2003/383/EC: Commission Decision of 2 October 2002 on State aid measure C 44/01 (ex NN 147/98) implemented by Germany for Technische Glaswerke Ilmenau GmbH (notified under document number C(2002) 2147) (Text with EEA relevance)
Date: 2002-10-02
Institutions: European Commission
Subjects: Germany, State aid, control of State aid, glass industry

L 140/30

EN

Official Journal of the European Union

6.6.2003

COMMISSION DECISION

of 2 October 2002

on State aid measure C 44/01 (ex NN 147/98) implemented by Germany for Technische Glaswerke
Ilmenau GmbH

(notified under document number C(2002) 2147)

(Only the German text is authentic)

(Text with EEA relevance)

(2003/383/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European
Community, and in particular Article 88(2) thereof,

Having regard to the Agreement on the European Economic
Area, and in particular Article 62(1)(a) thereof,

laid down in Article 88(2) of the EC Treaty in respect of
the waiver of DEM 4 000 000 of a purchase price (State
aid C 19/2000). At
the same time, Germany was
enjoined to provide all information and data necessary
to establish whether
loans amounting to
investment
DEM 17 100 000 allegedly granted by the Kreditanstalt
für Wiederaufbau (hereinafter referred to as KfW) under
aid schemes authorised by the Commission and aid of
DEM 2 000 000
Thuringia
Consolidation Fund, an approved aid scheme, complied
with the terms of the relevant schemes (3).

granted

under

the

on

called

interested

their
Having
comments (1) pursuant to Article 88(2) of the EC Treaty and
Article 6(1) of Council Regulation (EC) 659/1999 of 22 March
1999 laying down detailed rules for the application of Article
93 of the EC Treaty (2) and having regard to their comments,

submit

parties

to

Whereas:

1. PROCEDURE

(1)

By letter dated 1 December 1998, registered as received
on 4 December 1998, Germany notified restructuring
measures
for Technische Glaswerke Ilmenau GmbH
(hereinafter referred to as TGI) to the Commission in
accordance with Article 88(3) of the EC Treaty. Since
the aid had already been disbursed, the measures were
registered as non-notified aid under number NN 147/98.
By letters dated 23 December 1998 and 29 March
1999, the Commission requested additional information
from Germany, which was provided by letters dated 18
February 1999, registered on 19 February, and 31 May
1999, registered on 1 June. By letters of 15 September
1999, registered on 20 September, of 4 October 1999,
registered on 5 October, and of 29 October 1999,
registered on 3 November, Germany submitted further
information.

(2)

By letter dated 4 April 2000, the Commission informed
Germany that it had decided to initiate the procedure

(3)

(4)

(5)

(6)

By letter dated 3 July 2000,
registered on 7 July,
Germany replied to the decision initiating the procedure
information order. A meeting with
and to the
representatives of the German authorities was held on 7
November 2000. By letter dated 27 February 2001,
registered on 1 March, Germany submitted further
information.

In the context of the formal investigation proceedings in
case C 19/2000, the Commission received comments
from two interested parties.
forwarded them to
Germany for its comments. Germany's comments were
received by letters of 13 December 2000, registered on
15 December, and of 27 February 2001, registered on 1
March.

It

By letter dated 5 July 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 new aid.

The Commission decision to initiate the procedure was
published in the Official
the European
Communities (4). The Commission invited interested
parties to submit their comments on the aid measure.

Journal

of

(1) OJ C 272, 27.9.2001, p. 2.
(2) OJ C 83, 27.3.1999, p. 1.

(3) OJ C 217, 29.7.2000, p. 10.
(4) OJ C 272, 27.9.2001, p. 2.

(7)

(8)

(9)

(10)

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By letter dated 9 October 2001, registered that same
day, Germany responded to the decision initiating the
procedure. It provided additional information by letters
of 15 March 2002, registered on 18 March, and of 23
April 2002, registered on 24 April. By letter dated 12
June 2002, registered on 13 June, Germany submitted
further information.

(13)

the shares) and
The main shareholder ([…] (*) % of
managing director of the company, Mr Geiß, was also
the sole shareholder and managing director of two other
companies active in the same market as TGI:

— Laborbedarf

Stralsund GmbH (LS),

located in

Güstrow, Mecklenburg-Western Pomerania, and

received

from two
The Commission
interested parties. It forwarded them to Germany, which
submitted its response by letter dated 4 February 2002,
registered on 4 February.

comments

letters were

received from the

Further
company
concerned, one of 1 March 2002, registered on 4
March, and one of 11 April 2002, registered on 12
April. A meeting with German representatives and the
lawyers of the company was held on 17 May 2002. On
that occasion the
further
information, which was registered on 23 May.

company handed over

The waiver was the subject of proceedings in Case C
19/2000 and will not be assessed here. A final negative
taken on 12 June 2001 (5). The aid
decision was
recipient lodged an appeal against this decision on 28
August 2001 (Case T-198/01). By order of 4 April
Instance
2002,
conditions,
suspended,
subject
the Commission
implementation of Article 2 of
decision, which required recovery of
the aid. The
Commission contested this order on 18 June 2002.

the Court of First
certain
to

the President of

2. DESCRIPTION

2.1. Aid recipient

(11)

TGI is located in Ilmenau, Thuringia, an area eligible for
regional aid under Article 87(3)(a) of the EC Treaty. It
was set up in 1994 by two private persons, Mr and Mrs
Geiß, with the aim of
the 12
Ilmenauer Glaswerke GmbH
production lines of
(hereinafter referred to as IGW), a company that its sole
owner, the Treuhandanstalt (hereinafter referred to as
THA), had decided to wind up in 1994. The eight
shut down and
remaining production lines were
dismantled.

taking over four of

(12)

is active in the field of

technical glassware,
TGI
laboratory glass, glass for domestic use, sight glass, tubes
and rods. In 1997 it had 226 employees and a turnover
of DEM 28 048 000.

— Paul F. Schröder & Co. Technische Glaswaren
located in Ellerau, near

(PFS),

(GmbH & Co.)
Hamburg.

(14)

In 1997 LS had two employees. It stopped its business
activities in 1999. PFS had 74 employees and a turnover
of DEM 9 711 000 in 1997. It filed for bankruptcy in
January 2000.

2.2. Previous financial measures

(15)

The four IGW production lines (melting tanks) were
sold to TGI by means of two asset deals.

2.2.1. Asset deal 1 (contract of 26 September 1994)

(16)

(17)

In September 1994 the first three production lines were
sold to TGI after negotiations with other potential
investors had failed. The sale was approved by the THA,
the sole shareholder in IGW, in December 1994.

The purchase price totalled DEM 5 800 000 and was to
be paid in three instalments, the last one at the end of
1999. Payment was secured by a mortgage amounting
to DEM 4 000 000 and a bank guarantee of DEM
1 800 000. The latter was covered,
in turn, by other
counterguarantees and time deposits.

(18)

In the context of this asset deal, Germany granted the
following aid amounting to a total of DEM 58 500 000:

Financial measure

Amount

(in DEM)

Investment loans from the KfW

Investment grants (under joint Federal
Government/Länder scheme)

Investment allowances

BvS grants

17 100 000

6 750 000

1 150 000

16 500 000

THA/BvS grants for loss compensation

17 000 000

Total

58 500 000

(5) OJ L 62, 5.3.2002, p. 30.

(*)

[…] represents business secret.

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(19)

loans

grants

from the KfW
In addition to investment
amounting to DEM 17 100 000 and investment grants
and allowances amounting to DEM 7 900 000, TGI
received
für
from the
vereinigungsbedingte
(hereinafter
referred to as BvS) for the restructuring of a pilot plant
amounting to DEM 16 500 000 and THA/BvS grants for
loss
years 1994 to 1997
the
compensation for
amounting to DEM 17 000 000.

Sonderaufgaben

Bundesanstalt

2.2.2. Asset deal 2 (contract of 11 December 1995)

(20)

In December 1995 the fourth production line was sold
to TGI since no other investor could be found. The
purchase price was DEM 50 000.

(25) As a consequence, TGI was not able to start

the
investment project until April 1995, whereas it had
planned to start in the last quarter of 1994. This also
delayed the rest of the investment project.

(26) Moreover, TGI was unable to provide, in time, evidence
of
the guarantee which was a precondition for the
implementation of asset deal 2. Accordingly, the BvS did
not make available the grants amounting to DEM
4 000 000 for restructuring the fourth production line,
with the result that the necessary investments could not
be carried out. As TGI had also suffered, since its
inception from a continuous lack of liquidity, the whole
project was in the balance and by 1997 the company's
liquid resources were almost exhausted.

(21)

In the context of asset deal 2, Germany granted the
following aid amounting to a total of DEM 8 925 000:

(27)

Financial measure

Amount

(in DEM)

Investment allowances

Thüringer Aufbaubank loan under the
Consolidation Fund

BvS grants for restructuring the fourth
production line

BvS investment grants

THA/BvS grants for loss compensation

425 000

2 000 000

4 000 000

1 000 000

1 500 000

Total

8 925 000

(22)

the restructuring of

In addition to investment allowances amounting to DEM
425 000 and a loan from the Thüringer Aufbaubank
amounting to DEM 2 000 000, TGI received BvS grants
for
the fourth production line
amounting to DEM 4 000 000, BvS investment grants
amounting to DEM 1 000 000 and THA/BvS grants for
loss
years 1996 to 1998
the
compensation for
amounting to DEM 1 500 000.

(23)

The effectiveness of asset deal 2 was dependent on the
provision of a bank guarantee by TGI. As this was not
forthcoming, asset deal 2 was provisionally ineffective
until February 1998.

In order to restore viability, TGI was obliged to solve
the liquidity problem and to build up capital and
reserves. To this end, concerted action was decided on
by the BvS, the Land of Thuringia and the owner of the
company in February 1998.

(28) Germany submitted the following restructuring plan
with the notification. The time-frame envisaged was
1998 to 2000.

Financial requirements

Amount

(in DEM)

Purchase price

5 800 000

Restructuring of the fourth production line

4 000 000

Investments (fourth production line)

6 000 000

Projects to improve productivity

1 500 000

General overhaul

3 000 000

Accounts payable to suppliers for 1997

1 750 000

Rent for 1997

175 000

Total

22 225 000

2.3. Restructuring plan and financial measures

(29)

(24) According to Germany, TGI ran into difficulties as the
start-up of the investment project had to be postponed
for half a year because the THA approved the terms of
asset deal 1 only in December 1994.

The purchase price for the first three production lines
had still not been paid. In addition, DEM 4 000 000 was
needed for the restructuring of the fourth production
line and DEM 6 000 000 for related investments. For
projects to improve productivity and for a general
overhaul of the production lines, DEM 4 500 000 was
envisaged. For outstanding accounts payable to suppliers

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for 1997 and rent payments originally due in 1997, an
amount of DEM 1 925 000 was required.

(31)

(30)

The restructuring costs mentioned above were to be
financed as follows:

The BvS agreed to waive DEM 4 000 000 of the initial
purchase price.
the bank guarantee
amounting to DEM 1 800 000 under asset deal 1 was
converted into a mortgage in order to improve the
liquidity situation of the company.

In addition,

Financial measuren

Amount

(in DEM)

(32)

BvS waiver of purchase price

4 000 000

Conversion of bank guarantee for
remaining purchase price into mortgage

1 800 000

BvS grants for restructuring of the fourth
production line

4 000 000

THA/BvS grants for loss compensation

1 325 000

Investment allowances

Thüringer Aufbaubank loan from the
Consolidation Fund

475 000

2 000 000

Own resources (cash flow)

4 175 000

Private investor contribution

3 850 000

Waiver of staff's Christmas bonus

650 000

Release of guarantee for securing jobs

250 000

The BvS finally approved asset deal 2 without insisting
on the provision of a bank guarantee, a precondition
that had made the contract provisionally ineffective until
February 1998. The grants for restructuring the fourth
production line amounting to DEM 4 000 000 could
therefore finally be paid out. Moreover, the company
received THA/BvS grants for loss compensation totalling
DEM 1 325 000.

Investment allowances amounting to DEM 475 000
were granted to the company in the context of
the
restructuring.

The company received a DEM 2 000 000 loan from the
Thüringer
Thuringia
Consolidation Fund, as had been agreed in asset deal 2.

Aufbaubank

under

the

(33)

(34)

costs were

(35) Under the restructuring plan, DEM 4 175 000 of the
the
restructuring
company's own resources in the form of cash flow. No
details were given on whether
this cash flow had
already been generated or when it was to be generated.
A private investor, who still had to be found, was to
contribute DEM 3 850 000 to the restructuring.

financed by

to be

(36) Moreover, a waiver of

the staff's Christmas bonus

amounting to DEM […]* had been agreed.

Total

22 525 000

(37) With the release of

the guarantee for securing jobs,
DEM 250 000 became available for the restructuring.
No further information was given on this guarantee.

(38) According to the provisional profit and loss account, TGI was expected to have a positive result in
1999. This expectation did not materialise. The planned and the actual figures are shown in the
following table:

1997
(actual)

1998
(plan)

1998
(actual)

1999
(plan)

1999
(actual)

2000
(plan)

2000
(actual) (a)

(in DEM 1 000)

Turnover

28 048

34 800

31 429

38 700

27 371

41 000

24 200

Operating result

[…]*

[…]*

[…]*

[…]*

[…]*

[…]*

[…]*

Business secret (actual 1997 to 1999 and plan 1998: losses; actual 2000 and plan 1999 to 2000: profits).

Note:
(a) Until 30 September 2000.

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(39) According to the

latest

information submitted by
Germany, the company realised a turnover of DEM 32,7
million in 2000 and DEM 35,144 million in 2001. In
2002 it made a profit of some DEM […]*.

2.4. Market analysis

(40)

The products produced by TGI fall within the category
of special glass. Special glass accounted for some 6 % of
total EU glass output in 1997 and is a sector covering a
wide range of different products, with a limited number
of producers. TGI is one of the ten companies in the EU
producing lighting glass.

(41) According

to

to

the

available

the
information
Commission, (6) output growth in the special glass
sector in 1997 was more than 5 % up on 1996. The
market for lighting glass grew by around 4 % in 1997.
This positive trend did not continue as expected in 1998
as a consequence of the Asian crisis. Since mid-1999
the market has been recovering and the turnover of
special glass has grown by 3,4 % in Germany. The
general outlook remains positive.

2.5. Initiation of the formal investigation procedure

formal

The Commission initiated the
investigation
procedure in respect of a Thüringer Aufbaubank loan of
DEM 2 million allegedly granted under an approved aid
scheme. It appeared that the conditions of the approved
aid scheme had not been met and it was doubtful
whether the loan was compatible with the guidelines on
rescue
no
restructuring plan for restoring the firm's viability had
been submitted and there was clearly no contribution
from a private investor. The Commission also had
doubts about whether the aid recipient qualified as a
small or medium-sized enterprise (SME).

restructuring

instance,

and

aid.

For

(42)

(43)

(44)

(45)

(46)

(47)

3. COMMENTS FROM INTERESTED PARTIES

The Commission received comments from TGI itself and
its competitors. The comments were
from one of
forwarded to Germany for its reaction by letters dated
31 October 2001 and 12 November 2001 respectively.
It replied to the comments of
the competitor on 4
February 2002.

In its comments on the opening of the procedure, TGI
argued that the Commission had violated the principle
of sound administration. The proceedings in respect of
the waiver of DEM 4 000 000 of the purchase price, it
said, had been separated from those in respect of the
Thüringer Aufbaubank loan. A negative decision had
been taken in the first case, and then the proceedings
initiated in the second. As both measures were part of
the same restructuring plan, they ought to be assessed
in one set of proceedings. Picking out some elements of
the restructuring plan rendered it incoherent, with the
the negative decision in Case 19/2000
result
prejudged the outcome of the proceedings in respect of
the Thüringer Aufbaubank loan.

that

the

company was

TGI also argued that there was no need for an urgent
decision on the waiver
in
as
negotiations with an investor and was still adjusting its
restructuring plan. The Commission had violated the
sound administration by initiating the
principle of
formal
the
conversion of collateral 31 months after having been
informed of it. TGI also complained that in its decision
the
to initiate
Commission did not take into account the arguments
put forward by Germany and the latest data submitted.

investigation procedure

investigation procedure

in respect of

formal

the

the

claimed that

TGI
loan from the Thüringer
Aufbaubank did not constitute State aid but was a
compensation payment to which it was entitled because
the demolition of a building by the Land of
of
Thuringia.

the deferral of

The formal investigation procedure was also initiated in
the payment of DEM 1,8
respect of
million of the purchase price and the conversion of
collateral. The Commission suspected
these
measures constituted State aid and had doubts about
their compatibility with the rescue and restructuring
guidelines.

that

(48) Were the Commission not to accept this reasoning, TGI
argued that the loan was covered by the aid scheme
under which it was
the
Commission to conclude that the loan was not covered
it could be
by the aid scheme, TGI claimed that
authorised on the basis of the rescue and restructuring
guidelines.

allegedly granted. Were

(6) See 1997 Panorama of EU Industry, Vol. 1, Ch. 9, the 1998 Report
of the Standing Committee of the EC Glass Industries (CPIV), and
the 1999 Annual Report of the Bundesverband Glasindustrie und
Mineralfaserindustrie.

(49) According to TGI, one of the main problems for the
application of the rescue and restructuring guidelines
was the absence of a contribution from a private
investor who, according to the original restructuring
plan, was to have contributed DEM 3,85 million. TGI

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made the point that it was now in negotiations with a
[…]* group of investors and that the negotiations were
almost concluded. The group intended to invest DEM
[…]* in the company. TGI also submitted a letter of
intent from the group.

(50)

In its comments on the opening of proceedings, the
competitor argued that TGI did not qualify as an SME
given that its main shareholder, Mr Geiß, was also the
owner of several other companies. These companies had
to be viewed as a single business entity and,
taken
together, exceeded the threshold of 250 employees laid
down in the SME recommendation.

(56)

(57)

(51) Moreover, the competitor argued that the conversion of
collateral and the deferral of payment constituted State
aid. The conversion of a bank guarantee into a junior
mortgage constituted State aid, as a bank guarantee
normally involved no risk in the event of the company's
becoming insolvent. With a junior mortgage, the claims
of other creditors had priority and,
in the event of
insolvency, nothing could be recovered. The deferral of
payment also constituted State aid according to the
competitor
difficult
economic situation, the creditor could have enforced its
claim by making use of the bank guarantee. A private
creditor would not have waived this possibility.

company's

despite

since,

the

(52) As regards the loan from the Thüringer Aufbaubank,
the competitor argued that it constituted State aid and
was not covered by the scheme since the scheme was
designed for SMEs. Moreover, the requirements of the
guidelines on rescue and restructuring aid were not met.

(53)

The competitor accuses TGI of using State aid to sell its
products
thereby
systematically at dumping prices,
significantly distorting competition. The market shares
of competitors had decreased significantly and prices
had fallen sharply.

(54) As regards the compatibility of the aid measures with
the rescue and restructuring guidelines, the competitor
pointed to the absence of any restructuring plan.
In
addition, the guidelines required the abandonment of
competitor
structurally
claimed that TGI should have abandoned production of
activities in coffee pots, a declining market. Moreover,
the competitor claimed that the ‘first time,
last time'
principle, according to which restructuring aid can be
awarded only once, had not been observed.

activities. The

loss-making

(55)

there were
The competitor also pointed out
structural overcapacities in some of the product markets

that

in which TGI operated. Moreover, TGI's activity in the
lighting-glass market was very limited.

4. COMMENTS FROM GERMANY

In its reply to the decision initiating the procedure,
Germany claimed that the Thüringer Aufbaubank loan
was covered by the aid scheme under which it had
allegedly been granted. The various conditions of the
scheme had been met.

It argued that the aid recipient qualified as an SME. The
other companies owned by Mr Geiß were no longer
active in the market. At the time the aid was granted,
the recipient also ranked as an SME since there were no
synergies between the different companies. TGI and the
other
same
shareholder did not form a business entity. Even if TGI
had not qualified as an SME, a loan could have been
granted from the Thuringia Consolidation Fund. In this
case, notification would have been required.

that were owned by the

companies

(58) As regards the restructuring plan, Germany pointed out
that the original had had to be amended several times.
The company had produced an amended plan adapted
the
to its new situation in April 2001.
company was in negotiations with a private investor
which were close to being concluded. Germany would
submit the final plan at a later date.

In addition,

(59)

In Germany's view, capacity reductions were required
only if the SME was in a dominant position in a market
suffering from overcapacity. Since this was not the case
here, it did not consider a reduction of capacity to be
required.

(60) Germany claimed that

regards

the aid was

limited to the
minimum necessary. As
the private-investor
contribution, it argued that the guarantee provided for
the loan by the main shareholder and managing
director, Mr Geiß,
should be taken into account.
Moreover, there was a contribution from the employees.
Germany rejected the accusation by the competitor that
TGI had sold its products at dumping prices.

(61) Germany argued that

the loan from the Thüringer
Aufbaubank had been granted under an approved aid
scheme, the Thuringia Consolidation Fund. For reasons
of legal certainty, the Commission's assessment had to
the conditions for
be confined to deciding whether
granting the aid had been assessed appropriately and
that there had been no manifestly incorrect application
of the scheme. The Commission had not respected these
in particular with regard to the doubts
principles,
concerning the SME status of the aid recipient.

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(62)

The Commission notes that it had issued an information
order so as to obtain further information on the loan
granted from the Thuringia Consolidation Fund. On the
basis of the information provided, it concluded that the
conditions had not been met. It was therefore obliged to
initiate the formal investigation procedure.

the
decision concerning the waiver,
Commission could revoke a decision, and was even
obliged to do so, if a significant mistake had been made
in the procedure.

arguing that

(63) Were the Commission not to accept that the loan was
indeed covered by the aid scheme, Germany argued in
the alternative that the loan could be authorised under
the rescue and restructuring guidelines. It pointed out
that
the Commission took a less restrictive line on
restructuring aid to SMEs. According to Germany, TGI
qualified as an SME in 1997, with 226 employees. The
other companies owned by Mr Geiß were irrelevant to
the SME status of TGI.

(64) Germany referred to the expert report dating from
November 2000 as well as to more recent data on the
company's development which had been submitted to
the Commission and showed a positive trend. Germany
claimed that
this material had not been taken into
account by the Commission.

(65) Germany also argued that the loan from the Thüringer
Aufbaubank constituted not aid but compensation for
the demolition of the old batch house by the Land of
Thuringia. The use of this building was related to the
operation of the fourth production line. Its demolition
entailed additional costs of DEM 2 million for TGI since
a new building and a connecting bridge had to be built.
The loan from the Thuringia Consolidation Fund had
been awarded to the
compensation.
According to Germany, the link between the provision
of the loan and the demolition of the building was clear
from the contract, which indicated that the loan was to
be used for the financing of investments related to the
restoration of the building for the fourth production
line.

company as

(66) As regards the deferral of the payment of the remaining
purchase price, Germany argued that the BvS acted like
a private creditor. The deferral, it claimed, was necessary
to enable the company to renew the production lines
and thus to remain viable. In the event of insolvency,
the
claim would have been unenforceable.
According to Germany, the deferral therefore did not
constitute State aid within the meaning of Article 87(1)
of the EC Treaty. Germany argued in the alternative that
the deferral could be authorised on the basis of the
guidelines on rescue and restructuring aid.

entire

(68) Article 9 of Regulation No 659/1999 provides that the
Commission may revoke a decision where it was based
on incorrect information provided during the procedure
which was a determining factor for the decision. Since
this is not the case here, the Commission sees no reason
to revoke the decision.

(69) Germany claimed that

the
the outcome of
it claimed not

first negative decision
prejudged
second decision.
the
to have the possibility to
Moreover,
comment on the effect of all the measures that were
part of the restructuring plan and thus that its right of
defence was violated. Nor was the Commission able to
assess the restructuring plan as a whole. Germany
sound
claimed
therefore
administration had been violated.

principle

that

the

of

(70) Germany reiterated its position that

the

the loan was
effectively covered by the aid scheme under which it
had allegedly been granted. In the alternative, it argued
loan did not constitute aid but was a
that
compensation payment. It also argued that the loan did
not contain elements of State aid since it had been
provided on market terms. This was supported by the
fact
that Mr Geiß had personally guaranteed the
repayment of the loan.

(71) Germany pointed out that TGI was an SME at the time
the loan was granted. There were no synergies between
the two companies since the product groups were
different and business between the two companies was
carried out on an arm's
two
companies could not therefore be considered as one
entity whose actual economic power was greater than
that of an SME.

length basis. The

(72) Germany argued in the alternative that the loan was
compatible with the common market on the basis of
the guidelines on rescue and restructuring aid. In this
connection, it submitted the latest information on the
restoration of the firm's viability and the restructuring
plan. It submitted TGI's latest restructuring plan dating
from April 2001, which contained an investment plan
and an overview of the financing of the investments.

(67)

reply to the comments of

In its
the competitor,
Germany expressed disappointment that the proceedings
had been split. It asked the Commission to revoke its

(73) Germany also submitted an expert report which had
been prepared for Case T-198/01 (concerning the

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Commission's negative decision on the waiver) and
showed, according to Germany, that there had been a
sustained improvement
in the company's economic
performance and that its long-term viability had been
restored.

(74)

By letter dated 15 March 2002, Germany claimed that
TGI had found a new outside investor, […]*, which
would invest EUR […]* in the company and take over
[…]* % of
the shares. The investor had made its
contribution conditional on confirmation of the waiver
of DEM 4 million, which had been the subject of a
negative
the
Commission to revoke its negative decision concerning
the waiver in Case C 19/2000 and to include the waiver
in the current proceedings.

decision. Germany

therefore

asked

(75) Germany argued that

the negative decision in Case
19/2000 and the opening of the current proceedings
were based mainly on the absence of a contribution
from a private investor. The new investor enabled
Germany to present a new restructuring plan that met
the conditions of viability and proportionality of the
aid. The investments that had been delayed could now
be carried out.

contribution.

since, in addition to the public assistance from the BvS
it contained a significant
and the Land of Thuringia,
private
the
half
Lastly,
restructuring costs had been financed by the waiver of
the purchase price and the loan from the Thüringer
Aufbaubank, guaranteed by Mr Geiß. The rest had been
financed by the company itself, supported by the waiver
by the staff and management of
salary and
payments.

their

only

of

(80) Germany argued that

the new investment by […]*
worth EUR […]*, the guarantee by Mr Geiß for the
Thüringer Aufbaubank loan worth DEM 2 million (EUR
1,022 million), the deferred repayment of loans from a
private bank worth EUR […]*,
the deferral of staff
salaries and Christmas bonuses worth EUR […]* and
the waiver of the Christmas bonuses for 1997 worth
EUR […]* should all be viewed as a private-investor
contribution.

(81) Germany therefore concluded that the conditions were
met for the aid to be approved on the basis of the
guidelines on rescue and restructuring contribution.

(76)

latest

In its
letter dated 13 June 2002, Germany
reiterated primarily the arguments presented in previous
letters in the course of these proceedings.

5. ASSESSMENT

(77)

It stressed that TGI's competitor, Schott, would gain a
monopoly in some market segments if TGI were forced
out of the market. This fact ought to be taken into
account in deciding whether the restructuring aid was
compatible with the common market. Germany referred
to the guidelines on aid for rescuing and restructuring
firms in difficulty, which State that ‘State aid … may be
warranted,
instance, … by the desirability of
maintaining a competitive market structure when the
disappearance of firms could lead to a monopoly or
tight oligopoly situation …' (7).

for

(78) Germany also argued that, even if the Commission took
the view that the contribution from the new investor
could not be taken into account
in assessing the
compatibility of the aid, the aid could be approved on
financing the
the basis of
the alternative plan for
restructuring. This plan had
to the
Commission.

been sent

(82)

(83)

(84)

(79)

In Germany's view, this financing plan was plausible and
realistic, as demonstrated by the fact that the firm had
already carried out most of the restructuring. The plan
also met the requirement for the aid to be proportional

(85)

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

the separation of

The Commission notes
the
that
proceedings and the negative decision in the first
proceedings do not prejudge the outcome of the second
set of proceedings. All the information necessary for a
decision on the first measures was available and it is in
accordance with the principle of sound administration
to conclude a formal investigation as quickly as possible.

Financial assistance from public resources was granted
to TGI. The Commission first has to determine whether
these measures constitute State aid within the meaning
of Article 87(1) of the EC Treaty.

If TGI received assistance from public resources that no
private investor would have granted,
this gives the
company an advantage over its competitors and thus
distorts competition. This in turn affects trade between
Member States as the products in question are actively
therefore
traded.
constitute State aid within the meaning of Article 87(1)
of the EC Treaty and the Commission would have to
analyse their compatibility with the common market.

financial measures would

The

For each measure in support of TGI
public
analyse whether
whether it is compatible with the common market.

the Commission must
it constitutes State aid and,

financed from
therefore
if so,

resources,

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5.1. The recipient firm

(86) Germany considers TGI

to be the aid recipient.

It
moreover considers TGI to be an SME as defined in the
1996
Commission
concerning the definition of small and medium-sized
enterprises (8),
the SME
recommendation).

recommendation

referred to as

(hereinafter

3 April

of

(87)

the

formal

investigation
In its decision initiating
procedure,
the Commission raised the question of
whether the relevant undertaking might not be larger
than just TGI. The main shareholder and managing
director of TGI was at
sole
shareholder
two other
and managing director of
companies, PFS and LS. Taken together, TGI, PFS and LS
exceeded the threshold of 250 employees established by
the SME recommendation.

same time

the

the

(88)

Since the question of whether TGI qualifies as an SME is
not relevant for the assessment of the compatibility of
the measures concerned, this issue will not be pursued
further in these proceedings.

5.2. Existence of aid within the meaning of Article
87(1) of the EC Treaty and compliance with
approved aid schemes

5.2.1. Contributions from the THA/BvS in the context of
asset deal 1 (contract of 28 September 1994)

(89)

The measures granted as part of asset deal 1 fell under
the THA aid scheme E 15/92 (9). Since the closure of
the company would have been a less costly option but
the State none the less decided to privatise it with State
support, this decision implied a burden for the State of
DEM 33 500 000. Thus, the price of DEM 5 800 000 to
be paid for the company must be considered to be a
negative price. Since the undertaking had less than
1 000 workers,
from the
financial
THA/BvS to TGI was covered by THA scheme E 15/92.
It therefore constitutes existing aid, which does not need
to be reassessed as part of these proceedings.

assistance

this

5.2.2. Contributions from the THA/BvS in the context of
asset deal 2 (contract of 11 December 1995)

(90)

The measures granted under asset deal 2 fell with the
scope of THA scheme N 768/94 (10). Since the closure
of the company would have been a less costly option
but the State none the less decided to privatise it with

(8) OJ L 107, 30.4.1996, p. 4.
(9) THA scheme E 15/92, SG (92) D/17613, 8.12.1992.
(10) THA scheme N 768/94, SG (95) D/1062, 1.2.1995.

State support, this decision implied a burden for the
State of DEM 6 500 000. Since the undertaking had less
than 250 workers,
this financial assistance from the
THA/BvS to TGI was covered by THA scheme N
768/94. It therefore constitutes existing aid, which does
not need to be reassessed as part of these proceedings.

5.2.3. Investment loans from the KfW in the context of

asset-deal 1

(91)

Three
loans amounting to DEM 17 100 000 were
granted by KfW allegedly under aid schemes previously
authorised by the Commission.

granted under

(92) A first loan of DEM 10 000 000 was granted under a
KfW scheme for small businesses. A second loan of
a KfW EU
DEM 5 100 000 was
job-promotion scheme for small businesses. According
to the information submitted by Germany, both loans
were provided at market conditions with an interest rate
above the reference interest rate. As the company was
not in difficulties at the time the loans were granted, the
Commission concludes that they do not constitute State
aid.

authorised by

(93) A third loan of DEM 2 000 000 was provided under the
ERP reconstruction programme, a regional aid scheme
previously
It
complies with the conditions set out in the aid scheme
under which it was said to be granted and is thus
effectively
therefore
the
constitutes existing aid, which does not need to be
reassessed as part of these proceedings.

the Commission (11).

scheme.

covered

by

It

5.2.4. Investment grants and investment allowances

(94) As part of asset deal 1, TGI received investment grants
amounting to DEM 6 750 000 under the 23rd outline
plan for the Joint Federal Government/Länder scheme for
improving regional economic structures, a regional aid
scheme authorised by the Commission (12). These grants
comply with the terms of the aid scheme approved by
the Commission under which they were allegedly
granted. They are therefore regarded as existing aid.

(11) N 562/c/94 SG (94) D/17293, 1.12.1994.
(12) 23rd outline plan for the Joint Federal Government/Länder scheme
for improving regional economic structures: measures under this
scheme qualify as regional investment aid under Article 87(1) of
the EC Treaty and were approved by the Commission under the
the EC Treaty (N
exemption laid down in Article 87(3)(a) of
157/94, SG (94) D/11038, 1.8.1994).

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(95) Under

the

the

asset

deals, TGI

two asset deals,

investment allowances
amounting to DEM 1 575 000 were granted to TGI.
Moreover, outside
received
investment allowances amounting to DEM 876 000 in
1996 and DEM 748 000 in 1997. All payments were
Law
under
made
(Investitionszulagengesetz),
scheme
a
authorised by the Commission (13). On the basis of the
information submitted, the Commission concludes that
the investment allowances meet the conditions of the
aid scheme under which they were allegedly granted
and are thus effectively covered by the scheme. They are
therefore regarded as existing aid.

Allowance
aid

Investment

regional

the

suspected that these measures conferred advantages on
the firm which a private creditor would probably not
have granted to a firm in difficulty, with the result that
they constituted State aid.

(101) The Commission maintains

that

the BvS

a
government body. Its task, like that of its predecessor,
the Treuhandanstalt, is to privatise State-owned firms in
the federal
eastern Germany. The BvS is part of
government structure and is answerable to it. Measures
taken by the BvS are thus attributable to the State.

is

(96)

Existing aid does not need to be reassessed as part of
these proceedings, but it should be taken into account
for the calculation of the proportionality of the aid.

5.2.5. Waiver of DEM 4 000 000 of the purchase price

(97)

The waiver of DEM 4 000 000 of the purchase price
was the subject of the investigation procedure in Case
19/2000. A negative final decision was adopted on 12
June 2001 (14). The waiver will therefore not be assessed
in these proceedings.

(98) Germany had claimed that the waiver of the price did
not constitute State aid within the meaning of Article
87(1) of
the EC Treaty but corresponded to the
behaviour of a private creditor. It argued that it was
more profitable from an economic point of view for the
BvS to waive the price than to insist on payment of the
full price.

(99) However, the Commission took the view that the waiver
constituted State aid and was incompatible with the
common market. The aid recipient
lodged an appeal
against this decision with the Court of First Instance of
the European Communities.

5.2.6. Conversion of securities for DEM 1 800 000 of the

purchase price and deferral of payment

(100) As part of

the concerted action,

the BvS agreed to
convert
the bank guarantee worth DEM 1 800 000
under asset deal 1 into a junior mortgage. Payment of
the remaining purchase price was also deferred and is
now scheduled for 2003 onwards. The Commission
investigation procedure because it
initiated the formal

(13) Investitionszulagengesetz (Investment Allowance Law) (N 494/A/95,
SG (95), D/17154, 27.12.1995): Measures under this Law qualify as
regional investment aid under Article 87(1) of the EC Treaty and
were approved by the Commission under the exemption laid down
in Article 87(3)(a) of the EC Treaty.

(14) OJ L 62, 5.3.2002, p. 30.

(102) The security in the form of a junior mortgage is of
lower value than the bank guarantee. A bank guarantee
involves low risk. In the event of insolvency, the entire
purchase price of DEM 1,8 million could have been
junior rank compared
recovered. The mortgage is of
with the senior claims of
the banks. As Stated by
Germany in a letter dated 29 October 1999, which was
submitted in Case C 19/2000, the economic value of
this mortgage is very low. Given its junior rank after
it has to be expected that in the event of
the banks,
insolvency only a small percentage of the claim could
be recovered. This assessment was confirmed in the
letter dated 9 October 2001. The
conversion of
securities therefore confers an advantage on TGI that a
private
thus
creditor would not have granted.
constitutes State aid and has to be assessed as ad hoc
aid.

It

it corresponds

(103) As regards the deferral of the payment, Germany claims
that
to the behaviour of a private
creditor and therefore does not constitute State aid.
According to the established case-law of the Court of
Justice of
to
determine whether a measure by a public-sector body
constitutes State aid it is necessary to determine whether
the
economic
advantage which it would not have obtained under
normal market conditions (15).

the European Communities,

undertaking

in order

recipient

receives

an

(104) The remaining purchase price amounting to DEM 1,8
million was originally due for payment at the end of
1999. In October 2000 the BvS agreed to a deferral of
the payment. Payment
is now scheduled for 2003
onwards (in three instalments of DEM 600 000 each at
the end of 2003, 2004 and 2005).

to restore the viability of

(105) Germany argues that the deferral of the payment was
the
necessary in order
company. Otherwise the company would have gone
bankrupt. When the deferral was granted, the purchase
price of DEM 1,8 million was secured by a junior
mortgage. As pointed out above, the mortgage was of
low economic value and in the event of insolvency only
a small share of the DEM 1,8 million would have been
recovered.

(15) Case C-342/96 Spain v Commission [1999] ECR I-2459, at 41.

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(106) The Commission considers

that

the deferral was
consistent with the behaviour of a private creditor. This
is supported by the fact that some private banks agreed
to a deferral of their claims. The deferral therefore does
not constitute State aid and does not fall within the
scope of Article 87 of the EC Treaty. This does not
contradict
final
decision in Case C 19/2000, to the effect that the waiver
of DEM 4 million of
the purchase price constituted
State aid. A waiver and a deferral of payment are not
comparable.

the Commission's conclusion in its

5.2.7. Loan of DEM 2 000 000 granted by the Thüringer
Aufbaubank under the Thuringia Consolidation Fund
(February 1998)

(107) According to Germany, this loan was granted under the
Thuringia Consolidation Fund for firms in difficulty, an
aid scheme which had been authorised by
the
Commission (16). The Commission had serious doubts as
to whether the loan was effectively covered by the aid
scheme.
investigation
procedure.

It therefore initiated the formal

(108)

In its decision initiating the procedure, the Commission
questioned whether the company ranked as an SME.
However, the scheme was designed primarily for SMEs.
In the case of a large undertaking, an individual
notification would have been necessary.

those set out

(109) For the rest, the conditions of the scheme are the same
as
in the guidelines on rescue and
restructuring aid. As will be pointed out below, these
conditions are not met. The loan is therefore not
covered by the aid scheme, under which it was said to
have been granted. It therefore constitutes new aid and
has to be assessed as ad hoc aid.

conditions. According

(110) Were the Commission not to accept that the loan was
covered by the aid scheme, Germany argued that it did
not constitute aid. First, it claims that it was granted on
market
information
available, the loan was granted at an interest rate of
8,2 %. It is secured by a mortgage related to the real
eState of the fourth production line and by a directly
enforceable guarantee by Mr Geiß, the owner of the
company.

to the

(111) The Commission notes that the Thüringer Aufbaubank
is the development bank of the Land of Thuringia. It is a
public-sector body and is controlled by the Land of
Thuringia, which provides a 100 % guarantee for its
activities. The measures must accordingly be attributed
to the State. The Commission also notes that the loan

(16) NN 74/95, SG (96) D/1946, 6.2.1996.

was granted in accordance with an approved aid scheme
for firms in difficulty.

(112) The loan was granted by the Thüringer Aufbaubank in
December 1998, when the company was in serious
financial difficulties. The Commission considers that no
private investor would have granted a loan on these
terms to the company and that the loan thus constitutes
State aid.

(113) Germany argues in the alternative that the loan from
the Thüringer Aufbaubank does not constitute State aid
because it is a compensation payment by the Land of
Thuringia for the demolition of the old batch house.
The use of this building was related to the operation of
the fourth production line. Germany claims that because
of the demolition the company had to extend another
building and build a connecting bridge. This generated
costs amounting to DEM 2 million.

(114) No expert report or evidence has been provided to
show that the company was faced with additional costs
of DEM 2 million because of the demolition of the
building. Germany and the company claim that
the
relationship between the loan and the damage caused to
TGI can be deduced from the fact that the loan contract
States that the loan should be used for the financing of
the investments related to the renovation of the fourth
production line. This does not, however, prove that the
loan constitutes a compensation payment.

(115)

the company incurred additional costs of DEM 2
If
it
million and if these costs were to be compensated,
should in any event have received a grant of DEM 2
million and not a loan. This shows that Germany's
argument is unfounded.

(116) The Commission therefore concludes that the DEM 2
million loan from the Thüringer Aufbaubank constitutes
State aid and must be assessed as ad hoc aid.

5.3. Exemption under Article 87(3)(c) of the EC
Treaty

(117) The Thüringer Aufbaubank loan of DEM 2 million and
the conversion of securities must be assessed as ad hoc
aid by the Commission. Article 87(2) and (3) of the EC
Treaty lays down exemptions to the general principle of
the incompatibility of State aid established in Article
87(1).

(118) The exemptions in Article 87(2) do not apply in this
case because the aid measure does not have a social
character and is not granted to individual consumers, it
does not make good the damage caused by natural

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disasters or exceptional occurrences, and is not granted
to the economy of certain areas of the Federal Republic
of Germany affected by its division.

(119)

Further exemptions are laid down in Article 87(3)(a) and
(c) of the EC Treaty. As the primary objective of the aid
is not regional development but the restoration of the
long-term viability of an undertaking in difficulty, only
the exemptions laid down in Article 87(3)(c) 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
restructuring aid the Commission has issued special
guidelines. It considers that none of the other sets of
Community guidelines, such as those relating to aid for
research and development, environmental protection,
small and medium-sized enterprises or employment and
training, nor any other basis for compatibility apply in
this case.

its assessment of

(120) Since, according to the information available, the aid
the 1994
and

was
Community
restructuring firms in difficulty (17), are applicable (18).

before 30 April 2000,

guidelines on aid

rescuing

granted

for

(121) According to point 2.1 of the rescue and restructuring
guidelines, the financial weakness of firms that receive
help for restructuring is generally due to poor past
performance and dim future prospects. The typical
symptoms are deteriorating profitability or increasing
growing
diminishing
size
inventories,
cash flow,
capacity,
increasing debt, rising interest charges and low net asset
value.

turnover,

declining

losses,

excess

of

(122) On the basis of

the

information provided,

the
in
Commission concludes
It was
difficulty at
incurring continuous losses and generating insufficient
cash flow to carry out necessary investments. Moreover,
its equity capital had been reduced significantly.

the time the aid was granted.

company was

that

the

(17) OJ C 368, 23.12.1994, p. 12.
(18) Point 7.5 of the 1999 Guidelines States that ‘the Commission will
examine the compatibility with the common market of any rescue
and restructuring aid granted without its authorisation … on the
basis of the guidelines in force at the time the aid is granted …'
(OJ C 288, 9.10.1999, p. 2).

(123) Germany argued that the aid should be approved on the
ground that TGI's competitor, Schott, would have a
monopoly position in some market
segments and
strengthen its dominant position in others if TGI were
to be forced out of the market. However, the fact that
strengthen a
the
competitor's market position or dominant position
cannot
approving
restructuring aid if the relevant conditions are not met.

disappearance of

criterion for

firm will

decisive

the

be

a

R e s t o r a t i o n o f v i a b i l i t y

(124) 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.

(125) Germany submitted a restructuring plan covering the
period from 1998 to 2000. It also submitted a forecast
of
the company's turnover and results for the same
period. The company's viability was to be restored by
1999.

(126) The restructuring plan relied on the assumption that
there would be a new outside investor contributing
DEM 3 850 000. This amount was to cover a substantial
part
the
restructuring plan. However, this private investor could
not be found within a reasonable time span. The
financing of the measures was therefore not assured.

investment

specified

costs

the

of

in

(127)

absence of

this outside

contribution,

In the
the
restructuring plan was not realistic and not capable of
restoring the
company.
long-term viability of
Although, according to the restructuring plan, viability
was supposed to have been restored by 1999,
the
company was still making losses.

the

(128) Germany argued that the Commission did not take into
account an expert report from November 2000 which
contained a favourable assessment of
the company's
economic situation. The report pointed to a positive
development of the company's profit situation in the
years from 1997 to 2002. However, it also Stated that a
precondition for this development was the carrying out
of investments amounting to DEM 11,5 million. In 2000
investments amounting to only DEM 1 million were
carried out. The liquidity situation of the company is
serious. Besides finding the resources for investments
amounting to DEM 11,5 million, TGI also has to pay
back loans of DEM […]* million. According to the
estimations of the expert, the company will not be able
to carry out the financing with its own resources. To
ensure the viability of the company, further State aid or
the waiver of existing claims were said to be necessary.

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(129) Contrary to what Germany claimed, the expert report
does not show that the company had recovered but
States that it was still in serious difficulties and that its
long-term viability was not secured.

sufficient capital. The Commission therefore concludes
that the alternative financing plan was manifestly not
capable of restoring the firm's long-term viability.

(130) An ex

post

that

shows

assessment

the original
restructuring plan was implemented only in part. By the
end of 2000, the renovation of the four production
lines, which was necessary to restore the long-term
viability of the company, had not yet been completed.
In 2001 the first, third and fourth production lines were
renovated. The second production line has been shut
down temporarily since mid-2000.

the

company

it points

in economic

(131) Another expert report prepared for Case T-198/01 was
submitted in the course of the investigation procedure.
to the positive
According to Germany,
development of
and
employment terms. However, it is based on significantly
less investment than in the original
investment plan.
in October 2001 the company still had to
Moreover,
pay back debts amounting to around DEM […]*, not
including the purchase price of DEM 4 million,
the
waiver of which was the subject of a negative decision
by the Commission. The report also Stated that
the
liquidity situation would still be very difficult in 2001
and 2002.

(134) The Commission notes that, according to the latest
information submitted, the negotiations with the […]*
group of investors were not conclusive and that this
group of investors will not invest in the company.

(135) By letter dated 15 March 2002, Germany claimed that a
new private investor had been found and that
the
negotiations with this new investor had been concluded.
A binding contract had apparently been signed between
the new investor and the two owners of the company,
Mr and Mrs Geiß. The new investor would increase the
own capital of the company by EUR […]* to EUR […]*
and would then hold […]* of the stakes ([…]* %). In
addition, the new investor would provide TGI with EUR
[…],* which would be placed in the capital reserves.

(136) As a new investor had been found, Germany claimed
that the argument of the restructuring plan's not being
viable was not valid anymore. According to Germany,
the aid could therefore be authorised. Germany claims
that it cannot be argued that there is no temporal link.
The original restructuring plan, which, according to
Germany, was coherent from the outset and was carried
out in part only because of the absence of an investor,
could now be carried out in amended form.

(137)

the second production line.

(132) Germany submitted an alternative plan for financing the
restructuring measures which dated from April 2001
and took account of the fact that no private investor
had yet been found. This plan postpones the renovation
of
It also relies on the
deferral of staff salary payments and the medium-term
deferral of
to allow the
financing of the most important investments. Moreover,
the total
than in the original
restructuring plan. Germany argued that this alternative
plan was capable of
restoring the firm's long-term
viability.

loan payments,

investment

in order

lower

is

reasonable

It must be noted that the aid was granted in February
1998 and paid out in November 1998. Under the rescue
and restructuring guidelines, the restructuring plan must
restore the long-term viability and health of the firm
span and consequently
within a
restructuring
viable
to
restructuring programme submitted in all relevant detail
to the Commission. The plan must restore the firm to
competitiveness within a
reasonable period. The
restructuring plan should normally be established before
the granting of the aid.

aid must

linked

time

be

a

(133)

the Christmas bonuses

the salaries and Christmas bonuses,

In its latest letter, however, Germany explained that the
deferral of
the
deferral of repayments on the bank loans and the
waiver of
included in the
alternative financing plan were necessary for the firm to
survive until a contract was concluded with a new
investor. In order to guarantee the long-term viability of
the firm, the waiver of DEM 4 million of the purchase
price and the contribution from a new investor were
necessary to give TGI a sound financial basis and

an

(138) The original restructuring plan submitted was never
adjusted
If Germany now submits
realistic.
restructuring plan containing the contribution of a new
private investor,
this constitutes a new restructuring
plan and a new restructuring period. There is no link
between aid measures
a
restructuring plan with a new investor submitted more
than three years later. Since,
in the legal proceedings
relating to the decision in Case C 19/2000, TGI asserted
its serious liquidity problems, it is clear that the loan
from the Thüringer Aufbaubank has already been used.
Germany's arguments can therefore not be accepted.

in 1998 and

granted

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(139) The Commission also notes that the commitment of the
new private investor is not unconditional but depends
on the confirmation of the waiver of the purchase price,
which was the subject of a negative decision by the
Commission. This is explicitly Stated in the information
the
submitted by Germany. Germany writes
investor has made its commitment conditional on the
Commission's approving the waiver by the BvS. The
confirmation of
the
investment.

the waiver

the basis

that

for

is

(140) However, the waiver was considered by the Commission
in its decision of 12 June 2001 to constitute unlawful
its
and incompatible aid. The Commission regards
decision as lawful and sees no reason to revoke it. The
fact that implementation of the article on recovery was
suspended by order of the President of the Court of First
Instance on 4 April 2002 does not deprive the decision
of
all
Community legal instruments. The planned contribution
from a new private investor cannot therefore be taken
into account.

the presumption of

enjoyed

legality

by

40 and 41, according to the information available to the
Commission, the overall market does not seem to be in
overcapacity. Moreover, TGI
took over only four of
IGW's twelve production lines, with the result that a
reduction in capacity did take place.

P r o p o r t i o n a l i t y t o r e s t r u c t u r i n g c o s t s a n d
b e n e f i t s

(146) The amount and intensity of the aid must be limited to
the strict minimum needed to enable restructuring to be
related to the benefits
undertaken and must be
anticipated from the Community's viewpoint. Therefore,
the investor is normally expected to make a significant
contribution to the restructuring plan from its own
resources or external financing. Moreover, the way in
which the aid is granted must be such as to avoid
providing the company with surplus cash which would
be used for aggressive, market-distorting activities not
linked to the restructuring process.

(141) Accordingly, the Commission cannot conclude that a
restructuring plan existed which was
capable of
restoring the long-term viability and health of the firm
within a reasonable timescale and on the basis of
realistic assumptions. The viability criterion is therefore
not met.

N o u n d u e d i s t o r t i o n s o f c o m p e t i t i o n

the

the waiving of
in 1997 constituted part of

staff's
(147) Germany argued that
Christmas bonus
the
investor's contribution. While it can be seen as a
significant commitment on the part of the staff to the
restructuring of the company, it cannot be taken into
account within the investor's contribution since the
investor bears no risk in this respect. The same applies
to the deferral of salaries and Christmas bonuses, which
Germany identifies in its latest letter as a contribution
from a private investor. Moreover, these payments were
merely deferred. They therefore represent no more than
a temporary reduction in costs for the firm.

(142) The restructuring plan must contain measures

for
offsetting
effects on
as possible
competitors; otherwise the aid involved would be
contrary to the common interest and not eligible for
exemption pursuant to Article 87(3)(c) of the EC Treaty.

adverse

far

as

a

is

there

situation,

structural

(143) Where, on an objective assessment of the demand and
excess of
in the
the
contribution,
to the
sector by irreversibly

supply
production capacity in the relevant market
served
Community
by
plan must make
restructuring
proportionate to the amount of aid received,
restructuring of
the relevant
reducing or closing capacity.

recipient,

the

aid

a

However,

contribution.

to form part of

(148) Germany also considered the salary reduction for the
managing director (who is the main shareholder of the
the
company), worth DEM […]*,
investor's
this measure
constitutes a cost reduction for the firm and cannot be
viewed as a contribution by the owner to the financing
of the restructuring. This is supported by the fact that
the measure was not included in the restructuring plan.
Since the managing director, as the owner, also controls
the firm, he can himself decide the level of his salary
and thus the amount of any reduction, with the result
that a reduction of this kind does not correspond to a
verifiable contribution. The reduction in the managing
director's salary can therefore not be regarded as part of
the investor's own contribution.

(144) Germany Stated that TGI was not expected to increase
or decrease its production capacity in the future.

(149) Germany argued that the deferral of payments on a loan
from a private bank (Commerzbank)
ranked as a
contribution from an investor. However, this deferral
reduces the costs for
It
cannot be viewed as part of the investor's contribution.

the firm only temporarily.

(145)

comments on the decision initiating

In its
the
procedure, a competitor of TGI argued that there was
structural overcapacity in some of the product markets
in which TGI operated. However, as shown in recitals

(150) Germany also considered cash flow amounting to DEM
[…]* as the investor's contribution. The Commission
cannot accept that this internal financial measure forms

L 140/44

EN

Official Journal of the European Union

6.6.2003

part of the investor's contribution because it was largely
made possible directly and indirectly through aid
measures. Although the cash flow might reduce the
need for financing for the restructuring of the company,
the Commission cannot
into account as an
contribution. Moreover,
element of
Germany did not provide information on when this
cash flow was generated or if it still had to be generated
in the future.

investor's

take it

the

(151) Germany claimed that the directly enforceable guarantee
that Mr Geiß, the owner of the company, provided for
the Thüringer Aufbaubank loan of DEM 2 million was
part of the private investor's contribution. However, the
loan is granted from public resources and so cannot be
contribution.
considered
Moreover, it is secured by a mortgage of DEM 2 million
on the plot of the fourth production line. Mr Geiß has
therefore not assumed the entire risk and the value of
his guarantee must be considered to be far lower than
Stated by Germany.

a private-investor

to be

the

investor's own contribution,

(152) Even if the Commission recognises Mr Geiß's guarantee
as part of
that
contribution is still 10 % below the restructuring costs.
In accordance with the Commission's
customary
practice,
this is not sufficient. For these reasons, the
announced contribution from a new private investor is
not unconditional and cannot be taken into account.

(153) The Commission therefore concludes that there is no
significant private-investor
contribution within the
meaning of the rescue and restructuring guidelines. The
condition of the proportionality of the aid is not met.

F u l l i m p l e m e n t a t i o n o f t h e r e s t r u c t u r i n g
p l a n

The

plan

restructuring

(154) The company must fully implement the restructuring
plan.
the
Commission shows a gap in the financing as no new
outside investor could be found. Since a contribution
from an investor is essential for the implementation of
the restructuring plan, in particular for carrying out the
indispensable investment,
the restructuring plan was
implemented only in part.

submitted

to

(156) The measures do not meet the criteria laid down in the
guidelines on aid for rescuing and restructuring firms in
difficulty and therefore cannot be considered compatible
with the common market pursuant to Article 87(3)(c) of
the EC Treaty. The restructuring plan submitted is not
realistic as regards restoring the viability of the company
and there is no private investor contribution. The
Commission therefore asks Germany to recover the aid
from the recipient,

HAS ADOPTED THIS DECISION:

Article 1

The State aid implemented by Germany for Technische
Glaswerke Ilmenau GmbH in the form of a conversion of
securities for DEM 1 800 000 (EUR 914 109) of the purchase
price and a loan from the Thüringer Aufbaubank worth DEM
2 000 000 (EUR 1 015 677) is incompatible with the common
market.

Article 2

Germany shall take all necessary measures to recover
the aid referred to in Article 1 and

1.
from the recipient
unlawfully made available to the recipient.

shall be

Recovery

effected without delay

2.
and in
accordance 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 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

6. CONCLUSIONS

This Decision is addressed to the Federal Republic of Germany.

(155) The Commission notes that the conversion of securities
constitutes State aid. It also finds that the loan provided
the Thuringia
by the Thüringer Aufbaubank under
Consolidation Fund is not covered by the scheme under
which it was allegedly granted and that it constitutes
State aid.
It finds moreover that Germany unlawfully
implemented the two aid measures in breach of Article
88(3) of the EC Treaty.

Done at Brussels, 2 October 2002.

For the Commission

Mario MONTI

Member of the Commission