2002/900/EC: Commission Decision of 5 June 2002 on the State aid which Spain plans to grant Renault España SA (notified under document number C(2002) 1992) (Text with EEA relevance)
Date: 2002-06-05
Institutions: European Commission
Subjects: Spain, State aid, aid to undertakings, control of State aid, motor vehicle industry

L 314/92

EN

Official Journal of the European Communities

18.11.2002

COMMISSION DECISION

of 5 June 2002

on the State aid which Spain plans to grant Renault Espaæa SA

(notified under document number C(2002) 1992)

(Only the Spanish text is authentic)

(Text with EEA relevance)

(2002/900/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

(3)

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),

Whereas:

I. PROCEDURE

(1)

(2)

Castile-Leon,

By letter dated 15 December 2000 the Spanish
authorities notified a plan to grant regional aid to
Fabricaci(cid:243)n de Autom(cid:243)viles Renault Espaæa S.A., which
is located in Valladolid in the autonomous community
Espaæa(cid:146)).
of
The
Commission requested further
information on 26
January 2001 (submitted by the Spanish authorities on
22 and 27 February); on 26 April 2001 (submitted by
the Spanish authorities on 28 May 2001); and on 5 July
2001 (submitted by the Spanish authorities on 14
September 2001).

((cid:145)Renault

Spain

formal

to Article 88(2) of

The Commission decided on 13 November 2001 to
initiate proceedings pursuant
the
investigation
Treaty (decision to open the
procedure), as it found that there were doubts about
compatibility with the common market. After a meeting
held at the Commission’s premises on 8 January 2002,
Spain submitted its comments on the initiation of
proceedings on 17 January 2002. On 8 March 2002 the
Commission visited the Bursa plant
(Turkey), where
further information was supplied.

The Commission decision to initiate the procedure was
published in the Official
the European
Communities (2), with an invitation to interested parties
to submit their comments on the aid.

Journal

of

(4)

The Commission did not receive any comments from
interested parties.

II. DETAILED DESCRIPTION OF THE AID

T h e p r o j e c t

Renault Espaæa is a subsidiary of the French automotive
group Renault. The notified project
the
production of two distinct engines of the (cid:145)K(cid:146) family: the
K4, a 4-cylinder, 16-valve petrol engine, with 1,4 and
1,6 litre versions, and the K9, a common rail 4-cylinder,
8-valve, 1,5 litre diesel engine.

concerns

The notified project concerns the installation of various
production lines for engine components and a new
flexible assembly line with a capacity of 1 200 K4 or K9
engines/day. At Valladolid, capacity will
increase from
4 800 to 6 000 engines/day. At group level, Renault
plans
engine production substantially
between 1998 and 2005, from 1 600 000 to more than
3 000 000 engines/year.

to increase

to

According
investment
programme covers a six-year period, from January 1999
to December 2004.

notification,

the

the

According to Spain,
is mobile, and an
the project
alternative site in Bursa, Turkey, was regarded as a
viable alternative by the Renault group. The cost-benefit
analysis (CBA), however, was carried out on the basis of
a hypothetical site within the EEA or the central and

(5)

(6)

(7)

(8)

(1) OJ C 33, 6.2.2002, p. 13.

(2) See footnote 1.

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L 314/93

european

eastern
in
Romania was chosen for its similarities with Bursa as
regards location and costs.

(CEECs). Mioveni

countries

L e g a l b a s i s ; i n v e s t m e n t a n d a i d a m o u n t s

(9)

The notified aid will be granted in the form of direct
following
aid in accordance with the
investment
provisions: Royal Decree No 78/1997 of 24 January (3),
which partially amends the central government’s general
scheme of regional aid so as to adapt it to the regional
aid map for 1994 to 1999 (approved by
the
Commission by letter dated 7 September 1995, Case N
463/94);
of
5 December (4); and Decree No 125/2000 of 1 June of
the Autonomous Community of Castile-Leon (5), a draft
version of which was approved by the Commission on
16 May 2000 (Case N 410/99).

2486/1996

Decree

Royal

No

(15)

(16)

the project

Secondly, in their comments of 17 January 2002, the
is an
Spanish authorities confirm that
expansion of the existing facilities in Valladolid, which
will increase their capacity from 4 800 to approximately
6 000 engines per day. The expansion will
require
completely new machinery, and therefore any notion of
rationalisation or modernisation of the project can be
excluded.

for

costs

Thirdly,
the Spanish authorities maintain that only
eligible costs have been included in the CBA. Total
to
the
eligible
EUR 149 441 660, or EUR 128 724 990 at 1999
values. The investment costs of EUR 154 802 794
reported in the CBA are expressed in 2003 values and,
once the appropriate discounting has been carried out,
correspond to the amounts mentioned above.

amount

project

(10)

Renault Espaæa intends to invest a nominal amount of
EUR 149 441 660
of which
EUR 164 530 000,
(discounted value: EUR 128 724 990, taking 1999 as
the base year and assuming a discount rate of 4,72 %)
were regarded as eligible investment by Spain.

(17)

Fourthly,
the Spanish authorities clarified the doubts
expressed by the Commission about the CBA comparing
Valladolid with the hypothetical comparator
site of
Mioveni (Romania).

(11) According to the information received in January 2002,
the planned aid in nominal values amounts to EUR
22 333 832 gross grant equivalent, the present value of
which is EUR 18 366 569. Therefore, the aid intensity
would be 14,27 % gross grant equivalent.

(18)

(12) According to the notification, no other Community aid

or financing has been allocated to the project.

III. COMMENTS FROM SPAIN

comments on the

(13) On 17 January 2002 the Spanish authorities submitted
initiation of proceedings.
their
Additional information was provided during the visit to
the Bursa plant on 8 March 2002. The Commission has
taken the comments and information into account.

(14)

comments,

the Spanish authorities

In their
firstly
reaffirm that the project is mobile, and that the Renault
group seriously considered the alternative site of Bursa.
They also clarified the timetable for the project, and
stated that the quality standards for the engine produced
would be the same in Valladolid and Bursa. During the
visit to Bursa on 8 March 2002, additional documents
to prove these claims were made available to the
Commission.

(3) BOE No 34, 8.2.1997, p. 4167.
(4) BOE No 3, 3.1.1997, p. 89.
(5) BOCyL No 109, 7.6.2000, p. 6901.

scale at

the
Regarding the lack of economies of
comparator site of Mioveni,
the Spanish authorities
affirm that such diseconomies had already been taken
into consideration as regards supplier tooling, transfer
of technical staff and a higher proportion of indirect
labour. After a more detailed investigation, they assessed
the impact of carrying out the investment at Mioveni in
the following areas: auxiliary installations and flooring;
quality
IT systems. These
operations would have involved additional costs of
EUR 4 650 000, which have been included in an
updated CBA.

facilities;

control

and

(19) As

regards outward transport

the Spanish
costs,
authorities state that
the transport costs for Mioveni
have been calculated on the basis of Renault’s estimates
of its plants’ demand in the coming year. A detailed
breakdown was submitted, specifying the number of
cars assembled outside the Community and intended for
Community markets.

(20) As

regards potential

redundancy costs,

the Spanish
authorities maintain that a decision not to locate the
second flexible line at Valladolid would not have led to
redundancy costs at that plant. An increase in engine
production at Valladolid (1 800 engines per day) was
planned irrespective of the site chosen for the mobile

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project. This capacity increase would be enough to
absorb the workers released by outsourcing various
operations.

(21) As regards labour costs, the updated CBA assumes an
annual rate of convergence of labour costs at Mioveni of
5 %, in accordance with Commission practice in cases
where the comparator plant is located in a CEEC.

IV. ASSESSMENT OF THE AID

(22)

The measure notified by Spain concerning Renault
Espaæa 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
represents a significant proportion of
the project’s
funding, the aid is liable to distort competition in the
Community by giving Renault Espaæa an advantage over
competitors not receiving aid. Lastly, there is extensive
trade between Member States on the automobile market.

firm,

subparagraphs

(23) Article 87(2) of the Treaty lists certain types of aid that
are compatible with the EC Treaty. In view of the nature
and purpose of the aid, and the geographical location of
the
(b) and (c) are not
applicable to the plan in question. Article 87(3) specifies
other forms of aid that may be regarded as compatible
with the common market. The Commission notes that
is located in Valladolid, an area which
the project
qualifies for assistance under Article 87(3)(a), with a
regional ceiling of 35 % net grant equivalent for large
companies.

(a),

(24)

(25)

The aid in question is intended for Renault Espaæa,
which manufactures and assembles automobiles. The
the motor vehicle industry
firm is therefore part of
within the meaning of the Community framework on
State aid to the motor vehicle industry (6)(the motor
vehicles framework).

The motor vehicles framework specifies 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
granted if
before being
following
either of
thresholds
the project
(i)
reached:
is
total cost of
(ii) total gross aid for the
equalling EUR 50 million,
project, whether State aid or aid from Community

the

instruments equalling EUR 5 million. Both the total cost
this project and the amount of aid exceed the
of
notification thresholds. Thus, in notifying the proposed
aid for Renault Espaæa,
the Spanish authorities have
complied with the requirements of Article 88(3) of the
Treaty.

(26) According to the motor vehicles

framework,

the
Commission has to ensure that the aid granted is both
and
necessary for
realisation of
it
proportional
is
intended
and
Both
to
proportionality, must be satisfied if the Commission is
to authorise State aid in the motor vehicle industry.

the project
the problems
necessity

to the gravity of

solve.

tests,

the

(27) According to point 3.2(a) of

the motor vehicles
framework,
in order to demonstrate the necessity for
regional aid, the aid recipient must clearly prove that it
has an economically viable alternative location for its
project. If there were no other industrial site, whether
new or in existence, capable of receiving the investment
in question within the group, the undertaking would be
compelled to carry out
in the sole plant
available, even in the absence of aid. Therefore, no
regional aid may be authorised for a project that is not
geographically mobile.

its project

(28)

(29)

its external
The Commission has, with the help of
automotive expert, assessed the documentation and
information provided by Spain, with the view to
establishing whether the project is mobile.

to

in [(cid:133)] (*)

documents made

available
the
Firstly,
the
the Renault group
Commission show that
carried out an initial comparison of
the technical
feasibility and the necessary investment at Valladolid
and Bursa. Aid was mentioned as a possible element
that would at least partially compensate the higher costs
at Valladolid. In January 1999 an aid application was
submitted to the Spanish authorities. In [(cid:133)] 1999, the
Renault group discussed the Valladolid and Bursa
options in more detail at the [(cid:133)] level. A study was
presented, showing that the Bursa location would have
been more advantageous from the economic point of
view, while Valladolid presented advantages in terms of
engineering, possible synergies, and the possibility of
State aid. A final decision was postponed to a later
stage, pending confirmation of aid possibilities.
In
March 2000, the [(cid:133)] opted for the Valladolid site for
carrying out the project, again indicating State aid as an
important factor in the final decision.

(30)

Secondly, during the on-site visit of 8 March 2002 the
Commission was able to verify that the plant is capable
engines. Although K-type
of producing

complete

(6) OJ C 279, 15.9.1997, p. 1 (validity extended in OJ C 368,

22.12.2001, p. 10).

(*) Business secret.

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(cylinder head,

engines are only assembled in Bursa, the site has until
very recently carried out machining operations for all
the main components
crankshaft,
camshaft, cylinder block, flywheel and connecting rods)
of C-type engines. The Bursa plant therefore has enough
experience of manufacturing complete engines to host
the project. Setting up a new engine plant at Bursa
would have required a transfer of skilled labour from
other plants during the installation and start-up phases.
However, this factor does not undermine the fact that
engine production is technically feasible at Bursa.

Thirdly, from the information supplied and from that
obtained during the on-site visit of 8 March 2002, the
Commission was able to check that the Bursa plant is
capable of achieving quality levels comparable to those
of other Renault plants. A detailed breakdown of the
production operations scheduled at the two sites shows
that quality-critical operations would be automated at
both
assembly
certain
operations would be manual at Bursa and automated at
Valladolid.

plants, while

non-critical

that

the Renault
It should be noted in this context
group has a single set of quality standards, which do
not vary from one production plant to another. Internal
quality indicators
((cid:145)machining rejects(cid:146) and (cid:145)assembly
rectifications(cid:146)) measuring the number of parts failing to
specifications during the production process
meet
indicate a similar number of faulty parts per million at
Valladolid and Bursa. Quality indicators for finished
products (which have a direct impact on warranty costs)
also indicate a similar trend for the different production
plants. The target number of defaults for complete
engines is the same for every plant of
the Renault
Nissan venture, irrespective of the level of automation,
and has to be achieved by 2005.

(39)

(31)

(32)

(33)

aid

intended

Regional
for modernisation
and
is not
rationalisation, which is generally not mobile,
authorised in the motor vehicle industry. However, the
project
in expanding current
installations by investing in completely new production
lines, which are mobile in character.

in question consists

(34)

In view of the above, the Commission concludes that
the project is mobile and can therefore be considered
eligible for regional aid, since the aid is necessary to
attract the investment to the assisted region.

(36) According to point 3.2(c) of

the motor vehicles
framework the Commission needs to ensure that the
planned aid is proportional to the regional problems it
is intended to resolve. For that, a CBA is used.

(37) A CBA compares, with regard to the mobile elements,
the costs which an investor would bear in order to carry
out the project in the region in question with those it
would bear
in a different
location, which makes it possible to determine the
specific handicaps of the assisted region concerned. The
Commission authorises regional aid within the limit of
the regional handicaps resulting from the investment in
the comparator plant.

for an identical project

(38) According to the motor vehicles

framework,

if a
company is comparing one European site (whether in
the EEA or the CEECs) with a site outside Europe from
which it would import vehicles, the CBA may have to
be carried out using a hypothetical alternative site,
unless more than half of the production is to be sold
outside Europe. The alternative site of Bursa, Turkey, is
not within the EEA or the CEECs, and more than half
the engines produced will be sold within Europe.
Therefore,
the CBA must be carried out using a
hypothetical European site. In this case, the hypothetical
comparator site is Mioveni, in Romania, where Dacia, a
car manufacturer controlled by Renault, is located.

Since the project is an expansion project and not a new
development (greenfield site), the operating handicaps of
Valladolid compared with Mioveni are assessed over a
three-year period in the CBA, in accordance with point
framework. The CBA
3.2(c) of
submitted covers the period 2003(cid:151)2005,
three
years from the start of production, as required by point
3.3 of Annex I to the framework.

the motor vehicles

i.e.

(40) With the help of

its external automotive expert

the
Commission has examined the notified cost-benefit
analysis with a view to ascertaining how far
the
proposed regional aid is proportional to the regional
problems it seeks to solve. The CBA was amended as
the additional
explained below to take account of
information received from Spain following the initiation
of the proceeding.

(35)

The Commission notes that the eligible costs amount to
EUR 128 724 990 at 1999 values
rate:
4,72 %), as communicated by the Spanish authorities.

(discount

(41)

Regarding the lack of economies of
the
comparator site of Mioveni, the new CBA takes account
of additional investment costs at the Romanian site. The

scale at

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investment

that additional

Mioveni plant has undergone a rationalisation process in
recent years, which has freed a large amount of floor
space with the result
in
buildings would not be necessary. However, additional
the
costs of EUR 1 500 000 were
support
space
floor
the
renovation of
infrastructure. The plant
E-type
(which produces
engines)
test benches, but
additional investment of EUR 3 million is planned for
the installation of modern measuring systems for the
quality control of machined parts. Lastly, additional
investment of EUR 150 000 in IT equipment for logistic
planning has been taken into account.

included for
and for

already has

end-of-line

(42)

the

that

considers

Commission

additional
The
investment figure of EUR 4 650 000, coupled with the
additional costs already included in the CBA (higher
technical
supplier tooling investment,
labour)
staff and a higher proportion of
adequately expresses
the economic disadvantages of
Mioveni resulting from the lack of economies of scale.

the transfer of
indirect

(43) As regards outward transport costs,

the breakdown supplied by

the Commission
Spanish
the
accepts
demand
its
for
authorities of Renault’s
that production
non-Community plants. The
outside
intended for
is
Community markets explains why the demand for
engines at non-Community plants is higher than local
markets can supply.

forecast
fact
in part

the Community

(44) As regards potential redundancy costs, the Commission
was able to establish that
the plan was for engine
production at Valladolid to expand, even if the mobile
project did not take place there. This expansion would
released by
to absorb the workers
be
outsourcing
The Commission
operations.
various
there would not be any
therefore concludes
redundancy costs at Valladolid, even if
the mobile
investment were not carried out in Spain.

sufficient

that

(45) As regards the evolution of wage rates in Romania, the
Commission notes that
the updated CBA follows its
practice for cases where the comparator plant is located
in a CEEC by assuming an annual rate of convergence
of labour costs at Mioveni of 5 %.

(46)

The above changes in the analysis produce cost-benefit
results that differ from those initially notified by Spain.
The amended CBA indicates a net cost handicap for

of

Valladolid
EUR 31 498 101 at 1999 values
(compared with the EUR 35 927 252 initially notified).
The project’s handicap ratio is therefore 24,47 % (as
the 27,91 % initially notified). The
opposed
determining factor
labour, which is considerably
cheaper in Romania than Spain.

to

is

(47)

(48)

to invest

Lastly,
the Commission considered the question of a
(cid:145)top-up(cid:146), which is an increase in the allowable aid
intensity and is intended as a further incentive to the
in the region in question. The
investor
documents
the
Renault group will increase in the relevant period both
for engines and cars. Therefore, the regional handicap
ratio resulting from the CBA is
reduced by 1 %,
resulting in a final ratio of 23,47 %.

supplied show that

the capacity of

V. CONCLUSION

The aid intensity of the project (14,27 % gross grant
equivalent) is less than both the disadvantage identified
by the cost-benefit analysis (23,47 %) and the regional
aid ceiling (35 % net grant equivalent). The regional aid
that Spain plans to grant Renault Espaæa therefore
satisfies the tests of compatibility with the common
market under Article 87(3)(a) of the Treaty,

HAS ADOPTED THIS DECISION:

Article 1

The State aid which Spain plans to grant Renault Espaæa SA in
Valladolid (cid:151) a nominal EUR 22 333 832 (equivalent
to a
present value of EUR 18 366 569, taking 1999 as the base
year and assuming a discount rate of 4,72 %) (cid:151) for an eligible
investment
EUR
128 724 990), is compatible with the common market within
the meaning of Article 87(3)(a) of the Treaty.

EUR 149 441 660 (present

value:

of

The aid may therefore be granted.

Article 2

This Decision is addressed to the Kingdom of Spain.

Done at Brussels, 5 June 2002.

For the Commission

Mario MONTI

Member of the Commission