2006/260/EC: Commission Decision of  19 January 2005  on the State aid which Italy is planning to implement for Società Consortile De Tomaso srl and UAZ Europa srl, both part of the De Tomaso group  (notified under document number C(2005) 40)   (Text with EEA relevance)
Date: 2005-01-19
Institutions: European Commission
Subjects: Italy, State aid, aid to undertakings, control of State aid, motor vehicle industry

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II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 19 January 2005

on the State aid which Italy is planning to implement for Società Consortile De Tomaso srl and
UAZ Europa srl, both part of the De Tomaso group

(notified under document number C(2005) 40)

(Only the Italian version is authentic)

(Text with EEA relevance)

(2006/260/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

(5)

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

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

Having called on interested parties to submit their comments
pursuant to those provisions (1),

Whereas:

(1)

(2)

(3)

(4)

I. PROCEDURE

By letter dated 18 December 2002 the Italian authorities
notified to the Commission a plan to grant regional aid
to Società Consortile De Tomaso srl and UAZ Europa srl.
information on
The Commission requested further
4 February 2003. After requesting extensions of
the
deadline for replying on 12 March and 22 April 2003,
the Italian authorities provided the information by letter
dated 26 May 2003.

By letter dated 24 July 2003, the Commission informed
Italy that it had decided to initiate the procedure laid
down in Article 88(2) of the EC Treaty in respect of
the aid.

The Commission decision to initiate the procedure was
published in the Official Journal of the European Union (2).
The Commission called on interested parties to submit
their comments.

The Commission received no comments from interested
parties.

Italy submitted its comments in response to the decision
opening proceedings on 13 October 2003. On 6
February 2004, the Commission requested clarifications
from Italy. On 17 February 2004 a meeting took place
between Commission officials, the Italian authorities and
representatives of the company. Italy sent further infor-
mation by letter dated 23 April 2004. On 30 April
2004,
for Production Activities
addressed a letter to the Commission asking for an
early decision on the case. The Commission replied to
this letter on 18 June 2004.

the Italian Minister

(6)

II. DETAILED DESCRIPTION OF THE AID

The planned aid would be granted to Società Consortile
De Tomaso srl and UAZ Europa srl, which form part of
the De Tomaso group (‘De Tomaso’). De Tomaso is
currently active in the production of a very limited
number of high performance sports cars. According to
Italy, De Tomaso qualifies as a small or medium-sized
enterprise under the definition given in Commission
Regulation (EC) No 70/2001 of 12 January 2001 on
the application of Articles 87 and 88 of the EC Treaty
to state aid to small and medium-sized enterprises (3)
(‘the SME Regulation’).

The project

(7)

De Tomaso plans to set up a new greenfield production
plant that when completed will have an installed capacity
for:

(1) OJ C 227, 23.9.2003, p. 2.
(2) See footnote 1.

(3) OJ L 10, 13.1.2001, p. 33. Regulation last amended by Regulation

(EC) No 364/2004 (OJ L 63, 28.2.2004, p. 22).

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(a)

final assembly of around 40 000 units/year of the
Simbir model, an off-road vehicle produced by the
Russian motor vehicle manufacturer UAZ;

values, calculated using 2003 as the base year and a
discount rate of 5,06 %). The aid intensity notified by
the Italian authorities is 75,22 % gge.

(b) production of
Vallelunga,
a
units/year of the Pantera, a luxury sports model.

around 8 000 units/year of
sedan model,
sports

the
and 300

is planned to start

the
The project
Commission authorises the state aid and completion is
scheduled for 2006. Motor vehicle production would
start in 2005.

soon as

as

(8)

(9)

The project would be carried out
in Cutro, Calabria.
Calabria is an Article 87(3)(a) area whose regional aid
ceiling is 50 % gross grant equivalent (*) (‘gge’) for the
period 2000-06.

for

According to the Italian authorities, the project is mobile
and De Tomaso is considering the alternative sites of
Timisoara (Romania) for the Simbir model and Modena
the Vallelunga and Pantera models. The
(Italy)
investment at Timisoara would be carried out on a
greenfield site, while the investment at Modena would
consist
in the expansion of an existing De Tomaso
plant that currently produces a very limited number of
the Guara model, a high performance sports car.

a

nominal

(10) According to the notification, De Tomaso intends to
invest
EUR 218 760 000
(EUR 206 912 337 in present values, calculated using
2003 as the base year and a discount rate of 5,06% (4).
The entire investment amount was considered eligible by
the Italian authorities.

amount

of

(11)

(12)

Legal basis and aid amounts

Tomaso

The notified aid was granted, subject to approval by the
Commission, in two phases to two companies belonging
to De Tomaso. A first direct grant was approved in April
2001 in favour of UAZ Europa srl,
for a nominal
amount of EUR 9 518 817. A second direct grant was
approved in August 2002 in favour of Società Consortile
De
of
a
EUR 168 490 000. The grants would be paid over the
period 2004-08. The aid would be granted under
schemes approved by the Commission (5) and provided
for by the Law on measures to promote production
activities in depressed areas (‘Law No 488/1992’) and
to rationalise public finances
the Law on measures
(‘Law No 662/1996’).

nominal

amount

srl,

for

Since the two grants relate to the same project,
the
Italian authorities notified them jointly. Total aid to De
a nominal
Tomaso would
present
in
EUR 178 008 817

to
(EUR 155 640 104

therefore

amount

(13) According to Italy, no other Community aid or financing

has been allocated to the project.

Grounds for initiating the procedure

(14)

In its decision of 23 July 2003 to initiate proceedings,
the Commission expressed doubts as to whether De
Tomaso qualified as an SME. It also expressed doubts
concerning a number of elements of the Cost Benefit
Analysis (CBA), and in particular:

(a)

the comparability of the projects in the chosen and
alternative locations;

(b) the comparison of investment costs in the CBA;

(c)

the comparison of operating costs in the CBA, with
special reference to labour and outward transport
costs.

III. COMMENTS FROM ITALY

(15) On 13 October 2003,

Italy sent

its comments

in
response to the decision opening proceedings. Further
supplied to the
information and documents were
Commission during the meeting that
took place on
17 February 2004 and with the letters of 23 and
30 April 2004.

(16)

Regarding the SME status of De Tomaso, Italy provided
detailed information on the ownership structure as well
as the financial statements for the enterprise Alejandro
S.A. and an extract of Mr De Tomaso’s last will.

(17) On the comparability of the projects in the chosen and
alternative locations, Italy affirmed first of all that the
projects compared identical productions,
in identical
numbers, for the same product mix and with identical
prices. The difference in the investments necessary in the
alternatives could be explained by considering the speci-
ficity of the chosen location, which was similar to the
northern part of Italy from the standpoint of labour costs
and social, safety and environmental
legislation, but
lacked a skilled workforce and a solid industrial tradition.

(*) Factual error: should read ‘net grant equivalent’.
(4) The rate of 5,06% is taken from the table ‘State Aid - Reference and
discount rates (in %) since 01.08.1997’
(see http://europa.eu.int/
comm/competition/state_aid/others/reference_rates.html) and corre-
sponds to the rate for 2002, which was the year of notification.
(5) Commission Decision of 12 July 2000 not to raise objections in

case N 715/99, published in OJ C 278, 30.9.2000, p. 26.

(18)

The situation in the alternative locations was, according
to Italy, very different: a highly skilled workforce was
available at Modena, as was a dense network of auto-
motive suppliers and producers. At Timisoara, skilled
labour was available at a fraction of the cost it would
command at Cutro. Timisoara also presented a logistic
advantage for the production of the Simbir model.

(19)

(20)

(21)

(22)

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the area.

the industrial development of

Italy reaffirmed the strategic value of the Cutro project
for
In this
context, the technological choices aimed at establishing
an advanced production facility that
incorporated the
most innovative techniques and equipment and allowed
De Tomaso to carry out in-house research and devel-
opment. The projects for the alternative sites opted, on
the contrary, for more traditional technological solutions.

(25) As far as outward transport costs were concerned, Italy
provided updated information and documentation on the
transport costs for the Simbir model from the Timisoara
site, according to which outward transport costs would
not be higher from Cutro than from the Timisoara alter-
native.

Based on these considerations,
Italy affirmed that the
Commission’s demand that a comparison be made
between totally identical projects was wrong and
misleading, as it would force a comparison between
‘hypothetical’ solutions that were not based on the real
intention of the company carrying out the investments.

(26)

(27)

that
the

claimed
for

comparison ‘operation by
the
Italy
operation’
alternative
investments
solutions as required by the Commission for the CBA
was not feasible because it would require the complete
development of the alternative projects, something that
De Tomaso could afford to do only after the location
choice was made.

in the

Finally,
suffering from the length of the procedure.

Italy remarked that

the company had been

IV. ASSESSMENT OF THE AID

The measure notified by Italy for De Tomaso 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 De
Tomaso an advantage over competitors not receiving aid.
Lastly, there is extensive trade between Member States in
the automobile market. This is not contested by Italy.

This notwithstanding, Italy provided new, more detailed,
information comparing the investments at Cutro and the
alternative sites for pressing, welding and painting for the
sports cars (Cutro versus Modena) and for final assembly
and painting for
(Cutro versus
Timisoara).

the Simbir model

(23) According to Italy, many investments planned at Cutro
would not be necessary in the alternative solution
the possibility of outsourcing the relevant
because of
operations (painting and engine testing) or of renting
existing facilities (test track in the vicinity of Modena).
As regards painting of the sports cars, Italy provided an
estimate of the cost of investing in a new paintshop at
in-house painting at Modena
Modena to show that
would
and would
therefore slightly increase the handicap at Cutro. As
regards the engine test bench,
that
the Cutro facility would also allow De Tomaso to
develop specific versions of
future
productions.

than outsourcing

Italy pointed out

the engines

cheaper

for

be

(24)

Regarding operating aspects of the CBA, Italy explained
that the difference noted in headcounts was due partly to
a mistake in the CBA, by which the number of managers
and white collar workers was underestimated in the alter-
native solution, and partly to the fact that less labour
would be needed at Modena since painting could be
outsourced. Taking these two factors into account, Italy
arrived at similar workforce needs in the alternative
solutions.

(28) Article 87(2) of the EC Treaty lists certain types of aid
that are compatible with the common market. In view of
the nature and purpose of the aid, and the geographic
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 that
the project is located in Calabria, a region which qualifies
for assistance under Article 87(3)(a), with a maximum
regional ceiling of 50% net grant equivalent (nge) for
large companies (6).

(29)

The Commission considers that the beneficiary of the aid
under scrutiny is De Tomaso, the group that includes the
companies Società Consortile De Tomaso srl and UAZ
Europa srl, which will be the recipients of the aid. De
Tomaso plans to manufacture and assemble cars. The
firm is therefore part of
the motor vehicle industry
within the meaning of the Community framework for
(‘the motor
state aid to the motor vehicle industry (7)
vehicle framework’), which applies to the project
in
question as the aid was notified to the Commission
before 1 January 2003.

(6) According to Article 4(3) of

the SME Regulation, when SMEs
undertake investment projects in areas which qualify for regional
aid under Article 87(3)(a) of
the maximum aid
intensity for
investment aid determined in the map
approved by the Commission can be increased by up to 15
percentage points gge, provided that the total net aid intensity for
the project does not exceed 75%.

the Treaty,

regional

(7) OJ C 279, 15.9.1997, p. 1 and OJ C 368, 22.12.2001, p. 10.

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(30)

Both the total cost of the project and the amount of aid
exceed the notification thresholds in the motor vehicle
framework. These thresholds are:
(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. In notifying the
proposed aid for De Tomaso,
the Italian authorities
have complied with the requirements of Article 88(3)
of the Treaty.

(31) According

vehicle

framework,

to the motor

the
Commission must ensure that the aid granted is both
necessary for the implementation of
the project and
proportional to the gravity of the problems it intended
to solve. Both tests, necessity and proportionality, must
be satisfied if the Commission is to authorise state aid in
the motor vehicle industry.

(36)

(37)

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

If

the motor

vehicle
framework,
in order to demonstrate the necessity for
regional aid, the aid recipient must clearly prove that it
has an economically viable alternative location for its
the project consists in modernisation and
project.
rationalisation of an existing plant, or if
there is no
alternative industrial site, whether new or in existence,
capable of receiving the investment in question within
the group, the undertaking would be compelled to carry
out its project in the chosen location, even in the absence
of aid. Therefore, no regional aid may be authorised for a
project that is not geographically mobile.

the
framework the Commission needs to ensure that
planned aid is in proportion to the regional problems
it is intended to resolve. To that end, a CBA is used.

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

to determine

it possible

the

the

In accordance with point 3.2.(c) of the motor vehicle
framework, operating handicaps of Cutro as compared
with Timisoara and Modena are assessed over five years
in the CBA since the project is to be carried out on a
greenfield site. The time period covered by the CBA
submitted by the Italian authorities is 2005-09, that is
three years (*)
from the beginning of production in
compliance with point 3.3 of Annex I to the motor
vehicle framework. The notified CBA indicates a net
cost handicap of EUR 158 248 977 in present values
for the location at Cutro in comparison with the alter-
the ‘regional handicap
native locations. Consequently,
ratio’ of the project would be 76,48% (8).

(33)

In the present case, the geographic alternative to Cutro
for the project would be to assemble the Simbir model at
Timisoara (Romania) and produce the Vallelunga and
Pantera models at Modena (Italy). The Commission
considers that Italy has provided sufficient documentary
evidence to support this claim. The evidence provided
the alternative
includes
locations, plans and layouts and quotes from potential
equipment suppliers.

the feasibility of

studies of

(34)

the nature of

Taking into account
the investment
(greenfield project on a completely new site) and on
the basis of the documents received, the Commission
concludes that the project is mobile and that there is a
viable alternative location.

(35) According to point 3.2.(b) of

the motor vehicle
framework, the Commission determines whether or not
costs relating to the mobile aspects of the project are
eligible. According to point 3.2.(c) of the motor vehicle

(38) As a preliminary technical point, the Commission notes
that the CBA presented by Italy takes 2003 as the base
year for discounting the relevant figures. The correct year
is 2002, which is the year of notification of the planned
aid to the Commission. Since the discount rate applied is,
correctly, that of 2002 (5,06%), the change in reference
year does not however alter in any way the relevant
ratios and figures, and can therefore be maintained.

(39)

Turning to the substance of the CBA, the Commission
has assessed the information provided by Italy with the
aid of an external automotive expert. The assessment has
confirmed the doubts expressed in the decision to initiate
formal proceedings regarding the comparability of the
projects at Cutro and the alternative location. The
reasons that lead to this conclusion are detailed below
in points (40) to (63).

(*) Factual error: should read ‘five years’.

(8) Regional handicap ratio ¼ Investment

Net cost handicap (both in present values).
In the present case, the investment amounts to EUR 206 912 337
[see point 10 above].
Regional handicap ratio ¼ 158 248 977
206 912 337

¼ 76; 48%.

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(40) As noted in the decision initiating formal

that

and that
involve
The Commission

investigation
proceedings, the Commission has consistently interpreted
the ‘identical projects’ requirement in the motor vehicle
framework as meaning projects
concern the
production of comparable motor vehicles, in comparable
comparable production
numbers,
processes.
that
differences may exist in projects carried out at different
sites, for example, regarding final product quality levels
or varying degrees of plant automation as a function of
labour costs. However, the Commission does not accept
the comparison of substantially different projects, such as
projects where important investments in equipment and
machinery would be undertaken in one location, while
no investments for the corresponding production would
be undertaken at the comparator site.

accepts

usually

(41)

(42)

(43)

alternative

In the present case, the information provided by Italy has
not allowed the Commission to fully compare the
investment costs. Italy itself stated,
in its comments in
response to the decision initiating proceedings, that a
comparison ‘operation by operation’ for the investments
in the
the
solutions
Commission for the CBA was not feasible. Indeed, the
projects in the chosen location of Cutro and in the alter-
native locations of Modena and Timisoara are, according
to the
substantially
different from the point of view of the technological
content of the investments and the degree of vertical
differentiation.

information provided by Italy,

required

by

as

and

choices

ascertaining whether

Taking this constraint into account, the Commission has
examined the available information with the aim of
understanding the reasons underpinning the different
investment
the
substantial difference in investment costs is acceptable
within the CBA.
the
In carrying out
Commission does not contest the fact that projects can
differ greatly between different locations, for example as
a result of different
the
Commission needs to make sure that the CBA is a mean-
ingful means of evaluating the specific handicap of the
chosen location. This can be done only if the alternative
projects are comparable.

industrial choices. However,

its assessment,

and

building

construction, machinery

The Commission notes first of all that investment costs
at Cutro are much higher than at the alternative sites for
land,
and
equipment,
tooling. As
tools and dies and supplier
regards the costs of land and building and construction,
the Commission considers that the difference reported in
the CBA (EUR 41 530 657 at Cutro as
against
EUR 10 084 237 in the alternative) can be justified on
the one hand by the fact that these assets are much
cheaper in Romania than in Italy and on the other
hand by the fact that De Tomaso already possesses in

Modena the land and part of the buildings that would be
necessary for the project.

(44)

Conversely, as regards machinery and equipment, tools
and dies and supplier tooling, De Tomaso would have to
purchase them in large part anew both at Cutro and at
the alternative locations. For these assets, which are
usually bought
in
investment
(EUR 165 381 681 at Cutro as
against EUR 75 624 552 in the alternative) can be
the project at Cutro
explained only by the fact
foresees higher levels of automation and higher vertical
integration.

large differences

internationally,

costs

that

(45)

The Commission has assessed the available information
in order to ascertain whether these cost differences are
justified by the specific conditions of
the different
locations, and whether they are compatible with the
comparability requirements of the CBA.

(46)

Italy ascribes

The Commission notes
the cost
that
difference between Cutro and Timisoara mainly to
higher labour costs (higher automation is foreseen to
reduce headcount) and to tighter social, safety and envir-
legislation (newer
onmental
complicated
is required to comply with it). The cost
equipment
in Italy’s
difference between Cutro and Modena is,
view, mainly the result of a lower skilled workforce
(more automation needed to compensate for lack of
manual skills) and the lack of an established supplier
network (need for more vertical integration).

and more

(47)

The Commission accepts that these factors can contribute
to increasing investment costs. However it does not
consider that they can explain the very high cost differ-
entials in the case under scrutiny.

(48)

extent

Firstly, for a low volume manufacturer like De Tomaso
the
to which automation can help reduce
headcount is limited: investments in automation usually
pay off only for high or very high volume production.
Indeed,
the Cutro solution would hardly save any
workforce with respect to the alternatives. According to
the figures in the CBA, the workforce in 2009 would be
786 at Cutro, compared with 685 at Modena and
Timisoara combined. Even taking into account
the
higher
integration at Cutro (which
results in a larger workforce for the operations carried
out in-house), it is evident that higher automation brings
hardly any savings in the number of workers employed.

level of vertical

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(49)

(50)

(51)

(52)

Secondly, while it is true that social, safety and environ-
mental
than in
legislation in Italy is more stringent
Romania and therefore may require higher investments,
this factor should not be overestimated. When medium
to long term investment is decided, car makers tend to
look at prospective legislation as well as existing laws. In
the case of Romania, a convergence in standards towards
western European levels seems reasonable in the medium
term, also taking into account
likely
accession to the European Union.

the country’s

Thirdly, it is not always the case that higher automation
is needed to compensate for lower workforce skills.
Indeed, the contrary is often true: automated machines
require a highly skilled workforce for their operation and
maintenance, while a lower skilled workforce can operate
more easily simpler machinery.

(55)

(56)

Lastly, it is true that the lack of an established supplier
network can lead to a higher degree of vertical
inte-
gration and therefore to the need for higher investments.
However, any additional
investment justified on these
grounds
should be directly linked to the lack of
existing or prospective suppliers for specific operations.
This is often not the case in the case under scrutiny.

the investment and operating costs for

For example, in its comments in response to the deci-
sion initiating formal proceedings, Italy argued that out-
sourcing the painting operations for the sports cars in
Modena did not artificially increase the handicap for
Italy provided estimates
Cutro. To support this claim,
of
in-house
painting at Modena, showing that the impact of this
change on the CBA was very small, and was in the
direction of increasing Cutro’s handicap. However, the
investment cost of the paintshop at Modena would be
significantly lower than what is foreseen for Cutro (EUR
4.5 million as against EUR 6.3 million), due to its lower
automation content. This
the higher
the paintshop cannot be
investment at Cutro for
attributed to the
an established supplier
network, but is rather the consequence of different tech-
nological choices in the alternative locations.

lack of

shows

that

Tomaso, which would be a small volume producer both
at Cutro and in the alternative location. Similarly, quality
levels would be identical in the alternative locations.

elements have

The above
led the Commission to
conclude that the very high differences in investment
costs between Cutro and the alternative locations can
the projects
only be
compared are very different in nature. This conclusion
is
the
investments that Italy has provided for some operations.

the detailed description of

explained by the

supported by

that

fact

The latest information shows that the project at Cutro
consists in an up-to-date fully automated production
system designed for high volume production, while the
alternative project is based on a low automation and low
volume production concept. The following examples are
indicative of
the projects
the different nature of
compared:

(a)

for the assembly of the Simbir model at Cutro an
investment of over EUR 2 million is foreseen for a
very sophisticated and fully robotised station for the
installation of windscreens. This machinery is usually
preferred over manual installation processes only for
largely in excess of
very high volume productions,
the 50 000 units envisaged in this project. No such
investments are foreseen at Timisoara;

the Simbir model at Cutro
(b) similarly, assembly of
would employ robots
installing dashboards,
for
front end assemblies, roof panels and for seat and
door handling. No such machinery is foreseen at
Timisoara;

(c)

for the pressing and welding of the sports cars, a
high cost
laser cut station is planned for Cutro,
with no similar investment foreseen at Modena;

(53) A similar reasoning applies to the test track at Cutro.
While it is true that in the alternative of Modena De
Tomaso could rent existing facilities for
testing the
sports cars, no such facilities would be available for the
Simbir model in Timisoara. Indeed, Italy affirms that the
Simbir model would be tested on normal roads around
the Romanian plant. Yet a specific investment is foreseen
at Cutro for dedicated tracks to test the Simbir model.

(d)

at

Cutro

include

investments
expensive,
completely equipped metrological unit with a coor-
dinate based measuring system for both a complete
body and sub-components. No similar investment is
foreseen in the alternative;

an

(54)

could justify a higher degree of

The Commission notes furthermore that other factors
that
automation
between different locations do not apply in the present
case. Investment in automation is often justified by high
the case for De
volume production, but

this is not

(e) Cutro includes sophisticated quality control systems
for
incoming goods. This is contrary to current
practices to make quality control the responsibility
of
the supplier. The alternative solution does not
include this capability;

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(f)

the Cutro investment plans include a centralised IT
monitoring and diagnostic system for the assembly
lines. No such system is foreseen for the alternative
solution, although the final products are expected to
reach the same quality levels;

(g) the Cutro solution includes

the
for
centre with
creation of
suppliers’
multimedia
open
personnel. There is no such centre in the alternative
solution;

a permanent
facilities,

training
also

investments

to

(h) the investment at Cutro includes an engine test
bench. The facility would allow De Tomaso to
carry out both standard production tests and fine
and research and development on the
tuning,
engines
the sports cars and
(petrol engines
diesel engines for the Simbir) bought from external
suppliers and assembled in the cars at Cutro. In the
alternative solution, De Tomaso would outsource the
standard tests and fine tuning either to independent
companies
supplier
(Timisoara). No research and development would be
carried out.

to the engine

(Modena) or

for

(57)

Taking all these factors into account, the Commission
concludes that the investment costs for machinery and
equipment, tools and dies and supplier tooling at Cutro
are excessive and not comparable with the investment
costs in the alternative solution. On the basis of the
available information, the Commission, with the aid of
its external automotive expert, has estimated that the
objective differences between the alternative locations in
labour
terms of
skills
costs,
could justify a handicap of 25% at Cutro with respect
to the alternative solution. The Commission therefore
concludes that the investment costs for machinery and
equipment, tools and dies and supplier tooling that can
be considered eligible for aid at Cutro amount to EUR
94 530 690 (9), as against EUR 165 381 681 according
to Italy.

the existence of a supplier network,
and workforce

requirements

legislative

(58)

Regarding the estimate of the eligible costs carried out
above, the Commission remarks firstly that its objective
is not to decide which investment should or should not

(9) (Investment

in machinery and equipment,

tools and dies and
supplier tooling in the alternative) x (1+handicap rate at Cutro) =
75 624 552 [see point 46 above] x 1.25 = 94 530 690.

(59)

(60)

be carried out at Cutro, but to determine which of the
investments that De Tomaso plans to carry out are
comparable, within the meaning of the motor vehicle
framework, with the investments that would be carried
out in the alternative locations and are therefore eligible
for aid. Secondly, the Commission remarks that it has
not had the possibility to carry out a more detailed
comparison of the alternative projects, owing to Italy’s
claim that such more detailed comparison was not
feasible. The Commission therefore had to rely on the
information that was made available to it.

The Commission therefore concludes that total eligible
costs for the project amount to EUR 136 061 346 (10)
in present values. Therefore, only these investments have
been taken into account
the
regional handicap at Cutro. This modification has led
to a reduction in the handicap for investment costs
and other eligible expenses from EUR 89 757 129 to
EUR 18 906 138 (11).

the calculation of

for

alternative
the
that

to the
the workforce needs,

The Commission has also assessed the comparison of
operating costs in the CBA submitted by Italy with its
decision opening
comments
in response
the
proceedings. Regarding
Commission accepts the corrections made by Italy for
the number of managers and white collar workers in
solution. However,
the
the Commission
notes
increased workforce has not been
correctly included in the CBA for the calculation of
labour costs. The number of workers in the alternative
solution reported in the CBA is 642 in 2009, while the
supporting documentation gives the number as 685. The
Commission considers that the latter figure is the correct
one and has amended the CBA accordingly. Total labour
costs in the alternative solution consequently increase
from EUR 23 448 521 to EUR 28 526 739, and the
handicap for this item is reduced by EUR 5 078 218
(EUR 62 658 707 instead of EUR 67 736 925).

(61)

Regarding outward transport costs,
the Commission
accepts the correction made by Italy, which reduces the
overall outward transport
costs handicap to EUR
745 269 (the Italian authorities had originally calculated
EUR 754 916).

(10) Eligible costs of land, building and construction (41 530 657) [see
point 45 above] + eligible costs of machinery, equipment, tools and
dies and supplier tooling (94 530 690) [see point 59 above] =
136 061 346.

(11) Offset of any handicap in terms of investment costs for machinery,
equipment, tools and dies and supplier tooling equal to eligible
costs of
[see point 59
above] – costs of these items in the alternative (75 624 552) [see
point 46 above] = 18 906 138.

these items as calculated (94 530 690)

1.4.2006

EN

Official Journal of the European Union

L 94/41

(62)

(63)

(64)

The modifications introduced in the analysis produce
cost-benefit results that differ from those notified by
Italy. The modified CBA indicates a net cost handicap
for Cutro of EUR 82 310 114 (12)
in 2003 values
(compared to EUR 158 248 977 as notified). The
is 60,49% (13)
resulting handicap ratio of
(instead of 76,48% as initially notified).

the project

are

to the motor

that De Tomaso will
consequence of
levels

in accordance with point 3.2.(d) of the motor
Finally,
the Commission considered the
framework,
vehicle
question of a ‘top-up’, which is an increase in the
allowable aid intensity intended as a further incentive
to the investor to invest in the region in question. It is
increase dramatically its
clear
its
investment, as
the
capacity as
low.
extremely
currently
production
According
the
framework,
vehicle
‘regional handicap ratio’
resulting from the CBA is
(‘high’
therefore
impact on competition for an investment project in an
Article 87(3)(a)
ratio of
59,49% gge, which is lower than the regional ceiling of
50% nge for large enterprises in Calabria (which, for the
project under scrutiny, corresponds to 73,83% gge) and,
a fortiori, for SMEs. Given that the ‘regional handicap
ratio’ remains in any event below the regional ceiling
of 73,83% gge for the project, there is no longer any
need to determine whether De Tomaso is an SME.

reduced by one percentage point

region), resulting in a final

V. CONCLUSION

to grant

compatible with the

The Commission finds that the regional aid that Italy
the project
plans
in
to De Tomaso for
question is
common market
it does not exceed an aid intensity of
insofar as
59,49% gge of the eligible costs. The Commission finds
that the eligible costs for the project in question amount
to EUR 136 061 346 in 2003 values (discount rate

the Commission finds

the
5,06%). Therefore,
regional aid that Italy plans to grant to De Tomaso for
the project in question is compatible with the common
market insofar as it does not exceed EUR 80 949 501
gge (in 2003 values, discount rate 5,06%).

that

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

HAS ADOPTED THIS DECISION:

Article 1

The state aid which Italy is planning to implement for the
companies Società Consortile De Tomaso srl and UAZ Europa
srl is compatible with the common market within the meaning
of Article 87(1) of the Treaty, up to a maximum amount of
EUR 80 949 501 gross grant equivalent
in 2003 values
(discount rate 5,06%).

Article 2

Any state aid in addition to the aid amount referred to in
Article 1 that Italy plans to grant to the companies Società
Consortile De Tomaso srl and UAZ Europa srl for the project
under scrutiny shall be incompatible with the common market.

Article 3

This Decision is addressed to the Italian Republic.

Done at Brussels, 19 January 2005.

For the Commission

Neelie KROES
Member of the Commission

(12) 18 906 138 (investment costs [see point 61 above]) + 62 658 707
(operating costs [see point 62 above]) + 745 269 (transport costs
[see point 63 above]) = 82 310 114.

(13) Net cost handicap

Investment

¼ 82 310 114
136 061 346

¼ 60; 49% [see point 61 for the new

investment cost as corrected].