  basic  research, 
and  precompetitive  development;  the  risk  of  the  aid
distorting  competiton  increases  the  closer  the  R&D  is  to
the  market.

(˛)(cid:217)OJ  C  123,  18.5.1989;  OJ  C  36,  10.2.1993;  and  C  284,

28.10.1995  (latest  version).

(ˇ)(cid:217)OJ  C  45,  17.2.1996,  p.  5.
(—)(cid:217)OJ  C  72,  10.3.1994.

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16.1.98

Under  points  5.3  and  5.5  of  the  Community  R&D
framework, 
for
industrial  research  and  precompetitve  development  are,
respectively,  50(cid:216)%  and  25(cid:216)%  of  eligible  costs.

the  acceptable  gross  aid 

intensities 

The  aid  for  the  project  has  a  gross  intensity  of  50(cid:216)%  for
the  industrial  research  and  of  30(cid:216)%,  25(cid:216)%  or  0(cid:216)%  for  the
work  categorized  by  the  Austrian  authorities  as  precom(cid:220)
petitive  development.

Under  point  5.10.2  of  the  Community  framework  for
State  aid  for  research  and  development,  a  5(cid:216)%  bonus  is
possible,  up  to  the  ceilings  stipulated  in  point  5.10.6,  if
the  research  project  is  undertaken  in  an  area  as  defined
in  Article  92(cid:216)(3)  of  the  EC  Treaty.  The  Steyr  area  is
categorized  as 
the
permissible  maximum  intensities  are  increased  to  55(cid:216)%
for  the  industrial  research  and  30(cid:216)%  for  the  precom(cid:220)
petitive  development.  This  is  in  accordance  with  the
limits  set  in  point  5.10.6.  Thus  the  proposed  intensities
are  in  accordance  with  the  Community  framework  for
State  aid  for  research  and  development.

such  an  area.  Consequently, 

As  far  as  the  aid  for  industrial  research  is  concerned,  the
eligible  costs  are  in  accordance  with  Annex  II  of  the
Community  R&D  framework.  After  scrutinizing  the
details  of  each  subproject  notified  as  industrial  research,
the  Commission,  assisted  by  its  independent  experts,  has
concluded  the  these  projects  correspond  to  the  definition
contained  in  the  Community  R&D  framework,  since  the
research  to  be  undertaken  is  thorough  and  structured
and  aimed  at  achieving  significant  technological  progress
in  each  subproject.

With  regard  to  the  aid  for  precompetitive  development
(formerly  applied  research),  the  eligible  costs  likewise
satisfy  Annex  II  of  the  Community  R&D  framework.
The  Commission  interprets  precompetitive  development
industrial
as  meaning  the  shaping  of  the  results  of 
research  into  a  plan,  arrangement  or  design  for  new,
altered  or 
improved  products,  processes  or  services,
whether  they  are  intended  to  be  sold  or  used,  including
the  creation  of  an  initial  prototype  which  could  not  be
used  commercially.  The  details  provided  by  the  Austrian
authorities 
letter  dated  9  December  1996  and
supplemented  during  the  visit  to  Brussels  on  7  March
1997  demonstrate  that  the  subprojects  specified  in  the
notification  enable  the  results  of  previous  research  work
to  be  converted  into  new  products  and  processes,  up  to
and  including  the  production  of  a  prototype  not  suitable
for  commercial  use.

in  a 

The  eligible  costs  of  the  investment  in  the  development
centre  also  satisfy  Annex  II  to  the  Community  R&D

framework.  However,  some  items  of  equipment  have  a
lifespan  that  extends  beyond  the  period  of  the  project.
Consequently,  the  Commission  takes  the  view  that  only
the  depreciations  made  in  Phase  V  of  the  R&D  work  are
compatible  with  the  EC  Treaty.  The  ˆS  130  million
investment  in  the  development  centre  is  directly  linked  to
the  industrial  research  and  precompetitive  development
projects  described  above.

precompetitive  development, 

The  Austrian  authorities  have  pointed  out  several  times
that,  in  thier  opinion,  part  of  the  product  development  is
but  without
actually 
substantiating  this  claim  in  detail.  They  add  that,  for
purely  budgetary  reasons,  no  subsidy  was  planned  for
this.  The  Commission  considers  the  activities  described
under  ""product  development’’  to  be  competitive  work,
since  it  mainly  concerns  the  adaption  of  new  engines
[.(cid:216).(cid:216).(cid:129)  to  vehicles.  The  work  goes  beyond  the  stage  of
precompetitive  development  and  pilot  or  demonstration
projects.  Consequently,  under  the  Community  R&D
framework  no  aid  may  be  granted  for  this  product  devel(cid:220)
opment  work.  Moreover,  the  Commission  takes  the  view
that  the  competitive  work  undertaken  in  Steyr  during
Phase  V  does  not  contain  any  innovative  aspects,  since  it
is  a  logical  continuation  of  the  precompetitive  devel(cid:220)
opment  work  undertaken  during  Phase  IV.  The  Austrian
individual
authorities  have  never  maintained 
elements  of 
the
into 
competitive  work.

that 
integrated 

innovation 

are 

Point  6.1  of  the  Community  R&D  framework  stipulates
that  State  aid  must  constitute  an  incentive  for  the  firm  to
undertake  R&D 
its  normal
that 
day(cid:220)to(cid:220)day  operations.

in  addition 

to 

is 

According  to  the  Austrian  authorities,  the  number  of
staff  and  the  expenditure  at  the  development  centre  in
Steyr  are  being  considerably 
increased  between  1995
(end  of  Phase  IV)  and  1997  (Phase  V)  [.(cid:216).(cid:216).(cid:129).  As  a
percentage  of  turnover  with  diesel  engines,  R&D  expen(cid:220)
diture  [.(cid:216).(cid:216).(cid:129).

that 

The  letter  dated  22  April  1997  lists  individually  all  R&D
projects  that  the  BMW  group  is  carrying  out  in  Steyr.  In
agreement  with  its  independent  experts,  the  Commission
considers 
the  projects  connected  directly  and
exclusively  with  adaption  to  the  EU(cid:220)3  standards  have
been  taken  out  of  the  eligible  costs  because  they  do  not
satisfy  the  additionality  criterion.  While  the  work  on  the
further  development  of  a  lightweight  component  (ˆS  16
million)  and  the  adaption  to  [.(cid:216).(cid:216).(cid:129)  diesel  engines  with  the
aim  of  devising  a  minimal  consumption  [.(cid:216).(cid:216).(cid:129)  concept
(ˆS  11  million)  contribute  indirectly  to  a  reduction  in
harmful  exhaust  gases,  they  have  a  more  widespread
effect  than  just  adaption  to  the  EU(cid:220)3  standards  since
they  are  intended  to  enable  the  weight  and  consumption
of  vehicles  to  be  reduced.  BMW  is  not  required  to

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undertake  such  research  work,  but  is  carrying  it  out  in
addition  to  the  R&D  work  occuring  in  the  course  of  its
day(cid:220)to(cid:220)day  operations.

Moreover,  under  point  6.2  of  the  Community  R&D
framework  proposed  aid  may  also  be  permissible  if  it
contributes  towards  the  realization  of  a  research  project
that  would  have  been  less  ambitious  without  aid.  The
development  of  the  Lean  NOx  (cid:216)Catalyst  (costing  ˆS  106
million)  is  clearly  aimed  at  going  beyond  the  EU(cid:220)3
standards  and  considerably  anticipating  future  environ(cid:220)
mental(cid:220)protection  objectives.  Consequently, 
the
Commission’s  view  BMW  could  not  carry  out  an  equally
ambitious  precompetitive  development  project  without
State  aid.  After  all,  the  work  being  carried  out  by  BMW
carries  special  risks  owing  to  its  ambitious  objective,
since  some  of  the  subprojects  being  supported  might  not
lead  to  findings  that  can  be  applied  practically  in  the
motor  industry.

in 

effect 

the  Commission  considers 

that 
required  under  point  6  of 

the
Consequently, 
incentive 
the
Community  R&D  framework  is  present  in  the  R&D
measures  undertaken  by  BMW  as  part  of 
industrial
research  and  genuine  precompetitive  development.

it  no 

In  the  following  table  the  compatible  R&D  aid  for  the
individual  categories  is  listed  once  again,  with  BMW’s
classification  being  followed  for  the  sake  of  simplicity,
although 
the  current
longer  corresponds 
Community  framework  for  State  aid  for  research  and
development.  The  applied  research  and  the  investment  in
the  development  centre  count  as  precompetitive  devel(cid:220)
opment.  In  the  Commission’s  opinion,  the  product  devel(cid:220)
opment  work  contitutes  competitive  activity  that  is  not
eligible  for  R&D  subsidies.

to 

Description

Project  costs

Basis  for  support

Aid  intensity

Permissible  aid

(in  ˆS  million)

Industrial  research

Applied  research

Investment  in  the
Development  Centre

Product  development

47

186

130

[.(cid:216).(cid:216).(cid:129)

[.(cid:216).(cid:216).(cid:129)

Total(cid:216)

27

106

122

0

255

50(cid:216)%

25(cid:216)%

30(cid:216)%

0(cid:216)%

30(cid:216)%

13,5

26,5

36,6

0(cid:216)(cid:217)

76,6

The  R&D  aid  of  ˆS  76,6  million  qualifies  for  the
derogations  contained  in  Article  92(cid:216)(3)(cid:216)(c)  of  the  EC
Treaty  and  Article  61(cid:216)(3)(cid:216)(c)  of  the  EEA  Agreement,
since  it  is  in  accordance  with  the  Commission’s  policy  on
aid  for  R&D  and  for  the  motor  industry.

The  Commission  has  a  generally  positive  attitude
towards  training,  retraining  and  conversion  programmes.
However,  aid  for  such  programmes  must  be  examined  in
order  to  ensure  that  it  does  not  simply  alleviate  the  cost
burden  which  companies  would  normally  have  to  bear.
In  particular,  the  Commission  must  ensure  that  the
training  measures  correspond  to  genuinely  qualitative
changes  in  the  required  qualifications  of  the  labour  force
and  relate  to  a  significant  proportion  of  the  workers,  so
that  it  can  be  assumed  that  the  measures  are  intended  to
safeguard  employment  and  develop  new  employment
possibilities  for  persons  at  risk  of  unemployment.

in  a  genuine 

and  22  April  1997,  it  can  be  inferred  that  (a)  the  planned
training  results 
the
employees’  skills,  as  shown  by  the  programme  submitted
to  the  Commission,  and  (b)  a  considerable  proportion  of
the  employees  at  the  Steyr  plant  are  affected,  since  1(cid:216)500
of  the  total  workforce  of  around  2(cid:216)200  are  receiving
additional  training.

improvement 

in 

The wages and salaries of the staff to be trained are rightly
excluded  from  the  basis  for  support  and  the  costs  are
broken  down  by  type  of  training  measure:  ˆS  21  million
for  the  training  of  apprentices  and  ˆS  38  million  for
practical  training.  The  Commission  has  satisfied  itself  that
the  training  programmes  correspond  the  the  qualifications
described.

In  particular  from  the 
information  supplied  by  the
Austrian  authorities  in  letters  dated  9  December  1996

As  a  rule,  in  the  motor  industry  the  Commission  permits
aid  intensities  of  50(cid:216)%  for  apprentice  training  and  25(cid:216)%
for  practical  training.

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16.1.98

Description

Project  costs

Basis  for  support

Aid  intensity

(in  ˆS  million)

Permissible
aid

Apprentice  training

Practical  training

Apprentice  wages  and  salaries

Total(cid:216)

21

38

30

89

21

38

0

59

50(cid:216)%

25(cid:216)%

0(cid:216)%

34(cid:216)%

10,5

9,5

0(cid:216)(cid:217)

20,0

Consequently,  the  ˆS  20  million  notified  by  the  Austrian
authorities  is  compatible  with  the  EC  Treaty.

When  examining  regional  aid  to  the  motor  industry,  the
Commission’s  usual  practice  is  to  proceed  as  follows(cid:216)((cid:209)):

It 

to  weigh  up 

regional  development. 

The  Commission  is  aware  that  the  extension  of  existing
industrial  facilities  in  disadvantaged  areas  can  contribute
towards 
therefore  has  a
generally  positive  attitude  towards  investment  aid  that  is
granted  in  order  to  help  overcome  structural  handicaps
the  Community.  When  assessing
in  such  areas  of 
regional  aid  proposals,  the  Commission  must  have  the
opportunity 
the  regional  development
benefits  (such  as  a  contribution  to  the  sustained  devel(cid:220)
opment  of  the  region  through  the  creation  or  retention
of  long(cid:220)term  jobs  and  economic  integration  at  local  and
Community  level)  against  any  adverse  effects  on  the
sector  as  a  whole  (such  as  the  creation  or  retention  of
considerable  overcapacity).  The 
this
assessment  is  not  to  call  into  question  the  fundamental
the
importance  of 
Community,  but  rather  to  ensure  that  other  aspects  of
the  Community  interest,  such  as  the  development  of  the
sector  at  Community 
into
account.

likewise  taken 

for  cohesion 

regional  aid 

purpose  of 

level,  are 

in 

The  investment  project  will  enable  around  250  jobs  (the
number  of  jobs  in  the  mobile  workshops)  to  be  safe(cid:220)
guarded,  out  of  a  total  of  approximately  2(cid:216)300  jobs  at
the  Steyr  plant.  In  addition,  Phase  V  contributes  towards
guaranteeing  the  plant’s  economic  viability  for  a  number
investment 
of  years.  BMW’s 
thus  constitutes  an
the  economic  devel(cid:220)
towards 
important  contribution 
opment  of  the  assisted  area.  The  Commission  concludes
from  this  that  the  aid  for  the  partial  funding  of  this
project  will  assist  the  development  of  the  Steyr  area.

The  costs  for  mobile  investment  notified  by  the  Austrian
authorities  are  eligible  for  regional  aid  according  to  the
Community  framework.

-(cid:217)first, 

it  examines  whether  regional  aid  may  be
granted,  i.e.  whether  the  area  concerned  is  eligible
for  aid  under  Community  law  (normally  within  the
framework  of  existing  rules  on  State  aid)  and
whether  the  investor  has  the  option  of  choosing  an
alternative  location  for  his  project,  so  that  the  need
for  aid  can  be  substantiated  by  the  mobility  of  the
project,

it 

is 

is 

that 

itself 

intended 

to  whose 

the  Commission  satisfies, 

-(cid:217)second,  with  reference  to  the  mobile  parts  of  the
project 
the
amount  of  aid  is  in  proportion  to  the  regional  diffi(cid:220)
to
resolution 
culties 
tried(cid:220)and(cid:220)tested  method  of  cost(cid:220)
contribute.  The 
benefit 
a
applied  here.  Through 
analysis 
comparison  of  the  costs  incurred  by  the  investor  in
the  course  of  implementing  his  project  in  the  assisted
in  a  central,
area  concerned  with 
non(cid:220)assisted  area,  the  area(cid:220)specific  disadvantages  are
ascertained.  The  Commission’s  usual  practice  hitherto
has  been  to  accept  all  regional  aid  that  at  least
corresponds 
disadvantages
the 
connected  with  investment  in  the  assisted  area,

the  costs 

locational 

to 

the 

investor 

-(cid:217)third,  it  examines,  where  applicable,  whether  top(cid:220)ups
may  be  granted.  These  consist  of  increases  in  aid
intensity  designed  to  serve  as  an  additional  incentive
for 
the  assisted  area
invest 
concerned.  These  top(cid:220)ups  are  normally  approved
where  the  investment  does  not  contribute  towards
worsening  capacity  problems  in  the  sector  concerned.
In  such  a  case,  the  aid  is  strictly  limited  to  net
compensation  for  the  regional  disadvantages,

to 

in 

increase 

The  investment  mainly  concerns  new  products,  linked
with  an 
in  productivity,  above  all  due  to
additional  supplies  to  Rover  and  to  the  plant  in  Spart(cid:220)
anburg  (USA).  The  aspects  concerning  the  modern(cid:220)
ization  of  existing  products  were  excluded,  since  they
proved  to  be  not  mobile.

((cid:209))(cid:217)See,  for  example,  the  following  cases:  Ford/VW  (OJ  C(cid:216)257,
3.10.1991;  Opel  Eisenach,  (OJ  C(cid:216)43,  16.2.1993,  p.  14;  Fiat
Mezzogiorno  (OJ  C(cid:216)37,  11.2.1993,  p.  15);  Jaguar  (OJ
C(cid:216)201,  23.7.1994,  p.(cid:217)4);  FASA  Renault 
(OJ  C(cid:216)267,
14.10.1995,  p.  13);  Ford  Genk,  OJ  C(cid:216)5,  10.1.1996,  p.  5;  VW
Sachsen  (OJ  L(cid:216)308,  29.11.1996,  p.  46).

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-(cid:217)the  sum  of  the  amounts  ascertained  in  the  last  two
steps  constitutes  the  total  amount  of  aid  that  can  be
approved  by 
is
normally  discounted  and  expressed  as  a  percentage  of
the  investment  eligible  for  support,  in  order  to  be
able  to  compare  it  with  the  gross  grant  equivalent.

the  Commission.  The  amount 

This  procedure  was  explained  to  the  representatives  of
the  BMW  group  when  the  Commission  representatives
visited  Steyr  on  23  October  1996.

is 

located 

in  Steyr 

The  BMW  plant 
in  the  Steyr(cid:220)
Kirchdorf  area,  Upper  Austria,  an  assisted  area  within
the  meaning  of  Article  92  (3)  (c)  of  the  EC  Treaty.  In
that  area,  regional  aid  with  a  gross  grant  equivalent  of
up  to  23(cid:216)%  may  be  approved.  The  cumulative  regional
aid  notified  by  the  Austrian  authorities  amounts  to  a
gross  grant  equivalent  of  14,2(cid:216)%  (or  13,3(cid:216)%  after
discounting)  and  therefore 
lies  below  the  admissible
maximum.

In  order  to  substantiate  the  need  for  regional  aid,  the
Austrian  authorities  had  to  prove  the  mobility  of  the
project,  i.e.  show  that  there  is  an  economically  viable
alternative  location  for  the  project  or  parts  thereof.  If  the
planned  investment  cannot  be  carried  out  at  another  new
or  previously  existing  plant  of  the  group,  then  the  firm  is
compelled  to  carry  out  the  project  at  the  only  possible
location,  with  or  without  aid.  However,  where  appro(cid:220)
priate,  innovation  aid  may  be  granted  for  the  non(cid:220)mobile
parts  of  a  regional  investment.

the 

following 

Accordingly,  the  Austrian  authorities  divided  up  the
categories:  mobile;
investment 
into 
inno(cid:220)
non(cid:220)mobile  but 
vative.  The  Austrian  authorities  did  not  categorize  any
mobile  part  of  the  project  as  innovative.  The  investment
that  is  neither  mobile  nor  innovative  is  not  eligible  for
aid.

innovative;  neither  mobile  nor 

from  a 

In  the  case  of  BMW  Steyr,  part  of  the  investment  is
apparently  not  mobile  since 
technical  and
financial  point  of  view  it  would  be  inappropriate  to
choose  a  location  other  than  Steyr.  As  explained  in  the
letter  of  9  December  1996,  five  subprojects,  with  an
investment  allocation  of  ˆS  618  million,  are  classified  as
non(cid:220)mobile:  modernization  of 
existing  production
facilities  for  diesel  engines  (e.g.  for  the  manufacture  of
housings),  investment  in  connection  with  four(cid:220)cylinder
petrol  engines,  two  programmes  for  six(cid:220)cylinder  petrol
engines  [.(cid:216).(cid:216).(cid:129)  and  a  structural  measure  (new  conveyor
system).  The  remaining  subprojects  are  mobile;  they
could  also  be  carried  out  in  Regensburg,  Munich  or
Landshut.  This  was  confirmed  by  the  Commission’s
independent  experts  (PLI  -  Price  Waterhouse).

The  Regensburg  plant,  which  belongs  to  the  same  group
and  is  located  in  a  non(cid:220)assisted  area,  was  chosen  by
BMW,  with 
the
purpose  of  comparison,  because  this  project  could  most

the  Commission’s  agreement, 

for 

in  Bavaria.  In 

clearly  be  carried  out  in  Regensburg.  The  Commission
also  noted  that  Regensburg,  Landshut  and  Munich  are
located 
the
additional  costs  arising  due  to  the  structural  weaknesses
in  the  Steyr(cid:220)Kirchdorf  assisted  area  can  best  be  ascer(cid:220)
tained  by  comparing  the  project  with  an  identical  project
carried  out  in  a  non(cid:220)assisted  area.

the  Commission’s  view, 

its 

the  Commision  asked 

Accordingly, 
independent
experts  to  ascertain,  by  means  of  a  detailed  cost(cid:220)benefit
analysis,  the  net  extra  costs  that  would  arise  if  the  mobile
workshops  provided  for  in  the  project  were  set  up  in
Steyr  instead  of  in  Regensburg.  Such  additional  costs  can
be  traced  back  both  to  additional  investment  costs  and  to
additional  operating  costs  in  the  first  three  years  of
operation  (familiarization  with  new  work  and  increasing
the  work  tempo)(cid:216)((cid:210)).  In  the  case  in  question,  the  disad(cid:220)
vantage  assessed  by  the  Commission  and  its  independent
experts 
the
Regensburg  plant  has  a  better 
infrastructure  for  the
implementation  of  the  project  than  the  Steyr  plant.
However,  labour  costs  are  lower  at  the  Steyr  plant.  The
resulting  advantage  is  seen  once  the  investment  disad(cid:220)
vantages  have  been  subtracted.  The  final  results  show
that  the  discounted  cost  disadvantages  amount  to  14,2(cid:216)%
of  the  investment.

investment 

concerns 

costs, 

since 

the 

Since  the  discounted  cost  disadvantages,  at  14,2(cid:216)%  of
the 
investment,  are  higher  than  the  discounted  aid
intensity  of  13,3(cid:216)%,  no  additional  payment  is  necessary.

the 

that 

The  Commission  considers 
regional  aid
concerned  is  compatible  with  the  EC  Treaty  on  the  basis
of  Article  92  (3)  (c),  since  the  aid  intensity  provided  for
by  the  Austrian  authorities  does  not  exceed  the  regional
cost  disadvantage  and  the  project  therefore  has  only  a
limited  effect  on  the  sector.

In  accordance  with  the  Community  framework  on  State
aid  to  the  motor  vehicle 
industry,  the  Commission
adopts  a  strict  attitude  to  modernization  and  innovation
is
aid. 
examined  to  determine  whether  it  really  relates  to  the
introduction  of  genuinely 
innovative  products  or
processes  at  Community  level.

In  particular,  proposed  aid 

innovation 

for 

In  accordance  with  the  Austrian  authorities’  two  letters
of  9  December  1996  and  22  April  1997,  aid  is  proposed
to  fund  material  investment  in  order  to  support  BMW  in
its  innovation  effort.  The  projects  in  question  are  the
three 
of
six(cid:220)cylinder  petrol  engines  and  an  integrated  production
planning  system,  for  which  a  total  amount  of  ˆS  130
million  is  earmarked.

cold(cid:220)testing 

process’’ 

projects, 

""crack 

((cid:210))(cid:217)The  Commissin’s  assessment  of  the  regional  disadvantages  is
based  on  information  from  BMW  and  independent  sources.

C  12/12

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The  Commission  asked  its  independent  experts  to  assess
the  technical  aspects  of  the  project  classified  as  inno(cid:220)
vative  by  the  Austrian  authorities  and  to  compare  them
with  the  current  state  of  the  art  in  the  European  motor
industry.  The  independent  experts  concluded  that  the
integrated  production  planning  system  part,  involving  an
investment  of  ˆS  69  million,  is  based  on  innovative  tech(cid:220)
niques;  moreover,  the  express  aim  of  this  subproject  is  to
pass  on  the  results  of  the  work  to  all  partners  of  SAP.  As
regards  the  equipment  for  cold(cid:220)testing  of  six(cid:220)cylinder
petrol  engines,  the  Commission  likewise  acknowledges
the  innovative  character  of  the  project  owing  to  the
novelty  of  such  tests  and  the  risks  connected  with  the
laser(cid:220)
project.  Cracking  steel  connecting  rods  using 
perforated  fracturing  grooves  constitutes  a  genuine  inno(cid:220)
vation,  since  the  process  enables  steel  components  to  be
worked  instead  of  castings  (as  practised  by  some  manu(cid:220)
facturers).  This  change  in  material  constitutes  a  major
further  development  of  the  process.  All  the  specified
investment  entails  engineering  or  process(cid:220)development
costs  (ˆS  8  million).  The  maximum  admissible  aid
intensity  for  innovation  is  10(cid:216)%.

Description

Investment
eligible  for
support

Aid  inten(cid:220)
sity(cid:216)(*)

Permissible
aid

(in  ˆS  million)

Crack  process

Cold(cid:220)testing

PPS

Engineering

19

42

69

28

Total(cid:216)

158

10(cid:216)%

10(cid:216)%

10(cid:216)%

10(cid:216)%

10(cid:216)%

1,9

4,2

6,9

2,8

15,8

(*)(cid:217)The  intensity  of  innovation  aid  is  restricted  to  10(cid:216)%  in  line  with
Commission  practice:  see  MCC  Swatch  (OJ  C  391,  28.12.1996,
p.  11).

For  the  purposes  of  innovation,  investment  aid  of  ˆS
15,8  million  is  compatible  with  the  EC  Treaty  on  the
basis  of  the  derogations  contained  in  Article  92  (3)  (c)  of
the  EC  Treaty  and  Article  61  (3)  (c)  of  the  EEA
Agreement.

for 

Within  the  meaning  of  the  Community  framework  on
State  aid  to  the  motor  vehicle  industry,  the  development
of  less  polluting  and  energy(cid:220)saving  vehicles  is  a  standard
requirement 
imposed  by
Community  legislation,  and  should  therefore  be  financed
from  the  company’s  own  resources.  Aid  for  general
pollution  control,  for  example,  granted  under  the  terms
of 
framework,  may  still  be
accteptable  under  the  existing  aid  schemes.

the  environmental  aid 

industry,  parly 

the 

In  the  case  of  investment  aid  to  reduce  or  eliminate
pollution  and  nuisances  or  to  adapt  production  methods

in  order  to  protect  the  environment,  the  eligible  costs
must,  in  accordance  with  the  Community  guidelines  on
State  aid  for  environmental  protection(cid:216)((cid:211)),  be  strictly
confined  to  the  extra  investment  costs  necessary  to  meet
environmental  objectives.  General  investment  costs  not
attributable 
environmental  protection  must  be
excluded.

to 

Aid  for  investment  that  allows  significantly  higher  levels
of  environmental  protection  to  be  attained  than  those
required  by  mandatory  standards  may  be  authorized  up
to  a  maximum  of  30(cid:216)%  gross  of  the  eligible  costs  under
the  Community  guidelines.  In  fields  in  which  there  are
no  mandatory  standards  or  other  legal  obligations  on
firms  to  protect  the  environment,  firms  undertaking
investment 
their
environmental  performance  or  match  that  of  firms  in
other  Member  States 
in  which  mandatory  standards
apply  may  be  granted  aid  at  the  same  levels  and  subject
to  the  same  condition  of  proportionality  as  for  going
beyond  existing  standards,  i.e.  up  to  a  maximum  of  30(cid:216)%
gross  of  the  eligible  costs.

that  will  considerably 

improve  on 

In  this  context  the  Commission  asked  its  independent
experts  to  examine  the  following:

-(cid:217)whether  the  costs  of  the  investment  aimed  at  environ(cid:220)
mental  protection  contain  no  general  expenditure;

-(cid:217)whether 

the 

in
mandatory  national  or  Community  standards  being
met  or  surpassed.

improvements 

expected 

result 

independent  experts  concluded  that  the  planned
The 
investment  will 
improve  environmental
protection  in  an  area  in  which  no  mandatory  standards
exist.

significantly 

The  Community  guidelines  on  State  aid  for  environ(cid:220)
mental  protection  also  stipulate,  however,  that  the  cost
savings  resulting  for  the  investor  from  the  project  must
be  taken  into  account(cid:216)((cid:212)).  These  are  to  be  deducted  from
the  nominal  extra  costs,  in  order  to  arrive  at  the  net
extra  costs  and  hence  the  eligible  costs.  This  aspect  was
explained  to  the  Austrian  representatives  and  BMW  at
the  meeting  on  7  March  1997  in  Brussels.  In  the  letter
investment
of  22  April  1997  the  net  value  of  this 

((cid:211))(cid:217)OJ  C  72,  10.3.1994,  p.  3.
((cid:212))(cid:217)This  point  is  also  referred  to  in  the  DG  IV  working  paper
on  the  revision  of  those  Community  guidelines  tabled  at  the
multilateral  meeting  on  15  January  1997:  cost  savings  or
other  advantages  derived  by  the  capital  provider  on  the  basis
of  the  investment  are  to  be  excluded.

16.1.98

EN

Official  Journal  of  the  European  Communities

C  12/13

is  given  as  ˆS  15  million,  taking  into  account  the  savings
made  during  a  seven(cid:220)year  lifecycle  of  the  equipment
[.(cid:216).(cid:216).(cid:129).  After  detailed  examination,  the  Commission  and  its
independent  experts  are  convinced  that  this  assessment  is
satisfactory  and  that  it  also  substantiates  the  need  for
aid,  since  the  investment  is  not  covered  by  the  savings  in
operationg  costs  alone.  Consequently,  the  eligible  costs
amount  to  ˆS  15  million  with  a  maximum  aid  intensity
of  30(cid:216)%.

the  Commission  considers 

Consequently, 
the
environmental(cid:220)protection  aid  of  ˆS  4,5  million  specified
by  the  Austrian  authorities  in  the  notification  of  the
BMW  Steyr  case  is  compatible  with  the  implementing
provisions  of  the  relevant  Community  guidelines.

that 

adversely  affect  trading  conditions  to  an  extent  contrary
to  the  common  interest  and  hence  may  be  eligible  for
application  of  the  derogations  contained  in  Article  92  (3)
(c)  of  the  EC  Treaty  and  Article  61  (3)  (c)  of  the  EEA
Agreement.

Third  parties  who  prove  sufficient  interest  may  obtain  a
copy  of  this  letter.  Accordingly,  the  Commission  should
be  informed  within  seven  days  of  receiving  this  letter  if  it
is  thought  that  it  contains  any  sensitive  information  that
should  not  be  passed  on,  and  this  is  to  be  substantiated.
If  the  Commission  receives  no  comments  within  the
stipulated  period,  it  will  assume  agreement  to  the  publi(cid:220)
cation  of  the  full  text  of  this  letter.  Any  request  should
be  addressed  to:

Since  the  eligible  costs,  aid  intensity  and  observance  of
the  specific  criteria  set  out  in  the  relevant  Community
guidelines  correspond  to  Commission  policy  on  State
aid,  it  can  be  assumed  that  the  aid  concerned  does  not

European  Commission,
Rue  de  la  Loi/Wetstraat  200,
B(cid:220)1049  Brussel.’

Commission  communication  pursuant  to  Article  3  of  Commission  Regulation  (EC)  No  544/97
of  25  March  1997  introducing  certificates  of  origin  for  garlic  imported  from  certain  third
countries  (completion  by  these  countries  of  certain  administrative  cooperation  formalities  to
provide  evidence  of  the  origin  of  the  product)

(98/C  12/04)

Pursuant  to  Article  3  of  Regulation  (EC)  No  544/97(cid:216)(˛)  the  Commission  hereby  informs
importers  and  the  administrations  concerned  that  Iran  has  forwarded  to  the  European
Commission  imprints  of  the  stamps  used  by  the  Iranian  authorities,  and  the  names  and
addresses  of  the  Iranian  authorities  responsible  for 
issuing  and  receiving  requests  for
post(cid:220)clearance  checks  on  certificates  of  origin.  These  requirements  were  fulfilled  on  5  Novem(cid:220)
ber  1997.

(˛)(cid:217)OJ  L  84,  26.3.1997,  p.  8.