2004/244/EC: Commission Decision of 11 June 2003 on the State aid implemented by Spain for Volkswagen Navarra SA (Text with EEA relevance) (notified under document number C(2003) 1745)
Date: 2003-06-11
Institutions: European Commission
Subjects: Spain, State aid, control of State aid, motor vehicle industry

L 77/54

EN

Official Journal of the European Union

13.3.2004

II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 11 June 2003

on the State aid implemented by Spain for Volkswagen Navarra SA

(notified under document number C(2003) 1745)

(Only the Spanish text is authentic)

(Text with EEA relevance)

(2004/244/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

(3)

Having regard to the Treaty establishing the European Com-
munity, and in particular the first subparagraph of Article
88(2) thereof,

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

Having called on interested parties to submit their comments
pursuant to the provisions cited above (1),

(4)

Whereas:

I. PROCEDURE

(1)

(2)

By letter dated 2 February 2001, the Spanish authorities
notified a plan to grant regional aid to Volkswagen
Navarra SA (hereinafter referred to as ‘VW Navarra’). The
Commission requested further information on 2 April
2001. After requesting an extension of the deadline for
reply on 10 April and on 29 May 2001, the Spanish
authorities submitted additional
information by letter
dated 31 August 2001.

The Commission requested on site visits to the chosen
site of Arazuri (near Pamplona, in the Navarre region),
and the alternative site of Bratislava. The Spanish autho-
rities proposed no date for the visit to the Bratislava site.
A visit to the Arazuri site agreed for 8 November 2001
was cancelled by the Spanish authorities by letter dated
5 November 2001. The Commission addressed new
questions to Spain by letter dated 8 November 2001, to
which Spain responded on 11 December 2001.

(5)

(6)

By letter dated 19 December 2001, the Commission
in
requested anew for an on-site visit
Arazuri, and the Spanish authorities agreed to the date
of 31 January 2002, by e-mail of 17 January 2002.
After the visit, a further request for information was sent
on 13 February 2002, to which Spain responded on 20
March 2002.

to the plant

The Commission decided on 22 May 2002 to initiate
proceedings pursuant to Article 88(2) of the Treaty, deci-
sion to open the formal investigation procedure, as it
found that doubts were raised as to the compatibility of
the aid with the common market. Spain submitted its
comments to the opening of proceedings on 26 June
2002.

The Commission decision to initiate the procedure was
published in the Official Journal of the European Commu-
nities (2), with an invitation to interested parties
to
submit their comments on the aid. The Commission did
not receive any comments from interested parties.

An on-site visit to the Bratislava plant took place on 11
October 2002, after which the Commission addressed a
new request of information to Spain on 22 October.
After requesting an extension of the deadline for reply
on 13 December 2002,
Spanish authorities
information by letter dated 20
submitted additional
December 2002. On 13 March 2003, the Commission
requested further information,
that was provided by
Spain with a letter dated 31 March 2003.

the

(1) OJ C 161, 5.7.2002, p. 9.

(2) See footnote 1.

13.3.2004

EN

Official Journal of the European Union

L 77/55

II. DETAILED DESCRIPTION OF THE AID

(12)

to
The planned aid in nominal values
EUR 72 200 000 gross grant equivalent (gge), with an
actual value of EUR 61 850 000. Therefore,
the aid
intensity would be 18,45 % gge. Arazuri (Navarra) is in a
87(3)(c) area with a regional ceiling of 20 % net grant
equivalent (nge) for the period 2000 to 2006.

amounts

(13) No other Community aid or financing has been allocated

to the project.

VW Navarra is a Spanish subsidiary of the German auto-
motive group Volkswagen AG (hereinafter referred to as
‘VW group’). The notified project concerns production
of the latest generation of the VW Polo model, code-
named VW 24X. The overall project started in May
2000 and will terminate in December 2004. Investments
include a new press shop to manufacture sides, roofs
and wings of the new car, a second body work produc-
tion line, a new paint shop, and a second assembly line.

(7)

(8)

According to the notified project, production of the new
model would amount to 1 800 cars/day. Of this, 1 000
cars/day were initially destined for production in Arazuri
(Navarra) and 300 cars/day at a Volkswagen plant in
Bratislava (Slovakia). The remaining 500 cars/day, for
which new lines would have to be built, constitute,
according to Spain, the mobile project, for which the
alternative sites of Arazuri and Bratislava have been
considered. A study conducted by VW in February 2000
showed that Bratislava was a more attractive site than
Arazuri for the project. According to the notification,
the possibility of obtaining State aid to partially compen-
sate for the higher costs led VW to the decision of
favouring Arazuri for the location of the mobile 500
cars/day. The allocation of the project to Arazuri allows
the Spanish plant to maintain its capacity constant at
1 500 cars/day after the model changeover.

(14)

(15)

(9)

Production in Arazuri of the new Polo on the first new
(not mobile project) production line for 750 cars/day
started in July 2001. The existing Polo was produced on
the old line until September 2001. The old line was then
dismantled to make space for the construction of the
new second line for 750 cars/day (of which 500 of the
mobile project), in production since the end of 2001.

Legal basis; investment and aid amounts

(16)

(10)

The notified aid is granted under the approved schemes
provided for by Law: Decreto Foral 361/2000 ‘Nuevo
régimen de ayudas a la Inversión y el Empleo’ of
20.11.2000 (3).

III. GROUNDS FOR INITIATING THE PROCEDURE

In its decision of 22 May 2002 to initiate proceedings (4),
the Commission expressed doubts on the necessity and
proportionality of the proposed aid. In order to allay
these doubts, the Commission asked for additional clari-
fications and documents, as well as for the possibility to
visit the Bratislava plant.

the aid,

location for

the project. Firstly,

Regarding the necessity of
the Commission
doubted that Bratislava had been considered as a viable
the
for
alternative to Arazuri
Commission found that the information provided did
not prove that Bratislava was actively pursued as an
alternative
the mobile 500 cars/day.
Secondly, the Commission doubted that the mobile 500
cars/day could have been allocated to Bratislava in the
period immediately before November 2000 (when the
VW group officially chose Arazuri
for the project).
Indeed,
the Bratislava site had already in September
1999 been chosen by VW for another project (produc-
tion of the SUV ‘Tuareg’ model).

tooling’ had been considered mobile;

Regarding the proportionality of the aid, the Commis-
sion expressed doubts on: (a) whether investment into
‘supplier
(b)
whether all of the EUR […] (*) investment in the pre-
that was considered
treatment
mobile by Spain could be taken into account for the
establishment of the ‘eligible costs’ basis and for the
calculation of the regional handicap; and (c) whether
redundancy
in Arazuri had been properly
accounted for in the cost benefit analysis.

installation in Arazuri

costs

(11) According to the notification, total investment for the
to
mobile
EUR 368 500 000
to
EUR 335 300 000 in actualised values (base year 2001,
discount rate 6,33 %).

Arazuri will
nominal

amount
equal

project

terms,

in

in

(17)

Finally, the Commission expressed the need to verify the
notified capacity figures, in order to assess the impact of
the project on the capacity problems facing the motor
vehicle industry.

(3) The project of the scheme was approved by the Commission on 3
May 2000, case number N 141/2000, OJ C 284, 7.10.2000, p. 4.

(4) See footnote 1.
(*) Confidential information.

L 77/56

EN

Official Journal of the European Union

13.3.2004

IV. COMMENTS FROM SPAIN

(25)

(18) On 26 June 2002, the Spanish authorities sent their
comments to the opening of proceedings. Further infor-
mation and documents where provided to the Commis-
sion during the visit
to the Bratislava plant on 11
October 2002 and with the letter dated 13 December
2002. The Commission has taken the comments and
information into account.

(19)

Regarding the viability of Bratislava as an alternative
plant, the Spanish authorities have submitted evidence
the decision-making
detailing the various
steps of
process that
for the
project.

lead to the choice of Arazuri

(20) On the timing of the decision to locate the project in
Arazuri, the Spanish authorities affirmed that the project
to build the mobile 500 Polo/day in Bratislava was not
incompatible with the project to build the SUV ‘Tuareg’
model at
the
increase in Polo production in Bratislava would have
been accommodated within the plant by building the
production lines for the Tuareg to a piece of land next
to the existing plant perimeter.

the same plant. According to Spain,

(21)

(22)

Spain maintained that, although the land in question
was not property of Volkswagen at the end of 2000, it
could have been easily purchased. The land was already
destined for industrial use, and Volkswagen could have
made recourse to the Slovak law N. 175/99 on large
foresees swift and effective
investment projects,
industrial
procedures for
projects.

land acquisition for major

that

the
Spain provided information documenting that
Tuareg and Polo projects could have been carried out at
the same time, and that the Tuareg model could have
been completed in the programmed time-frame (July
2002), and with acceptable additional costs. Spain esti-
mated that carrying out the Tuareg project outside the
plant's current perimeter would have involved additional
costs of EUR […] million, mostly for the acquisition of
the land and for basic infrastructure. All other costs
(buildings, machinery) were independent of the exact
location within the Bratislava site. However, Spain did
not insert these extra costs in the cost benefit analysis, as
they do not relate directly to the decision on the location
of the mobile 500 Polo/day.

(23)

The Spanish authorities also provided additional infor-
mation on the doubts expressed by the Commission in
the opening of procedure for what regards the propor-
tionality of the aid.

shop,

facilities

in the Arazuri paint

Secondly, regarding the investments in the new pre-
treatment
the
Spanish authorities argued that the VW group never
considered the possibility to construct a pre-treatment
hall for 1 000 cars/day, and therefore it was not possible
to provide figures for this investment. The VW group
was faced with the following two alternatives: (a) adapt
the existing line for 1 000 cars/day (cost of EUR […])
and construct a new additional
line for 500 cars/day
(cost of EUR […]), giving rise to two distinct pre-treat-
ment processes; (b) construct a new pre-treatment line
for 1 500 cars/day (cost EUR […]) with one single pre-
treatment process.

(26)

(27)

(28)

The VW group chose the latter option, because it makes
it possible to operate one single process, using a single
technology and standardised quality, and because it
requires fewer resources for maintenance. These advan-
tages compensate in the long run for the greater invest-
ment cost.

The Spanish authorities conclude that the mobile invest-
ment to be accounted for in the CBA should be of EUR
[…]. This figure is equal to EUR […] for new pre-treat-
ment line for 1 500 cars/day minus EUR […] for the
transformation of the existing line for 1 000 cars/day
that would have been necessary in the event of the
project being carried out
in Bratislava. The Spanish
authorities affirm that this is in line with the method
applied throughout the CBA, that consists in calculating
the investment required to manufacture 1 000 cars and
then 1 500 cars, and taking the difference as the mobile
investment volume.

Secondly, the Spanish authorities provided a detailed
breakdown of the redundancy costs for the […] workers
that would have lost their job, had the alternative loca-
tion been chosen. The figure of total costs of EUR […]
million has been computed according to Article 51 of
Statute of Workers Rights (Estatuto de los Trabajadores),
that sets the indemnity in the event of collective lay-offs
at 20 calendar days per year worked. Redundancy costs
have been calculated for the workers with less seniority
in the company, that were hired in 1998. The Spanish
government also affirmed that VW Navarra does not
have a redundancy plan, but a voluntary early retirement
plan, that cannot be considered as reflecting the normal
practice as regards major workforce lay-offs.

(24)

Firstly, the Spanish authorities clarified that no invest-
ment into ‘supplier tooling’ was considered ‘mobile’ in
the CBA.

(29)

Finally, the Spanish authorities confirmed that, according
to the latest annual planning round (in 2002 for the
2003 to 2007 period) no capacity increases are foreseen
at the level of the VW group in Europe until 2004.

13.3.2004

EN

Official Journal of the European Union

L 77/57

V. ASSESSMENT OF THE AID

(30)

The measure notified by Spain in favour of VW Navarra
constitutes State aid within the meaning of Article 87(1)
of the Treaty.
It would be financed by the State or
through State resources. Furthermore, as it constitutes a
significant proportion of the funding of the project, the
aid is liable to distort competition in the Community by
giving VW Navarra an advantage over competitors not
receiving aid. Lastly, there is extensive trade between
Member States in the automobile market.

(31) Article 87(2) of the Treaty lists certain types of aid that
are compatible with the Treaty. In view of the nature
and purpose of the aid, and the geographical location of
the firm, subparagraphs (a), (b) and (c) are not applicable
to the plan in question. Article 87(3) specifies other
forms of aid, which may be regarded as compatible with
the common market. The Commission notes than the
is located in Arazuri, Navarre region, which
project
qualifies for assistance under Article 87(3)(c) with a
regional aid ceiling of 20 % net grant equivalent.

(36) According to point 3.2.(a) of

the car framework,

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

that

(37)

The Commission has, with the help of its external auto-
motive expert, assessed the documentation and informa-
tion provided by Spain, with the view to establish
whether the project is mobile.

(32)

(33)

The aid in question is intended for VW Navarra, which
manufactures and assembles motor vehicles. The firm is
therefore part of the motor vehicle industry within the
meaning of the Community framework on State aid to
the motor vehicle industry (5) (hereinafter ‘the car frame-
work’).

(38)

The car framework specifies that all aid which the public
authorities plan to grant to an individual project under
authorised aid schemes for a firm operating in the
motor vehicle industry must, in accordance with Article
88(3) of the Treaty, be notified before being granted if
either of the following thresholds is reached:
(i) total
cost of the project equalling EUR 50 million, (ii) total
gross aid for the project, whether State aid or aid from
Community instruments equalling EUR 5 million.

Regarding the question whether Bratislava was a viable
alternative for the project, the Commission is satisfied
with the evidence provided by the Spanish authorities.
the VW
The documents provided demonstrate that
group set an initial target for 1998 of […] cars/day for
the new Polo model, that were to be built at the Arazuri,
Bratislava, and Martorell (Spain) plants. Plans to build
the car in Martorell were subsequently dropped, and the
initial forecasts were lowered in June 1999 to […] cars/
day, of which […] cars/day in Arazuri and the rest in
Bratislava. At
the VW group held
contacts with the government of Navarre regarding
possible State aid to secure the investment in Arazuri. In
this phase, the VW group studied the technical feasibility
and the necessary investment under the various hypoth-
eses for the two sites. The formal decision to build
1 500 cars/day in Arazuri, and 300 cars/day in Bratislava
was finally taken by the VW group in November 2000,
after having received assurance from the government of
Navarre regarding the possibility to aid the project.

the same time,

(34)

Both the total cost of the project and the amount of aid
exceed the notification thresholds. Thus,
in notifying
both the training aid and the regional aid proposed for
VW Navarra, the Spanish authorities have complied with
the requirements of Article 88(3) of the Treaty.

(35) According to the car framework, the Commission shall
ensure that the aid granted is both necessary for the
realisation of the project and proportional to the gravity
of the problems it intends to solve. Both tests, necessity
and proportionality, must be satisfied if the Commission
is to authorise State aid in the motor vehicle industry.

(5) OJ C 279, 15.9.1997, p. 1.

(39)

Regarding the possibility of carrying out the Polo project
in Bratislava at the same time as the Tuareg project
already earmarked for the Slovak site, the documentary
evidence provided by the Spanish authorities and the
on-site visit to the plant, demonstrate that such possibi-
lity effectively existed. Indeed, there was sufficient land
readily available for an expansion to accommodate the
Tuareg project in the immediate proximity of the plant,
and no specific technical obstacles would have hindered
its implementation.

L 77/58

EN

Official Journal of the European Union

13.3.2004

(40) However, the Commission considers that the extra costs
related to the implementation of
the Tuareg project
outside the current plant perimeter, that Spain quantified
in EUR […] million, are to be considered as an addi-
tional cost to the alternative of locating the mobile 500
Polo/day in Bratislava. Indeed, these costs would have
been incurred as a direct consequence of the decision
not to carry out the project in Arazuri, and did not arise
thanks to the eventual decision to locate the project in
Arazuri.

(46)

(41)

(42)

Based on the above information,
the Commission
concludes that Bratislava was effectively considered as a
viable alternative to Azambuja for the project under
consideration.

Regional aid intended for modernisation and rationalisa-
tion, which is generally not mobile, is not authorised in
the motor vehicle sector. However, an expansion or
transformation, involving a radical change in production
structures on the existing site could be eligible for
regional aid.

of the eligible costs. The Commission however cannot
agree with the estimation of the eligible costs for the
pre-treatment installation proposed by Spain.

installation,

The Commission considers that, for what concerns the
the Spanish authorities did
pre-treatment
not make the correct comparison between the invest-
ment volumes required to manufacture 1 000 cars/day
(with the mobile project to Bratislava) and 1 500 cars/
day (with the mobile project to Arazuri). In the former
case the investments accounted for are those for the
adaptation of an old installation for the non-mobile
1 000 cars/day. In the latter, the investments accounted
for are those for a brand new installation for the non-
mobile 1 000 cars/day, as well as for the mobile 500
car/day. Taking the difference between these two esti-
mates inflates the costs of
for 500
mobile cars/day, by attributing to them also costs that
are instead pertaining to the non-mobile 1 000 cars/day.

the investment

(43) During the on-site visit

to the Arazuri plant,

the
Commission, aided by an external automotive expert,
could establish that the investment project in question
concerns the transformation of an existing plant, on the
occasion of the complete renewal of a model. The press
shop and paint shop are completely new, and the level
of change in the bodywork and assembly lines, together
with the addition of a second bodywork production line
indicate that the project
and a second assembly line,
concerns a radical refurbishment of an existing site. The
Commission considers that the project in question could
be regarded as a transformation.

(44)

Based on the considerations above,
the Commission
concludes that the project is mobile in character and can
therefore be considered eligible for regional aid, since
the aid is necessary to attract the investment to the
assisted region.

(45) According to point 3.2.(b) of the car framework, the
Commission determines whether or not costs relating to
the mobile aspects of the project are eligible. Conse-
the project are not
quently, non-mobile aspects of
eligible for aid. Regarding this point, the Commission
firstly takes note that no investment in vendor tooling
was considered eligible for aid by Spain. Secondly, the
Commission notes that Spain claimed in its comments
to the opening of procedure that EUR […] (6) of the
investment in the pre-treatment hall of the Arazuri paint
shop should be considered mobile investment, and part

(6) That is, EUR […] for new pre-treatment line for 1 500 cars/day
minus EUR […] for the adaptation of the existing line for 1 000
cars/day. See recital 27.

(47)

In order to make a meaningful comparison, the Spanish
authorities should have instead calculated the cost of a
brand new pre-treatment installation for 1 000 cars/day,
the cost of a brand new pre-treatment installation for
1 500 cars/day, and calculated the difference between
the two.

(48) However, the Spanish authorities did not provide infor-
mation on the investment necessary for a brand new
pre-treatment installation for 1 000 cars/day, affirming
that the VW group never considered this an option. The
Commission finds that, even if the VW group did not
consider this option, the fact that the Spanish authorities
consider as mobile some costs that are in fact to be
attributed to non-mobile aspects of
is
unchanged. By constructing as new pre-treatment instal-
lation in Arazuri, VW Navarra will benefit from a state-
of-the-art facility, that will ensure higher quality stan-
lower maintenance costs, and will have a
dards, will
the old
longer productive life that an adaptation of
installation. These positive effects benefit
the
production of the new model, and not just the mobile
portion of this production.

the project

to all

(49)

For these reasons, the Commission concludes that only
the investments truly pertaining to the 500 mobile cars/
day can be considered as eligible costs. The Commission
has therefore to ascertain which portion of the EUR […]
investment in the pre-treatment installation pertains to
then be
the 500 mobile cars/day. This portion will
considered as part of the eligible costs.

13.3.2004

EN

Official Journal of the European Union

L 77/59

(50)

(51)

In their comments to the opening of procedure, the
Spanish authorities affirm that the cost of a new addi-
tional line for 500 cars/day would amount to EUR […].
However,
this figure
the Commission considers that
would overestimate the true cost of the mobile invest-
ment. Indeed, this figure implies that the cost for the
pre-treatment installation for the non-mobile 1 000 cars/
day amounted to EUR […], or 31 % of the costs for
66 % of
to
imputing all the fixed costs of the new pre-treatment
installation in Arazuri to the mobile part of the invest-
ment.

the cars produced. This

is equivalent

The Commission, with the aid of its automotive expert,
considers that, as the new pre-treatment installation will
benefit equally the mobile and the non-mobile portion
of the production, the investment costs should be in this
case divided proportionally between the two parts.
Consequently, the Commission considers that one third
of the investment costs in the pre-treatment facility in
in nominal amounts) can be
Arazuri
considered mobile. This corresponds to EUR […] in
actualised values, if the specific investment is carried out
with the same timing as the rest of the project.

(or EUR […]

(52)

The Commission therefore concludes that total eligible
costs for the project amount to EUR 299 335 000 in
actualised values.

(53) According to point 3.2.(c) of the car framework the
Commission needs to ensure that the planned aid is in
proportion to the regional problems it is intended to
resolve. For that, a cost benefit analysis (CBA) is used.

(54) A CBA compares, with regard to the mobile elements,
the investment and operating costs which an investor
would bear in order to carry out the project in the
region in question with those it would bear for an iden-
location. The comparison
tical project
allows the identification of the specific handicaps of the
assisted region concerned. The Commission authorises
regional aid within the limit of the regional handicaps
resulting from the investment in the comparator plant.

in a different

(55) Operating handicaps of Arazuri as compared to Brati-
slava are assessed over three years in the CBA since the
project in question is an expansion project, not a green-
field site. The time period covered by the submitted CBA
is 2002 to 2004, that is three years from the beginning
of production in compliance with point 3.3 of Annex I
to the car framework.

(56)

The CBA provided by the Spanish authorities indicates a
net cost handicap of EUR 61 020 000 for the location
in Arazuri in comparison with the location in Bratislava,
with a resulting ‘handicap intensity’ of 18,2 %.

(57)

(58)

(59)

(60)

The Commission has, with the help of its external auto-
motive expert, evaluated the notified CBA with a view to
ascertaining to what extent the proposed regional aid is
in proportion to the regional problems it seeks to solve.
Taking into account the additional information received
the
from Spain following the opening of procedure,
CBA was modified with respect
to some elements
detailed below.

the plant's

current perimeter.

Firstly, the Commission has inserted as an extra cost to
the Bratislava option the additional EUR […] that would
have been necessary to carry out the Tuareg project
outside
the
Commission considers that these costs relate directly to
the decision on the location of the mobile 500 Polo/day.
These costs did not materialise because the Polo project
was carried out in Arazuri and not in Bratislava. Conse-
quently, the VW group must have considered them as a
direct advantage of carrying out the project in Spain.

Indeed,

Secondly, the Commission excluded from the compar-
ison in the CBA the costs that do not pertain to mobile
aspects of the pre-treatment installation (i.e the costs
imputed to the non-mobile 1 000 cars/day). As detailed
above, this led to the reduction of the costs for the pre-
to
treatment
nominal EUR […]. If the specific investment is carried
out with the same timing as the rest of the project, this
corresponds to a decrease of the investment costs in
Arazuri of EUR […]
in actualised values, and to a
decrease of EUR […], also in actualised values, of the
handicap for Arazuri with respect to Bratislava (7).

installation from nominal EUR […]

Thirdly, as regards the redundancy costs, the Commis-
sion has assessed the additional information provided by
the Spanish authorities after the opening of procedure.
The new information details the rules for collective lay-
offs justified by economic, technical, organisational or
production causes in Spain, as well as the seniority
profile of the workers that would have been affected by
the decision to carry out the project in Bratislava. Based
on this information, the Commission considers that the
redundancy costs' estimate of EUR […] is acceptable.

(7) This figure results by taking the actualised value of the difference
between the eligible costs proposed by Spain (EUR […]) and the
eligible costs calculated by the Commission (EUR […]).

L 77/60

EN

Official Journal of the European Union

13.3.2004

(61)

(62)

(63)

The modifications introduced in the analysis produce
cost-benefit results that differ from those notified by
Spain. The modified CBA indicates a net cost handicap
for Arazuri of EUR 16 235 000 at 2001 values
(compared to initially notified EUR 61 020 000). The
is 5,42 %
resulting handicap ratio of
(compared to initially notified 18,20 %).

the project

Finally,
the car
in accordance with point 3.2.(d) of
framework the Commission considered the question of a
‘top-up’, which is an increase in the allowable aid inten-
sity intended as a further incentive to the investor to
invest in the region in question. The documentation
provided shows that the capacity at the level of VW
group in Europe is set to remain virtually constant in
the 2000 to 2004 period, with a decrease from
4 257 300 to 4 247 700 vehicles/year. According to the
car framework, the ‘regional handicap ratio’ resulting
from the CBA is therefore increased by one percentage
point (‘moderate’ impact on competition for an invest-
ment project in an 87(3)(c) region), resulting in a final
ratio of 6,42 %.

In such a case,

impact on competition (8).

The Commission notes however that a small increase in
the European capacity of the VW group at the end of
the project from the levels foreseen would lead to a
‘high’
the
‘regional handicap ratio’ resulting from the CBA would
be decreased by two percentage points, resulting in a
final ratio of 5,42 %. In view of the potential distortion
of competition resulting from an increase in capacity at
the group level, the Commission considers it necessary
that the Spanish authorities should monitor the evolu-
tion of the capacity situation of the VW group. The
motor vehicle framework foresees that the Commission
may require ex post monitoring and assessment of aid
granted, the amount of detail varying according to the
case and the potential distortion of competition. Accord-
ingly, the Commission requests the Spanish authorities
to send to it, by April 2005, a report on the outcome of
the monitoring regarding the capacity situation at the
level of VW group in Europe in December 2004.

(discount

rate 6,33 %). Therefore,

the project in question amount to EUR 299 335 000 in
2001 values
the
Commission finds that the regional aid that Spain plans
to grant for VW Navarra for the project in question is
compatible with the common market insofar as it does
not exceed EUR 19 228 000 gge (at 2001 values,
discount rate 6,33 %).

(65) Any additional State aid for the investment projects in
question is incompatible with the common market.

(66) Although the Commission does not have doubts on the
plausibility of the estimates provided, the Spanish autho-
rities are requested to send to the Commission by April
2005 a report indicating the European capacity at the
level of the VW group in December 2004. Should the
capacity situation deviate from the notified data, the
Commission reserves the right to reduce accordingly the
amount of compatible aid,

HAS ADOPTED THIS DECISION:

Article 1

the

for Volkswagen Navarra SA for

The regional investment aid which Spain has planned to imple-
ment
amount of
EUR 19 228 000 gross grant equivalent in actualised values,
base year 2001, discount rate 6,33 %, for the project relating to
is
the production of
compatible with the common market within the meaning of
Article 87 of the Treaty. This amount corresponds to an aid
intensity
of
the
EUR 299 335 000 in actualised values.

the new VW Polo model

6,42 % of

in Arazuri

investment

eligible

of

Article 2

Any State aid in addition to the aid amount referred to in
Article 1 that Spain plans to grant to Volkswagen Navarra SA
for the project under scrutiny shall be incompatible with the
common market.

VI. CONCLUSION

(64)

The Commission finds that the regional aid that Spain
plans to grant for VW Navarra for the project in ques-
tion is compatible with the common market insofar as it
does not exceed an aid intensity of 6,42 % of the eligible
costs. The Commission finds that the eligible costs for

(8) According to point 3.2.(d) of the car framework, the impact on
competition is high when the ratio between the capacity of the
group after and before the investment is higher or equal to 1,01. In
this case, the impact on competition would be high if VW's capacity
were, at the end of the project, of 4 299 873 vehicles/year or more.

Article 3

Spain shall inform the Commission, within two months of the
date of notification of this decision, of the measures it has
taken to comply with it.

Additionally, Spain will provide by April 2005 a report indi-
cating the European capacity at the level of the VW group in
December 2004.

13.3.2004

EN

Official Journal of the European Union

L 77/61

This Decision is addressed to the Kingdom of Spain.

Article 4

Done at Brussels, 11 June 2003.

For the Commission

Mario MONTI

Member of the Commission