2000/337/EC: Commission Decision of 15 February 2000 on the State aid which Italy plans to grant to Fiat Auto SpA for its plant in Rivalta (Turin) (notified under document number C(2000) 487) (Text with EEA relevance) (Only the Italian text is authentic)
Date: 2000-02-15
Institutions: European Commission
Subjects: Italy, State aid, industrial investment, motor vehicle industry, regional aid

L 117/26

EN

Official Journal of the European Communities

18.5.2000

II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 15 February 2000

on the State aid which Italy plans to grant to Fiat Auto SpA for its plant in Rivalta (Turin)

(notified under document number C(2000) 487)

(Only the Italian text is authentic)

(Text with EEA relevance)

(2000/337/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 invited interested parties to submit their comments in
accordance with the abovementioned provisions (1),

Whereas:

I. PROCEDURE

(1)

Between October and December 1997 Italy notified the
Commission, pursuant to Article 88(3) of the Treaty, of
six planned measures under which it proposed to grant
State aid to Fiat Auto SpA (‘Fiat’), one of which (regis-
concerned the automobile
tered under N 834/97)
assembly plant at Rivalta, Turin,
in the province of
Piedmont (‘Fiat Rivalta’). Requests for further informa-
tion and a number of reminders were sent to the Italian
authorities to elicit the data required for a Commission
decision. On 23 April 1998 a meeting was held with
representatives of
to
clarify the various aspects of the examination of the

the Italian authorities and Fiat

case. Partial
replies to the questions raised by the
Commission were supplied by the Italian authorities in a
letter of 20 November 1998.

By letter of 9 March 1999, the Commission informed
Italy of its decision of 3 February 1999 to initiate the
procedure laid down in Article 88(2) of the Treaty in
respect of the proposed aid measures, allowing Italy one
month to supply all the documents,
information and
data required to assess the compatibility of the aid with
the common market. In the absence of any reply, the
Commission would reach a decision on the basis of the
information in its possession.

The decision to initiate the procedure was published in
the Official Journal of the European Communities (2), and
interested parties were invited by the Commission to
submit comments. No comments were received.

Representatives of the Commission went to Mirafiori on
24 February 1999 to discuss the Fiat Rivalta plan,
among other matters.

On 9 April 1999 the Italian authorities requested an
extension of the deadline for replying and on 16 April
1999 they sent a letter to the Commission containing
the information they considered necessary for it
to
complete its examination of the case.

(2)

(3)

(4)

(5)

(1) OJ C 120, 1.5.1999 and

OJ C 288, 9.10.1999, p. 37.

(2) OJ C 120, 1.5.1999, p. 6.

(6)

(7)

(8)

(9)

18.5.2000

EN

Official Journal of the European Communities

L 117/27

the Rivalta case served to
Further examination of
strengthen the Commission's initial doubts, particularly
as regards the need for the planned aid. By letter of 14
June 1999, the Commission therefore informed Italy of
its decision of 26 May 1999 to widen the procedure
initiated on 3 February 1999, allowing the Italian
authorities one month in which to supply the informa-
tion and data required to assess the compatibility of the
aid with the common market. In the absence of any
reply, the Commission would reach a decision on the
basis of the information in its possession.

The decision to widen the procedure was published in
the Official Journal of the European Communities (1), and
interested parties were invited by the Commission to
submit comments. No comments were received.

(13)

(14)

(15)

The investment must be seen in the context of the very
close links between Fiat Rivalta and Fiat Mirafiori. The
manufacturing processes and agreements on work
organisation enable
to coordinate
production according to technical and commercial
they therefore constitute a
requirements. Together,
highly integrated complex which Fiat
itself calls the
‘comprensorio di Rivalta-Mirafiori’.

two plants

the

The
investment programme dates back to 1994.
Spending began in September 1994. The ‘pre-produc-
tion series’ were to be launched at Fiat Rivalta during the
first half of 1997.

Regional aid is planned totalling a nominal
ITL 46
billion (EUR 24 million) under the scheme, which has
already been approved by the Commission and is
provided for by Law No 488/92. The discounted aid
intensity was initially assessed at 4,2 %.

II. DETAILED DESCRIPTION OF THE AID

The aid notified would be granted to Fiat, controlled by
Fiat SpA. The Fiat group operates in the automobile
sector through three companies: Fiat Auto for cars,
IVECO for industrial vehicles and Magneti Marelli for
parts.

Fiat has plants in Italy, Poland, Turkey and South
America. In 1998 it produced 2,4 million vehicles (2) of
the Alfa Romeo, Ferrari, Fiat, Lancia and Maserati makes;
38 % of these were produced in Italy, 29 % in the rest of
Europe and 33 % in the rest of the world.

(10)

The investment planned by Fiat is at Rivalta, in an area
qualifying for assistance under Article 87(3)(c) of the
Treaty over
the
maximum regional aid intensity for the aid was 10 % net
grant equivalent (nge) for large firms.

the period March 1995 to 1999;

(11)

In 1997 the Rivalta plant, which employed 4 580
workers, produced around 85 000 cars.

(16) When the procedure was initiated on 3 February 1999,
the Commission expressed doubts as to the compati-
bility of the planned aid,
in particular as regards the
mobility of the project and the extent to which the
notified aid corresponded to regional problems (its
‘proportionality’) and asked the Italian authorities to
provide the following information:

(i) a locational study (or equivalent) by Fiat clearly
showing that the investment is mobile, i.e. that the
project could have been carried out in an economic-
ally viable manner at an alternative site in the
Community or in a central or eastern European
country;

(ii) a cost-benefit analysis carried out on the basis of the
indicating the operating and invest-

above study,
ment costs of the project;

(12)

The general aims of the project would be as follows:

(iii) the development of the production capacity of the

Fiat Rivalta plant.

— to increase the flexibility of the plant in order to
produce the Fiat Bravo/Brava, Marea, Lancia Nuova
Dedra and Alfa Romeo 166 models,

— to improve the ergonomics of the workplace,

— to achieve a more efficient balance between auto-
mation and manual work in the production process,

— to reduce the environmental

impact,

— for the Bravo/Brava and Marea models, to enable the
Rivalta plant to produce the quantities that at times
of peak demand other factories of the group cannot
deliver.

(1) OJ C 288, 9.10.1999, p. 37.
(2) Source:

‘Fiat, facts and figures 1999’.

(17)

It subsequently emerged that until March 1995 Fiat
Rivalta was not located in an assisted area. The project
was begun in 1994 and was preceded by feasibility
locational studies, etc. which had presumably
studies,
been carried out in 1993 or before. Thus the decision to
invest in Rivalta must have been taken in 1993/1994, at
a time when the plant was not located in an assisted
area.
the
In its decision to widen the procedure,
Commission therefore expressed serious doubts as to
whether
the investor, when it was considering the
financing of the project, could have worked on the
assumption that it would obtain regional aid. If these
doubts were correct, then the aid was not necessary to
the completion of the investment in Rivalta.

L 117/28

EN

Official Journal of the European Communities

18.5.2000

(18)

Furthermore, both in the decision to initiate the proce-
dure and in the decision to widen it the Commission
asked Italy to supply within one month all the informa-
tion required to assess the compatibility of the aid. In
the absence of any reply, the Commission would reach a
decision on the basis of the information in its posses-
sion.

(20)

Firstly, the Italian Government explained that the mobile
part of the project concerned the production of 200
Marea and 200 Bravo/Brava cars per day. Alternatively,
the cars could have been manufactured in Poland at the
existing Tichy or Bielsko-Biala factories. This alternative
solution would have had certain advantages, including
offering lower labour costs while guaranteeing high
levels of quality, limiting investment and bringing the
production of segment C and D cars of the Fiat group
closer to certain markets in central and eastern Europe
and, finally, developing a network of local suppliers, one
of Fiat's major objectives.

III. COMMENTS BY ITALY

(19) On 9 April 1999 the Italian authorities requested an
extension of the deadline in order to prepare their reply
to the decision of 3 February 1999, and on 16 April
1999 they sent a letter to the Commission containing
the information they considered necessary to complete
its examination of the case.

(21)

Secondly, the Italian authorities carried out a cost-benefit
analysis comparing the costs of
the projects at Fiat
Rivalta and those in Poland on the basis of the mobility
referred to in recital 20. The investment, worth a total of
ITL 689 billion (around EUR 356 million),
is carried
out according to the following timetable:

1994

1995

1996

1997

1998

1999

2000

Total

(in billion ITL)

Mobile investment

Non-mobile investment

11

10

21

43

55

98

115

190

76

52

305

128

49

34

83

Total

33

33

21

21

294

395

689

(22)

The net disadvantage for the Italian plant, which is due
mostly to high labour and investment costs, would
therefore be 65 %, while the aid intensity would be
4,7 %.

(23)

The planned regional aid does not offset the extra costs
of locating the investment at Fiat Rivalta, but certainly
had an incentive effect on the final decision.

(24)

Thirdly, the Italian Government states that the produc-
tion capacity,
initially of 1 400 vehicles per day, has
fallen since 1997. However, no exact figures are given.

(25)

(26)

Fourthly, Italy generally points out the specific terms for
implementing Law No 488/92, particularly as regards
the retroactive conditions for eligibility of the invest-
ment.

In reply to the Commission's decision to widen the
procedure of 26 May 1999, Italy sent on 20 July 1999 a
letter setting out in detail two main considerations: first,
the process whereby the aid scheme was approved and
how this tied in with the implementation of the aid in
question, and, second, compliance with the formal
criteria in the aid application.

IV. ASSESSMENT OF THE AID

(27)

(28)

(29)

The measure notified by the Italian authorities for Fiat
Auto constitutes State aid within the meaning of Article
87(1) of the Treaty. It would be financed by the State or
through State resources. Furthermore, as it constitutes a
significant proportion of the funding of the project, the
aid is liable to distort competition in the Community by
giving Fiat Auto an edge over competitors not receiving
aid. Lastly, there is extensive trade between Member
States in the automobile market.

The aid in question is intended for a firm which manu-
factures and assembles cars. The firm is therefore part of
the motor vehicle industry within the meaning of the
Community framework on State aid to the motor
vehicle industry (hereinafter ‘the relevant Community
guidelines’) (1).

The aid in question, notified on 3 December 1997, is to
be granted under the scheme approved by Law No
488/92. The relevant Community guidelines specify that
aid which the public authorities plan to grant to an
individual project under an authorised aid scheme for a
firm operating in the motor vehicle industry must, in
accordance with Article 88(3) of the Treaty, be notified
before being granted if either of the following thresholds
is reached:

(1) OJ C 279, 15.9.1997, p. 1.

18.5.2000

EN

Official Journal of the European Communities

L 117/29

(i) total cost of the project equalling EUR 50 million,

(35)

(ii) total gross aid for the project, whether State aid or
aid from Community instruments equalling EUR 5
million.

(30)

Both the total cost of the project and the amount of aid
exceed their notification threshold. Thus,
in notifying
the proposed aid for Fiat Rivalta, the Italian authorities
have complied with the requirements of Article 88(3) of
the Treaty.

(31) Article 87(2) of the Treaty specifies certain types of aid
In view of the
that are compatible with the Treaty.
character and purpose of the aid, and the geographic
location of the investment, Article 87(2)(a), (b) and (c)
are not applicable. Article 87(3) specifies other forms of
aid which may be regarded as compatible with the
common market. Compatibility must be assessed from
the standpoint of the Community as a whole and not in
a purely domestic context.
In order to maintain the
proper functioning of the common market and having
regard to the principle in Article 3(g) of the Treaty, the
exceptions in Article 87(3) must be construed narrowly.
With regard to the exceptions in Article 87(3)(b) and (d),
it is clear that the aid in question is not intended for a
project of common European interest or to remedy a
to
serious disturbance in the Italian economy or
promote culture and heritage conservation. As regards
the exceptions in Article 87(3)(a) and (c), only subpara-
graph (c) could be relevant as Rivalta has been assisted
by virtue of that provision and has never been assisted
under subparagraph (a).

(32)

(33)

In order to decide whether the planned regional aid
under the exception in Article 87(3)(c) of the Treaty is
compatible with the common market, the Commission
must therefore check whether the conditions laid down
in the relevant Community guidelines have been met.

In these guidelines the Commission stipulates that in all
cases the aid must be in proportion to the gravity of the
problems to be resolved and necessary for the realisation
of the project. Compliance with these two criteria of
proportionality and necessity is essential if the Commis-
sion is to authorise State aid in the automobile sector (1).

(36)

(37)

(38)

(39)

In initiating the procedure, the Commission took note of
the special circumstances which led to the authorisation
of the scheme under Law No 488/92. As in its decisions
of 18 November 1997 (2), 7 April 1998 (3) and 30
September 1998 (4),
it acknowledged that particular
circumstances surrounding the adoption of Law No
488/92 could explain the long delays between the
launch of the project, the start of series production of
the vehicles under the project, the application for aid in
1996 and the notification in December 1997. However,
in assessing the necessity of the aid for locating the
project in Rivalta, the Commission cannot confine itself
to this consideration alone; it must examine other ques-
tions, namely:

(i) whether the regional aid was actually taken into
consideration in the financial analysis of the project
and the locational study which led to the selection of
the Rivalta site, and

(ii) the effective mobility of the project.

Furthermore, for each of these points, the Commission
must check whether the evidence submitted by Italy in
support of its claims are sufficient in the context of a
narrow interpretation of the exceptions in Article 87(3)
of the Treaty and in view of the Commission's requests
of 3 February and 26 May 1999.

The letter from the Italian authorities of 16 April 1999
recalls that the investment started on 31 May 1994.
Moreover, according to information at the Commission's
disposal,
spending began in September 1994 and
production of the Bravo/Brava and Marea models (the
only vehicles affected by alleged mobility and therefore
the only ones for which regional aid could be author-
ised) began in 1995 and 1996 respectively.

The letter from the Italian authorities of 20 July 1999
states that
the machinery/equipment was ordered in
March/April 1994, with deliveries beginning in the
second half of 1994. Moreover, it confirmed that the
locational study which led Fiat to choose Rivalta was
carried out in 1993 and 1994.

The Commission notes that Fiat Rivalta was not located
in an assisted area until March 1995, when the area was
defined as such under Article 87(3)(c) of the Treaty.
Furthermore, as reiterated in the letter of 20 July 1999,
Italy submitted the first proposal
for regions to be
defined as assisted areas on the basis of this provision
only in September 1994.

(34) Although, as a rule, the question of proportionality is
assessed by means of a cost-benefit analysis,
the
its
limit
Commission may,
assessment to compliance with the necessity criterion
only.

in the case in question,

(1) See point 17 of the judgment of the Court of Justice in Case 730/

79 Philip Morris [1980] ECR 2671.

(40)

The decision on the investment in question therefore
dates from a time when Fiat Rivalta was not located in
an assisted area.

(2) OJ C 70, 6.3.1998, p. 7.
(3) OJ C 240, 31.7.1998, p. 3.
(4) OJ C 409, 30.12.1998, p. 7, and
OJ C 384, 12.12.1998, p. 20.

L 117/30

EN

Official Journal of the European Communities

18.5.2000

(41)

This assessment is not affected either by the fact that Fiat
Rivalta is located in an Objective 2 area or by the alleged
possibility of moving machinery/equipment from one
site to another during the first phase of the project.

(47)

Lastly, in the Commission's view, a Member State and,
all the more so, a firm cannot legitimately work on the
assumption that a given region will be defined as an
assisted area under Article 87(3)(c) of the Treaty until
the Commission has adopted a decision to that effect.

(42)

(43)

(44)

(45)

The start of series production of the Bravo/Brava models
at Rivalta, which, according to information supplied by
the Italian authorities, took place in 1995, confirms
moreover that most of the necessary investment was
carried out in the period up to 1995, before the decision
on assisted-area status was taken.

It is therefore highly unlikely that, when considering the
financing of
the Rivalta project, Fiat was actually
it would obtain
working on the assumption that
regional aid. The Italian authorities have not provided
any evidence to remove the Commission's doubts in this
respect.

(48)

(49)

Even if
it had included the possibility of receiving
regional aid in its calculations, the firm was implicitly
accepting the risk of not obtaining it since the relevant
Community guidelines
stipulate the need for prior
authorisation by decision of the Commission.

Furthermore, when Fiat decided to carry out the invest-
ment and therefore took into account possible State aid
to finance the Fiat Rivalta project, Commission practice
required a cost-benefit analysis based on a comparison
between the regional plant and an alternative site located
in a non-assisted region of the Community where Fiat
would in all probability have carried out the investment.
Both Italy and Fiat were familiar at the time with this
practice, which had already been applied, for example, in
the Fiat Mezzogiorno case (1). The Commission has no
information on the selection of the comparator site, but
the most probable one would have been a plant in the
Italy. The Commission's experience
centre/north of
shows that a cost-benefit analysis carried out using such
a comparator site would have made it difficult, not to
say impossible, to identify disadvantages for Fiat Rivalta
and therefore to authorise regional aid. Again, the Italian
authorities have not demonstrated that Fiat, when
deciding to carry out the investment at Fiat Rivalta, was
in fact including regional aid in its calculations.

(46)

The Commission would make it quite clear that refer-
ence to an alternative plant in Poland (Bielsko-Biala or
Tichy), as Italy suggests, became possible only when the
relevant Community guidelines came into force in
January 1998,
four years after Fiat's investment
decision.

i.e.

(1) OJ C 37, 11.2.1993, p. 15.

For this reason, the Commission finds that the Italian
Government has not demonstrated that Fiat actually
took the granting of regional aid into its calculations as
a necessary criterion for selecting the Rivalta site. The
notified regional aid is not therefore necessary to achieve
the objectives referred to in Article 87(3) of the Treaty.

industrial site, whether new or

Furthermore, on the basis of the relevant Community
guidelines,
in order to demonstrate the necessity of
regional aid, the aid recipient must clearly prove that it
has an economically viable alternative location for its
project or for subpart(s) of the project. If there were no
other
in existence,
capable of receiving the investment in question within
the group, the firm would be compelled to carry out its
project in the sole plant available, even in the absence of
aid. Now, with the guidelines in force, the mobility study
is more important than in the past. In the Commission's
view, it is no longer a question of recognising theoretical
mobility but of making sure that the investor is both
able and intends to locate the project at the alternative
site if it is not possible to receive regional aid.

(50) Despite the Commission's requests,

the information
supplied by Italy in this regard is still inadequate. The
Commission was given only a very brief explanation
stating that Fiat's choice had been between the Polish
plants and the Rivalta/Mirafiori complex and claiming
that the Polish alternative would have had significant
advantages over Italy, especially in terms of labour costs.

(51)

The Commission takes the view that, at the time the
investment decision was made in 1993/1994, the real
possibility of locating the project in Poland was not so
the Italian authorities now claim. For
evident as
example, the industrial risk was not insignificant at a
time when Fiat Auto Poland was undergoing reorganisa-
tion. The networks of local parts suppliers were not as
developed as they are today and it was not certain that
in their
suppliers would become established. Also,
assessment of the mobility of the project, the Italian
authorities pass over the important advantages in terms
of flexibility (one of Fiat's strategic objectives) to be
gained from establishing and maintaining the Rivalta/
Mirafiori complex.

18.5.2000

EN

Official Journal of the European Communities

L 117/31

(52)

(53)

The Italian Government has given the Commission only
sketchy information on the possibility of producing 200
Bravo/Brava and 200 Marea at Bielsko-Biala or Tichy in
optimum conditions and practically no information on
Fiat's actual
to
Poland.

intention to relocate the investment

The Commission therefore considers that Italy has not
demonstrated the mobility of the project. In the absence
of a credible alternative site, the notified regional aid is
therefore unnecessary to achieve the objectives referred
to in Article 87(3) of the Treaty.

(54) Other objectives of the aid, referred to in passing by the
Italian Government and including environmental protec-
tion and innovation, have never been explained in detail,
despite requests from the Commission for information.
The Commission has therefore been unable to assess the
existence of aid concerning possible innovative or envir-
onmental protection measures.

V. CONCLUSION

(55)

The regional aid which the Italian authorities plan to
grant Fiat Rivalta is not necessary in order to achieve the
objectives referred to in Article 87(3)(c), namely to facili-
tate the development of certain economic activities or of
certain economic areas. The aid in question is therefore
incompatible with the common market.

(56)

For similar reasons, the Commission adopted on 22
December 1999 a negative final decision in respect of
aid C 9/99 for Fiat Mirafiori Meccanica,

HAS ADOPTED THIS DECISION:

Article 1

The State aid that Italy plans to grant Fiat Auto SpA in connec-
is incompatible with the
tion with its Rivalta plant (Turin)
common market.

The aid shall consequently not be put into effect.

Article 2

Italy shall inform the Commission, within two months of the
date of notification of this Decision, of the measures it has
taken to comply with it.

This Decision is addressed to the Italian Republic.

Article 3

Done at Brussels, 15 February 2000.

For the Commission

Mario MONTI

Member of the Commission