2002/346/EC: Commission Decision of 17 October 2001 on the State aid granted by Germany to Deckel Maho Seebach GmbH (Text with EEA relevance) (Notified under document number C(2001) 3062)
Date: 2001-10-17
Institutions: European Commission
Subjects: Germany, State aid, control of State aid, export, machine tool, production, type of business

L 126/14

EN

Official Journal of the European Communities

13.5.2002

COMMISSION DECISION

of 17 October 2001

on the State aid granted by Germany to Deckel Maho Seebach GmbH

(Notified under document number C(2001) 3062)

(Only the German text is authentic)

(Text with EEA relevance)

(2002/346/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 the provisions cited above (1) and having regard to
their comments,

Whereas:

1. PROCEDURE

(1)

concerning

other measures

On 12 February 1998, Germany notified a guarantee
and a loan to be awarded to Deckel Maho Seebach
GmbH ((cid:145)DMS(cid:146)). The complete notification was received
on 27 February 1998. The notification also contained
information
already
awarded, and the case was
therefore registered as
unnotified and the Commission sent Germany several
sets of questions on 16 April 1998 and 14 August
1998. Germany replied on 30 June 1998 and 17
September 1998. A first meeting to discuss the case
took place on 15 October 1998 between representatives
of Germany and of the Commission. On 23 December
1998, the Commission sent Germany a reasoned outline
of its concerns and requested that Germany respond.
On 5 March 1999, Germany submitted a reply and tried
to withdraw its notification concerning the guarantee
and loan. On 23 September 1999, a meeting was held
to discuss the case again. Further
information was
submitted on 2 November 1999.

(2)

By letter dated 17 May 2000, the Commission informed
Germany that it had decided to initiate the procedure
laid down in Article 88(2) of the EC Treaty in respect of

(1) OJ C 217, 29.7.2000, p. 20.

(3)

(4)

(5)

(6)

the same time,

the aid. At
injunction pursuant
Regulation (EC) No 659/1999 of 22 March 1999 (2).

issued an information
to Article 10(3) of Council

it

Germany reacted to the initiation of proceedings and
the information injunction by letter dated 14 July 2000.

The Commission decision to initiate the procedure was
published in the Official
the European
Communities (3). The Commission called on interested
parties to submit their comments on the measures.

Journal

of

The Commission received comments from interested
parties. It forwarded them to Germany, which was given
the opportunity to react; its comments were received by
letter dated 10 August 2001.

2. DETAILED DESCRIPTION OF THE AID

2.1. The beneficiary of the aid

Article 87(1) of the EC Treaty refers to the concept of
undertaking in defining the beneficiary of aid. As
confirmed by the Court of Justice (4), an undertaking for
that provision does not have to be
the purposes of
single legal entity, but may encompass a group of
companies. The key criterion in determining whether
there is an undertaking within the meaning of
that
provision is whether an (cid:145)economic unit(cid:146) is involved. An
legal
economic unit may be composed of
persons. In the present case, the legal entity which is the
beneficiary of the different financial measures is DMS.
However, several elements indicate that
the relevant
undertaking is not confined to the legal person of DMS
alone.

several

(2) OJ L 83, 27.3.1999, p. 1.
(3) See footnote 1.
(4) Case 323/82 Intermills v Commission [1984] ECR 3809.

13.5.2002

EN

Official Journal of the European Communities

L 126/15

2.1.1. Setting up and ownership of DMS

(cid:151) Deckel Maho Geretsried GmbH, Geretsried (100 %

owned by Gildemeister AG),

(7)

(8)

(9)

(10)

6

June

1994

DMS is based in Seebach, Thuringia. It was established
on
vehicle
under
(cid:145)Verm(cid:246)gensverwaltung SIDEED GmbH(cid:146) and originally
had its registered office in Frankfurt am Main. On 11
May 1995, the name of the company was changed to
Deckel Maho Seebach GmbH and the registered office
was transferred to Seebach.

legal

the

DMS was initially a subsidiary of Deckel Maho GmbH in
Pfronten, which since the end of 1994 had belonged to
Gildemeister AG. DMS took over essential economic
assets from a company in liquidation, MAHO Seebach
GmbH i.L. (MS). MS was a subsidiary of a company in
bankruptcy, Deckel MAHO Aktiengesellschaft i.K (DM).
MS was not itself in bankruptcy, but belonged to the
company. The
its
bankruptcy
the economic assets of MS by DMS
acquisition of
occurred
bankruptcy
of
control
administrator of DM and an independent auction
company valued the goods.

parent

under

estate

the

the

of

the

1996,

October

In
Th(cid:252)ringer
Industriebeteiligungsgesellschaft GmbH & Co. KG (TIB)
took a stake amounting to DEM 6 million in DMS
within the framework of a capital increase and became
the second shareholder of the company with 37.5 % of
In December 1998, Gildemeister AG
the
the shares in DMS, which
acquired over 62.5 % of
became a direct subsidiary of Gildemeister AG.

shares.

2.1.2. Integration of DMS into the Gildemeister group

to

its

has

belonged

creation, DMS

Since
the
Gildemeister group. The Gildemeister group companies
are ultimately owned by Gildemeister AG, which is
based in Bielefeld, Germany. The Gildemeister group
designs, manufactures and exports precision machine
tools. It was involved in a restructuring process until the
end of 1997. In the context of this restructuring, the
group received state aid, which the Commission decided
on in its decision of 18 November 1997 (hereinafter the
1997 decision) (5). In 1998, it employed 2 500 people
and had a turnover of over DEM 1 billion.

(cid:151) DMS, Seebach (62,5 % owned by Gildemeister AG),

(cid:151) DMG Vertriebs und Service GmbH Deckel Maho
by

Bielefeld

(100 %

owned

Gildemeister,
Gildemeister AG),

(cid:151) A & f Stahl und Maschinenbau GmbH, W(cid:252)rzburg

(51 % owned by Gildemeister AG).

(12)

In addition,
there are a further six distribution and
service companies in Germany, nine in the rest of
Europe, seven in Asia and three in the United States.
There
companies providing various
are
(cid:145)technical services(cid:146).

also five

(13) Until 1997, DMS was

fully dependent on other
companies of the Gildemeister group. It did not carry its
own marketing and distribution activities. According to
the Commission’s information,
it did not enter into
contracts with parties outside the Gildemeister group. It
acted as an extended work bench of Deckel MAHO
GmbH Pfronten within the framework of supply and
performance contracts. According to Germany, DMS
goods were sold at arm’s length.

(14) One of the measures planned and implemented as part
of the restructuring of the Gildemeister group was the
the Deckel MAHO companies into
reorganisation of
centres. DMS was given more
independent profit
independence at
the
information contained in the group’s 1998 annual
report shows that DMS is still very much economically
integrated into the Gildemeister group.

the end of 1997. However,

(11) According to the group’s own company report

for
1998, the group consisted of Gildemeister AG and the
following companies and their subsidiaries:

(cid:151) Gildemeister Drehmaschinen GmbH,
(100 % owned by Gildemeister AG),

Bielefeld

(cid:151) Deckel Maho GmbH, Pfronten (100 % owned by

Gildemeister AG),

(5) OJ C 181, 12.6.1998, p. 4.

(15)

The Gildemeister group’s annual report describes the
group as composed of four production facilities, one of
them being DMS. DMS is also described as a production
facility for turning and milling machines together with
Deckel Maho Geretsried GmbH and Gildemeister
Drehmaschinen GmbH. According to the report, all
companies are strictly managed as profit centres in
order to achieve maximum performance output. To
allow the companies to fully concentrate on their core
activities, Gildemeister relies on an integrated and as far
as possible uniform EDP structure for all administrative
Interdisciplinary key functions are handled by
work.
centralised agencies. This
controlling and
finance functions as well as personnel management and
marketing.

includes

L 126/16

EN

Official Journal of the European Communities

13.5.2002

(16) Moreover DMS is described as supplying the other
the Gildemeister group with high-quality
plants of
products at marketable prices and as
securing the
group’s know-how in the machining sector. The group
is organised according to the concept of insourcing of
specific quantities. This shows that although functioning
as an independent profit centre, DMS is very much
integrated in the Gildemeister group. Moreover, all
profits and losses of DMS are directly transferred to
Gildemeister AG in accordance with an agreement for
the transfer of profits.

Gildemeister group can be regarded as a company in
difficulty until the end of 1997, since it was involved in
restructuring.

(20)

the group can no longer be
From 1998 onwards,
regarded as a company in difficulty. The restructuring
was successful and has led to the restoration of the
viability of the company.

2.1.4. The restructuring of the group

(17)

the aid.

In view of

In light of the above, the Commission concludes that
the whole Gildemeister group must be regarded as the
beneficiary of
the ownership
structure and the economic integration of DMS into the
Gildemeister group, DMS cannot be considered to be an
autonomous economic unit. Rather,
the Gildemeister
group forms a single economic unit. DMS cannot be
considered in isolation due to its integration into the
group. Therefore the beneficiary of the measures has to
be defined as the whole of the Gildemeister group. This
is consistent with the Commission’s 1997 decision.

2.1.3. The economic situation of the aid recipient

(18)

The financial situation of the Gildemeister group from
1994 to 1999 can be summarised as follows:

Table 1

(21) As

the
already presented in the 1997 decision,
restructuring plan of the Gildemeister group aimed at
concentrating activities and production programmes,
sites
staff
cutbacks. The following objectives were to be achieved:

and at making drastic

and companies

(cid:151) trimming of production,

(cid:151) combining of various production sites into a single

lathe production at Bielefeld,

(cid:151) restructuring of marketing,

(cid:151) closure of production capacity in certain plants,

(DEM million)

(cid:151) substantial reduction in the workforce.

1994

1995

1996

1997

1998

1999

Total turnover

482

732

830

875 1 141 1 369

(22)

Personnel costs

167

237

238

248

285

285

Operating result

ﬂ42

ﬂ6,6

14

34

71

91

Financial result

ﬂ16

ﬂ22

ﬂ20

ﬂ22

ﬂ20

ﬂ23

Net income/loss

ﬂ41

ﬂ23

7,6 12,5

32

64

In 1992,

experienced by

(19) As from 1991, the Gildemeister group felt the effects of
the machine-tool
the deep crisis
industry.
the Gildemeister group recorded
losses of over DEM 70 million, its losses in 1991 having
amounted to DEM 29 million. Its turnover was DEM
378 million in 1992 and DEM 254 million in 1993. In
1993, the group was still making losses, and a pool of
banks, including one of Gildemeister AG’s shareholders,
the Westdeutsche Landesbank (WestLB), waived claims
and granted new loans to the Gildemeister group. These
measures in favour of the whole Gildemeister group
were the subject of the Commission’s 1997 decision.
The restructuring period to which that decision relates
was from 1994 to 1997. Germany has confirmed that
the restructuring ended at the end of 1997 as planned.
The Commission can therefore already conclude that the

(23)

(24)

The plan provided for three stages. During the first
stage of the consolidation strategy, lathe production at
the Hanover site was halted and the production plant
closed. As a result, some 20 000 m2 of production plant
and some DEM 90 million in turnover were eliminated
from the market. At the beginning of 1993, the heavy
machinery division was
sold, under a management
buy-out, to the previous leading manufacturer of such
the profit-and-loss account of
products. As a result,
Gildemeister AG for 1992 was able to avoid outgoings
of some DEM 4 million. The remaining lathe activities
of the Gildemeister group were transferred to a newly
established firm, Gildemeister Drehmaschinen GmbH. At
the same time, production capacity and personnel were
substantially reduced.

In November 1992, Gildemeister AG sold the shares it
had in the company Witzig & Frank Turmatic GmbH
(WFT) GmbH. This sale achieved a revenue of DEM 25
million, which was used to finance the restructuring.

to

the

addition

In
abovementioned measures,
Gildemeister established a new distribution firm, Deckel
Gildemeister Vertriebs GmbH, together with Friedrich
Deckel AG.

13.5.2002

EN

Official Journal of the European Communities

L 126/17

(25)

(26)

(27)

(28)

(33)

The second stage of
comprised
measures:

the

the restructuring programme
following

the

of

implementation

(cid:151) optimisation of manufacturing processes within the
firm, with a switch to a modern process-oriented
type of team organisation,

(cid:151) renewal of the product range,

(cid:151) production, organised as (cid:145)profit centre assembly(cid:146) for
the
relevant product groups, was made more
efficient, slimmed down and brought closer to the
market,

(cid:151) further cost reduction was achieved through the

optimisation of procurement and logistics.

The third stage of the restructuring process comprises
the reorganisation of the data-processing system, further
measures related to logistics and the sale of unneeded
assets in 1997.

(29)

restructuring of

The
completed at the end of 1997 as planned.

the Gildemeister group was

2.2. Description of the State measures

2.2.1. Aid for MS ((cid:145)Measure A(cid:146))

(30) At

the time of

the initiation of proceedings,

the
Commission did not have any information as to the
nature, level and source of the cash injections received
by MS. In its reply to the initiation of proceedings and
to the information injunction, Germany explained that
these cash injections were made by the parent company
of MS, Deckel MAHO AG, in the form of several capital
increases.

(31) Germany confirmed that MS did not receive any other
State aid in addition to investment aid covered by
approved aid schemes.

restructuring of

the Gildemeister group also
The
the Deckel Maho
comprised the reorganisation of
subgroup.
In particular, DMS was organised as an
independent profit centre with its own product area and
separate accounting.

(32)

in all,

The restructuring of the Gildemeister group involved a
substantial reduction in the group’s production capacity.
the surface area required for lathes was
All
reduced from 42 500 m2
to 29 400 m2
(a 31 %
reduction). The
consolidation measures have been
accompanied by a substantial cutback in the workforce.
Total employment
in lathe production was reduced;
compared with 1991, the reduction in capacity for the
production of lathes amounts to more than 75 %.

2.2.2. Aid for DMS

The relevant measures were taken by the TIB and the
Th(cid:252)ringer Aufbaubank (TAB) (6), both state bodies.
There are two categories of measures:
the measures
already taken between 1994 and 1996 when the
Gildemeister group was undergoing restructuring (the
(cid:145)new(cid:146) measures,
(cid:145)restructuring measures(cid:146))
planned by Germany as a replacement for and extension
of the (cid:145)restructuring measures(cid:146). It is to be noted that
measures B and C consist of extensions of two loans
granted by the TAB in 1994 and assessed by the
Commission as not being aid in its 1997 decision. The
relevant measures are:

and

the

Table 2

(cid:145)Restructuring measures(cid:146)

Form

Source

DEM mil-
lion

Conditions

B

Extension of loan of 31 August
1994

TAB

8,5

(cid:151) extended annually since 1995

(cid:151) interest rate: (6,5 % (cid:151) 8 %)

(cid:151) secured through:

(cid:151) first mortgage on the company land, assignment as security of the
production machinery and a letter of intent from Gildemeister AG

(cid:151) purpose: financing of the purchase price of equipment and stocks

(6) The TAB’s and TIB’s activities are currently being examined by the
Commission under the following case numbers: N 529/99 for the
TAB and C 17/99 (ex NN 120/98, N 804/97) for the TIB.

L 126/18

EN

Official Journal of the European Communities

13.5.2002

Form

Source

DEM mil-
lion

Conditions

(cid:145)Restructuring measures(cid:146)

C

Extension of loan of 30 November
1994

TAB

15,0

(cid:151) extended annually since 1995

D

Loan and extension

TAB

5,0

(cid:151) granted on 13 June 1995

(cid:151) interest rate: (6,5 % (cid:151) 8 %)

(cid:151) secured through: same as B

(cid:151) purpose: financing of investment (purchase price of land and

buildings)

(cid:151) extended annually since 1995

(cid:151) to finance working capital

(cid:151) interest rate (6,5 % (cid:151) 8,5 %)

(cid:151) secured through: same as B

E

Loan and extension

TAB

3,5

(cid:151) granted on 15 August 1995

(cid:151) extended annually since 1995

(cid:151) to finance working capital

(cid:151) interest rate: (6,5 % (cid:151) 8,5 %)

(cid:151) secured through: same as B

F

Loan and extension

TAB

2,0

(cid:151) granted on 30 November 1995

(cid:151) extended annually since 1995

(cid:151) interest rate: (6,5 % (cid:151) 7,75 %)

(cid:151) secured through: same as B

(cid:151) to finance working capital

G

H

Cash contribution

TIB

6,0

(cid:151) made in June 1996

Loan

TIB

4,0

(cid:151) granted in June 1996

(cid:151) cash for a 37,5 % holding in DMS

(cid:151) sleeping partnership

(cid:151) interest rate: 6,5 %

(34) As shown in Table 2, the TAB granted loans in the
amount of DEM 34 million in the years 1994/1995.
According to Germany, they were granted on market
conditions and their extension was also based on market
conditions. Germany indicated that DMS has already
paid to TAB interest
in the amount of DEM 13.4
million and that, at the time of extension, transaction
processing fees on market terms were imposed on DMS.

(35) As far as the TIB measures are concerned, Germany
wrote that the reason for the application by DMS for a
TIB holding in DMS was the liquidity shortage due to
the greater working capital
requirement during the
building-up of activity. Before taking a holding in DMS,
the TIB asked a consultancy to report on the viability of
the company and on the prospects attaching to a
holding. PME Projekt Management Eschbach GmbH

the

lack of

economic

autonomy.

sufficiently

setting-up of

(PME) produced a report in June 1996. According to the
report, DMS faced several difficulties due to its new
creation and a
In
particular, PME noted that essential functions enabling
the company to be independent were missing. A
condition for a good economic return on the holding
was
independent
a
undertaking. According to PME, if the shareholders of
DMS committed themselves to transforming DMS into
an independent profit center and if they could guarantee
that they would have the right to decide on the essential
aspects of the company, such as product development,
the conditions for a holding by a third party in the
company could be deemed to be fulfilled. According to
Germany, these conditions were fulfilled, since from the
end of 1996 several measures were undertaken to
transform DMS into an independent undertaking.

13.5.2002

EN

Official Journal of the European Communities

L 126/19

(36)

(37)

In addition to the 37,5 % holding in DMS,
the TIB
acquired a sleeping partnership in DMS in the amount
of DEM 4 million. The interest rate is of 6,5 % per

annum and the TIB also has a participation in the profit
of the company as long as it is over DEM 500 000.

Form

Source

Table 3

(cid:145)New measures(cid:146)

DEM mil-
lion

Conditions

I

Loan

Consortium

10,0

(cid:151) granted in 1998

(cid:151) three sources: TAB (3.4), Deutsche Genossenschaftsbank

(3.3), Landesbank Hessen-Th(cid:252)ringen (3.3)

(cid:151) term: 5 years

(cid:151) interest rate: 7,5 % p.a.

(cid:151) security: same as B

(cid:151) purpose: financing of further expansion of turnover and

building-up of distribution network

J

Loan

Consortium

34,0

(cid:151) to replace measures B-F

(cid:151) three sources: Deutsche Genossenschaftsbank (15);
Landesbank Hessen Th(cid:252)ringen (15) and TAB (14)

(cid:151) same conditions as B

(cid:151) not yet granted

K

Guarantee

TAB

35,2

(cid:151) 80 % of DEM 44 million for measures I and J

(cid:151) application withdrawn on 17.7.2000

(38) According to Germany, loan I was granted on market
consortium have
conditions. The partners
concluded a security pool contract in order to secure
the loan. The mortgage amount serving as security was
increased from DEM 35 million to DEM 45 million.

in the

(39) Measure J

is

intended to replace the TAB loans
amounting to DEM 34 million. The total amount of the
TAB loans is to be replaced on the same conditions as
measure I. This replacement is supposed to lead to a
decrease in the above-average interest rate on the TAB
loans granted in 1994 and 1995. According to
Germany, DMS/Gildemeister AG accepted this high
interest
this new financing
possibility.

rate only because of

(40)

(41)

The application for measure K was withdrawn on 17
July 2000.

In addition to these measures, DEM 8.3 million was
granted to DMS in the form of investment grants and
investment allowances on the basis of approved aid
schemes (7).

(7) Gemeinschaftsaufgabe

regionalen
(cid:145)Verbesserung
Wirtschaftsstruktur(cid:146) (Joint Federal Government/L(cid:228)nder programme
for improving economic structures). Sonderprogramm (cid:145)Aufschwung
Ost(cid:146)
recovery in eastern
Germany). Th(cid:252)ringen F(cid:246)rderprogramm f(cid:252)r Forschung (Thuringia
research aid programme).

(Special programme

economic

der

for

(42)

(43)

(44)

(45)

2.3. The relevant market

The relevant product market is that for the development
and production of milling and drilling machinery. The
relevant geographic market
is worldwide and thus
extends across all the Member States.

fluctuations

The machinery and equipment sector has to contend
with sharper cyclical
than most other
branches of industry. That is due to its high degree of
dependence on the investment activity of enterprises,
which react very sensitively to developments in the
economy as a whole.

in the course of which demands

The vigorous investment boom of 1989 to 1990 was
followed, from 1991 to 1993, by a marked falling-off in
investment,
for
machinery was
recession in
mechanical engineering, which came to an end in 1993,
hit the industry heavily. In order to survive, the industry
has undergone rationalisation in order to reduce costs,
particularly through automation.

down sharply. The

improved.
From 1994 onwards, market conditions
Investment activity recovered outside Europe
from
1993. From the beginning of 1994 onwards, demand
also stabilised in the Member States and in the rest of
western Europe, with the result that total new orders for
machinery and equipment rose again.

L 126/20

EN

Official Journal of the European Communities

13.5.2002

(46) However, in the second half of 1995, the propensity to
invest and also to consume fell off surprisingly sharply
in most Member States and orders from the Community
began to decline. At
the growth in
demand for machinery from third countries slowed
appreciably. The process of rationalisation was pursued
at the end of the 1990s, with the manufacturers of
machinery and equipment looking increasingly towards
automated solutions.

the same time,

decided

therefore
against
initiate
measures A to K and sent an information injunction to
Germany.

proceedings

to

3. COMMENTS FROM INTERESTED PARTIES

(47) Germany states that in 1998 the market on which DMS
operates was characterised by a growing price war and
that in the first part of 1997 the market underwent a
mild recession.

(53)

The Commission received a letter from Gildemeister AG
on 24 August 2000 commenting on the initiation of
proceedings. DMS’s parent company referred to the
comments by Germany and wished to recall certain
facts about DMS,
its economic situation and the
measures in support of it.

2.4. Grounds for initiating the proceedings

(48) Despite several requests for information, Germany had
failed to submit satisfactory information enabling the
Commission to decide on the nature of the financial
measures in support of DMS.
In particular, several
points remained open on the identity and financial
the beneficiary and on the measures
condition of
granted to MS and DMS.

(54)

Concerning DMS, Gildemeister AG wrote that
the
company was legally independent from both MS and
Deckel Maho AG i.K. Gildemeister AG believes that no
notifiable aid was granted to DMS.

(55) Gildemeister AG pointed out that DMS had made losses
only when it started its activity. After two years, it was
already showing some profits, and in 1998 it had a
turnover profitability of 8 %.

(49)

In particular, it appeared to the Commission that DMS
might not be the entire relevant undertaking in this
case, both because of its relationship to a previously
founded
its
relationship with other parts of the Gildemeister group.

legal person, MS,

because of

and

(50) As the full extent of

it was also unclear

the relevant undertaking was
to what extent data
unclear,
concerning the performance of DMS alone could be
taken into account as evidence of
the
relevant undertaking as a whole. On DMS, moreover,
the information was only limited and selective.

the state of

The Commission had also doubts as to the compatibility
of the different measures with the common market. The
information concerning the measures granted to MS and
DMS was incomplete. The purpose and terms of the
measures was often not specified and it was not always
clear whether these measures had already been granted
or not.

(51)

(52)

(56) According to Gildemeister AG, only DMS benefited
from the various measures and no other company of
the Gildemeister group. All the companies of the group
centres with
are organised as
independent
the
benefit of Gildemeister AG is therefore excluded.

accounting. Cross-subsidisation for

independent profit

(57) Gildemeister AG stressed the fact that the TIB acquired
a holding in DMS only after having checked the
profitability of
the investment. The TAB loans were
granted on market conditions, and since the company
has to be considered as not being in difficulties, these
measures do not constitute aid.

4. COMMENTS FROM GERMANY

The Commission concluded that on several points
the measures was difficult because of
assessment of
inadequate information submitted by Germany. Several
information submitted by Germany led the
items of
Commission to believe that
the
measures may have been in difficulties at the relevant
time and that aid may be involved. The Commission

the beneficiary of

(58)

In its comments of 14 July 2000 on the initiation of
proceedings, Germany insisted that DMS should be
regarded as a newly created company. It gave details on
the creation and development of DMS as well as on its
legal links with MS, Deckel Maho Pfronten GmbH and
Gildemeister AG.
It also provided data on DMS’s
economic situation and concluded that DMS was not a
company in difficulties.

13.5.2002

EN

Official Journal of the European Communities

L 126/21

(59) At

the Commission’s request, Germany provided an
explanation of the various measures in support of MS
and DMS. According to Germany, the measures by the
TAB and the TIB in support of DMS do not constitute
state aid, since they were granted on market conditions
to a company which was not in difficulties. Germany
also gave details on the interest already paid by DMS to
the TAB and to the TIB.

5.1.1.

(cid:145)Aid granted through State resources(cid:146)

(64) Measure A consisted of cash injections made by
Gildemeister AG into MS. Since this measure does not
is not aid within the
derive from State resources it
meaning of Article 87(1) of the EC Treaty.

(60) Germany recalled that, at the time of the new creation
of DMS, Gildemeister AG was in restructuring. The
Commission decided at the time that the restructuring
aid for Gildemeister was compatible with the common
market. Germany confirmed that
restructuring
ended at the end of 1997 as planned.

the

(61) Germany emphasised that any spillover effect of

the
financial measures
in support of DMS to other
companies of the Gildemeister group could be excluded.
According to Germany, the public measures in support
of DMS could only benefit DMS since they were
applicable to undertakings in Thuringia. The Thuringia
authorities had taken the necessary measures to ensure
that the purpose of the measures was complied with.
Moreover, as DMS gradually gained in independence, all
the transactions between DMS and other companies of
the Gildemeister group were carried out on market
conditions. All companies of the Gildemeister group are
organised as independent profit centres.

(62)

thanks

Finally, Germany wrote that the success of DMS had
strong
been made possible only
commitment of the Gildemeister group. Between 1994
and the end of 1999, the Gildemeister group invested
DEM 41,3 million in DMS and participated significantly
in the development of the business plan and in the
development of new products.

to the

5. ASSESSMENT OF THE AID

5.1. Are any of the measures A to K aid within the scope

of Article 87(1) of the Treaty?

the

financial

are public

(65) Measures B to F and measures G and H were granted by
the TAB and the TIB, which are both State-owned.
Measure I was granted by a consortium of banks. The
Landesbank Hessen-Th(cid:252)ringen (the
TAB and
institutions. The
Landesbank)
Deutsche Genossenschaftsbank (DG Bank) has been a
stock corporation since 1998. For the time being, the
shares are not traded or quoted on the stock-exchange.
More than 90 % of DG Bank’s share capital is directly or
indirectly in the hands of cooperative undertakings or
holding companies. The loan granted by DG Bank
therefore be deemed to derive from state
cannot
resources. Measure J
is to be granted by the same
consortium. Out of DEM 34 million, DEM 29 million
derive from State resources.

(66)

The application for measure K was withdrawn and is
therefore no longer the subject of this decision.

(67)

(68)

5.1.2.

(cid:145)Distorts or threatens to distort competition by
favouring certain undertakings(cid:146) and (cid:145)affects trade
between Member States(cid:146)

The beneficiary of
the aid has to be defined as the
whole Gildemeister group, since the group appears to
be a modular construct with no part functioning as a
stand-alone economic unit.

that

although the TIB,

In order to decide whether the measures granted by the
their
TIB,
the TAB and the Landesbank favour
it is
beneficiary within the meaning of Article 87(1),
necessary to examine the economic situation of
the
beneficiary at the time of the grant. The Commission
notes
the TAB and the
Landesbank are State bodies, they can act as private
investors. A key issue in deciding whether they acted as
such is whether the undertaking receiving the measures
was in difficulties. If it was in difficulties, a measure can
be deemed to be aid.
in
difficulties, then a measure is aid only to the extent that
it deviates from market conditions.

the recipient was not

If

(63) Article 87(1) of the EC Treaty stipulates that (cid:145)any aid
granted by a Member State or through State resources
in any form whatsoever which distorts or threatens to
distort competition by favouring certain undertakings or
the production of certain goods shall,
in so far as it
affects trade between Member States, be incompatible
with the common market(cid:146).

(69)

the Gildemeister group was
From 1994 until 1997,
undergoing restructuring. It made losses in 1994 and
1995. Although it achieved a profit from 1996 on, the
group has to be regarded as being in difficulties as long
as its restructuring financed partly through state aid had
not been completed, i.e. until the end of 1997. As from

L 126/22

EN

Official Journal of the European Communities

13.5.2002

1998, the group can be regarded as no longer being in
difficulties.

(70) As far as trade between Member States is concerned,
such trade is likely to be affected since the Gildemeister
group is active on a market extending across borders.

restructuring. The terms of these loans correspond to
market conditions applied to healthy companies. The
in accordance with the
Commission notes
Commission notice on the method for
setting the
reference and discount rates (9), to exclude the presence
of aid, the reference rate should be increased by at least
4 % in the case of companies in difficulty.

that,

Table 4

Interest rate

Reference rate

5.1.2.1. M e a s u r e s B t o F

Measure B

8 %

from 31.8.1994

7,62 %

(71) Measures B and C are extensions of two loans originally
granted in 1994. The original loans amounted to DEM
23,5 million. Their interest rate was 8 % and they were
secured through the land and production equipment of
the company. They were due to be paid back on 31
In its decision to initiate proceedings
March 1995.
aid for Gildemeister AG (8)
(1996
against
State
the
the Commission took the view that
decision),
original
loans were not aid, but in line with private
investor behaviour. Germany asserts that the extension
of the original loans as well as the granting of additional
loans (measures D to F) are also in line with private
investor behaviour.

(72) Although the loans extended under measures B and C
were held by the Commission in its 1996 decision not
to be aid, the extension of the term of these loans may
constitute an additional economic benefit going beyond
If this additional benefit is
that of the original
provided
appropriate
body without
commercial return then the extension may constitute
aid even though the original loans may not have been
aid. Similar considerations apply to the granting of
additional loans.

loan.

state

by

a

7,50 % from 1.10.1995

6,99 %

6,50 % from 1.1.1996

6,99 %

7,75 % from 1.1.1998

5,94 %

Measure C

8 %

from 30.11.1994

7,62 %

7,50 % from 1.10.1995

6,99 %

6,50 % from 1.1.1996

6,99 %

7,75 % from 1.1.1998

5,94 %

Measure D

8,50 % from 23.6.1995

8,28 %

7,50 % from 1.10.1995

6,69 %

6,50 % from 1.1.1996

6,99 %

7,75 % from 1.1.1998

5,94 %

Measure E

8,50 % from 26.8.1995

6,99 %

7,50 % from 1.10.1995

6,99 %

6,50 % from 1.1.1996

7,33 %

7,75 % from 1.1.1998

5,94 %

Measure F

7,50 % from 20.11.1995

6,99 %

6,50 % from 1.1.1996

7,33 %

7,75 % from 1.1.1998

5,94 %

(73) Measures B to F amount to DEM 34 million. They have
all been extended annually since 1995. No reason was
stated by Germany to explain why the two original
loans had to be extended and why additional loans had
to be granted. Germany only mentioned that the loans
were granted to finance investment, to finance working
capital and to finance the creation of a distribution
structure and that they were seen as long-term loans.
Despite the extension and the additional
financial
resources granted to the beneficiary, the terms of the
loans and in particular the interest rate remained similar
with an interest rate between 6,50 % and 8,50 %.

(74) Measures B to F were granted to DMS at a time when
the beneficiary was in difficulties and embarked on

(75) As Table 4 shows, the interest rates of the loans were
below or just above the reference rate for healthy
companies. The Commission cannot conclude that a
market economy investor would have provided such
to a
financial
company in difficulties.
the economic
situation of the beneficiary, it must be concluded that
measures B to F were not granted in line with market
their
investor
beneficiary. They therefore constitute aid within the
meaning of Article 87(1) of the EC Treaty.

support even on market conditions

In view of

behaviour

therefore

favour

and

(8) OJ C 101, 3.4.1996, p. 7.

(9) OJ C 273, 9.9.1997, p. 3.

13.5.2002

EN

Official Journal of the European Communities

L 126/23

5.1.2.2. M e a s u r e s G a n d H

5.1.2.3. M e a s u r e s I a n d J

(76)

Both measures G and H were granted by the TIB. When
the TIB acquired a holding in DMS and granted the
beneficiary a cash contribution of DEM 6 million and a
loan of DEM 4 million in June 1996,
the relevant
In its decision of 8
undertaking was in difficulties.
August 1994 approving programme N 183/94 on the
TIB’s activities, the Commission concluded that holdings
in companies in difficulty constitute State aid within the
meaning of Article 87(1) of the EC Treaty. Such aid can
be considered compatible with the common market if
certain conditions are fulfilled.
In the case of DMS,
Germany failed to fulfil its obligation of providing prior
notification of holdings in large companies. These aid
measures and their compatibility with the common
market must therefore be assessed ad hoc.

(77) Germany submitted a report drawn up by PME,
intended to examine the profitability of a holding in
DMS. According to Germany, this report shows that
DMS was not a company in difficulty within the
meaning of the Community guidelines on State aid for
rescuing and restructuring firms in difficulty (10) (1994
guidelines) and that
the TIB behaved as a private
investor with the aim of obtaining profits.

(78)

(79)

the Gildemeister group. However,

The Commission notes that the report by PME only
looked at DMS and its then parent company Deckel
Maho Pfronten. It did not consider in detail the overall
in
situation of
highlighting the difficulties faced by DMS, PME stressed
the fact
that DMS was not an independent and
autonomous undertaking and that one of its problems
was its lack of independence and its vulnerability caused
by the difficulties faced by the other group companies.
These difficulties had to be added to the intrinsic
difficulties
it
concluded that acquiring a holding in DMS would be a
the guarantee was
sound economic decision only if
there that DMS would be able to decide on its own
development.

faced by DMS itself.

In particular,

of

report

conclusion

The
the
this
Commission’s analysis according to which DMS cannot
be seen in isolation from the Gildemeister group and
that it has therefore to be regarded as being in difficulty
at the time the TIB acquired a holding in its capital.

reinforces

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

(80) Measure I was granted in 1998 at

time where the
beneficiary was not in difficulties. The terms of this loan
are in line with market conditions since its interest rate
is above the reference rate for 1998 and since the loan
can be deemed to be sufficiently secured through the
land and equipment of the company. The Commission
the beneficiary did not
can therefore conclude that
derive any advantage and that
this measure does
therefore not constitute State aid within the meaning of
Article 87(1) of the EC Treaty.

(81) Measure J has not yet been granted. Its conditions are
similar to the conditions of I and the interest rate has
remained above the reference rate. Since the beneficiary
is no longer a company in difficulty,
it may be
concluded that the public banks in the consortium are
acting as private investors and that measure J
is
therefore not aid within the meaning of Article 87(1) of
the EC Treaty.

5.2. Derogation under Article 87(3)(c) of the EC Treaty

(82)

The aid falls to be assessed as ad hoc aid by the
Commission. Article 87(2) and (3) of
the EC Treaty
provide for exceptions to the general ban on aid laid
down in Article 87(1).

(83)

(84)

The exemptions in Article 87(2) of the EC Treaty do not
apply in the present case because the aid measures do
not have a social character and are not granted to
individual consumers, nor do they make good the
damage caused by natural disasters or exceptional
occurrences, nor is the aid granted to the economy of
certain areas of
the Federal Republic of Germany
affected by its division.

Further exemptions are provided for in Article 87(3)(a)
and (c) of the EC Treaty. As the primary objective of the
aid is not regional, but concerns the restoration of
long-term viability of an undertaking in difficulty, only
the exemptions of Article 87(3)(c) of
the EC Treaty
apply. Article 87(3)(c) provides for the authorisation of
State aid granted to promote the development of certain
economic sectors, where such aid does not adversely
affect trading conditions to an extent contrary to the
common interest. For
rescue and
the Commission has issued special
restructuring aid,
the Commission
guidelines. Following examination,

its assessment of

L 126/24

EN

Official Journal of the European Communities

13.5.2002

considers that none of the other Community guidelines,
the
such as
environment, small and medium-sized enterprises, or
employment and training, could apply here.

research and development,

those for

(85)

in

(1999

guidelines),

difficulty (11)

In accordance with point 101 of
the Community
guidelines on State aid for rescuing and restructuring
the
firms
Commission will examine the compatibility with the
common market of any rescue and restructuring aid
granted without its authorisation (cid:145)(a) on the basis of
these guidelines if some or all of the aid is granted after
their publication in the Official Journal of the European
Communities; (b) on the basis of the guidelines in force
at the time the aid is granted in all other cases.(cid:146) Since,
according to the information available, all the aid was
granted before the publication of the 1999 guidelines,
the 1994 guidelines apply.

(86)

The aid to DMS was granted in the context of
the
restructuring of the whole Gildemeister group, the plan
for which was submitted by Germany in 1996.

(87)

(88)

5.2.1. Restoration of viability

The granting of restructuring aid requires a feasible,
coherent and far-reaching restructuring plan capable of
restoring the long-term viability of the firm within a
reasonable time span and on the basis of
realistic
assumptions. Restructuring aid should normally only
need to be granted once.

The Commission already concluded in its 1997 decision
that the plan was capable of restoring the long-term
viability of the group. The restructuring was based on
internal as well as external measures as described in
point 2.1.4. The information received through the
annual reports submitted by Germany confirms the full
and successful implementation of the restructuring plan.
The financial measures provided for in the plan were
confirmed by the actual
results which have been
successfully
since
achieved
completed at the end of 1997. The Gildemeister group
is now making profits.

restructuring was

the

(90)

(91)

(92)

(93)

otherwise the aid involved is contrary to the common
to
interest and not eligible for exemption pursuant
Article 87(3)(c) of the EC Treaty.

If the undertaking operates on a Community market on
which an objective assessment of demand and supply
shows that there is a structural excess of production
capacity, the restructuring plan must make a significant
to the amount of aid
contribution, proportionate
received, to the restructuring of the industry serving the
relevant market by irreversibly reducing or closing
capacity.

The machine-tools industry went through a recession in
the course of
the nineties and was characterised by
the
The
slight
Gildemeister group involved a substantial reduction in
the group’s production capacity.

over-capacity.

restructuring

of

The Commission concluded in its 1997 decision that
the aid measures in support of the Gildemeister group
would not result in an undue distortion of competition.
The 1997 decision concerns the restructuring of the
whole of the Gildemeister group,
including DMS. The
capacity reduction which was assessed in the 1997
decision concerns the reduction of the capacity of the
whole group.
It can therefore be concluded that the
the 1997 decision is not altered by the
finding of
additional aid measures,
the important
in view of
capacity reduction resulting from the restructuring.

5.2.3. Aid limited to the minimum

the

light of
the company and its

The amount of aid must be limited to the strict
restructuring to be
minimum required to enable
existing financial
undertaken in the
In
shareholders.
resources of
addition,
the beneficiary must make a substantial
contribution to the restructuring costs from its own
resources or external
financing at market conditions.
Moreover, the way in which the aid is granted must be
such as to avoid providing the company with surplus
aggressive,
be
cash
market-distorting
the
activities
restructuring process.

for
linked

used
not

which

could

to

5.2.2. Avoidance of undue distortion of competition

(94)

In its 1997 decision,
following measures as being aid:

the Commission identified the

(89)

The restructuring must contain measures taken to offset
far as possible adverse effects on competitors,
as

(11) OJ C 288, 9.10.1999, p. 2.

1. a guarantee granted by the Land of North-Rhine
Westphalia on loans of DEM 20 million was deemed
to fall under a previously approved scheme,

13.5.2002

EN

Official Journal of the European Communities

L 126/25

2.

the financing by the Land of Bavaria of a one
percentage point interest rate reduction on a 9,25 %
interest rate on a DEM 15 million subordinated
five-year
the Bayerische
granted
Landesanstalt f(cid:252)r Aufbaufinanzierung ((cid:145)LfA(cid:146)) and

loan (12)

by

88(3) of the Treaty. However, in view of the foregoing,
the Commission concludes that, since the aid complies
with the 1994 guidelines,
is compatible with the
common market,

it

3. guarantees provided by the LfA and by the TIB to
WestLB in respect of its placement guarantee for
Gildemeister AG’s October 1994 DEM 34 million
capital increase.

HAS ADOPTED THIS DECISION:

(95)

In addition to these measures, the following measures
were identified as aid in the course of the proceedings:

Article 1

1. extension of existing loans and grant of additional
loans by the TAB in the amount of DEM 34 million
(measures B to F), and

1.
The loan amounting to DEM 10 million (referred to as
measure I above), which Germany granted in 1998 to Deckel
Maho Seebach GmbH (DMS), does not constitute aid within
the meaning of Article 87(1) of the EC Treaty.

2. cash contribution and dormant equity holding of
the TIB in the amount of DEM 10 million (measures
G and H).

2.
The loan amounting to DEM 34 million (referred to as
measure J above), which Germany intends to grant to DMS,
does not constitute aid within the meaning of Article 87(1).

(96)

that

since

decision

concluded

the
1997
The
restructuring was
financed essentially by financial
resources raised by the group itself, the aid received was
limited to the minimum needed. Among the financial
resources raised by the Gildemeister group, the 1997
decision identified a private investor contribution in the
amount of DEM 126 million (13). After adding the
additional aid measures in the amount of DEM 44
million to the aid measures already assessed under the
1997 decision,
the total aid amounts to DEM 98,4
million. Consequently, the additional measures do not
change the assessment made in the 1997 decision, since
the private contribution to the restructuring can still be
estimated at more than 55 % of the total financing.

5.2.4. Full implementation of the restructuring plan

(97) A company in receipt of restructuring aid must fully
implement
the plan submitted and approved by the
Commission. Germany has submitted annual reports to
the
the
has
restructuring was successfully completed at the end of
1997.

Commission

confirmed

that

and

The aid consisting of

the following measures and
3.
amounting to DEM 44 million, which Germany granted to
DMS,
to
Article 87(3)(c):

is compatible with the common market pursuant

(a)

the extension (referred to as measure B above) of the loan
of DEM 8.5 million granted by the Th(cid:252)ringer Aufbaubank
to DMS on 31 August 1994 to cover operating costs;

(b) the extension (referred to as measure C above) of the loan
of DEM 15 million granted by the Th(cid:252)ringer Aufbaubank
to DMS on 30 November 1994 to finance a purchase
price;

(c) a loan of DEM 5 million (referred to as measure D above)
granted by the Th(cid:252)ringer Aufbaubank to DMS on 13 June
1995 to finance working capital;

(d) a loan of DEM 3,5 million (referred to as measure E above)
granted by the Th(cid:252)ringer Aufbaubank to DMS on 15
August 1995 to finance working capital;

6. CONCLUSION

(e) a loan of DEM 2 million (referred to as measure F above)
granted by the Th(cid:252)ringer Aufbaubank to DMS on 30
November 1995 to finance working capital;

(98)

The Commission finds that Germany has unlawfully
implemented the aid in question in breach of Article

(12) The aid element is to be estimated at some DEM 361 500.
(13) For further details, please refer to the 1997 decision.

(f) a cash contribution of DEM 6 million (referred to as
Th(cid:252)ringer

measure
Industriebeteiligungsgesellschaft to DMS in June 1996;

above) made

the

by

G

L 126/26

EN

Official Journal of the European Communities

13.5.2002

(g) a loan of DEM 4 million (partiarisches Darlehen) (referred
to as measure H above) granted by the Th(cid:252)ringer
Industriebeteiligungsgesellschaft to DMS in June 1996.

Article 2

This Decision is addressed to the Federal Republic of Germany.

Done at Brussels, 17 October 2001.

For the Commission

Mario MONTI

Member of the Commission