2006/747/EC: Commission Decision of 26 April 2006 on State Aid which France is planning to implement for Euromoteurs (C 1/2005 (ex N 426/2004)) (notified under document number C(2006) 1540)   (Text with EEA relevance)
Date: 2006-04-26
Institutions: European Commission
Subjects: France, State aid, aid for restructuring, control of State aid, electric machinery, household electrical appliance

7.11.2006

EN

Official Journal of the European Union

L 307/213

COMMISSION DECISION

of 26 April 2006

on State Aid which France is planning to implement for Euromoteurs (C 1/2005 (ex N 426/2004))

(notified under document number C(2006) 1540)

(Only the French text is authentic)

(Text with EEA relevance)

(2006/747/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

2.

DESCRIPTION OF THE MEASURES

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

2.1. The recipient

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

(4)

Euromoteurs S.A.S.
(‘Euromoteurs’) has its origins in a
former subsidiary of Moulinex responsible for producing
the household
electric motors intended primarily for
appliances market.

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

Whereas:

(1)

(2)

(3)

1.

PROCEDURE

By letter registered as received on 5 October 2004, France
notified the Commission of its intention to contribute an
amount of €2 million to the restructuring of Euromoteurs.
The case was registered as N426/2004. By letter dated
18 October 2004, the Commission asked for additional
information concerning the notification. France replied by
letter dated 1 December 2004.

By letter dated 19 January 2005, the Commission informed
France that it had decided to initiate the procedure laid
down in Article 88(2) of the Treaty in respect of the
measure. The decision was published in the Official Journal
of the European Communities (2). The Commission invited
interested parties
their comments on the
measure.

to submit

The Commission received comments from the French
authorities on 19 May 2005. A meeting between the French
authorities and Commission representatives took place on
12 October 2005. The French authorities sent information
to the Commission by letter dated 10 November 2005 and
by email dated 31 January 2006.

(1) OJ C 137, 4.6.2005, p. 16.
(2) See footnote 1.

(5) More precisely,

in December 1999, Moulinex set up
Compagnie Générale des Moteurs Electriques (‘CGME’) in
to turn its motors production business into a
order
into
In September 2001, Moulinex went
subsidiary.
receivership,
followed by CGME. When the SEB group
(‘SEB’) acquired part of Moulinex in 2001, it did not take
over CGME but instead concluded with the latter a four-year
supply contract which enabled it to start up in business
again.

(6)

(7)

(8)

limited company Compagnie

In January 2002, 12 executives from CGME established the
private
Financière des
Moteurs Electriques (‘COFIME’), which acts as a consultancy
and has a majority stake in Euromoteurs, which was formed
in September of the same year.

In September 2002, COFIME and Euromoteurs took over
CGME’s assets. The judgment of the commercial court
authorising the operation prohibited until September 2004
any economic layoffs or asset disposals.

This prohibition runs counter to the purchasers’ original
plan, which was
to concentrate CGME’s means of
production on one site instead of two and to dismiss more
than half the workforce. Moreover, the company is faced
with a sharp decline in sales due, in France’s view, to the
poor state of the world economy, SEB's shrinking order
book and the falling dollar/euro exchange rate.

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Official Journal of the European Union

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(9)

The trend in Euromoteurs’ accounting figures is as follows:

(14) The programme is to be financed as follows:

(EUR millions)

2002 (4
months’
operations)

2003

2004

Turnover

13

25

Net profit

Own capital

-0

4

-1

3

18

-5

-3

— sale of one of the two production sites: €1,45 million;

— advance on an order from SEB: €1,5 million;

— freeing-up of shareholders’ capital: €1 million;

— restructuring aid.

2.4. Description of the aid

(15) According to the notification of 5 October 2004, the

restructuring aid amounts to €2 million.

(10)

In 2004, sales to SEB accounted for 93 % of Euromoteurs’
turnover.

(16)

2.2. The market

(11) According to the information communicated in December
2004, Euromoteurs’ production of universal motors for
household appliances is equivalent to 25 % of European
consumption. As part of its diversification strategy, the
company envisages producing nearly 10 % of European
consumption of seat motors in 2006.

(12) According to the French authorities, Euromoteurs’ main
competitors are in Europe and Asia both for universal
motors (Ametek, Domel, LG, Johnson Electric, Sun Motors)
and for permanent magnet motors (Valeo, Bosch, Meritor,
Johnson Electric).

In the letter from the French authorities dated 1 December
2004, the notified aid takes the form of a €1 million
government grant and a €1,25 million debt write-off
towards local authorities (€1 million by the Regional
Council and €0,25 million by the General Councils of La
Manche and Calvados), giving a total of €2,25 million.

(17) Lastly, in their letter of 10 November 2005, the French
‘a minimum of €2,65 million is

authorities state that
needed in the way of public financing (…).’

(18) Consequently, uncertainty still surrounds the amount of the
notified aid, which may be either €2 million, €2,25 million
or €2,65 million.

2.3. Restructuring programme

3.

GROUNDS FOR THE INITIATION OF THE

PROCEDURE UNDER ARTICLE 88(2) OF THE TREATY

(13) The restructuring programme communicated by the French
authorities extends over a period of two years from the date
of payment of
three
components:
industrial, financial and social, for a total
amount of €5,95 million:

the notified aid.

It consists of

— the industrial restructuring will cost an estimated

€1,10 million and includes:

1)

the closure of one of the two production sites;

2)

a search for cheaper suppliers;

3)

a search for new business partners;

4)

diversification into the motor vehicle industry
(seat motors).

— the financial restructuring is aimed at clearing the

company’s €2,5 million worth of debts;

(19) The decision to initiate the procedure laid down in
a preliminary
Article 88(2) of
assessment of the measure in the light inter alia of the
1999 Community guidelines on state aid for rescuing and
restructuring firms in difficulty (3) (‘the guidelines’).

the Treaty includes

(20)

In its decision, the Commission expressed doubts about
whether the restructuring plan was capable of restoring
Euromoteurs’ viability, whether undue distortions of
competition would be prevented and whether the aid
would be restricted to the necessary minimum.

(21) The Commission also pointed out that Euromoteurs had
benefited from certain tax exemptions under Article 44
septies of the General Tax Code (‘Article 44 septies’). This aid
had been declared unlawful and incompatible by Commis-
sion Decision 2004/343/EC of 16 December 2003 on the
aid scheme implemented by France for the takeover of
in difficulty (4), and the Commission expressed
firms
doubts about the compatibility of the notified aid under
the ‘Deggendorf’ case law.

— the social restructuring is aimed at helping the 246
dismissed employees find a new job and will cost
€2,35 million.

(3) OJ C 288, 9.10.1999, p. 2.
(4) OJ C 108, 16.4.2004, p. 38.

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4.

OBSERVATIONS FROM THIRD PARTIES AND

COMMENTS FROM FRANCE

(22) Following the initiation of the procedure, the Commission
has received no observations from third parties. The
comments from France may be summarised as follows:

(28) France points out

that, according to the Groupement
Interprofessionnel des Fabricants d’Appareils d’Equipement
(Inter-trade organisation of household goods
Ménager
manufacturers), supply contracts are infrequent
in the
household goods sector and rarely exceed one year’s
duration. It concludes from this that this three-year contract
signals the contractor’s wish to establish a lasting relation-
ship with its supplier.

Unlawful incompatible aid received by Euromoteurs under
Article 44 septies

(23) By letter dated 19 May 2005,

the French authorities
confirmed that Euromoteurs had benefited from certain tax
exemptions under Article 44 septies.

(24)

In a previous letter to the Commission dated 15 March
the French authorities estimated the financial
2005,
advantage thus received at a maximum (5) of €1,7 million
for Euromoteurs and €1,5 for COFIME.

(25) At

the time when Euromoteurs was in receipt of
the
advantages provided for by Article 44 septies, the company
did not belong to the category of small and medium-sized
enterprises as defined in Commission Recommendation
2003/361/EC of 6 May 2003 concerning the definition of
micro, small and medium-sized enterprises (6) and was not
located in an area eligible for regional aid. Consequently,
even though it is not known at the time of this Decision
exactly how much incompatible aid has to be recovered, the
Commission considers that Euromoteurs will have to repay
a sum close to €1,7 million. To this sum must be added
interest
in accordance with Article 14(2) 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 (7).

(26)

In their comments dated 19 May 2005,
the French
the amount of aid needed to
authorities stated that
restructure Euromoteurs did not take into account the
prospect of a reimbursement of the unlawful incompatible
aid received by the company and that ‘such a reimburse-
ment, were it to take place, would have the effect of
seriously undermining Euromoteurs’ financial situation’.

Restoration of viability upon completion of the restructuring

(27) The French authorities have informed the Commission that,
in the middle of 2005, Euromoteurs concluded with
Johnson Electric Industrial Manufacturing Ltd (‘Johnson’) a
three-year tapered supply contract (replacing Euromoteurs’
contracts with SEB) worth €12 million in 2005 and
€9 million in 2006. This contract also enables Euromoteurs
to obtain supplies of raw materials and sub-assemblies from
Johnson on advantageous terms.

(5) Advantage calculated without taking account of
allowed by the applicable Community frameworks.

the deductions

(6) OJ C 124, 20.5.2003, p. 36.
(7) OJ C 83, 27.3.1999, p. 1. Regulation as amended by the 2003 Act of

Accession.

(29) The French authorities have also transmitted a forecast
profit and loss and cash flow account for Euromoteurs for
2006. In addition to the €9 million in sales to Johnson,
Euromoteurs plans on achieving €6 million in turnover by
diversifying its customer base. In November 2005, 25 % of
this target was covered by orders, and contracts for sales
totalling €0,6 million were being negotiated.

Avoidance of undue distortions of competition

(30) The French authorities have stressed that, by the time it had
completed its industrial restructuring, Euromoteurs had
dismissed 60 % of its workforce, closed one production site
out of two and become a medium-sized enterprise within
the meaning of Community legislation. They point out that
the company faces competition from large groups such as
Ametek in Italy, Domel in Slovenia and Goldstar in Korea,
which have much bigger sales networks than Euromoteurs.

(31) Lastly, the French authorities suggest that, as Euromoteurs
has become a medium-sized enterprise, the Commission’s
analysis should be based on the new restructuring aid
guidelines (8).

5.

ASSESSMENT

5.1. Existence of state aid

(32) The measure notified by France is in effect state aid within
the meaning of Article 87(1) of the Treaty. Granted by the
State, it will be financed through state resources for the
benefit of a specific undertaking, Euromoteurs. What is
more, Euromoteurs has competitors
in the common
market, such as Ametek in Italy and Domel in Slovenia,
and its products are traded internationally (Euromoteurs
for example).
has customers in Germany and Egypt,
Consequently, the notified measure affects trade between
Member States and distorts, or
to distort,
competition.

threatens

(33) France has therefore fulfilled its obligations under Article 88

(3) of the Treaty.

(8) OJ C 244, 1.10.2004, p. 2.

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5.2. Compatibility of the aid with the common market

Preliminary remark

(34) As the Court of Justice of the European Communities held
in its judgment of 3 October 1991 in Italy v Commission (9),
‘when the Commission considers the compatibility of a
State aid with the common market it must take all the
relevant factors into account, including, where relevant, the
circumstances already considered in a prior decision and
the obligations which that decision may have imposed on a
Member State’.

(39) Further derogations are provided for in Article 87(3)(a) and
(c) of the EC Treaty. As the primary objective of the aid is
not regional but concerns the restructuring of an under-
taking in difficulty, only the derogations provided for in
Article 87(3)(c) apply. Article 87(3)(c) provides for the
authorisation of state aid granted to facilitate the develop-
ment of certain economic activities, where such aid does
not adversely affect trading conditions to an extent contrary
to the common interest. The Commission has published
specific guidelines for assessing aid for
rescuing and
the
restructuring firms in difficulty. Contrary to what
French authorities maintain, the aid in this case, having
been notified before 10 October 2004, must be assessed in
the light of the criteria set out in the 1999 guidelines (11).
Clearly, the measure has no other horizontal objective in
view. Moreover, France mentions no other objective and
bases itself on the said guidelines to justify the compatibility
of the notified measure.

(35)

(36)

In its judgment of 15 May 1997 in Deggendorf (10), the Court
went so far as to state that, where earlier unlawful
incompatible aid has still not been recovered despite a
Commission decision to that effect, the assessment of new
aid to the same recipient must take into consideration, first,
any cumulative effect of the earlier, unlawful incompatible
aid and the new aid and, secondly, the fact that the earlier
aid had not been repaid.

the compatibility of

In its assessment of
the measure
notified by France, the Commission will therefore take into
account all the relevant factors,
including the fact that,
according to the information furnished by the French
authorities, Euromoteurs has received earlier aid under a
scheme declared unlawful and partly incompatible by the
Commission and that that aid, which does not form part of
the measures either considered not to constitute aid or
declared compatible by the Commission, has still not been
recovered despite Decision 2004/343/EC.

(40)

Assessment of the aid as restructuring aid

E l i g i b i l i t y :

f i r m i n d i f f i c u l t y

this

concept. With a

In order to be eligible for restructuring aid, a firm must
qualify as a firm in difficulty. Point 2.1 of the guidelines
subscribed capital of
defines
€4 million, Euromoteurs recorded a loss in 2004 of
€5,4 million, which reduced its own capital to minus
€2,6 million. The firm may therefore be considered to be a
firm in difficulty within the meaning of point 5(a) of the
guidelines.

Derogations from the prohibition in principle of state aid

(37)

In the context of the present investigation, the aid falls to be
assessed as ad hoc state aid. Article 87(2) and (3) of the
Treaty provides for derogations from the general incompat-
ibility rule set out in Article 87(1).

(41) Point 7 of the guidelines stipulates that a newly created firm
is not eligible for restructuring aid even if its initial financial
position is insecure. Having been set up two years and a
month prior to the notification,
the company cannot,
under the Commission’s practice in applying the guidelines,
be considered to be newly created.

(38) The derogations in Article 87(2) of the Treaty are not
applicable here, given that the aid does not have a social
character and is not granted to individual consumers, does
not serve to make good the damage caused by natural
disasters or other exceptional occurrences and is not
granted to the economy of certain areas of the Federal
Republic of Germany affected by the division of Germany.
The same holds true for the derogations provided for in
Article 87(3)(b) and (d), which are manifestly not applicable
here.

(9) Case C-261/89 [1991] ECR I-4437.
(10) Case C-355/95 P Textilwerke Deggendorf GmbH v Commission and

Germany [1997] ECR I-2549.

P r e v e n t i o n o f d i s t o r t i o n s o f c o m p e t i t i o n
( p o i n t s 3 5 t o 3 9 o f

t h e g u i d e l i n e s )

(42) By the time it had completed its industrial restructuring,
Euromoteurs had dismissed 60 % of its workforce, closed
one production site out of two and become a medium-sized
enterprise. As a result, the Commission considers that,
viewed in isolation from the unlawful incompatible aid, the
restructuring aid is not likely to give rise to any undue
distortions of competition.

(11) See point 103 of the new guidelines.

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(43) However, as stressed by the Court’s case law (12), when the
Commission assesses whether an aid scheme is compatible
with the common market, it has to take into account all
relevant
already
considered for the purposes of an earlier decision and
any obligations which that decision might have imposed on
a Member State.

including the

circumstances

factors,

(44)

In the present case, the Commission would point out that,
until such time as Euromoteurs pays back the unlawfully
granted aid, that aid and the newly notified aid would have
the cumulative effect of giving Euromoteurs an excessive,
undue advantage which would adversely affect
trading
conditions to an extent contrary to the common interest.
Until such time as the unlawful incompatible aid is repaid,
the undue distortion of competition to which it has given
rise will not have been remedied. This distortion would be
further increased if Euromoteurs were to receive restructur-
ing aid on top of the unlawful incompatible aid.

(45)

In conclusion, in order to prevent the creation of undue
distortions of competition, it is essential that Euromoteurs
repay the unlawfully granted aid before it can receive the
notified restructuring aid.

R e s t o r a t i o n o f v i a b i l i t y ( p o i n t s 3 2 t o 3 4 o f
t h e g u i d e l i n e s )

(46) According to point 3.2.2 of the guidelines, the grant of the
aid is conditional on implementation of a restructuring
plan which must restore the long-term viability of the
company within a reasonable time scale and on the basis of
realistic assumptions as to its future operating conditions.

(47)

If Euromoteurs’ viability is to be restored, the company will
have to meet two challenges: it will have to rationalise its
production facilities, and it will have to diversify its
customer base so as to end its reliance on orders from
SEB (which have been trailing off since 2002 and are now
channelled through Johnson).

(48) On the first point, the Commission would observe that the
closure of the Carpiquet plant and the dismissal of 246
people have enabled Euromoteurs to reduce its operating
costs substantially (France estimates the savings from
focusing production on one site at €1,491 million) and
to tailor its production facilities to the volume of its sales.

(50) The Commission has received only forecasts for 2006 from
the French authorities. According to these forecasts,
Euromoteurs’
turnover will be €15 million, with an
operating result of €0,2 million and a net result of
€1,7 million. The Commission considers that, inasmuch as
they are limited to one year and show an operating margin
of 1,3 %, these forecasts do not enable it to conclude that
succeed in restoring the
the restructuring plan will
In 2006, Euro-
company’s viability on a lasting basis.
moteurs still benefits
signed with
Johnson. The contract ends, however, in 2007. The results
for the 2006 financial year alone are therefore not sufficient
to enable the Commission to conclude that the company’s
viability will be restored on a lasting basis.

from the contract

(51) Moreover, as France stated in its comments of 19 May
2005, the notified aid and the accompanying restructuring
plan do not take into account the possibility that the
incompatible aid which Euromoteurs received
unlawful
under Article 44 septies might have to be repaid.
Its
repayment was ordered by the Commission in its Decision
2004/343/EC, and the amount
to be recovered from
Euromoteurs is estimated at €1,7 million. Such repayment
will worsen the company’s financial problems, and the
Commission considers that, under the circumstances, the
plan cannot be deemed realistic. This assessment is borne
out by the fact
the French
authorities informed the Commission that the difficulties
inherent in the restructuring of Euromoteurs (in particular
its financing needs) had been underestimated at the time of
the notification and that the company’s public financing
need had to be revised upwards (+132,5 %).

in November 2005,

that,

(52)

In the light of the above, the Commission concludes that
the French authorities have not demonstrated that the
notified restructuring plan is based on realistic assumptions
and will help restore the company’s viability.

A i d l i m i t e d t o t h e m i n i m u m ( p o i n t s 4 0 t o
41 o f

t h e g u i d e l i n e s )

(49) On the second point, the contract with Johnson, which
covers the period 2005-07, gives the company time to find
its legs by guaranteeing it a significant level of sales until
2007. On the basis of the information in its possession, the
Commission is of the opinion that, in the electric motors
sector, Euromoteurs’ diversification strategy is starting to
bear fruit. On the other hand, in the motor vehicle seat
motor market, the second pillar of Euromoteurs’ diversifi-
cation plan, none of the negotiations have reached an
advanced stage.

(12) See paragraph 34 of this Decision.

(53) The cost of the restructuring plan communicated to the
Commission is estimated by the French authorities at
€5,95 million. The plan calls for €2 million of public
financing. In their letter dated 10 November 2005, the
French authorities informed the Commission that
the
difficulties inherent in the restructuring of Euromoteurs (in
particular its financing needs) had been underestimated at
the time of the notification and that the company’s public
financing need could be estimated at not
than
€2,65 million. No details as to how this new need was
calculated (whether in terms of additional restructuring
costs or of new cash flow requirements) were commu-
nicated to the Commission.

less

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(54) The Commission accordingly considers that, at all events,
the French authorities have not demonstrated that aid in
excess of €2 million is needed to restore the company’s
viability and it cannot therefore conclude that the notified
aid is limited to the minimum necessary.

O n e t i m e ,

l a s t

t i m e

(55) According to the French authorities, no restructuring aid

has been paid to Euromoteurs in the past,

HAS ADOPTED THIS DECISION:

Article 1

The state aid which France is planning to implement
for
Euromoteurs for an amount of €2 million, €2,25 million or
€2,65 million is incompatible with the common market.

The aid may accordingly not be implemented.

Article 2

This Decision is addressed to the French Republic.

Done at Brussels, 26 April 2006.

For the Commission

Neelie KROES

Member of the Commission