2001/398/EC: Commission Decision of 17 January 2001 on the State aid which the United Kingdom is planning to implement for Nissan Motor Manufacturing (UK) Ltd (Text with EEA relevance) (notified under document number C(2001) 164)
Date: 2001-01-17
Institutions: European Commission
Subjects: State aid, United Kingdom, application of EU law, control of State aid, motor vehicle industry

24.5.2001

EN

Official Journal of the European Communities

L 140/65

II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 17 January 2001

on the State aid which the United Kingdom is planning to implement for Nissan Motor
Manufacturing (UK) Ltd

(notified under document number C(2001) 164)

(Only the English text is authentic)

(Text with EEA relevance)

(2001/398/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 regard to Council Regulation (EC) No 659/1999 of 22
March 1999 laying down detailed rules for the application of
Article 93 of the EC Treaty (1),

Having called on interested parties to submit their comments
pursuant to those provisions,

Whereas:

Procedure

(1)

(2)

By letter dated 25 July 2000, the United Kingdom noti-
fied the proposed aid to the Commission, pursuant to
Article 88(3) of the Treaty. A pre-notification meeting
was held between the United Kingdom authorities,
representatives of Nissan, Renault and the Commission's
services on 19 July 2000.

On 20 September 2000, the Commission decided to
initiate the procedure laid down in Article 88(2) of the
Treaty in respect of the aid. The United Kingdom was
informed of this decision by letter dated 29 September
2000.

(3)

The Commission decision to initiate the procedure was
published in the Official Journal of the European Communi-

(4)

(5)

(6)

(7)

ties (2). The Commission called on interested parties to
submit their comments.

The Commission received no comments from interested
parties.

By letter dated 25 October 2000, the United Kingdom
submitted its comments and provided information,
which it
aid.
considered necessary to assess
Following a visit by Commission representatives on 8
and 9 November 2000 on site in Sunderland and Flins
(France),
the Commission raised additional questions,
which were answered by the United Kingdom in a letter
dated 23 November 2000.

the

Detailed description of the proposed aid

The recipient of the aid would be Nissan Motor Manu-
facturing (UK) Ltd (hereinafter referred to as ‘NMUK’).
The NMUK plant is situated in Sunderland. NMUK is
wholly owned by Nissan Motor Co.,Ltd (Japan) (herein-
after referred to as ‘Nissan Motor’). The turnover of
NMUK in 1999 was GBP 1 813,5 million and the net
profit GBP 8,3 million. NMUK's Sunderland plant
produced 271 000 vehicles
and
114 000 Primera) in 1999.

(157 000 Micra

Renault has taken a 36,8 % equity stake in Nissan
Motor, a 22,5 % in Nissan Diesel and 100 % of the
capital of Nissan's European sales financial subsidiaries.
Renault and Nissan signed an alliance agreement on 27
March 1999, involving the joint development of plat-
forms, a global joint purchasing policy, joint develop-
ment and use of engines and gearboxes as well as close
cooperation in other areas.

(1) OJ L 83, 27.3.1999, p. 1.

(2) OJ C 310, 28.10.2000, p. 6.

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Official Journal of the European Communities

24.5.2001

(8)

(9)

(10)

(11)

(12)

(13)

The aid in question is regional investment aid leading to
the transformation of the Nissan plant in Sunderland, in
order to introduce the new Micra to replace the current
model. The new Micra will comprise a three and five-
door hatchback as well as another derivative. It will be
built on a common Nissan-Renault platform developed
to replace the current Nissan Micra, March and Cube as
well as the Renault Clio and Twingo.

The new Micra will compete in the B segment against
models such as the Ford Ka, Fiat Punto, VW Polo,
Toyota Yaris and Citroen Saxo.

The project is to run from January 2001 until March
2005. According to the United Kingdom authorities, no
decision as to the site of production has yet been taken
by Nissan and the final decision is planned to be taken
in January 2001. Production is planned to start
in
January 2003. The total amount of investment amounts
to GBP 315,8 million, of which GBP 211,8 million is
eligible. The net present value of the eligible investments
is GBP 193,2 million. These investments consist of
machinery and equipment
(GBP 155,3 million) and
supplier tooling (GBP 38 million). The aid of GBP 40
million (net present value: GBP 36 million) would be
provided as Regional Selective Assistance. The aid inten-
sity is 18,62 % gross grant equivalent (gge).

Sunderland was recognised by the Commission as a
regionally assisted area for
the purposes of Article
87(3)(c) of the Treaty under the Regional Aid map (1) for
the period 2000 to 2006, with a regional ceiling of
20 % net grant equivalent (nge).

The cost-benefit analysis comparing the costs and bene-
fits of the chosen location in Sunderland with those of
the stated alternative location in Flins, France, results in
a net cost handicap of GBP 62,8 million for the location
in Sunderland in comparison with the location in Flins.
Consequently, the handicap intensity of the project is
32,48 %.

In its decision to initiate the procedure laid down in
Article 88(2) in respect of the planned regional aid, the
Commission raised doubts mainly as to the necessity of
the aid, the eligibility of costs, several hypotheses used
by the United Kingdom authorities in the cost benefit
analysis and the effects on production capacity.

Comments from interested parties

(16)

(17)

(18)

(19)

(20)

Firstly, the United Kingdom explained the character and
objectives of the Renault-Nissan Alliance. A key objec-
tive of the Alliance is to globally reduce the number of
main passenger car platforms and to increase the
average volume produced on each platform. Whenever
either company is considering the location of a new
model investment project, it can take into consideration
the full available capacity of the alliance partners in
reaching its location decision. Other investment projects,
taking advantage of this strategy, are mentioned.

Secondly, with regard to the issue of mobility,
the
United Kingdom referred to past two-model profitability
and viability with production volumes similar to or
lower than those envisaged in the case of a shift of the
Micra production to Flins. According to the United
Kingdom, the decisions to produce the Almera (until
2005) and new Primera (from 2002 until 2007) at
Sunderland have already been taken, and production of
these models
the decision
is assured regardless of
concerning the Micra. In addition, there will be further
opportunities for NMUK to win future model investment
in competition with other plants across the alliance.

Thirdly,
that all
the United Kingdom pointed out
elements of the project investment relate to transforma-
tion since they involve a complete dismantling of
existing Micra bodywork and final assembly lines. The
original vendor tooling estimates included in the noti-
fication for both locations have been modified to take
into account the more advanced planning of the project.

The United Kingdom also expressed its views and
provided more detailed information with regard to a
number of assumptions and cost factors applied in the
cost-benefit-analysis.

Finally, the United Kingdom stated that the total capacity
of
the
the Nissan-Renault alliance before and after
investment for the Member States and central and east
European countries would be unchanged as a result of
the investment.

(14)

The Commission received no comments from third
parties.

Assessment of the aid

Comments from the United Kingdom

(21)

(15)

The United Kingdom submitted to the Commission by
letter dated 25 October 2000 its comments on the
opening of procedure. By letter dated 23 November
2000, the United Kingdom provided further informa-
tion. These comments have been taken into account.

(1) OJ C 272, 23.9.2000, p. 43.

The measure notified by the United Kingdom 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 signifi-
cant proportion of the funding of the project, the aid is
liable to distort competition in the Community by
giving NMUK an edge over competitors not receiving
aid. Finally, there is extensive trade between Member
States in the automobile market.

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Official Journal of the European Communities

L 140/67

(22)

(23)

(24)

The aid in question is intended for an undertaking which
manufactures and assembles cars. That undertaking is
therefore part of the motor vehicle industry within the
meaning of the Community framework for State aid to
the motor vehicle industry (1) (hereinafter ‘the Guidelines
on State aid to the motor vehicle industry’).

The proposed aid is to be granted under the Regional
Selective Assistance scheme, which was adapted by the
United Kingdom to the Guidelines on national regional
the Commission proposed appropriate
aid (2), after
the
measures
Treaty (3).

in accordance with Article 88(1) of

The Guidelines on State aid to the motor vehicle
industry specify that, in accordance with Article 88(3) of
the Treaty, 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
be notified before being granted if either the total cost of
the project is equal to EUR 50 million, or the total gross
aid for the project, whether State aid or aid from
Community instruments,

is equal to EUR 5 million.

(25)

Both the total cost of the project and the amount of aid
exceed the notification threshold. Thus, in notifying the
proposed aid for NMUK,
the United Kingdom has
complied with the requirements of Article 88(3) of the
Treaty.

(26) Article 87(2) of the Treaty specifies certain types of aid
that are compatible with the Treaty.
In view of the
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
serious disturbance in the United Kingdom economy or
to promote culture and heritage conservation. As
regards the exceptions in Article 87(3)(a) and (c), the
Commission notes that the plant is located in the region
of Sunderland, which qualifies for assistance under point
(c).

(1) OJ C 279, 15.9.1997, p. 1.
(2) OJ C 74, 10.3.1998, p. 9.
(3) Commission letter dated 19 July 2000.

(27)

(28)

(29)

(30)

In order to decide whether the planned regional aid is
compatible with the common market, the Commission
must check whether the conditions specified in the
Guidelines on State aid to the motor vehicle industry
have been met.

To authorise aid under those Guidelines, the Commis-
sion, after checking that the region in question is eligible
for aid under Community law, establishes whether the
investor could have chosen an alternative site for its
project, so as to demonstrate the need for the aid, with
particular reference to the mobility of the project. Under
the
the new regional map in the United Kingdom,
Sunderland car plant is located in an area assisted under
Article 87(3)(c) with a regional aid ceiling of 20 % nge
for large firms.

the ownership structure of

Taking into account
the
Nissan-Renault alliance and the technical characteristics
of the particular project in question, the Commission
considers that the two companies Nissan and Renault
can be considered as a single business unit
for the
purpose of analysing the necessity and proportionality
requirement in this case.

The Commission has studied the geographic mobility of
the project. As for the viability of the Sunderland plant
in case of a shift of the Micra production to Flins, the
United Kingdom confirmed that decisions to produce
the Almera (until 2005) and the new Primera (until
2007) have already been taken, and production of these
models in Sunderland is assured, regardless of the Micra
the depreciation charges
decision. For this scenario,
relating to the residual book value of past
long-life
investments attributable to the Micra have been allocated
to the remaining production in Sunderland and have
been taken into account in the cost-benefit analysis. The
Commission considers that the plant in Flins is a viable
alternative to Sunderland. This has been confirmed by a
visit on site in Flins and technical documents provided
the United
by the United Kingdom.
Kingdom submitted
showing Nissan's
genuine intention to consider producing the Micra
model in Flins. Thus, the project is mobile in character
and can therefore be considered eligible for regional aid,
since the aid is necessary in attracting the investment to
the assisted region.

In addition,

documents

(31)

Regional aid intended for modernisation and rationalisa-
tion, which is generally not mobile, is not authorised in
the motor vehicle sector. However, a transformation,
involving a radical change in production structures on
the existing site could be eligible for regional aid. On the
basis of the layouts provided by the United Kingdom
and the visit on site, the Commission considers the
investments in the context of the launch of the new
Micra model as a transformation,
involving a radical
change in production structures.

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Official Journal of the European Communities

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(32)

(33)

(34)

(35)

The Commission has, together with its external automo-
tive expert, evaluated the notified cost-benefit analysis
with a view to ascertaining the extent to which the
proposed regional aid is in proportion to the regional
problems it seeks to solve. The exchange rate used in the
cost-benefit analysis is usually the exchange rate at the
time of the location decision. If the time of the location
decision is not verifiable or if no decision has yet been
taken, as in the present case, the applicable rate is the
rate at the time of notification. The in-depth analysis of
the cost-benefit analysis has made it possible to clarify
the elements which were raised in the decision to initiate
the procedure. Taking into account the additional infor-
mation received from the United Kingdom following the
the cost benefit analysis was
opening of procedure,
modified with respect to a number of elements.

The original vendor tooling estimates included in the
notification for both locations have been modified to
take into account the more advanced planning of the
project. The effect on the cost-benefit analysis (in net
present value terms) is to increase the eligible investment
amount by GBP 7,9 million to GBP 193,2 million, to
increase the investment cost handicap by GBP 1,6
million and to reduce the other handicap by GBP 0,3
million.

The Commission considers that the labour cost handicap
of Sunderland in the original cost benefit analysis
submission in respect of management and other salaried
employees was overstated. The cost benefit analysis was
modified accordingly, with the effect (in net present
value terms) of reducing the labour cost handicap of
Sunderland by GBP 17,7 million.

cost-benefit
Those modifications produce different
results
from those initially notified by the United
Kingdom. The initially notified handicap intensity of
Sunderland, of 42,71 %, was reduced to 32,48 %. The
revised aid intensity is 18,62 % gge, compared to 19,41
gge % initially.

(36)

The Commission has considered the question of a
‘top-up’, which is an increase in the permissible aid
intensity intended as a further incentive to the investor
to invest in the region in question. Such top-ups are
authorised on condition that the investment does not
increase the capacity problems facing the motor vehicle
industry. In this particular case, the results of the cost-
benefit analysis obviate the need for such an exam-
ination.

Conclusion

(37)

The aid intensity of the project is less than both the
disadvantage identified by the cost-benefit analysis and
the regional aid ceiling. The regional aid that the United
Kingdom plans to grant for NMUK is therefore compat-
ible with the common market pursuant
to Article
87(3)(c) of the Treaty,

HAS ADOPTED THIS DECISION:

Article 1

The State aid which the United Kingdom is planning to grant
to Nissan Motor Manufacturing (UK) Ltd for its plant
in
Sunderland, amounting to a maximum of GBP 40 million,
with an aid intensity of 18,62 % gross grant equivalent,
is
compatible with the common market within the meaning of
Article 87(3)(c) of the Treaty.

Implementation of the aid is accordingly authorised.

Article 2

This Decision is addressed to the United Kingdom of Great
Britain and Northern Ireland.

Done at Brussels, 17 January 2001.

For the Commission

Mario MONTI

Member of the Commission