1999/840/EC: Commission Decision of 28 July 1999 on State aid granted by the Federal Republic of Germany to Kranbau Eberswalde GmbH (notified under document number C(1999) 2915) (Text with EEA relevance) (Only the German version is authentic)
Date: 1999-07-28
Institutions: European Commission
Subjects: Germany, State aid, aid to undertakings, industrial investment, industrial restructuring, privatisation

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Official Journal of the European Communities

L 326/57

II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 28 July 1999

on State aid granted by the Federal Republic of Germany to Kranbau Eberswalde GmbH

(notified under document number C(1999) 2915)

(Text with EEA relevance)

(Only the German version is authentic)

(1999/840/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European
Community, and in particular the first subparagraph of Article
88(2) thereof,

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

Having, called on interested parties to submit their comments
pursuant to Article 88(2) of the EC Treaty and Article 6(1) of
Council Regulation (EC) No 659/1999 of 22 March 1999 (1)
laying down detailed rules for the application of Article 93 of
the EC Treaty (2),

Whereas:

I. PROCEDURE

(1)

By letter dated 25 June 1997, received by the Commis-
sion on 27 June 1997 and registered under number
N 433/97, the German authorities notified the Commis-
sion of aid from the Federal Office for Special Unifica-
tion-related Tasks (BvS) and the Land of Brandenburg for
Kranbau Eberswalde GmbH (‘Kranbau Eberswalde’). By
letter dated 28. July 1997, the Commission requested
further information. Germany replied by letter dated 10
September 1997, received by the Commission on 11
September 1997. By letter dated 25 November 1997,
received by the Commission on 26 November 1997,
Germany notified further possible aid measures which

(1) OJ L 83, 27.3.1999, p. 1.
(2) OJ C 353, 19.11.1998, p. 3.

this

were being pressed for by the private investor. On 21
reclassified under
January 1998,
the
the case was
number NN 9/98. The formal
investigation procedure
was initiated in March 1998, and a letter stating the
reasons for this was sent to the German authorities on
16 April 1998. The contents of
letter were
published in the Official Journal of the European Communi-
ties on 19 November 1998 (3). By letter dated 20 August
1998, received on 24 August 1998, Germany stated its
position on the initiation of the formal
investigation
procedure. A meeting with the investor and the recipient
took place on 11 October 1998, and the German
authorities confirmed the information provided at the
meeting by letter dated 23 December 1998. The
comments of interested parties were sent to Germany on
1 March 1999, to which Germany replied by letter dated
12 April 1999. Further information was provided by
Germany by letter dated 12 July 1999, received on 13
July 1999, and by letter dated 23 July 1999, received on
the same day.

II. THE UNDERTAKINGS

(2)

The aid recipient is Kranbau Eberswalde, based in Ebers
tilde (Brandenburg) (4), which produces special cranes for
loading in ports, in combined road-rail transport and for
other purposes. In 1998, it had a workforce of 160 and
an annual turnover of DEM 75 million. As it is part of
the Koehne Group (see below),
it is not a small or
medium-sized enterprise (SME) within the meaning of
the Community guidelines on State aid for small and
medium-sized enterprises (5).

(3) See footnote 2.
(4) The unemployment rate in the relevant region is 22,1 %. If secon-
dary employment is also taken into account, the figure is increased
by a further 6,9 %.

(5) OJ C 213, 27.7.1996, p. 4.

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(3)

(4)

(5)

(6)

(7)

from Kranbau Eberswalde,

and achieved an annual

The investor, the Koehne Group, comprises a number of
companies previously held by Koehne Verwaltungs
GmbH & Co. Holding KG. The Group is active in the
manufacture and supply of building materials and in the
manufacture of cranes and special vehicles. It has 800
turnover of
employees
DEM 224 million in 1997. The Kirow group is the
subdivision of the Koehne Group responsible for the
manufacture of cranes and special vehicles. It has 400
employees and achieved a turnover of DEM 118,286
the Kirow
million. Apart
Group also includes the company Kocks Krane Inter-
national GmbH (‘KKI’), which on completion of
the
restructuring is to form a single operational unit with
Kranbau Eberswalde (see Section IV). KKI is based in
Bremen and designs postpanamax cranes, container
bridges, ship unloaders and giant cranes. It has a work-
force of 72 and a turnover of [...] (*). It is based on the
assets bought from the administrator in bankruptcy of
the Bremen-based Vulkan Kocks GmbH (‘Vulkan Kocks’)
— a member of the Bremer Vulkan Verbund (‘BVV’) —
which went bankrupt in 1997 (no aid was involved in
the acquisition of the assets by the Kirow Group).

(8)

(9)

III. PRIVATISATION

Kranbau Eberswalde was originally privatised by sale to
the BVV in November 1993. his was by open public
tender with sale to what was described as the best bid.
Because of the BVV Group's difficulties, Kranbau Ebers-
walde was taken back into State ownership in October
1996 and a new private investor sought. Following an
open and unconditional
invitation to submit tenders,
negotiations took place between the BvS and at least
seven companies. The Koehne Group was selected as the
best offer.

According to the information provided, neither Kranbau
Eberswalde nor Vulkan Kocks was integrated into the
BVV cash management system.

The contract on the acquisition of Kranbau Eberswalde
by the current private investor and owner of
the
company was concluded in December 1996. The final
transfer of all the shares to Kirow-Leipzig Rail & Port
AG took place in March 1997. [...] *, and the investor
paid DEM 2 million by way of capital contribution.
(Other contributions to Kranbau Eberswalde made by
the investor are described in Section V.)

(10)

IV. THE CURRENT RESTRUCTURING

Apart from the measures to rationalise operations within
Kranbau Eberswalde, the current restructuring of the
company involves two aspects. The first is the comple-
tion of the restructuring begun in 1993 on the basis of
the approach pursued at that time, which involved the
full economic merger of
the operations of Kranbau
Eberswalde with those of the economic predecessor of

(*) Business secret.

KKI. The second is the integration of Kranbau Ebers-
walde into the Koehne Group.

The restructuring of Kranbau Eberswalde started in
1993. The objective was the merger of the operations of
two companies based in different geographic locations,
Kranbau Eberswalde in Eberswalde and Vulkan Kocks in
into a single economic entity. Vulkan Kocks
Bremen;
the management,
for
entirely responsible
became
distribution and tinancial control functions of Kranbau
Eberswalde; the engineering design offices for Kranbau
Eberswalde were with Vulkan Kocks; the two companies
shared a common assembly and construction team;
Kranbau Eberswalde's
strategy was
dependent on the industrial property of Vulkan Kocks;
technological
improvements made by Kranbau Ebers-
walde could be exploited only through access to Vulkan
Kocks' intellectual property, and in many areas there was
shared personnel.

future business

The restructuring of Kranbau Eberswalde within the BVV
Group was accompanied by growing losses. The BVV
Group as a whole was facing difficulties. As a result of
this, Kranbau Eberswalde, as an East German operation,
was extracted from the BVV Group by the BvS prior to
the BVV Group's bankruptcy, so that Kranbau Ebers-
walde itself was not involved in the bankruptcy proceed-
ings.
(By contrast, Vulkan Kocks, based in West
Germany, went bankrupt.) When the BVV Group ran
into difficulties, the integration of Kranbau Eberswalde
and Vulkan Kocks was at an advanced stage. Vulkan
Kocks had become responsible for the management and
distribution functions of Kranbau Eberswalde, and the
future of Kranbau Eberswalde had also become
dependent on the industrial property of Vulkan Kocks. It
was because of
integration between
Kranbau Eberswalde and Vulkan Kocks that the assets of
Vulkan Kocks were acquired by the Kirow Group from
the administrator in April 1997 and used to form KKI.
Without these assets, the restructuring of Kranbau Ebers-
walde could not have been completed without drawing
up an entirely new restructuring plan. According to the
German authorities, these assets were acquired at arm's
length and no aid was otherwise involved.

the degree of

The integration of Kranbau Eberswalde into the Koehne
Group will help it to become a profitable undertaking.
In particular, Kranbau Eberswalde will draw benefit from
its relationship with its immediate parent company,
Kirow-Leipzig Rall & Port AG; since they operate in
adjoining markets, this should mean that each has access
to the other's customers and can offer a broad range of
products. The two companies could also reduce costs by
sharing certain internal services and using common
parts.
savings
through common purchase strategies
in respect of
components. Internal rationalisation measures such as
the contracting-out of certain production stages,
the
introduction of computer-assisted design technology and
the drawing-up of a new marketing approach should
enable Kranbau Eberswalde to develop new products
and enter new markets.

they could exploit cost

In addition,

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Official Journal of the European Communities

(11) Another aspect of the current organisational restruc-
turing of Kranbau Eberswalde is the permanent reduc-
tion in its production capacity in terms of plant, prem-
ises and equipment and in terms of skilled personnel.
Since the beginning of 1997, it has sold off production
including cutting and welding equipment,
equipment,
presses and lathes to a variety of different purchasers.
Since these machines cannot be used separately to make
cranes, but have to work as an ensemble, the sales to
purchasers
in different markets mean a permanent
reduction in crane production capacity. The workforce
has also been reduced from 239 in 1997 to 159 in
1998. As a result of this, production capacity expressed
in hours has been reduced from 255 000 hours in 1990
to 52 000 in 1998. At the beginning of the current
restructuring phase in 1997,
it amounted to 73 500
hours.

(12)

(13)

It should be pointed out that, although the KKI engin-
eering operation is not the aid recipient and is not
therefore required to make a capacity reduction, it has
effectively done so in the process of its emergence from
Vulkan Kocks. An indicator of an engineering company's
capacity is the number of employees. Between 1997 and
1999, KKI's workforce fell from 184 to 73.

in addition to its obligation
It should be noted that,
under the privatisation contract to ensure that aid is
used only for the purposes of the contract, Kranbau
Eberswalde has its own account separate from the
others, and it keeps its own profit and loss accounts and
balance sheet;
the use of State-financial
resources is checked by an independent party.

furthermore,

(14)

The restructuring costs amount
to some DEM 99,7
million and are made up as follows (in DEM million):

L 326/59

(in million DEM)

[...] *

[...] *

[...] *

[...] *

[...] *

[...] *

16,8

30,0

11,0

41,0

41,9

99,7

Investment

[...] *

[...] *

[...] *

[...] *

[...] *

[...] *

Total

Total

Financing of orders

For Kranbau Eberswalde

For KKI

Offsetting of losses 1996/1997

Total restructuring costs

(15)

The loss cover of DEM 41,9 million relates to losses
from the period prior privatisation (1996) and from the
new investor's run-in phase (1997). These losses were
incurred as a result of the collapse of the BVV Group,
which affected both customer contidence and the ability
of Kranbau Eberswalde to obtain commercial loans. The
Koehne Group is unable to obtain the full amount
necessary for restoring Kranbau Eberswalde to profit-
ability.

(16) Under the restructuring plan, profitability is to be re-
established in 1999. The following table (6) contains the
key data for the projected return to profitability. The
figures for 1999 and 2000 are based on the projections
drawn up at the time of privatisation (in DEM million).

Turnover

Material costs

Personnel costs

Profit/loss

1997
actual

[...] *

[...] *

[...] *

[...] *

1998
actual

[...] *

[...] *

[...] *

[...] *

1999
plan

[...] *

[...] *

[...] *

[...] *

2000
plan

[...] *

[...] *

[...] *

[...] *

(17)

Turnover increases from [...] * in 1997 to [...] * in 2000. As from 1999, positive operating results are
expected, thus covering losses and achieving [...] * profit. The increase in turnover between 1998 and
1999 reflects an improved order book due to the impact of privatisation and to the development of
new products. The reduction in personnel costs between 1997 and 1998 reflects a further decrease
in the workforce after privatisation and the impact of a collective agreement to reduce wages.

(6) This table contains only a selection of key data, and the columns

are not arithmetically complete.

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V. CURRENT AID MEASURES AND INVESTOR

(19)

CONTRIBUTION

(18)

The current restructuring phase of Kranbau Eberswalde,
costing some DEM 99,7 million, is being financed from
public and private sources. Kranbau Eberswalde has
received or will receive from the BvS and from the Land
of Brandenburg
to
in total
DEM 60,64 million, (7) comprising the following:

amounting

finance

(a) a DEM 5 million loan granted by the BvS in 1996
together with

subsequent waiver,

its

and
DEM 95 000 in interest;

(b) a DEM 5 million loan granted by the Land of Bran-
denburg in 1996 and its subsequent waiver, together
with DEM 76 000 in interest;

(c) a DEM 15 million loan from the BvS at an annual
interest rate of 5 %, and its subsequent waiver in the
event of a positive Commission decision;

(d) a DEM 5 million investment by the Brandenburg

consolidation fund (8);

(e) a guarantee by the Federal and Land authorities of up
to 80 % (i.e. DEM 24 million) of credit facilities of
DEM 30 million (this guarantee will be called upon
only if a DEM 6 million guarantee provided by the
investors has been used up);

(f) a DEM 2,5 million grant from the BvS in the event

of a positive Commission decision;

(g) a DEM 4,14 million grant under the approved aid
scheme known as the joint Federal Government/
Lander scheme for improving regional economic
structures (9) (GA resources).

From private sources, Kranbau Eberswalde (including
KKI) will receive DEM 39,06 million from the Koehne
Group. This amount comprises the following privately
financed measures totalling DEM 25,06 million directly
in favour of Kranbau Eberswalde:

(a) the provision of capital (including purchase price) of

DEM 2 million;

(b) the provision of a guarantee of DEM 6 million;

(c) the provision of a loan of DEM 10 million from a

private bank (10);

(d) other non-cash capital contributions amounting to
DEM 300 000 (expert's report costs, audit costs);

(e) other cash payments amounting to DEM 350 000;

(f) funds from outside sources amounting to DEM 6,41

million.

(20)

In addition, apart from the purchase price of [...] * for
the shares, the investor has invested DEM 14 million in
the setting up of KKI in order to complete the restruc-
turing of Kranbau Eberswalde (see Section IV). This
amount consists of the following:

(a) the provision of capital

(fully paid) of DEM 3

million;

(b) the provision of guarantees of up to DEM 11

million.

(The German authorities have confirmed that no aid was
granted in connection with KKI.)

(21)

The following table shows the origin of the various
financing measures (in DEM million):

Public

Waiver of loan by the BvS (incuding interest of DEM 0,095 million)

Waiver of loan by the Land (including interest of DEM 0,076 million

Loan from the BvS

Brandenburg consolidation fund

Federal Government/Land guarantee (up to 80 % of the DEM 30 million
in credit facilities)

Grant

GA resources

Total public funds

(DEM million)

5,00

5,00

15,00

5,00

24,00

2,50

4,14

60,64

(7) This figure does not include loan interest.
(8) SG(95) D/9074.
(9) 27th framework programme.

(10) This loan is covered by a guarantee provided by Kirow-Leipzig Rail
& Port AG amounting to DEM 3 million and by a guarantee
provided by Koehem Beteiligungsgesellschaft GmbH & Co. Holding
KG amounting to DEM 3 million. The German authorities confirm
that neither the Federal Government nor the Land of Brandenburg
is involved in these.

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Private
(Koehne Group)

To Kranbau Eberswalde

Provision of capital

Garantee

Bridging loan

Other cash payments

Other non-cash capital payments

Funds from external sources

Via KKI (to Kranbau
Eberswalde)

Provision of capital

Garantee

(DEM million)

2,00

6,00

10,00

0,30

0,35

6,41

Total

25,06

3,0

11,0

14,0

99,7

Total

Restructuring measures: Total

VI. MARKET

sector generally. There is also lively cross-border trade
within the Community in this sector (11).

(24) However, Kranbau Eberswalde operates in a specialised
market in which there appears to be no overcapacity.

(22)

The business activities of Kranbau Eberswalde comprise
the construction and assembly of various types of
special cranes, including container cranes, bridge cranes
harbour cranes. The company has specialised in partic-
ular the manufacture of double-lever level-luffing jib
cranes. The immediate owner of Kranbau Eberswalde,
Kirow-Leipzig Rail & Port AG, operates in neighbouring
areas, producing railway cranes, port equipment, reach
stackers,
systems and railway engineering
equipment. There is no overlap between the two compa-
nies in terms of specific types of products. In its restruc-
tured form, the company will also operate on the market
for the development of postpanamax cranes, container
bridges, ship unloaders and giant cranes (KKI's activities).

transport

(23)

Since the relevant market is worldwide, trade between
Member States is affected (Kranbau Eberswalde exports
its output to other Member States, 46,6 %
2,5 % of
outside the Community and the remaining 50,9 %
within Germany). The general market for cranes and
lifting equipment is very competitive and, according to
the information available to the Commission, there are
grounds for believing that there is overcapacity in this

(25) As far as the new activity brought

in by KKI

is
concerned, KKI as an engineering firm operates on an
upstream market. Since there is no indication that the
downstream market in which Kranbau Eberswalde oper-
ates is suffering from overcapacity, there is little reason
to believe that the upstream market for crane design is
affected by overcapacity.

VII. GROUNDS

FOR INITIATING THE
INVESTIGATION PROCEDURE

INFORMAL

(26)

The information provided by Germany in the noti-
fication was unsatisfactory on several points and gave
rise to doubts as to the compatibility of the measures
with the guidelines on rescue and restructuring aid for
firms in difficulties (12) These included:

(a) an unclear restructuring plan with divergences from

the projected performance;

(b) apparent structural overcapacity on the relevant
market, plus lack of clarity on capacity development,
and, in any event, no obvious capacity reduction by
Kranbau Eberswalde;

(c) an apparently low investor contribution.

(11) See pages 57 and 60 of Statistiches Handbuch für den Maschinenbau,
1997 edition, published by the Verband Deutscher Maschinen- und
Anlagenbau e.V.

(12) OJ C 368, 23.12.1994, p. 12.

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VIII. COMMENTS FROM INTERESTED PARTIES AND

GERMANY

(c) a DEM 15 million loan from the BvS at an annual
interest rate of 5 % and its subsequent waiver in the
event of a positive Commission decision;

(27)

(28)

(29)

the investigation procedure elicited
The initiation of
comments from two competitors, Caillard (a subsidiary
of the Rolls Royce Group) and Kranservice Rheinberg
GmbH (‘KSR’) (a subsidiary of the Mannesman Dematic
Group). Germany provided detailed and closely argued
replies on both sets of comments.

In a letter received on 4 January 1999, Caillard claimed
that there was overcapacity and that the Kirow-Leipzig
Rail & Port AG (another member of the Kirow Group)
had received aid which had been used for predatory
pricing. Germany argued in response that Caillard's
claims did not relate to the current aid recipient and
It argued that any
were chronologically inconsistent.
flow of aid from Kranbau Eberswalde to Kirow-Leipzig
Rail & Port AG was not possible; both companies had
an arm's length relationship, as confirmed by an audi-
tor's report.

KSR claimed that there was overcapacity and predatory
pricing. As an example, it cited an invitation to tender
by Deutsche Bahn for two container cranes. Kranbau
Eberswalde's tender was 15 % lower than KSR's, even
though KSR had submitted a tender in which it did not
expect to make any profit and had cut the administra-
tion, distribution and material costs by 40 %. Germany
rejected KSR's assertions: Kranbau Eberswalde's tender
covered costs and was not even selected as the best bid.
As far as capacity was concerned, Germany reiterated
that Kranbau Eberswalde was operating on an expanding
niche market.

IX. ASSESSMENT

(30)

The financial measures for Kranbau Eberswalde consti-
tute aid within the meaning of Article 87(1) of the EC
Treaty, since they are granted through State resources
and confer on Kranbau Eberswalde a free benefit which
a company in difficulty would not have received from a
they threaten to distort
private investor; as
competition and, given the nature of
the relevant
market, affect
trade between Member States. The
following aid packages must be regarded as new aid to
be assessed by the Commission:

such,

(a) a DEM 5 million loan granted by the BvS in 1996
and its subsequent waiver together with interest of
DEM 95 000;

(d) a DEM 5 million contribution from the Branden-

burg consolidation fund (13);

(e) a guarantee by the Federal Government and the Land
of up to 80 % (DEM 24 million) of the DEM 30
million credit facilities (this guarantee will be called
upon only if a DEM 6 million guarantee provided
by the investors has been used);

(f) a DEM 2,5 million grant from the BvS in the event

of a positive Commission decision.

(31) Although the DEM 4,14 million grant stems from the
the joint Federal
approved aid scheme known as
Government/Land scheme for
the improvement of
regional economic structures (14) (GA resources) and is
not
it will be taken into
account in assessing the proportionality of the aid.

therefore a new measure,

(32) Under Article 87(1) of the EC Treaty, aid for certain
undertakings is incompatible with the common market
if it affects trade between Member States and distorts or
threatens to distort competition in the common market.
Given the nature of the aid in question and the partic-
ular features of the crane manufacturing industry, the
current aid package clearly falls within the scope of
Article 87(1) of the EC Treaty. Such aid is in principle
incompatible with the common market unless it
is
eligible for one of the derogations provided for in Article
87(2) or (3) of the EC Treaty. Article 87(3) is relevant in
this instance.
It gives the Commission discretionary
power to authorise State aid in certain specified circum-
stances. These include, under Article 87(3)(c), aid to
facilitate the development of certain economic activities,
where such aid does not adversely affect trading condi-
tions to an extent contrary to the common interest. The
geuidelines set out the conditions to be met for the
Commission to be able to exercise its discretionary
power.

(33) Under Article 87(3)(a) of the EC Treaty, the Commission
also has the power to authorise State aid intended to
promote the economic development of areas where the
standard of living is abnormally low or where there is
serious underemployment. The new German Länder fall
within the scope of this provision (15). The fact that the
aid is to be granted to a single firm in difficulty does not

(b) a DEM 5 million loan granted by the Land of Bran-
denburg in 1996 and its subsequent waiver together
with interest of DEM 76 000;

(13) See footnote 8.
(14) 27th framework programme.
(15) See Commission Decision in aid case N 464/93.

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L 326/63

preclude it from being deemed to be regional aid falling
within the scope of Article 87(3)(a) (16). In this case,
however, the main purpose of the aid is to restructure a
company in difficulty rather
than to promote the
economic development of an area. Even if a successfully
restructured company may contribute to the develop-
ment of an area, the aid should be assessed under Article
87(3)(c) rather than under Article 87(3)(a).

(34)

The notification submitted by Germany in June 1997
was intended to be in respect of restructuring aid. The
notified measures must therefore fulfil the conditions
laid down in point 3.2 of the guidelines if they are to be
regarded as restructuring aid that is compatible with the
common market within the meaning of Article 87(3)(c)
of the EC Treaty.

X. RESTORING LONG-TERM VIABILITY

(35)

(36)

(37)

The restructuring plan must restore the long-term viabi-
lity of the firm within a reasonable timescale and on the
basis of realistic assumptions. In order to be able to
assess the cogency of the plan, the Commission requires
information as to the reasons for the current difficulties
the proposed internal
the undertaking concerned,
of
measures and their expected effect.

restructuring measures. The problems

in response to its letter
The Commission notes that,
announcing the initiation of the formal
investigation
procedure, Germany provided additional information on
the
facing
required to
Kranbau Eberswalde and the measures
address them were outlined above. The measures are
appropriate for addressing these problems. Furthermore,
the economic performance of Kranbau Eberswalde is in
line with what was projected at the time of privatisation.

It follows from the financial analysis that Kranbau Ebers-
walde should be able to reduce its losses considerably
and to solve its problems in the next few years. Its
financial situation has improved steadily (see Section IV),
and the steady improvement in the figures and in the
qualitative aspects of the restructuring mean that the
financial outlook is credible.

(38)

Thus,
the restructuring following privatisation show
allow Kranbau Eberswalde to return to profitability
within the four-year restructuring period, which can be
regarded as a reasonable timescale.

(16) See Joined Cases C-278/92 and C-279/92 Spain v Commission

(Hytasa/Imepiel) [1994] ECR 1-4103.

XI. NO UNDUE DISTORTIONS OF COMPETITION

(39) A further condition for restructuring aid set out in the
guidelines is that measures are taken to offset as far as
possible adverse effects on competitors. Otherwise aid
would be contrary to the common interest. Generally
speaking, restructuring aid will result in undue distor-
tions of competition if it is used to increase production
capacity. In the event of structural overcapacity in the
relevant market, the aid recipient must contribute to a
reduction of the excess capacity by irreversibly reducing
its own capacity by an amount proportionate to the aid
received.

(40)

(41)

It is to be noted that Kranbau Eberswalde has in any
event carried out a reduction in its capacity as part of
the current restructuring and that there is no evidence
that overcapacity exists on the niche market on which it
operates. (It is also noted that the KKI engineering opera-
tion, although not the aid recipient, has also reduced its
capacity.)

In assessing the reduction in capacity, account must also
be taken of the fact that Kranbau Eberswalde is based in
an area covered by Article 87(3)(a) of the EC Treaty.
Thus, in accordance with the guidelines, the Commis-
sion can show greater
flexibility in applying this
criterion in cases involving markets with structural over-
capacity. In this instance, therefore, no further capacity
reduction by Kranbau Eberswalde is necessary.

(42) Accordingly, the Commission considers that, since the
aid recipient has substantially reduced capacity and since
Kranbau Eberswalde operates on an expanding niche
market, the impact on competitors must be regarded as
minimal. There will therefore be no undue distortions of
competition.

XII. AID IN PROPORTION TO THE RESTRUCTURING

COSTS AND BENEFITS

(43) A further requirement

in the guidelines 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 antici-
pated from the Community's point of view. Aid recipi-
ents will therefore be expected to make a significant
contribution to the restructuring plan from their own
resources. To limit the distortive effect, the form in
which the aid is granted must be such as to avoid
providing the company with surplus cash which could
be used for market-distorting activities.

L 326/64

EN

Official Journal of the European Communities

18. 12. 1999

(44)

(45)

In this case, the total aid package from the BvS and the
Land amounts to DEM 60,64 million. This amount is
made up of the waiver of a loan of DEM 5 million
together with interest of DEM 95 000, the waiver of a
loan of DEM 5 million together with interest of
DEM 76 000, a loan of DEM 15 million and a contri-
bution of DEM 5 million from the Brandenburg consoli-
dation fund. A Further component of the aid package
consists of a guarantee of up to DEM 24 million
provided by the BvS and the Land. The DEM 4,14
million granted under the GA resources programme has
to be added to the amount of new aid for the purpose of
assessing proportionality.

In addition to the purchase price of [...] *, the investors
have committed themselves to investing DEM 25,06
million (17) in the restructuring of Kranbau Eberswalde.
The restructuring costs directly related to Kranbau Ebers-
walde amount
to DEM 85,7 million, of which the
private investor is contributing some 29 %. If one also
includes the investor's costs incurred in respect of KKI
(DEM 14 million) (17),
contribution
the
amounts to over 39 % of the total restructuring costs of
DEM 99,7 million. The investor's contribution may
therefore in either case be regarded as appropriate.

investor

(46)

In view of the foregoing, the Commission concludes that
its concerns expressed when the proceedings were
initiated have been addressed and that the criterion of
proportionality of the aid is met.

XIII. FULL IMPLEMENTATION OF THE PLAN

(47) A company receiving restructuring aid must fully imple-
ment the restructuring plan that was submitted to and
accepted by the Commission and must discharge any
other obligations
laid down by the Commission
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. Germany has given an assurance
that all possible measures will be taken to ensure that
the restructuring plan is carried out. The Commission
therefore concludes that this part of the guidelines is
also complied with.

restructuring aid, the measures are compatible with the
common market,

HAS ADOPTED THIS DECISION:

Article 1

aid

state

amounting

The
DEM 60 640 000
(EUR 30 004 739) plus interest which Germany has granted
and is to grant to Kranbau Eberswalde is compatible with the
common market.

to

According to the information available, the aid consists of the
following measures:

(a) a DEM 5 million loan granted by the Federal Office for
Special Unification-related Tasks (BvS) and its subsequent
waiver together with DEM 95 000 in interest;

(b) a DEM 5 million loan granted by the Land of Brandenburg
and its subsequent waiver together with DEM 76 000 in
interest;

(c) a DEM 15 million loan from the BvS at an annual interest
rate of 5 % and its subsequent waiver in the event of a
positive Commission decision;

(d) a DEM 5 million contribution from the Brandenburg

consolidation fund;

(e) a DEM 24 million guarantee provided by the Federal

Government and the Land;

(f) a DEM 2,5 million grant from the BvS.

Article 2

In accordance with the guidelines on State aid for rescuing and
restructuring firms in difficulty, Germany shall submit detailed
annual reports on the implementation of
the restructuring
plan.

Article 3

This Decision is addressed to the Federal Republic of Germany.

XIV. CONCLUSIONS

Done at Brussels, 28 July 1999.

(48)

The Commission finds that Germany has unlawfully
implemented the aid measures described above in breach
of Article 88(3) of the EC Treaty. However, in view of
the considerations
the Commission
set out above,
concludes that, since they comply with the guidelines on

For the Commission

Karel VAN MIERT

Member of the Commission

(17) For details of the investor contribution, see Section V.