2003/791/EC: Commission decision of 5 June 2002 on State aid implemented by Germany for Eisenguss Torgelow GmbH (Text with EEA relevance.) (notified under document number C(2002) 2008)
Date: 2002-06-05
Institutions: European Commission
Subjects: Germany, State aid, control of State aid, iron and steel industry

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COMMISSION DECISION

of 5 June 2002

on State aid implemented by Germany for Eisenguss Torgelow GmbH

(notified under document number C(2002) 2008)

(Only the German text is authentic)

(Text with EEA relevance)

(2003/791/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

II. DESCRIPTION

Having regard to the Treaty establishing the European Commu-
nity, 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)

(2)

(3)

I. PROCEDURE

By fax dated 29 December 1999 the German Govern-
ment informed the Commission of financial measures to
assist Eisenguss Torgelow GmbH (EGT), whose head
office is in Torgelow, Mecklenburg-Western Pomerania,
which were registered by the Commission on 3 January
2000 as aid NN 6/2000. Given that the aid had already
been granted to the firm at the time of the notification,
the measures were registered as non-notified State aid
(NN) in accordance with Article 88(3) of the EC Treaty.
The Commission requested additional
information by
letters dated 31 January and 26 May 2000 and
15 June, 16 July and 13 September 2001. Germany
replied by letters dated 23 March, 24 May, 4 July
and 1 and 5 September 2000, and 17 April and 10
and 28 August 2001.

By letter dated 5 November 2001 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
the aid, with the case being registered
under No C 77/2001. Germany submitted comments
which were received on 21 January 2002.

The Commission's decision to initiate the formal inves-
tigation procedure was published in the Official Journal
of the European Communities (2). The Commission invited
interested parties to submit their comments on the aid.
Comments by interested parties were
received on
10 April 2002.

(1) OJ C 63, 12.3.2002, p. 4.
(2) See footnote 1.

(4)

(5)

(6)

(7)

(8)

(9)

the successor

EGT is
to the formerly State-owned
Gießerei Torgelow GmbH (GT), which, after being priva-
tised in 1993, filed for bankruptcy in 1997. On 1 May
2001 EGT also filed for bankruptcy.

its objects
The firm was active in the foundry sector,
being the manufacture and processing of castings.
It
produced mainly parts for engines, plant and machinery.

In 1999 EGT had 87 employees and achieved a turnover
of DEM 5 592 000.

1. The privatisation

On 17 June 1993 GT was privatised by the Treuhand-
anstalt (THA) and sold to a Mr Helmut Schumann for
DEM 1. In 1996 it employed 80 people and achieved a
turnover of DEM 8 771 000. On 1 September 1997 it
went bankrupt.

2. The restructuring

During the course of
the bankruptcy proceedings the
receiver decided to maintain GT as a going concern in
order to seek new investors for the firm.

Germany states that, out of 12 potential investors, only
one group of investors made an offer to purchase the
firm. On 6 April 1998 the new investors set up EGT
with a view to continuing the business of GT. As of
1 May 1998 EGT rented the assets necessary to this end.
A contract to purchase the assets was signed in August
1998 and entered into force in June 1999. The price
paid for the assets was DEM 500 000.

(10)

The new investors were:

(a) Neue Harzer Werke (NHW) (20 %);

(b) Mr Dieter Brunke (20 %);

(c) Saparmet (20 %);

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(d) Allgemeine Industrie Beteiligungs- und Produktions-
gesellschaft mbH (AIP), whose sole shareholder was
a Mr Dierk Behrmann (20 %); and

(e) Unitool GmbH, whose sole shareholder was a Mr

Lüpertz (20 %).

(11)

According to the information in the Commission's
possession, the following relationships existed between
the investors:

(15)

(a) Mr Brunke was managing director of NHW;

(b) Saparmet was

the holding company controlling

Metallwerke Harzgerode (MWH);

(c) Mr Dierk Behrmann was managing director of EGT,
MWH and, since March 1999, NHW. He also holds
24 % of the shares in NHW and 38 % of those in
MWH.

(12) NHW and MWH were both active in the same sector as
EGT. According to the information in the Commission's
possession, between 1996 and 1998 NHW, which since
1996 had also been undergoing restructuring (3), had
between 173 and 176 employees and achieved a turn-
over which ranged from DEM 13,4 million to
DEM 20 million. In September 2000 NHW went bank-
rupt. In 1998 (1999) MWH had some 400 employees
and, out of a balance sheet total of DEM 116 million
of
(DEM 144 million),
DEM 112 million (DEM 104 million).

turnover

achieved

a

(13)

Some significant
1998 to 2001 are given below:

financial data for

the years

from

the main criterion for

the sale was the
states that
purchase price and that CHL, which now operates the
business under the name Eisengießerei Torgelow GmbH,
submitted the best offer.

3. The restructuring

The restructuring period lasted from 1998 to 2000.
Under the restructuring plan, EGT was to concentrate
on niche markets such as the production of small
volumes of custom-made castings.
In order to avoid
dependency on any one segment or any one customer,
not more than 30 % of EGT's turnover was to be
derived from one segment and not more than 20 %
from one customer. EGT was to cooperate closely with
its new investors. The intention was that sales should
increase by 30 % in 2000. According to Germany, a
further increase of 100 % was planned for 2001.

(16)

The restructuring costs were indicated as follows:

Asset purchase
Investment 1998
Investment 1999
Investment 2000

Training workshop
Maintenance, repairs and
removal
Product development
R & D
Miscellaneous

(DEM '000)

Investment

10 894

Working capital

Other

500
309
6 840
3 245

452

2 000

318
233

3 539

3 003

(DEM '000)

Total

17 436

1998

1999

2000

2001

Turnover

3 862

5 900

5 592

10 339 14 305

Net profit

- 330

424

- 1 420 (*)

797

1 072

Employees

64

86

87

90

95

(*) Germany states that the profit and loss account for 1999 does not
take into account a grant of DEM 2 million which was awarded
subject to Commission approval.
italic = planned.

(14) On 1 May 2001 EGT was declared bankrupt. While the
bankruptcy proceedings were under way, the firm was
maintained as a going concern and the assets were sold
to a new investor, CHL Handels- und Projektierungs-
gesellschaft mbH (CHL), which, according to Germany,
is not linked in any way to the bankrupt firm. Germany

4. Rescue and restructuring aid

(17)

The following aid was granted with a view to rescuing
GT or restructuring EGT:

Source

Measure

Rescue aid:

1.

Land (4)

70 % fallback guarantee in
relation to private loan at
7,75 % p.a. until
30.10.1998 (5)

(DEM '000)

1 050

(3) NHW had also received aid that was registered by the Commission
investigation procedure was

in 1999 under NN 38/99. A formal
initiated on 16 May 2000.

(4) The Land of Mecklenburg-Western Pomerania.
(5) Rules on guarantees of the Land of Mecklenburg-Western Pomerania:

SG(91) D 21124 of 12 November 1991 (N 627/91).

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Source

Measure

2. BvS (a)

Loan at 7 % p.a. until
31.10.1998

(DEM '000)

500

Source

Measure

(DEM '000)

Total

17 590

Subtotal

1 550

the Treuhandanstalt).

(b) Kreditanstalt für Wiederaufbau.

(a) Bundesanstalt für vereinigungsbedingte Sonderaufgaben (successor to

Restructuring aid:

3.

Land

80 % guarantee (6)

4. KfW (b)

Refinancing of loans at
3,75 % p.a. (7)

5.

Land

Investment grants (GA-
Mittel) (8)

6.

Federal
Gover-
nment

Investment allowance (Inves-
titionszulage) (9)

3 760

1 955

3 047

1 660

(18)

7.

Land

R & D measures (10)

318

R & D project

(292)

Innovationsassistent

(26)

8.

9.

Landes-
förder-
institut

Loan at 7 % p.a. for inter-
mediate financing of invest-
ment allowance (11)

Landes-
förder-
institut

Loan at 7 % p.a. for inter-
mediate financing of capital
stock (Gesellschafterein-
lage) (12)

10. KfW

Refinancing of loans (ERP-
Aufbauprogramm) (13)

11. BvS

Grant (awarded as a loan at
6 % pending Commission
approval)

12. KfW

Refinancing of loans (KfW-
Mittelstandsprogramm)

1 300

400

978

2 000

622

5. Financial contributions from other sources

to the

initial
the financing of

information provided by
According
Germany,
the restructuring included
the following contributions from the recipient firm and
from external commercial sources:

(a) financing

of

the

purchase

DEM 500 000 and shareholder
DEM 1 500 000;

loans

price

of
totalling

(b) a 20 % guarantee provided by Deutsche Bank AG
(Deutsche Bank), i.e. DEM 940 000, on a credit line
of DEM 2 700 000 at 7,75 % p.a. and an ERP loan
the KfW, measure No 4) of
(refinanced by
DEM 1 955 830 at 3,75 % p.a. granted in July 1999;

(c) a bridging loan of DEM 485 000 at 7,75 % p.a.
granted by Deutsche Bank in July 1999 until
June
2000 pending payment of
the public investment
allowance;

Subtotal

16 040

(d) loans amounting to DEM 1 600 000 granted by
Deutsche Bank in August 2000 and refinanced by
the KfW that same month (measure No 10);

(6) Rules on guarantees of the Land of Mecklenburg-Western Pomerania:

SG(91) D 21124 of 12 November 1991 (N 627/91).

(7) ERP reconstruction programme: SG(94) D 17293 of 1 December

1994 (N 563/C/94).

(e) a partial wage
between
1999
DEM 1 550 000;

cut accepted by the workforce
to

amounting

2000,

and

(8) 27th framework plan of

the joint Federal Government/Länder
scheme for improving regional economic structures: SG(99) D 582
of 26 January 1999 (C 84/98).
Investment allowance for the new Länder: SG(96) D 3794 of 11 April
1996 (N 494/A/95).

(9)

(10) Reconstruction programme of the Land of Mecklenburg-Western
Pomerania — Promotion
innovation:
of
SG(97) D 156 of 10 January 1997.

technology

and

(11) Consolidation fund of the Land of Mecklenburg-Western Pomerania:

SG(95) D 7054 of 2 June 1995 (N 75/95).

(12) Consolidation fund of the Land of Mecklenburg-Western Pomerania:

SG(95) D 7054 of 2 June 1995 (N 75/95).

(13) ERP reconstruction programme: SG(94) D 17293 of 1 December

1994 (N 563/C/94).

(f) cash flow of DEM 161 000.

(19)

The financial contributions made by Deutsche Bank in
1999 were secured by the 80 % public guarantee
(measure No 3) and by collateral provided by the
including a mortgage
recipient firm and the investors,
taken out by EGT (DEM 5 million),
the transfer of
ownership of machinery by way of security, equipment
the assignment of claims, and personal
and stocks,
guarantees.

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6. The decision to initiate proceedings under

Article 88(2) of the EC Treaty

(20)

investigation
In the decision to initiate the formal
procedure, EGT was also considered a recipient of the
rescue aid originally granted to its predecessor in liqui-
dation, Gießerei Torgelow, since the actual purpose of
the aid was to make possible EGT's formation and
subsequent restructuring.

(21) Additionally, the refinancing of a Deutsche Bank loan of
DEM 622 085 at 6 % p.a. via the KfW (measure No 12)
was assumed to constitute aid since the measure was
granted by a public body on terms that a private
investor would probably have found unacceptable.

(22) On the question of the compatibility of the aid with the

common market, the Commission wondered:

(a) whether the whole group of companies consisting of
EGT, NHW and MWH into which EGT had been
integrated ought not to be considered the aid reci-
pient since some of these companies are related to
one another through the influence that several of
the investors exert on them and through their
mutual cooperation. The recipient could therefore
be a larger undertaking;

(b) whether

four measures supposedly granted under
approved schemes, i.e. the KfW refinancing of loans
amounting to DEM 1 955 830 (measure No 4) and
DEM 977 915 (measure No 10),
investment grants
(GA-Mittel) amounting to DEM 3 760 000 (measure
of
No
DEM 1 660 000 (measure No 6), complied with the
conditions of those schemes since it was question-
able whether the maximum aid intensities admissible
for investment grants and the cumulative aid ceilings
had been observed;

investment

allowance

and

an

5)

(c) whether the aid had been paid out only for the time
to
necessary to devise the restructuring plan,
bridge the gap until
the restructuring aid was
granted, since the rescue loan was only partially
reimbursed 16 months after it was disbursed and
12 months after restructuring had begun;

i.e.

(d) whether the aid was granted to a firm in difficulty
since it was doubtful whether EGT could be consid-
ered the sole recipient of the restructuring aid;

(i) the plan provided for cooperation with NHW,
the investor companies, which from
in

one of
1996 up until
2000 was itself in continuous difficulties;

it was declared bankrupt

(ii) it was doubtful whether the plan to allocate
resources among various segments within the
sector was implemented as part of the restruc-
turing; and

(iii) it was questionable whether the plan was based

on realistic assumptions;

(f) whether the aid was limited to the minimum needed
to enable restructuring to be undertaken since the
contribution by the recipient from its own resources
in the
and from external
Commission's view,
i.e.
11,5 % of the restructuring costs.

financing amounted,
to only DEM 2 000 000,

(23)

The Commission therefore had doubts whether the aid
was granted in compliance with the criteria of the 1999
Community guidelines on state aid for rescuing and
restructuring firms in difficulty (14).

III. COMMENTS FROM GERMANY

(24)

In its response to the decision to initiate the formal
investigation procedure, Germany states that EGT fulfils
the criteria of Commission Recommendation 96/280/EC
of April 3, 1996 concerning the definition of small and
medium-sized enterprises (15) because it does not possess
any shares in other companies and no other company
or individual exercises an influence exceeding 25 % over
EGT's capital or voting rights. Additionally, EGT, NHW
and MWH are independent companies with completely
separate financing and production. The supply relation-
ships between EGT and MHW, for example, accounted
for only 12,1 % of EGT's aggregate turnover.

(25) With respect to the rescue aid, Germany points out that
the loans granted have since been fully reimbursed and
that the delay in repayment was due to the fact that
they were to be reimbursed from out of the proceeds of
the sale of EGT's bankrupt predecessor GT.

(26) With respect to the refinancing of the Deutsche Bank
loan of DEM 622 085 at 6 % p.a. by the KfW (measure
No 12), Germany is of the opinion that the fact that
Deutsche Bank entered into this commitment shows
that it judged its fallback risk to be reasonable and that
this contribution can therefore be considered external
financing.

(e) whether

the

restructuring plan was

capable of

restoring the firm's viability since:

(14) OJ C 288, 9.10.1999, p. 2.
(15) OJ L 107, 30.4.1996, p. 4.

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(27) On the question whether the restructuring plan was
capable of restoring EGT's viability, it is stated that the
relationship with NHW under the plan was of minor
importance and that,
the customer base was
in fact,
spread over some nine major customers none of which
accounted for more than 15 % of EGT's turnover. It is
the plan was based on detailed
further
customer/turnover
had
that
planning
increased steadily.

stated that

orders

and

IV. COMMENTS FROM INTERESTED PARTIES

(30)

Eisengießerei Torgelow GmbH, as the firm is now called,
submitted comments on the aid. It states that it learned
of the sale of the assets only from an official notice in
the ‘Frankfurter Allgemeine Zeitung’ and the ‘Handels-
blatt’. After studying the call for tenders,
it decided to
submit a bid under
in which
other bidders also took part.

the tender procedure,

(28) With respect to contributions by the aid recipient from
its own resources or from external financing, Germany
states that:

V. ASSESSMENT OF THE AID

(a) the provision of own capital by the investors is
of

made
injection
a
DEM 500 000 and loans of DEM 2 200 000;

capital

up

of

(31)

Article 87(1) of the EC Treaty declares any aid granted
through State resources which distorts or threatens to
distort competition by favouring certain undertakings
incompatible with the common market in so far as it
affects trade between Member States.

(b) a loan from Deutsche Bank of DEM 660 000 at
9,25 % p.a. used to pre-finance a public loan which
subsequently was not granted is to be considered
external financing;

1. State aid

(c) the cash flow is a contribution by the aid recipient
since, even though its claimed amount cannot be
guaranteed, the investors still have to finance it even
if
is not generated by the firm. According to
Germany, this was the case with EGT and therefore
capital by
the
DEM 264 000;

investors had to increase

the

it

(d) the 20 % guarantee provided by Deutsche Bank on a
credit line of DEM 2 700 000 at 7,75 % p.a.
inde-
pendently of a public fallback guarantee must be
considered external financing since the whole loan
was secured by private collateral prior to the fallback
guarantee. Furthermore, Germany points out that the
interest rate of 7,5 % was not fixed but adjustable
and amounted to 9,26 % at the end of 2000;

(e) the interest rate for calculating the interest subsidy
contained in a DEM 1 956 000 loan from Deutsche
Bank should be established in the light not of the
firm's situation before the restructuring but of
its
prospects for recovery.

(29)

Lastly, Germany provided additional information on the
application of schemes which indicates that, owing to
larger investments and to R & D measures, the restruc-
turing costs are higher than originally estimated and, in
fact, amount to DEM 18 965 000.

(32) Article 87(1) of the EC Treaty applies to all the financial
measures made available by Germany to the recipient
firm. All
these measures involve conferring economic
benefits on a certain undertaking which it would not
have received from commercial sources. The measures
therefore constitute aid. By its very nature, such aid is
likely to distort competition. Given the nature of the
assistance and the existence of intra-Community trade in
the
the sector in which the recipient
financial measures granted fall within the scope of
Article 87(1).

firm is active,

(33) With respect

to the

aid allegedly granted under
approved schemes,
the Commission would point out
that the schemes concerned will not be further assessed
in this Decision. It is accordingly not necessary for the
Commission to decide whether EGT is to be regarded as
a small or medium-sized firm.

(34)

The rescue aid of DEM 500 000 (measure No 2) and
the restructuring grant of DEM 2 000 000 (measure
No 11) are measures that could not have been obtained
by a firm in difficulty on these terms from commercial
sources. They must therefore be considered ad hoc aid
in the present Decision.

(35) With

to

loan

Bank

respect

the Deutsche

of
DEM 1 600 000 at 6 % p.a., it must be noted that the
full amount was refinanced by the KfW, which also bore
50 % of
amount of
DEM 978 000 (measure No 10),
the refinancing falls
under an approved aid scheme and therefore need not
be assessed in this Decision.

fallback risk. To the

the

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(36)

(37)

The remaining amount of DEM 622 085 (measure
No 12) of
the above loan was not covered by any
scheme. The 50 % fallback risk of DEM 311 042 in
relation to the refinanced part outside the scheme must
be considered ad hoc aid since, when it received this
aid, EGT was a firm in difficulty and would not have
received such assistance from commercial sources.

opinion

contrary

to Germany's

investigation procedure,

the conclusion must be drawn that
in fact, a result of

Furthermore,
as
expressed in its response to the decision to initiate the
formal
the Commission takes
the view that EGT would also not have received such a
loan at 6 % p.a. from Deutsche Bank without the public
refinancing. Deutsche Bank's decision to grant the loan
at 6 % cannot be seen as an independent risk assess-
ment that does not take into account the public refinan-
cing. On the contrary, if, as Germany itself suggests, one
assesses Deutsche Bank's contribution as part of an
overall plan,
the
6 % interest rate is,
the public
refinancing of the loan. Therefore the difference between
the actual costs and the costs at market rates has to be
considered ad hoc aid. Since it is impossible to compare
these conditions with the actual market conditions
prevailing at the time, the Commission's reference rate
plus 4 % is taken as a basis in accordance with the
setting the
Commission notice on the method for
reference and discount
In 2000, when the
loan was granted, the reference rate was 5,7 %, which
gives as a basis for comparison with market conditions
an interest rate of 9,7 %. As a result, the Commission
represented by the difference
considers
between the two interest
i.e. 3,7 % p.a. of
DEM 622 085, also as ad hoc aid to the restructuring.

the amount

rates (16).

rates,

(40)

and

case

indeed

present

conditions of Article 87(2), and it is obvious from the
facts of the case that this provision does not apply here.
The aid in question must therefore be assessed in the
light of Article 87(3) of the Treaty, which confers on the
Commission a discretion to authorise State aid in
certain specified circumstances. The derogations referred
to in Article 87(3)(b), (d) and (e) were not invoked in
the
relevant.
are
Article 87(3)(a) empowers the Commission to authorise
State aid intended to promote the economic develop-
living is abnor-
ment of areas where the standard of
mally low or where there is serious underemployment.
The Land of Mecklenburg-Western Pomerania falls under
this provision. In the present case, however, the main
purpose of the aid was to promote the development of
than the economic
a certain economic sector rather
development of an area. Thus the restructuring aid
granted in accordance with the submitted restructuring
plan should be assessed under Article 87(3)(c) of the EC
Treaty rather than under Article 87(3)(a).

not

of

its

exercise

discretion

in difficulty (the guidelines),

In its 1999 guidelines on state aid for rescuing and
restructuring firms
the
Commission laid down in detail the preconditions for a
favourable
under
Article 87(3)(c) of the Treaty. Pursuant to point 7.5 of
the
the guidelines,
examine
the Commission will
compatibility of non-notified aid on the basis of
the
guidelines if some or all of the aid was granted after
their publication in the Official
the European
Communities. Although the plan for the restructuring of
EGT was drawn up in 1998, some of the aid examined
here was not granted until 1999 or even later. The
guidelines therefore apply to the measures in question.

Journal of

(38)

The Commission notes further that Germany failed to
discharge its obligation under Article 88(3) of the EC
Treaty. From a formal point of view, the aid is therefore
unlawful. It may, however, be declared compatible with
the common market if the conditions of the derogations
provided for in Article 87(2) and (3) of the EC Treaty
are satisfied.

(a) Rescue aid

2. Derogations under Article 87(3) of the EC Treaty

(39) Measures falling within Article 87(1) of the EC Treaty
that do not constitute existing aid are generally incom-
patible with the common market unless the derogations
provided for in Article 87(2) or (3) are applicable to
them. Germany has not claimed that the aid satisfies the

(41) With respect to whether the time limits for the reim-
bursement of
the rescue aid (measure No 2) were
exceeded, the Commission notes Germany's comments
as expressed in its response to the decision to initiate
the formal investigation procedure to the effect that the
rescue aid has since been fully reimbursed and that the
delay in repayment was due to its being effected from
the sale of EGT's bankrupt
out of
In keeping with previous practice in
predecessor GT.
similar cases (17),
the
the Commission considers that
conditions for the granting of rescue aid were met.

the proceeds of

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

31.5.1983, p. 27).

(17) See Commission Decision 83/252/EEC (Cematex)

(OJ L 140,

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(b) Restructuring aid

is borne out by the fact that the firm had to file for
bankruptcy in 2001.

(42)

The Commission would point out first of all that the
material time for assessing restructuring aid under the
guidelines is the time when the restructuring plan was
drawn up.

3. Ai d l imi ted to th e m in imum

(43) Measure No 11, the 50 % fallback guarantee and the
interest subsidy in relation to measure No 12 must be
assessed as ad hoc aid to the restructuring.

(48)

The guidelines require aid recipients to make a signifi-
cant contribution to the restructuring plan from their
financing on market
own resources or from external
conditions.

(44)

In its decision to initiate the formal investigation proce-
dure, the Commission expressed doubts as to whether
the following conditions laid down in the guidelines for
the authorisation of rescue aid were met:

1. E li gi bi li t y of t he f ir m

(45)

In the light of
the information now available to the
effect that EGT was not part of a larger economic unit,
the Commission notes that
its doubts as to whether
EGT could be considered a firm in difficulty have been
removed.

2. R e stor ati on of vi ab il it y

(49)

The restructuring costs amount to DEM 18 965 000.

(50)

The Commission notes that, according to the latest
information submitted by Germany,
recipient's
contribution from its own resources or from external
financing amounts to DEM 3 900 000, which can be
broken down as follows:

the

1.

2.

Capital/shareholder loans

20 % guarantee by Deutsche Bank on a
credit line at 7,75 % p.a.

2 700 000

540 000

3.

Deutsche Bank loan at 9,25 % p.a.

660 000

Note: The table contains rounded figures and is not arithmetically correct.

Total

3 900 000

capable of

(46) As regards its doubts as to whether the restructuring
plan was
the
Commission notes Germany's comments to the effect
that the customer base was spread over several custo-
mers and that the relationship with NHW was of minor
importance.

restoring EGT's viability,

(47) However,

the assertion that

the plan was based on
detailed customer/turnover planning could not remove
the basic doubt as to whether the plan was based on
the
realistic assumptions. The Commission is still of
opinion that
the planned large increase in sales and
profits, which does not correspond to the market data
for the sector as indicated by the market analysis,
is
unrealistic. According to Germany, EGT's sales were
projected to increase by 30 % in 2000 and by a further
100 % in 2001. The data contained in the market
analysis indicate that sales in the foundry sector overall
and in the subsegment of engine and transmission parts
in particular are in fact decreasing. Although this point
was also raised in the decision to initiate the formal
investigation procedure,
the information submitted by
Germany does not explain why sales by EGT should
improve in the face of the forecast trend in the market
and in the subsegment in which EGT is active. It must
according to the
information
also be noted that,
employee have
submitted,
costs per
the personnel
increased significantly, which against
the above back-
ground further threatens the viability of the plan. The
the plan is not
Commission therefore considers that
capable of restoring the firm's viability. This conclusion

(51) With regard to the other contributions that, in Germa-
ny's view, should also be considered contributions by
the recipient from its own resources or from external
view as
financing,
expressed in the decision to initiate the formal investiga-
tion procedure that they cannot be taken into account
as a contribution by the recipient.

the Commission reiterates

its

(52) However, in view of the fact that, according to the latest
information, the recipient's contributions from its own
resources and from external financing are significantly
higher than indicated in the preliminary assessment, the
Commission concludes
to
that
whether the recipient did make a significant contribu-
tion to the restructuring have been removed.

initial doubts as

its

VI. CONCLUSION

(53)

The Commission finds that Germany has implemented
the aid in question in breach of Article 88(3) of the EC
Treaty. On the basis of its assessment, the Commission
further concludes that the ad hoc aid for the restruc-
turing is incompatible with the common market as it
does not fulfil the conditions set out in the guidelines,

18.11.2003

EN

Official Journal of the European Union

L 300/61

HAS ADOPTED THIS DECISION:

Article 1

The aid which Germany has
implemented for Eisenguss
Torgelow GmbH, Torgelow, Mecklenburg-Western Pomerania,
in the form of a DEM 2 000 000 (EUR 1 022 583) grant, a
DEM 311 042 (EUR 159 033) fallback guarantee provided by
in respect
the Kreditanstalt
the
DEM 622 085 (EUR 318 067)
loan provided by Deutsche
Bank AG and the 3,7 % interest subsidy on the same loan, is
incompatible with the common market.

für Wiederaufbau

of

which it was at the disposal of the recipient until the date of
its recovery.
Interest shall be calculated on the basis of the
reference rate used for calculating the grant equivalent of
regional aid.

Article 3

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

Article 4

Article 2

This Decision is addressed to the Federal Republic of Germany.

Germany shall

take all necessary measures to recover
1.
from the recipient the aid referred to in Article 1 and unlaw-
fully made available to the recipient.

2.
Recovery shall be effected without delay and in accor-
dance with the procedures of national law provided that they
allow the immediate and effective execution of the decision.
The aid to be recovered shall include interest from the date on

Done at Brussels, 5 June 2002.

For the Commission

Mario MONTI

Member of the Commission