2003/194/EC: Commission Decision of 30 October 2002 on the State aid implemented by Germany for Schmitz-Gotha Fahrzeugwerke GmbH (notified under document number C(2002) 2145) (Text with EEA relevance)
Date: 2002-10-30
Institutions: European Commission
Subjects: Germany, State aid, aid for restructuring, aid to undertakings, control of State aid, motor vehicle industry

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COMMISSION DECISION

of 30 October 2002

on the State aid implemented by Germany for Schmitz-Gotha Fahrzeugwerke GmbH

C 31/2001 (ex NN 156/99 and N 288/98)

(notified under document number C(2002) 2145)

(Only the German version is authentic)

(Text with EEA relevance)

(2003/194/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

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

the first

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:

I. PROCEDURE

(1)

(2)

By letter dated 18 May 1998, Germany informed the Commission of aid to Schmitz-Gotha
Fahrzeugwerke GmbH (Schmitz-Gotha). The aid case was registered under NN 156/99. By letters
dated 12 June 1998, 21 December 1999 and 17 May 2000, the Commission asked Germany for
further information. Germany replied by letters dated 15 October 1998, 21 July 1999, 27 April
2000, 1 December 2000 and 8 January 2001.

By letter dated 23 May 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 and to register it as
C 31/2001. Comments presented by Germany were received on 14 and 22 August 2001. The
Commission decision to initiate the procedure was published in the Official Journal of the European
Communities (2). The Commission invited interested parties to submit their comments on the aid.
No comments from interested parties were received. The Commission asked Germany further
questions by letter dated 1 October 2001. Germany replied on 14 December 2001. Further
information was received on 16 and 28 May and 3 July 2002.

II. DESCRIPTION

1. The aid recipient

(3)

The case concerns financial measures for the restructuring of Schmitz-Gotha, a company situated in
Thuringia active in motor vehicle construction and the construction of bodies and trailers in
particular. Schmitz-Gotha is the successor to Gothaer Fahrzeugwerke GmbH (Gotha-old), a formerly
Lintra
State-owned company, which after

its privatisation in 1994 belonged to the

(1) OJ C 211, 28.7.2001, p. 15.
(2) See footnote 1.

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Beteiligungsholding GmbH (Lintra-Holding). In addition to other aid, the eight companies belonging
to Lintra-Holding were granted loss compensation amounting to DEM 175 million for the period
1995 to 1997 by the public authorities in support of
their privatisation. This public loss
compensation was completely used up as early as 1996, and Gotha-old made a loss of DEM 12,4
million the following year. A further
loss of DEM 7,5 million was expected for 1997.
in 1996 the privatisation of Gotha-old was regarded as having failed, and the
Consequently,
Bundesanstalt f(cid:252)r vereinigungsbedingte Sonderaufgaben (BvS) resumed the control over the company and
decided to continue its restructuring with the aim of preparing it for sale. Finally, two companies,
Schmitz-Gotha and Gothaer Fahrzeugtechnik, took over the parts of the assets of Gotha-old that
where deemed suitable for sale. The remaining assets of the former operation were put into
liquidation. The following figures were given for the performance of Gotha-old up to that point:

1994 (before
privatisation)

1995

1996

Turnover

Profit/loss

55 500

ﬂ13 900

113 000

500

48 200

ﬂ12 400

(a) These figures are hypothetical, since in 1997 the physical assets were transferred to the new investors

(in DEM 1 000)

1997
(estimates (a))

62 800

ﬂ7 500

(4)

Out of eight potential investors, only the two present-day investors Schmitz Cargobull AG (70 %)
and Josef Koch GmbH (30 %) jointly submitted an offer for Schmitz-Gotha. They acquired the
assets on 10 September 1997 at a purchase price of DEM 1. Mr Koch subsequently became the
sole manager of Schmitz-Gotha. After the takeover in 1997, Schmitz-Gotha employed 77 people.

2. The restructuring

(5)

The main problem of Gotha-old in motor vehicle construction (now Schmitz-Gotha) was the
inability to carry out serial production of its own competitive products, which made the firm
dependent on production to order for essentially two main customers. Production to order meant
the production of only small batches. Given the small production quantities, the technical and
staffing capacity of the firm was excessively large, leading to excessive fixed costs. Germany states
that, for the purpose of restructuring, investment was necessary to separate the infrastructure of the
two successor companies and for revamping, maintenance and replacement of machinery and
logistics in order to set up efficient serial production of its own products.

(6)

Before the decision to open the formal investigation procedure, the costs for restructuring were
indicated as follows:

General investment in machinery and equipment

Separation of infrastructure

Working capital

(in DEM)

13 900 000

1 600 000

1 600 000

Total

17 100 000

(7)

Under the plan originally presented, the firm was to reach marketability within two to three years
and to achieve sustained positive business results by the end of the fourth business year. According
to the restructuring plan, Schmitz-Gotha was to concentrate its production on vehicle bodies,

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trailers and different types of special trailers and was to take over the project sales of the Schmitz
group for clients such as the army and rental companies. Schmitz-Gotha was supposed to benefit
from the large sales network of its investors.

(8)

On 9 October 1997, one month after the takeover by the new investors, Schmitz-Gotha acquired,
for DEM 3,7 million, a 100 % holding in one of its subcontractors, (((cid:133))(*)), a company founded by
Mr Koch and run by him as managing partner. Despite the information injunction contained in the
decision to initiate proceedings, regarding in particular the circumstances under which the 100 %
holding in ((cid:133))* was acquired, Germany did not provide any purchase contract or any precise
information on the previous owners of ((cid:133))*. The information submitted merely indicated that ((cid:133))*
was previously owned by three private individuals. DEM 2,2 million of the purchase price was paid
on 25 February 1998. The remaining DEM 1,5 million was to be paid in four annual instalments
trading profit before tax of DEM
of DEM 375 000, provided that
((cid:133))* achieved an annual
500 000. Since it was assumed that
the
outstanding amount of DEM 1,5 million was set aside in full. With the payment of each instalment,
the amount
to be repaid decreased accordingly. With the takeover, production was to be
streamlined and the subcontracting of special vehicle parts secured.

the company would achieve the planned results,

(9)

The plan originally submitted by letter dated 18 May 1998 foresaw the following business
development:

Turnover

Cost of materials

Staff costs

Depreciations

Other operating costs

Operating result

Result before tax

(in DEM 1 000)

1997/1998

1998/1999

1999/2000

2000/2001

2001/2002

19 020

25 208

29 315

35 000

40 000

((cid:133))*

((cid:133))*

((cid:133))*

((cid:133))*

((cid:133))*

((cid:133))*

((cid:133))*

((cid:133))*

((cid:133))*

((cid:133))*

((cid:133))*

((cid:133))*

((cid:133))*

((cid:133))*

((cid:133))*

ﬂ2 527

ﬂ1 836

ﬂ668

((cid:133))*

((cid:133))*

((cid:133))*

((cid:133))*

((cid:133))*

547

((cid:133))*

((cid:133))*

((cid:133))*

((cid:133))*

((cid:133))*

1 618

3. State financial measures for the restructuring

(10) Originally the following measures were indicated by Germany as contributions from public sources

which were granted after the 1997 takeover for the restructuring:

TABLE 1

Measures originally indicated as public contributions

(in DEM)

Source

Measure

1

Thuringia

Employment measures (a)

(a) Grant supposedly made under a scheme which Germany could not

(7 500)

identify before the initiation of the procedure

(b) Grant made under an approved wage subsidy scheme (3)

(342 198)

349 698

(*) Business Secret replaced by (cid:145)((cid:133))*(cid:146).

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Source

Measure

2

3

Thuringia

Investment grant supposedly given under an approved scheme (4)

BvS

Investment grant to carry out the separation of infrastructure and urgent
repair work

(in DEM)

2 420 000

3 200 000

(a) Germany claimed that these measures do not constitute aid.
(3) Arbeitsf(cid:246)rderungsreformgesetz, (cid:151) Lohnkostenzuschuss Ost, SG(98) D/1049, 6.2.1998 (NN 107/97).
(4)

26. Rahmenplan der Gemeinschaftsaufgabe (cid:145)F(cid:246)rderung der regionalen Wirtschaftstruktur(cid:146), NN 123/97, 18.8.1997.

Total

5 970 198

(11)

In 1997 Gotha-old also received a BvS grant of DEM 6,1 million in order to compensate laid-off
employees. In Germany’s view, the measure did not qualify as aid since the laid-off employees were
the recipients. Even if the measure were considered to be aid, Germany argued, Schmitz-Gotha
could not be considered to be the recipient, since, in accordance with German law, it had taken
over all remaining employees. Therefore, according to Germany, if the measures were considered to
be aid, Gotha-old would have to be considered to be the recipient as the measure served to reduce
the workforce at Gotha-old and liquidate the company.

4. Financial contributions from other sources

(12) Originally Germany indicated the following contributions as contributions from the recipient or

external commercial sources:

TABLE 2

Measures originally indicated as private contributions

Source

Measure

4

Investor

Shareholder loan

Schmitz Cargobull

DEM 2 100 000 (70 %)

J. Koch

DEM 900 000 (30 %)

5 Vereinsbank

Investment loan (a)

6 Vereinsbank

Creditline at an adjustable interest rate according to the market rate
secured by a mortgage of DEM 7,5 million on the company premises

7 Vereinsbank

Loan granted on 30.7.1998 termed until 30.9.2008 at 5,11 % p.a.
refinanced by the Kreditanstalt f(cid:252)r Wiederaufbau (KfW) secured by
mortgage of DEM 7,5 million on the company premises

Total contribution to the restructuring (Nos 1(cid:150)7 of Tables 1 and 2
above)

(a) According to the information originally submitted, this loan was not used.

(in DEM)

3 000 000

2 650 000

1 000 000

2 350 000

9 000 000

14 970 000

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5. Market information

(13)

The company is active in the field of motor vehicle manufacture and in particular the manufacture
of bodies and trailers, which falls under NACE Rev. 1.34.20, a sector in which there is
intra-Community trade. The share in trailer production in 2000 amounted to 19 % on the German
market and 7 % on the European market.

(14) Originally Germany stated that the relevant capacities had to be measured according to the number
of workers and production halls, since the production mainly consisted of assembly work. Between
1997 and 2001,
the number of workers increased from 77 to 240, while the number of
production halls remained the same. Germany stated that the long waiting lists for delivery on the
trailer market indicated that the market was not in excess capacity.

6. The decision to initiate the proceedings under Article 88(2) of the EC Treaty

(15)

(16)

In the decision to initiate the formal investigation procedure, measures under No 1 in Table 1
above, contrary to Germany’s claim that they did not constitute aid, were considered to be aid,
because, even though they are intended to facilitate the employment of individual workers, they
also have to be regarded as benefits to the company. Consequently, they fall under the application
of Article 87 of the EC Treaty.

forward by Germany,

Contrary to the arguments put
the BvS grant of DEM 6,1 million as
described in recital 11 was also considered to be aid, since obligations to provide redundancy
benefits deriving from employment legislation or collective agreements were considered to be part
of
the normal costs which an undertaking has to bear itself. The measures were therefore
considered to be aid to Schmitz-Gotha, because the Commission took the view that, even though
its sole purpose was to enable the subsequent takeover by its
the aid was paid to Gotha-old,
successors. Since no information on the breakdown of this grant between the two successors was
available, an information injunction was issued.

(17) When the proceedings were initiated, the aid was considered to fall under the new Community
guidelines on State aid for rescuing and restructuring firms in difficulty (5) (the 1999 guidelines),
since it was assumed that part of the aid had been granted after the new guidelines had been
published in the Official Journal of the European Communities.

(18)

Furthermore, the Commission expressed the following doubts when it initiated the proceedings:

(a) whether the sale to the new investors at DEM 1 comprised new aid, since it was not clear if the
sales procedure was open and unconditional. Additionally, it was unclear whether the price
corresponded to the market price as the liquidation value appeared to be DEM 4,36 million;

(b) whether the investment grant under measure No 2 in Table 1 above complied with the

conditions of the scheme referred to by Germany;

(c) whether the grant under measure No 1(b) in Table 1 above complied with the conditions of the

scheme referred to by Germany;

(d) whether the restructuring plan was suitable to restore the long-term viability of Schmitz-Gotha,
since the potential obligation to repay aid to the amount of DEM 7,1 million deriving from the
negative Commission decision concerning the predecessor company Lintra-Holding, for which
Schmitz-Gotha amongst other beneficiaries is jointly and severally liable, might threaten the
accomplishment of the goals of the restructuring plan;

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

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(e) whether, contrary to the arguments put

the aid unduly distorted
competition through an increase in capacity, since the number of employees had increased
from 77 to 240 within the restructuring period;

forward by Germany,

(f) whether the aid was in proportion to the restructuring costs and benefits, since the financial
contributions to the restructuring as indicated within the preliminary assessment procedure
appeared not
it also appeared
doubtful whether the beneficiary had made a significant contribution to the restructuring from
its own or external commercial resources, because it seemed that the following contributions
indicated by Germany could be considered to be contributions by the beneficiary within the
meaning of the guidelines:

to cover the indicated restructuring costs.

In that context

(i)

the Vereinsbank loan amounting to DEM 2,65 million (measure No 5 in Table 2 above), as
according to the information submitted it was never used;

(ii) the Vereinsbank loan of DEM 2,35 million (measure No 7 in Table 2 above), as it appeared

to be refinanced by aid measures, namely a KfW programme.

Therefore, contrary to what was stated by Germany, the contributions of the beneficiary to the
restructuring appeared to amount to only DEM 4 million;

(g) at the same time it appeared doubtful whether the aid was limited to the minimum needed for
the restructuring to be undertaken, since during the restructuring period Schmitz-Gotha
acquired a 100 % holding in another undertaking at a price of DEM 3,7 million.

(19) With respect to the doubts raised in conjunction with points (a) to (c),

(f)(ii) and (g), the
Commission issued an information injunction pursuant to Article 10(3) of Council Regulation (EC)
No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article 93 of the
EC Treaty (6).

(e),

III. COMMENTS FROM GERMANY

(20) Under the formal
information.

investigation procedure, Germany supplied the following new or amended

(21)

In relation to the measures under No 1 in Table 1 above, Germany informed the Commission that
these consisted of different amounts than originally indicated. According to the latest information,
Schmitz-Gotha had from 1997 to 2000 received wage subsidies to the amount of DEM 527 000.
Of this amount, DEM 43 824 was supposedly granted in accordance with the Commission notice
on the de minimis rule for State aid (7) and an amount of DEM 351 160 was supposedly granted
under an approved aid scheme (8). Lastly, an amount of DEM 131 745 was granted under a
provision of national law (9), which in the opinion of Germany does not constitute aid, but is a
individual workers and does not
is aimed at the re-employment of
general measure since it
therefore confer benefits on the company, but rather on the individual re-employed workers.

(22) As regards the allocation of the BvS grant of DEM 6,1 million for the compensation of laid-off
workers during the transition from Gotha-old to its successor (recital 11), Germany informed the
Commission that in relation to the assets taken over by Schmitz-Gotha only 26 out of 144
employees were not employed and subsequently received redundancy allowances amounting to
DEM 497 000, which were covered by the BvS grant. According to Germany, all remaining
amounts were used for the winding-up of Gotha-old.

(6) OJ L 83, 27.3.1999, p. 1.
(7) OJ C 68, 6.3.1996, p. 9.
(8) See footnote 3.
(9) Paragraphs 217 and 10 of the Sozialgesetzbuch III (German social law code).

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(23) Germany informed the Commission that the BvS grant of DEM 3,2 million (measure No 3 in Table

1) was granted in 1998, not 1999.

(24)

Concerning the sales procedure, Germany stated that due to the extensive press coverage on the
collapse of Lintra-Holding all potentially interested bidders were aware of the envisaged sale of the
assets. Additionally, all
leading companies in the vehicle industry were also contacted directly
before the sale. Subsequently, eight companies showed an interest in acquiring the assets and
received information material. Four of those companies entered into closer negotiations at the end
of which only two submitted credible offers. Of these two, the offer of Schmitz/Koch proved to be
the soundest in economic terms.

(25) As regards the liquidation value of DEM 4,26 million in relation to the sales price of DEM 1,
Germany pointed out that the liquidation value as established by an expert report (Forensika report)
concerned only parts of the assets, which also were not exactly identical to the assets sold to
Schmitz-Gotha. It also had to be taken into account that the overall liquidation required the supply
of further financial resources of DEM 15,375 million and that, due to the negative overall result,
the earning capacity value for the relevant assets would in any case not have been positive.
Furthermore, the individual liquidation value of the assets sold would have to take account of the
fact that the capacities which were the basis of the evaluation could never realistically have been
fully used. The realistic value therefore would amount to only 50 % of the evaluation and again
would have to be reduced by immediate restructuring costs of DEM 2,5 million. Therefore, the
market value of the assets sold to Schmitz-Gotha could not have exceeded DEM 0.

(26) As regards the potential obligation to repay DEM 7,1 million in relation to illegal aid to
Lintra-Holding, Germany informed the Commission that these liabilities were repaid out of the
liquidation of Gotha-old.

(27) With respect to the potential distortion of competition, Germany supplied additional information

on the market, as follows:

(a) Schmitz-Gotha’s market share in the semi-trailers segment was 4,28 % in Germany and 0,2 %

in the Community;

(b) due to strong cyclical fluctuations which are typical of the industry,

it is difficult to give
accurate information on the capacity situation. However, the number of registrations from
1998 to 2000 and the existing waiting lists for delivery of about 6 to 8 months in 1999 would
indicate that there are no excess capacities on the market. Capacity utilisation had increased
from 80,2 % in 1997 to 89,2 % in 1999. Orders on hand increased between 1996 and 1999
from an average of 10,8 weeks to 12,8 weeks. Average turnover increased by 30 % between
1997 and 2000;

(c)

the firm’s production capacity was too large by some 50 %, but could not be partially shut
down. Therefore, the increase in employees led only to improved utilisation of the existing
production capacity.

technical capacity, and its previous statements that

Additionally, Germany argued that, according to the guidelines, capacity is measured as production
capacity in the sense of
the capacity at
Schmitz-Gotha was better measured according to the workforce employed must not therefore be
the technical capacity had never been increased and
misunderstood. Germany stressed that
consistently had been only 50 % used. Concerning the increase in the number of employees, it was
stated that the operation was taken over in October 1997 without an exact estimate of future
contracts and possible production quantities. Therefore, the most significant increase took place in
1998 when the actual need for staff could be more accurately estimated. Germany stated that since
then the increase in staff had been rather insignificant.

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(28) As regards the appropriate own contribution in relation to the restructuring costs and benefits,

Germany provided additional information on the contributions made by the beneficiary:

(a)

the restructuring costs amounted not to DEM 17,1 million, but to DEM 27,328 million,
comprising the following amounts:

Wage cost subsidies

Severance pay

Separation of infrastructure

Investment

Miscellaneous

(in DEM)

351 000

497 000

1 833 000

23 817 000

830 000

Total

27 328 000

Amongst other things,
maintenance and new procurements amounting to DEM 23,8 million:

these had consisted of

the following investments for renovation,

Investments

1997/1998

1998/1999

1999/2000

2000/2001

Intangible assets (software)

Physical assets (land, buildings,
plant)

((cid:133))*

((cid:133))*

Financial assets (holdings)

3 712 379

Total

((cid:133))*

((cid:133))*

((cid:133))*

((cid:133))*

((cid:133))*

((cid:133))*

((cid:133))*

((cid:133))*

((cid:133))*

((cid:133))*

((cid:133))*

((cid:133))*

((cid:133))*

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

(in DEM)

Total

((cid:133))*

((cid:133))*

((cid:133))*

23 836 821

(b) measure No 2 in Table 1 above, which initially amounted to DEM 2,42 million, consists of a
different amount than originally indicated. This comprises investment grants of DEM 1,836
million and an investment subsidy under an approved investment subsidy scheme (10) of DEM
362 000, giving a total of DEM 2,198 million;

(c) a surplus of DEM 14,732 million was achieved which contributed to the company’s capital
reserves. Therefore, DEM 650 000 of the investment grants contained in measure No 2 in Table
1 as well as a Vereinsbank loan (measure No 5 in Table 2) did not need to be used;

(d) measure No 7 in Table 2 was exclusively secured by collateral of Schmitz-Gotha, for which the
KfW, which refinanced this loan, did not provide any fallback guarantees. With respect to the
reduced interest rate of 4,25 % instead of the 5,11 % originally indicated, Germany states that
the aid element contained in the loan amounts to either 1,69 % p.a., i.e. DEM 39 000 p.a., or
5,69 %, i.e. DEM 131 000 p.a., depending on whether an increase of 4 %, in accordance with
the notice on the method for setting of the reference and discount rates (11), is applied.

Germany claims that the contribution of the beneficiary from its own and external commercial
sources amounts to DEM 20,692 million or 75,72 %.

(10) Investitionszulage f(cid:252)r die neuen Bundesl(cid:228)nder, SG(96) D 3794, 11.4.1996 (N 494/A/95).
(11) OJ C 273, 9.9.1997, p. 3.

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(29)

Therefore, according to the latest information, the assistance from public sources amounted to
DEM 6,636 million, comprising the following:

Measures indicated as public contributions after the initiation of proceedings

TABLE 3

(in DEM)

Source

Measure

1 Thuringia

Employment measures

(a) Supposedly not aid:

(i) Grant supposedly given as a general measure under § 227 SGB (a) III

(131 745)

(ii) Grant supposedly given in accordance with the de minimis rule

(b) Grant given under an approved wage subsidy scheme (12)

2 Thuringia

(a) Investment grant (GA-Mittel)

(b) Investment subsidy

3 BvS

(a) Redundancy allowance

b) Investment grant

KfW

(c) Investment subsidy contained in refinanced loan (measure No 7 in

Table 2)

Total
(excluding No 1 (a) and (b))

Sozialgesetzbuch (German social law code)

(a)
(12) Arbeitsf(cid:246)rderungsreformgesetz, (cid:151) Lohnkostenzuschuss Ost, SG(98) D/1049, 6.2.1998 (NN 107/97).

(43 824)

351 000

1 836 000

362 000

497 000

3 200 000

390 000

6 636 000

(30) As regards the takeover of ((cid:133))* by Schmitz-Gotha, Germany states that the four outstanding
instalments of DEM 375 000 have been paid. According to the information provided by Germany,
((cid:133))* was taken over in order to acquire additional know-how and to add technical development
capacities to production. Germany states that Schmitz-Gotha was not in a position to manufacture
itself parts acquired from ((cid:133))* or to improve appreciably ((cid:133))* terms of delivery. The main
objective in the acquisition was to cut production costs, since Schmitz-Gotha is now supplied by
((cid:133))* at production prices. ((cid:133))* earns its profits from turnover with some 30 other firms which it
also supplies. With regard to various models, production costs were significantly reduced by the
takeover, which helped to shorten the restructuring phase by one year. Annual profits before tax
were increased by DEM ((cid:133))* between 1998 and 2002, as a result of which the takeover financed
itself from the profits which it generated itself. The takeover resulted in the following changes in
the original restructuring plan:

Turnover

Cost of materials

Staff costs

Depreciations

Other operating costs

Operating result

Result before tax

(in DEM 1 000)

1997/1998

1998/1999

1999/2000

2000/2001

2001/2002

19 020

25 208

29 315

35 000

40 000

10 965

14 461

16 580

19 868

22 668

5 593

1 506

2 301

ﬂ1 145

ﬂ1 645

6 498

1 683

2 957

ﬂ192

ﬂ722

6 765

1 740

3 356

1 074

544

7 300

1 740

3 942

2 350

1 595

7 800

1 683

4 430

3 619

2 864

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IV. ASSESSMENT OF THE AID

(31)

Pursuant to Article 87(1) of the EC Treaty, any aid granted by a Member State or through State
resources in any form whatsoever which distorts or threatens to distort competition by favouring
certain undertakings or the production of certain goods is incompatible with the common market.
Measures falling within the scope of Article 87(1) of the EC Treaty that do not constitute existing
aid are generally incompatible with the common market unless they fall within the scope of the
derogation of either Article 87(2) or Article 87(3) of the EC Treaty.

1. State aid

(32) According to the information received, the measure under § 227 SGB III, i.e. measure No 1(a)(i) in
Table 3, appears to constitute a general measure. In any case, even if considered to be aid, it would
not affect the outcome of this Decision and therefore need not be further assessed here. According
to the information received, only DEM 497 000 (see measure No 3(a) in Table 3) of the BvS grant
that
of DEM 6,1 million were used for
Schmitz-Gotha would have been obliged to take over. The remaining amount of DEM 5,6 million
was used in conjunction with the winding-up of Gotha-old and therefore need not be assessed for
the purposes of this Decision.

in relation to workers

redundancy allowances

(33) All leading companies in the motor vehicle construction sector were contacted in the 1997 sales
procedure, of which eight showed interest and two finally participated in the tender. Furthermore,
the liquidation value as established by the Forensika report concerned only parts of the assets
which were not identical to those sold to Schmitz-Gotha and also did not include additional
financial burdens which would have occurred immediately in conjunction with the sale. As a result
of the additional information submitted by Germany on the sales procedure in 1997, the initial
doubts whether the sale included an aid element have been allayed.

(34) Article 87(1) of the EC Treaty applies to all the other financial measures made available by
Germany to the recipient undertaking. The Commission notes that the BvS is a federal body whose
task, like that of its predecessor the Treuhandanstalt, is to privatise State-owned operations in eastern
Germany. The BvS is part of the federal administration and accountable to it. Consequently,
measures taken by the BvS must be regarded as State measures. The Commission also notes that
the KfW, Germany’s development bank, is a body governed by public law for which the federal
government provides a 100 % liability guarantee. For these reasons, the measures taken by the KfW
are also attributable to the State.

(35) All these measures involve conferring on a specific undertaking economic benefits which it would
not have received from commercial sources. The measures therefore constitute State aid which is
liable to distort competition. Given the nature of
the assistance and the existence of
intra-Community trade in the sector in which the recipient undertaking was active, the financial
measures fall within the scope of Article 87(1) of the EC Treaty.

(36) With respect to measure No 1(a)(ii)

in Table 3, the Commission notes that, according to the
information submitted, this measure complies with the notice on de minimis aid (13) since within
the relevant three-year period it did not exceed the amount of EUR 100 000. It does not therefore
need to be assessed for the purposes of this Decision. Even so, the assessment of this case would
not be any different if this measure were taken into account.

(37) With respect to the aid granted under approved schemes, it can be noted that, in view of the
additional information provided by Germany concerning measures No 1(b) and No 2(a) in Table 3,
the Commission’s doubts concerning the correct application of the schemes have been allayed.
Additionally, in view of the information provided with respect to the investment subsidy of DEM
362 000 (measure No 2(b) in Table 3), which was first mentioned after the initiation of the formal
investigation procedure, it can be noted that, in the light of the available information, the subsidy

(13) See footnote 7. See also Commission Regulation (EC) No 69/2001 of 12 January 2001 on the application of

Articles 87 and 88 of the EC Treaty to de minimis aid (OJ L 10, 13.1.2001, p. 30).

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complies with the conditions of the scheme referred to. Therefore, the aforementioned measures do
not need to be further assessed for the purposes of this Decision.

(38)

The measures amounting to DEM 4,087 million referred to under No 3 in Table 3 were not
granted in accordance with an aid scheme approved by the Commission and therefore have to be
considered to be ad hoc aid in this Decision.

(39)

In particular with respect to measure No 3(c) in Table 3, the loan of DEM 2,35 million, it has to be
noted that the loan was refinanced by the KfW at a reduced interest rate and consequently contains
an interest-rate subsidy. As explained below, at the time it was granted, Schmitz-Gotha had to be
considered to be a firm in difficulty. Consequently, an increased reference interest rate must be
applied here to take account of the aid element involved in this interest-rate subsidy financed with
public money. According to the notice on the method for setting the reference and discount rates,
a premium of 4 % or more may be added for such situations involving a particular risk. Since
Schmitz-Gotha would not have obtained this loan on the same terms without the re-financing
provided by the KfW, the Commission is applying here a reference interest rate increased by the
to establish the aid element contained in this loan.
minimum premium of 4 %,
Therefore the investment subsidy contained in this loan is represented by the annual premium of
5,69 %, i.e. DEM 131 000 a year, and has to be regarded as aid.

i.e. 9,94 %,

(40)

The Commission further notes that Germany failed to comply with its obligation under Article
88(3) of the EC Treaty. The aid is therefore unlawful. This does not necessarily mean, however, that
the aid is incompatible with the common market. As a consequence, the individual measures must
be examined under Article 87 of the EC Treaty.

2. Derogations under Article 87 of the EC Treaty

(41)

The purpose of the aid was to enable the restructuring of the beneficiary. Since none of the other
derogations mentioned in Article 87(2) and (3) is applicable, Article 87(3)(c) applies.

(42)

its discretion under Article 87(3)(c) of

In its guidelines on rescue and restructuring aid, the Commission set out in detail the preconditions
for exercise of
the EC Treaty. Since the information
submitted by Germany under the formal
investigation procedure showed that all the aid was
granted to the recipient before publication of the 1999 guidelines, pursuant to recital 101 of those
guidelines, the 1994 guidelines on State aid for rescuing and restructuring firms in difficulty are
applicable (14).

(43) A precondition for the eligibility of restructuring aid under the guidelines is that the aid recipient
must be a firm in difficulty. Under section 2.1 of the guidelines, the typical symptoms of a firm in
difficulty include deteriorating profitability or increasing size of
losses, diminishing turnover,
declining cash flow and low net asset value.

(44)

The Commission notes that Gotha-old was previously making continual
losses which it proved
possible to cover only in the first year following privatisation, partly through the public takeover of
losses. Consequently, Gotha-old could clearly be regarded as a firm in difficulty. The aid was
granted to the firm after the 1997 takeover. It must be noted that the activity taken over by
Schmitz-Gotha involved difficulties such as the inability to carry out serial production and excess
technical and workforce capacities, leading to excessive fixed costs. It may be assumed that the

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

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structural difficulties of Gotha-old were also taken over by the new investors. Additional costs were
infrastructure. The restructuring plan originally
also generated by the necessary separation of
submitted in 1998 anticipated continuing losses for the first three years, despite the granting of aid.
Consequently, the Commission assumes that, even after the takeover, the company had to be
regarded as a firm in difficulty.

(45)

In the decision to initiate the formal investigation procedure, the Commission expressed doubts
whether the conditions laid down in the guidelines were met.

(a) Restoration of viability

(46)

In the initiation of proceedings, it was noted that the measures under the restructuring plan seemed
generally suitable to restore the long-term viability of the company. However, it was also noted that
the potential obligation under the restructuring to repay old aid to the amount of DEM 7,1 million
threatened the achievement of the goals of the plan.

(47) During the formal

investigation procedure, Germany informed the Commission that

the (cid:145)old(cid:146)
liabilities meanwhile had been paid back by Gotha-old. The initial doubts concerning the
restoration of viability were therefore allayed. This seems to be confirmed by the economic
performance of the firm, which in 1999 exceeded its planned operating result of DEM 5 million by
DEM ((cid:133))* million, achieving an operating profit of DEM ((cid:133))* million.

(b) Avoidance of distortions of competition

(48)

information provided, however,

The Commission notes that the market in which Schmitz-Gotha operates is marked by cyclical
fluctuations, so that it is difficult to determine the precise situation regarding capacities. In view of
it appears that no excess capacities exist. The
the additional
Commission also notes that, according to the information provided by Germany,
technical
capacities were not increased. It is also noted that, in order to restore profitability, it was necessary
to increase once again the workforce capacity which had initially been very drastically reduced and
that, nevertheless,
increased in comparison with Gotha-old.
Consequently, the initial doubts concerning a distortion of competition have been allayed.

the workforce capacity has not

(c) Proportionality to the restructuring costs and benefits

(49)

The 1994 guidelines state that aid beneficiaries will normally be expected to make a significant
contribution to the restructuring plan from their own resources, or from external commercial
financing. The latter is to be understood as financing in accordance with market conditions.

(50) According to the latest information, the restructuring costs amount to DEM 27,328 million. As

explained, most of the costs incurred are investment in the firm’s fixed assets.

(51)

The latest information submitted indicates that
sources:

these costs were financed from the following

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Financing of the restructuring costs as indicated after the initiation of proceedings

TABLE 4

Source

Public sources

Measure

Measures 1 to 3 in Table 3 (excluding measures
under No 1(a)

Private sources

4 Investor

Shareholder loan

5 Vereinsbank

Credit (not used)

6 Vereinsbank

Credit line

7 Vereinsbank

Loan (measure No 7 in Table 2) reduced by the
interest subsidy (measure No 3(c) in Table 3)

8 Beneficiary

Surplus/cashflow

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

Subtotal
(excluding No 5)

Total
(excluding No 5)

(in DEM)

6 636 000

3 000 000

2 650 000

1 000 000

1 960 000

14 732 000

20 692 000

27 328 000

(52) Germany takes the view that this contains contributions from the beneficiary’s own resources or

from external commercial financing amounting to DEM 20 692 000.

(53)

In the light of the information available to the Commission, the following must be noted.

(54) Measure No 4 in Table 4, the provision of own capital to the amount of DEM 3 million, can be

considered to be a contribution by the beneficiary.

(55)

(56)

The loan of DEM 1 million (measure No 6 in Table 4) was granted by a private bank and is
exclusively secured by collateral provided by the beneficiary without public participation. It can
therefore be considered to be a contribution by the beneficiary.

The Vereinsbank loan amounting to DEM 2,35 million (measure No 7 in Table 2) was refinanced
by the KfW and therefore contains aid in the form of an interest subsidy. Therefore,
the
contribution cannot in principle be considered to have been provided under market conditions.
However, in accordance with the Commission’s practice in previous cases, the amount remaining
after the deduction of that interest subsidy can be considered to be a contribution made by the
beneficiary as long as no other aid elements are contained in it. Since the loan was exclusively
secured by collateral provided by the beneficiary without further public participation, the amount
of DEM 1,96 million (measure No 7 in Table 4) can be considered to be a contribution from the
beneficiary.

(57)

In relation to the surplus of DEM 14,732 million (measure No 8 in Table 4), it has to be noted that
cashflow generally cannot be considered to be a contribution from the beneficiary since it is
directly or indirectly generated through granted aid measures and its exact amount cannot be
determined at the time the restructuring plan is set up. Therefore,
in principle measure No 8
cannot be taken into account. This also applies to the amount of DEM 650 000 which Germany
claims was not used from the investment grant (measure No 2 in Table 3), since this measure in

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any case would have had to be regarded as aid. Since Germany states that a loan already granted by
the Vereinsbank to the amount of DEM 2,65 million (measure No 5 in Table 4) was not used due
to the generated surplus, it appears questionable whether this amount can be considered to be a
contribution from the beneficiary to the restructuring. However, this does not affect the outcome of
the proportionality assessment.

(58)

It must therefore be concluded that, contrary to the view taken by Germany, the contribution by
the beneficiary from its own or external commercial sources amounts to only DEM 5,96 million.

(59) On the other hand, a considerable proportion of the restructuring costs has been financed by
contributions that can be regarded neither as contributions from the recipient nor as aid, since they
are part of the capital surplus to be achieved by the company. Because of this fact in particular, the
proportion of the contribution which the aid recipient is to be recognised as making to the overall
costs of the restructuring is small. However, it must also be noted that the amount is close to the
amount of DEM 6,6 million financed by aid and that, in previous cases involving the new German
L(cid:228)nder, the Commission has sometimes accepted fairly small contributions from the recipient.
Consequently, the initial doubts as to whether the recipient had made a significant contribution
from its own resources to the restructuring can be considered to have been allayed.

(60) When the proceedings were initiated, doubts were also expressed as to whether the aid, as
stipulated in the 1994 guidelines, would be limited to the strict minimum. Under
the
proportionality criterion, the aid must be limited to the strict minimum needed so as to limit the
distortive effect. This also means that the aid must not enable the recipient
to finance new
investment not required for the restructuring.

(61) At the start of the restructuring in October 1997, Schmitz-Gotha acquired the subcontractor ((cid:133))*
for DEM 3,7 million. DEM 2,2 million of the purchase price was paid right away during the first
half-year of the restructuring. The remaining DEM 1,5 million, however, was paid in four further
annual instalments that were tied to the achievement of a specific level of turnover by ((cid:133))*. The
takeover of ((cid:133))* must be regarded as (cid:145)new investment(cid:146) which, under the 1994 guidelines,
is
justified only if it is to be regarded as being required for the restructuring.

(62)

(63)

information provided orally,

In this context, it must be noted that the investors acquired the fixed assets for DEM 1. Mr Koch
was one of the investors and at the same time the founder and managing partner of ((cid:133))* and the
future manager of both firms. The Commission would point out once again that, despite the
information injunction, neither the purchase contract nor detailed written information on the
original ownership structure of ((cid:133))* were provided by Germany. Consequently,
in the light of
other circumstances and of
the Commission cannot exclude the
possibility that, prior to the takeover, a substantial part of ((cid:133))* was directly or indirectly owned by
Mr Koch or his family. Germany has stated that Schmitz-Gotha could not itself manufacture the
parts obtained from ((cid:133))* and was not in a position to appreciably improve the terms of delivery,
and that consequently the main purpose of
the takeover was to cut production costs. The
Commission cannot exclude the possibility that, through the takeover of ((cid:133))*, a substantial amount
that should have been used to finance the restructuring was in fact paid to one of the new
investors. At any rate, the takeover of ((cid:133))* was not necessary in order to ensure good cooperation
with ((cid:133))*. Since Mr Koch was the founder and managing partner of ((cid:133))* and subsequently also
became the manager of Schmitz-Gotha, it appears improbable that better purchase terms could not
have been agreed with ((cid:133))*. Furthermore, a competitive firm should in principal be able to finance
its subcontracting requirements at market prices without thereby getting into financial difficulties.

The information supplied by Germany shows that the takeover of ((cid:133))* was a useful investment for
the company, since it resulted in substantial savings which helped to shorten the restructuring
period by a year. However, this does not necessarily mean that the investment was required in
order to carry out the restructuring. If a company receives aid for the purposes of financing its
restructuring, in principle not every investment which increases its efficiency is permissible, since
such investment also inevitably simultaneously reduces the aid recipient’s ability to finance the
restructuring from its own resources. Only if, without
the
restructuring as a whole would be jeopardised or unreasonably delayed can an investment be

the investment,

the success of

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regarded as being required for the restructuring, since the purpose of the aid is restricted to
restoring the viability of the firm within a reasonable timescale. Any investment which goes beyond
what is required for restoring viability within a reasonable time scale inevitably uses up financial
resources which should have been used for the restructuring costs actually required and which
would thus have reduced the amount of aid required for the restructuring.
follows that
investment not thus required for the restructuring results in an aid intensity that goes beyond the
necessary minimum which, according to the proportionality criterion,
the
restructuring.

required for

is

It

(64)

(65)

((cid:133))*,

the success of

The cutting of supply costs cannot on its own justify the need to carry out the acquisition for the
purposes of the restructuring. Furthermore, Germany has never claimed that, without the takeover
of
the restructuring would have been jeopardised or delayed to an
unreasonable extent. Even without taking account of the takeover of ((cid:133))*, the original plan foresaw
the achievement of a positive business result by the end of the fourth business year. According to
the most recent information, this period was shortened by one year as a result of the takeover.
However, a period of four years in order to achieve the profitability threshold cannot be regarded
as an unreasonable period for the purposes of restructuring. On the contrary, the original plan
provided for the fairly rapid restoration of viability. It must therefore be noted that, even without
the takeover of
the restructuring could have been carried out successfully within an
appropriate period and the acquisition was not therefore necessary in order for the restructuring to
be successful. Consequently, the Commission finds that the acquisition of ((cid:133))* was not essential to
achieving the objectives of the plan. It follows from this that the resources used for the acquisition
should have been used elsewhere for the financing of the restructuring so as to reduce the amount
of aid required for the restructuring.

((cid:133))*,

The purchase price of DEM 3,7 million is part of the investment of DEM 23,8 million anticipated
for the restructuring of DEM 27,3 million. The fact that the takeover occurred at the very outset of
the restructuring and that DEM 2,2 million was paid already in the first half year of
the
restructuring shows that, even at this stage, the firm already had surplus liquidity of at least DEM
2,2 million with which it was able to undertake the investment that was not necessary for the
restructuring. The remaining amount of DEM 1,5 million was only paid in four subsequent annual
instalments of DEM 375 000. Although these instalments were also actually paid, it must be noted
that they were payable only in so far as ((cid:133))* achieved an annual result before tax of DEM
500 000. Even if, at the time of the acquisition, ((cid:133))* was seen to be a profitable undertaking and
subsequently also achieved the anticipated results, the Commission notes that, at the time of the
acquisition, it was not yet certain whether the firm would actually be able to achieve the desired
results. Consequently, the view may be taken that, for the same reasons as those for which capital
reserves that are to be generated cannot be assessed as contributions from the recipient to the
restructuring, the surpluses with which the acquisition was financed were not guaranteed to the
amount of DEM 1,5 million and thus did not form part of the surplus liquidity of the firm.

(66)

The Commission therefore concludes that aid amounting to DEM 2,2 million was granted in excess
of the strict minimum needed for the restructuring within the meaning of the guidelines. The
Commission accordingly considers an aid amount of DEM 2,2 million to be incompatible with the
common market pursuant to Article 87(1) of the EC Treaty.

V. CONCLUSIONS

(67)

The Commission concludes that,
the aid to
Schmitz-Gotha was not limited to the strict minimum needed for the restructuring and therefore
does not comply with the criteria set out in the 1994 guidelines.

in respect of an amount of DEM 2,2 million,

(68) Germany has unlawfully granted the aid in question in breach of Article 88(3) of the EC Treaty.
Aid amounting to DEM 2,2 million is incompatible with the common market, since it does not
fulfil the conditions set out in the 1994 guidelines,

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HAS ADOPTED THIS DECISION:

Article 1

An amount of EUR 1,12 million of the aid which Germany has granted to Schmitz-Gotha Fahrzeugwerke
GmbH is incompatible with the common market.

Article 2

Germany shall take all necessary measures to recover from the beneficiary the aid referred to in Article 1
and unlawfully made available to the beneficiary.

Recovery shall be effected without delay and in accordance with the procedures of German law, provided
that they allow the immediate and effective execution of this Decision. The aid to be recovered shall
include interest from the date on which it was at the disposal of the beneficiary until the date of its
recovery.
the reference rate used for calculating the
grant-equivalent of regional aid.

Interest shall be calculated on the basis of

Germany shall
measures taken to comply with it.

inform the Commission, within two months of notification of this Decision, of the

Article 3

This Decision is addressed to the Federal Republic of Germany.

Article 4

Done at Brussels, 30 October 2002.

For the Commission

Mario MONTI

Member of the Commission