2000/271/EC: Commission Decision of 30 September 1998 on aid granted by Germany to SKET Verseilmaschinenbau GmbH (notified under document number C(1998) 3022) (Text with EEA relevance) (Only the German text is authentic)
Date: 1998-09-30
Institutions: European Commission
Subjects: Germany, State aid, aid for restructuring, bankruptcy, industrial restructuring, privatisation

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COMMISSION

COMMISSION DECISION

of 30 September 1998

on aid granted by Germany to SKET Verseilmaschinenbau GmbH

(notified under document number C(1998) 3022)

(Only the German text is authentic)

(Text with EEA relevance)

(2000/271/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

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

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

Having given the interested parties, pursuant to Article 93(2), a
period in which to submit their comments,

Whereas:

I

On 15 March 1995 the Commission decided to initiate
proceedings under Article 93(2) of the EC Treaty in respect of
State aid for SKET Schwermaschinenbau Magdeburg GmbH,
Magdeburg (SKET SMM) (1). The proceedings also concerned
i.e. Entstaubungstechnik Magde-
the SKET SMM subsidiaries,
burg GmbH, Magdeburg (ETM) and Drahtziehmaschinenwerk
Grüna GmbH, Chemnitz (DZM). The aid in question had been
received by SKET SMM before, and in the course of, its privati-
sation and restructuring. Previously, SKET SMM had already
received aid, to which the Commission had not objected (NN
46/93 and NN 95/93). The proceedings were given the number
C 16/95.

On 30 July 1996 the Commission decided to extend the C
16/95 proceedings to the State aid paid since the initiation
decision, which was not covered by that decision (2). The

investors (Oestmann & Borchert Industriebeteiligungen GbR)
had withdrawn from the restructuring plan at the end of 1995,
and a new plan with additional aid had been notified. The new
plan envisaged,
the creation of several successor
companies which would operate those profitable parts of the
SKET SMM operation which could be salvaged from the bank-
rupt company. SKET Verseilmaschinenbau GmbH was one of
the successor companies.

inter alia,

SKET SMM was forced in October 1996 to file for a Gesamtvoll-
(bankruptcy proceedings in the new
streckungsverfahren (GV)
Länder). The plan which was the subject of
the initiation
decision of 30 July 1996 had thus not been able to restore
SKET SMM to viability. On 26 July 1997 the Commission
adopted the negative final Decision 97/765/EC with regard to
the aid for SKET SMM (3). The GV did not apply to the two
subsidiaries ETM and DZM, which were transferred to the
Federal Office for Special Unification-related Tasks (the BvS).
Decision 97/765/EC terminated case C 16/95 in respect only of
that part of SKET SMM which was covered by the GV. The case
was therefore split into three separate parts, as follows: C
16a/95 for SKET SMM, C 16b/95 for ETM and C 16c/95 for
DZM.

To reflect the new reality that the successor companies to SKET
SMM were taking independent courses, each of the successor
companies was allocated a separate aid number to reflect this.
SKET Verseilmaschinenbau GmbH was allocated NN 124/97.
The present Decision relates only to SKET Verseilmaschinenbau
GmbH.

(1) OJ C 215, 19.8.1995, p. 8 andOJ C 298, 9.10.1996, p. 2.
(2) OJ C 298, 9.10.1996, p. 2.

(3) OJ L 314, 8.11.1997, p. 20.

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On 5 November 1997 the Commission decided to initiate the
Article 93(2) procedure in respect of aid measures to SKET
Verseilmaschinenbau GmbH and the file was assigned the case
number C 72/97. By letter dated 28 November 1997 (SG(97)
D/9912) the Commission advised Germany of its decision. The
contents of this letter were published in the Official Journal of
the European Communities on 18 March 1998 (4).

By letter dated 5 December 1997 (and registered as received on
the same date by the Commission), Germany advised the
Commission that
the privatisation of SKET Verseilmaschi-
nenbau GmbH had occurred and provided some details of the
privatisation. By letter dated 26 January 1998 (and registered as
received on 27 January 1998 by the Commission), Germany
replied to the Commission's letter of 28 November 1997 and
also provided additional details on the privatisation of SKET
Verseilmaschinenbau GmbH. The Commission submitted
further queries on 14 May 1998 to the German authorities,
who replied by letter dated 26 May 1998 (registered as received
on the same day by the Commission).

II

SKET Verseilmaschinenbau GmbH is based in Magdeburg,
Saxony-Anhalt, Germany.
In 1997 it employed some 35
persons, had a turnover of DEM 20 800 000 and a balance
sheet total of DEM 29 400 000.

SKET Verseilmaschinenbau GmbH was entered as a company
in the Magdeburg trade register on 8 November 1996 with a
share capital of DEM 50 000. The sole shareholder was the
BvS. On 22 November 1996, SKET Verseilmaschinenbau
GmbH entered into an agreement with the liquidator of SKET
SMM to take over various assets of the cable-making machinery
including second-hand
operation of SKET SMM. The assets,
office equipment, old software and intellectual property were
acquired at
their market value and paid for from money
awarded to SKET Verseilmaschinenbau GmbH by the BvS by
way of capital provision. The transfer was confirmed by a
notarially certified contract on 27 March 1997.

types made to meet

SKET Verseilmaschinenbau GmbH is an engineering company
specialising in the design and development of cable and wire
making machines of all
individual
customer requirements. It can complete entire systems on a
turnkey basis. Consequently, it provides all the services asso-
ciated with the development, design, supervision of manufac-
ture, construction and assembly,
installation and commis-
sioning of custom-built cable-making machinery. It is to be
noted that at the time of privatisation the firm engaged in all

(4) OJ C 83, 18.3.1998, p. 10.

stages involved in the manufacture of machinery and plants for
the production of cable, except that of actual manufacture. For
this, it relied on the services of a mechanical engineering firm.
Under the proposed restructuring plan it will acquire some
productive capacity.

The type of cable products which can be produced on the
machinery designed and developed by SKET Verseilmaschi-
nenbau GmbH range from steel wire, corded steel, stressed steel
cable for mechanical purposes such as for reinforcing tyres and
use in stressed concrete to copper and aluminium cable and
wire products for electronic communications or energy trans-
mission purposes such as in telephone lines, high voltage cable
and undersea cable.

III

The general market
for machine manufacture is extremely
diversified and the subsector for cable and wire making machi-
nery is dependent on the condition of the markets down-
stream. The general market
for machine manufacture was
affected by the recession at the end of 1994. Although growth
returned in 1995, the extent to which it may continue in
coming years is unclear. A clearer view of
the state and
prospects for the cable and wire making machinery subsector
can be gauged by reference to demand for cable and wire
products (5).

The market for cable- and wire-making machinery is world-
wide. This means that not only is there direct trade between
that undertakings in
Member States in these products but
different Member States are also competing for market shares
in third countries (6). Demand for this type of machinery is
dependent on the condition of downstream markets and,
because cable and wire are important both for communications
and energy transmission, demand is determined by the general
state of the economy. Demand for cabling and wire is also
particularly dependent on the state of the automotive industry.
In the long term, increased demand for energy and communi-
cations, coupled with deregulation, and an associated increase
in competing networks will ensure steady growth. However, it
is to be noted that the growth in demand for optical fibre will
mean that demand for metal-based wires in the telecommuni-
cations industry will not increase as much as in the past.
Geographically speaking, as a result of the changes in central
and eastern europe and growth in South-East Asia and the
People's Republic of China,
these areas are also becoming
increasingly important sales markets. The sector is also charac-
terised by a growing specialisation in high-tech products, with
customer service gaining in importance as a value-added
element. The sector was affected by the recession in 1992 to
1993, but the sector began its recovery in 1994 and growth
continued into 1995. The general upward trend should
continue from 1997 onwards (7).

Since the recovery in 1994, the relevant market has therefore
apparently not suffered from structural overcapacity despite the
impact of the recession.

(5) On the state of

the general machine manufacturing sector, see
Panorama of EU Industry 1997, Volume 2, pages 13-23 to 13-29.
see

trade with third countries,

(6) Intra-Community trade exceeds

Panorama of EU Industry 1997, Volume 2, page 15-5.

(7) On the state of the market for cable and wire, see Panorama of EU
Industry 1997, Volume 2, pages 15-3 to 15-7 and 15-4 to 15-17.

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IV

various products,

The economic environment in which SKET SMM was originally
designed to operate was that of a centralised command
In terms of product range, SKET SMM was a
economy.
conglomerate manufacturing
including
rolling mills, wire and cable producing equipment and
machines for processing oil seeds. Such a diverse and frag-
mented structure meant
that as its economic environment
changed into that of a competitive market, attempts to priva-
tise SKET SMM as a single economic unit undertaking met with
no success. The restructuring of the conglomerate had been
started early on, but had not been completed when the
Commission reached a negative decision regarding the aid
measures to SKET SMM notified in 1994. The measures also
concerned the potentially profitable
the
conglomerate, one of which was the cable-making machinery
operation. By the time SKET SMM filed for bankruptcy
proceedings in October 1996, Germany had modified its orig-
inal strategy and had resolved to extract the potentially profit-
able activities from the conglomerate, which were to be
continued as smaller, autonomous economic units.

components of

In order to achieve this, the BvS set up a commercially inactive
coordinating company, SKET Management- und Vertriebsge-
sellschaft GmbH (8), to supervise the restructuring and prepara-
tion for privatisation of five commercially autonomous compa-
nies, also owned by the BvS. All were small- or medium-sized
enterprises.
SKET Management- und Vertriebsgesellschaft
GmbH, acting on the instructions of the BvS, was entrusted
with the task of finding investors and negotiating the privatisa-
tion of the five salvaged undertakings. In April 1998, the last
the five companies was privatised and the process of
of
dismantling the SKET Management- und Vertriebsgesellschaft
GmbH began. The five salvaged businesses
(Auffanggesell-
schaften) are:

— SKET Maschinen- und Anlagenbau GmbH (9)

— SKET Walzwerkstechnik GmbH (10)

— SKET Ölsaatentechnik GmbH (later renamed Cimbria SKET

GmbH) (11)

— SKET Maschinenbau-EDV GmbH (12)

— SKET Verseilmaschinenbau GmbH.

(In addition to these, there are the two subsidiaries, ETM and
DZM, which were transferred to the BvS prior to the opening
of bankruptcy proceedings against SKET SMM.)

by

The purchase price of DEM 1 has been paid to the BvS. The
other obligations accepted by the purchaser as part of the
privatisation involve taking over by 31 August 1998 existing
in the amount of DEM 6 700 000 originally
guarantees
granted
lodged
the
BvS
the time of privatisation as a security
DEM 3 000 000 at
against this commitment), releasing the BvS from another guar-
antee of DEM 876 000 and a
to invest
DEM 6 500 000 in the restructuring of the company (secured
by 75 % penalty payments in the event of a failure to do so).
The investor may not distribute any profits or other sums from
SKET Verseilmaschinenbau GmbH before 31 December 2000.

commitment

investor

having

(the

The investor, Mr Johannes Erich Wilms, is the sole owner of
several small-
to medium-sized companies making up the
Wilms Group. The Group, which has its main office in
Menden, North Rhine-Westphalia, Germany operates in three
sectors: electric cable and connection manufacturing, environ-
mental technology (for example, technology for filtering and
sewage works) and machine construction. [...] (*). With the
exception of one Austrian subsidiary, the Group is entirely
based in Germany. The Wilms Group employs some 1 500
people.

VI

The original problems related to the operation of SKET Verseil-
maschinenbau GmbH when it was a component of SKET SMM
were a consequence of being part of an unwieldy and frag-
mented industrial conglomerate not run according to market
principles.

The first step in the restructuring programme was to separate
the cable machine operation from SKET SMM. In order to do
this,
the resources comprising the cable-making machine
production operation needed to be preserved for possible sepa-
ration from the failing SKET SMM, reorganised on a stand-
alone basis and then transferred to SKET Verseilmaschinenbau
GmbH, which would continue to implement the restructuring
measures. The new company acquired staff, machinery, tech-
nical equipment and office equipment from the liquidator of
SKET SMM. Thirty-five employees were involved and the equip-
ment included old office equipment (originally acquired for
DEM 1 000 000)
for
DEM 200 000) acquired for DEM 150 000 as well as intellec-
tual property rights, also acquired for DEM 150 000.

(originally

software

acquired

and

V

On 6 November 1997 an agreement for the sale of the shares
in SKET Verseilmaschinenbau GmbH was concluded between
the BvS, as vendor, and Mr
the
purchaser. The sale was on the basis of open public tender, the
purchaser's tender being the best offer submitted in response
thereto.

Johannes Erich Wilms,

A further problem concerned the acceptance by SKET Verseil-
maschinenbau GmbH, of five contracts originally awarded to
SKET SMM. Payment under the contracts had already been
made to SKET SMM in advance of their completion and the
sums then became part of the assets of the bankrupt company.
Consequently, SKET Verseilmaschinenbau GmbH will make a
loss on these contracts. However, from SKET Verseilmaschi-
nenbau GmbH's point of view, it must fulfil the contracts to
secure its customer base and commercial reputation.

(8) State aid case number NN 67/97.
(9) State aid case number C 69/97
(10) State aid case number C 70/97
(11) State aid case number NN 125/97
(12) Aid to this firm was approved by the Commission in May 1998

(Case number NN 126/97).

The final phases of the restructuring operation envisaged under
the restructuring plan consist of a strategic reorientation,
in
particular a shift to production, and full incorporation into the
Wilms Group.

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The strategic reorientation involved switching from a purely engineering operation to an operation which
includes a manufacturing capacity, so that SKET Verseilmaschinenbau GmbH can develop and deliver
turnkey systems with full service support from initial design and development through to final on-site
commissioning of installed systems. The acquisition of production capacity requires additional premises (at
an estimated cost of DEM 3 100 000) and an increase in the workforce to 50 in 2001. In addition, the
product range has been expanded to include extruder machines. The cost of the new equipment is
estimated at DEM 600 000. Entry into the market for the development and manufacture of extruders will
cost an estimated DEM 1 400 000. In addition, a simplified set of common components will be developed
to reduce costs. Parts of minimal importance for the operations or where quality need not be a major
consideration will be outsourced. Furthermore, the purchase of materials and components and final
production will be based to a greater extent on just-in-time strategies. The costs for promoting the
company's products are estimated at DEM 600 000. In addition, as it is important for this type of
operation to be able to demonstrate techniques and machinery to clients, an estimated further
DEM 800 000 is to be invested in constructing demonstration models and prototypes. On this basis, the
total cost of this final phase of the restructuring is estimated at DEM 6 500 000.

The integration into the Wilms Group operation will cut costs as a result of
the introduction of
standardised processes and common standards as well as common components at the Group level. It is also
intended that other companies in the Wilms Group's machine manufacturing operation (which are not
active in the same sector as SKET Verseilmaschinenbau GmbH) will be able to supply aggregate compo-
nents which can be incorporated by SKET Verseilmaschinenbau GmbH into its final products. In addition,
the buying-in of materials will be centralised within the group, although SKET Verseilmaschinenbau will
still retain a purchasing department. The financial control and personnel departments will also be central-
ised. SKET Verseilmaschinenbau GmbH will also be integrated into the investor's sales and distribution
network. Further measures will be taken in respect of cooperation at the research and development stage.
This final phase of restructuring will be completed by 1999.

The aid measures under consideration are as follows:

VII

Source

Type

DEM

Bvs

Bvs

Bvs

Bvs

Payment towards capital provision

Loan in respect of the cable machine operation of SKET SMM and subsequent waiver of
right to repayment thereof

5 000 000

500 000

Loan for prefinancing of contracts and subsequent waiver of right to repayment thereof

1 000 000

Payment towards final restructuring costs

1 750 000

Total

8 250 000

There is also the guarantee of DEM 6 700 000 which was taken over by the investor on 31 August 1998
(secured by the deposit of DEM 3 000 000 when the company was privatised). It is to be noted that, as
well as paying by means of a security, the investor assumed responsibility for the guarantee in April 1998
and that SKET Verseilmaschinenbau GmbH therefore enjoyed the benefit of this guarantee for only some
four months.

The aid measures identified above fall within the scope of Article 92(1) of the EC Treaty for the following
reasons.

VIII

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SKET Verseilmaschinenbau GmbH is an undertaking operating in a sector in which the relevant market
extends across Member States, and trade between Member States is therefore affected. Aid by its very nature
tends to distort competition. The aid measures granted to the company by Germany therefore fall within
the scope of Article 92(1) of the EC Treaty. Article 92(2) and (3) of the EC Treaty provides for the
possibility of exemption of aid falling within the scope of Article 92(1). For the reasons set out below, the
only basis for exempting the restructuring aid to SKET Verseilmaschinenbau GmbH, a firm in difficulty, is
Article 92(3)(c).

The aid was granted to an undertaking which the BvS had founded when bankruptcy proceedings were
initiated against another economic entity. Although operating through the legal person of SKET SMM
GmbH, this latter entity was in reality a cluster of diverse economic operations which had been undergoing
restructuring over a period of several years. The new undertaking, SKET Verseilmaschinenbau GmbH, is a
continuation of part of the cable-making machinery operation of SKET SMM. The BvS strategy, as modified,
was to provide the new company with capital and funds in order to privatise it on a stand-alone basis. The
distinguishing feature of this arrangement is that SKET SMM GmbH, which had been in continuous State
ownership since 1990, could never have been privatised as a single or as a group economic unit. These
circumstances distinguish this case from those involving the creation of Auffanggesellschaften following the
failure of a company already privatised.

At the moment of its creation, SKET Verseilmaschinenbau GmbH was not viable. The cable-making
machinery operation of SKET SMM was not founded and operated as an autonomous commercial
enterprise, but was embedded in a vast and unwieldy conglomerate. Therefore, it was necessary to extract
the operation from the bankrupt company and to restructure it to make it attractive for sale on the market.

That the aid granted to SKET Verseilmaschinenbau GmbH, which took over parts of the assets and
resources of a bankrupt company, may be treated as restructuring aid is justifiable both in view of the
particular historic and economic circumstances of the companies, which found themselves being compelled
to readjust rapidly from a centralised economic system to a market system, and in view of the role played
by the BvS (the organisation which took over from the Treuhandanstalt) in this readjustment.

In view of these considerations, the Commission considers the derogation in Article 92(3)(c) of the EC
Treaty relevant. In order to meet the requirements for a derogation under this heading, the aid must satisfy
the criteria set out in the guidelines for rescue and restructuring aid (the Guidelines) (*).

The Commission considers that aid for rescue and restructuring may contribute to the development of
economic activities without adversely affecting trade against the Community interest if the conditions set
out in Section 3 of the Guidelines are met, and will therefore authorise such aid under those conditions.
Where the firms to be rescued or restructured are located in assisted areas, the Commission will take
regional considerations under subparagraphs (a) and (c) of Article 92(3) into account as described in
paragraph 3.2.3 of the Guidelines.

The measures notified by Germany in 1996 amounted to DEM 18 100 000 and were intended to be
restructuring aid.

IX

To satisfy the criteria set out in the Guidelines, all restructuring plans must restore the long-term viability
and health of the firm within a reasonable time scale and on the basis of realistic assumptions.

(*) Business secret.

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The problems faced by the operation which was eventually to become SKET Verseilmaschinenbau GmbH
and the measures required to address them were outlined above. These included identifying the core,
profitable activity of the operation and then extracting it together with the relevant assets from the old
operation as a going concern. This also entailed completing contracts in respect of cable-making equipment
awarded to SKET SMM. The final phase of the restructuring comprised establishing test facilities and
integration into the Wilms Group.

On the basis of the figures provided by Germany, SKET Verseilmaschinenbau GmbH should begin to make
a small operating profit in 1999:

1997

1998

1999

2000

2001

(1 000 DM)

Operating income

20 800

27 700

26 000

30 600

33 500

Material costs

17 600

16 700

19 100

21 900

23 600

Personnel costs

2 500

2 900

3 300

3 700

3 800

Written off

100

380

620

700

600

Other operating costs

7 200

3 700

3 200

3 500

4 025

Result before interest

300

–450

580

980

1 215

Extraordinary sums

–800

–400

–400

–500

–550

Pre-tax result

–400

–780

280

580

756

The projected increase in turnover from 1999 onwards appears realistic. SKET Verseilmaschinenbau GmbH
began to secure profitable contracts even prior to privatisation, and negotiations for several further
contracts for 1999 were also being conducted. This improved position has been consolidated by the
integration into the Wilms Group and will be enhanced by the acquisition of manufacturing capacity.

In view of the foregoing, the Commission concludes that its concerns expressed in the initiation of
proceedings have been addressed and that the criterion in the Guidelines concerning the restoration to
profitability is satisfied.

X

A further condition under the Guidelines for restructuring aid to be acceptable is that measures are taken to
offset, as far as possible, adverse effects on competitors. Where there is a structural excess of production
capacity in a relevant market in the Community served by the recipient, the restructuring plan must make a
contribution, proportionate to the amount of aid received, to the restructuring of the industry serving the
relevant market in the European Community by irreversibly reducing or closing capacity. Where, on the
other hand, there is no structural excess of production capacity in a relevant market in the Community
served by the recipient, the Commission will normally not require a reduction of capacity in return for the
aid.

The Commission notes that the recipient firm is located in an area covered by Article 92(3)(a) of the EC
Treaty (13). Under the Guidelines, where overcapacity needs to be reduced in regions eligible for aid
pursuant to Article 92(3)(a) of the EC Treaty, the Commission may adopt a more flexible approach and
accept a smaller reduction than it would in other regions (14).

(13) OJ C 368, 23.12.1994, p. 12.
(14) See State aid case N 464/93.

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However, there is no overcapacity identifiable by the Commission in the market in which SKET Verseilma-
schinenbau GmbH is operating (15). Therefore, there is no need for SKET Verseilmaschinenbau GmbH to
reduce capacity in order to comply with the Guidelines.

The Wilms Group is active in related markets, that of the production of cable and wiring and the
production of cable and wire-making machinery. The incorporation of SKET Verseilmaschinenbau GmbH
into the Group will therefore have elements both of vertical integration and concentration. Given the
relatively stable levels of probable consumption of cable and wiring in the Community over the last few
years, this suggests that the Wilms Group, enlarged by the acquisition of SKET Verseilmaschinenbau, will
have a market share within the European Union of less than 1 %. Given that the geographic market is
global, the overall market share should be even smaller (16). Nor has the Commission reason to believe that
the enlarged Group will acquire a market share in the production of cable and wire-making machinery
affording it market power. Therefore, such concentration as may occur under the privatisation will have a
negligible impact on the market, and the element of vertical integration cannot be used to extend market
power gained at one level of the market either upstream or downstream.

It is to be noted that no comments were received from third parties in response to publication of the
contents of the letter to Germany announcing the Commission's decision to initiate proceedings (17). It is
further to be noted that the initial notification related to a much higher aid package and no private investor
seemed forthcoming at that time.

In view of the foregoing, the Commission concludes that its concerns expressed in the initiation of
proceedings have been addressed and that the criterion concerning no undue distortion of competition is
satisfied.

XI

A further condition under the Guidelines for restructuring aid to be acceptable is that the amount and
intensity of the aid must be limited to the strict minimum needed to enable restructuring to be undertaken
and must be related to the benefits anticipated from the Community's point of view. The investor is also
expected to make a significant contribution to the restructuring plan from its own resources.

In this case, the total aid package from the BvS amounts to DEM 8 250 000. This amount is made up of a
subsidy of DEM 5 000 000 awarded by the BvS in order to equip SKET Verseilmaschinenbau GmbH with
capital. A further element of the package consists of what was initially a loan of DEM 1 000 000 in order
to cover expenses incurred in carrying out contracts. The right to repayment was then waived. SKET
Verseilmaschinenbau GmbH has also benefited from a loan to the liquidator of SKET SMM in the amount
of DEM 500 000 to extract the cable-making machinery operation from SKET SMM repayment of which
was also waived during the privatisation. Finally, SKET Verseilmaschinenbau GmbH will also benefit from a
payment of DEM 1 750 000 to be out paid in tranches in respect of the final phase of restructuring. There
is also a guarantee in the amount DEM 6 700 000 granted until 31 August 1998 and taken over by the
investor in advance of that date in April 1998.

Although the purchase price was only DEM 1, the investor was committed to taking over guarantees from
the BvS in the amount DEM 6 700 000 by 31 August 1998 (a commitment secured by the sum of
DEM 3 000 000 lodged at the time of privatisation, with the investor assuming full responsibility for the
guarantee in April 1998) and is also committed to investing DEM 6 500 000 in SKET Verseilmaschinenbau
GmbH (a commitment secured in the event if non-performance by penalty payments of 75 %). The investor
may not distribute any profits or other sums from SKET Verseilmaschinenbau GmbH before 31 December
2000. In addition the investor has committed to maintaining 40 jobs until June 1999, increasing staff to 50
by 2001. The total restructuring costs therefore amount to DEM 21 450 000, of which the private investor
is contributing some 60 %. The investor's contribution may therefore be regarded as reasonable. In view of
the foregoing, the Commission concludes that its concerns expressed in the initiation of proceedings have
been addressed and that the criterion concerning the proportionality of aid is satisfied.

(15) See Section 3.2.3 of the Guidelines.
(16) See Panorama of EU Industry 1997, Volume 2, pages 13-23 to 13-29 in conjunction with pages 15-3 to 15-7 and

15-4 to 15-17.

(17) See Panorama of EU Industry 1997, Volume 2, pages 15-14 to 15-17.

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XII

The company must fully implement the restructuring plan that was submitted to and accepted by the
Commission and must discharge any other obligations required by the Decision. Otherwise, unless the
original Decision is amended following a new notification from the Member State, the Commission will
take steps to require the recovery of the aid. Part of the restructuring of SKET Verseilmaschinenbau GmbH
had occurred prior to its privatisation. The investor is committed to implementing the rest of the
restructuring plan. This is demonstrated by its commitment to investing DEM 6 500 000 in the new
subsidiary, secured by penalty payments, and it has also taken over full responsibility for an existing
guarantee from the BvS in advance of the date for which this was envisaged.

In view of the foregoing, the Commission finds that the restructuring aid to SKET Verseilmaschinenbau
GmbH may be regarded as compatible with the common market, provided it satisfies the conditions set out
in the guidelines on State aid for rescuing and restructuring firms in difficulty,

XIII

HAS ADOPTED THIS DECISION:

Article 1

The aid granted by Germany to SKET Verseilmaschinenbau GmbH comprising:

(a) the payment to the company by way of provision of capital (DEM 5 000 000)

(b) the loan in respect of

the cable machine operation and the waiver of

repayment

thereof

(DEM 500 000)

(c) the loan to finance performance of contracts and the waiver of repayment thereof (DEM 1 000 000)

(d) the payment in respect of the final phase of restructuring (DEM 1 750 000)

(e) the performance guarantee by the BvS (DEM 6 700 000) subsequently taken over by the investor in

April 1998

is compatible with the common market in accordance with Article 92(3)(c) of the EC Treaty and Article 61
(3)(c) of the EEA Agreement.

In accordance with the Community guidelines on State aid for rescuing and restructuring firms in difficulty
(1994), Germany shall submit a detailed annual report on the implementation of the restructuring plan.

Article 2

This Decision is addressed to the Federal Republic of Germany.

Article 3

Done at Brussels, 30 September 1998.

For the Commission

Karel VAN MIERT

Member of the Commission