Source: EURLEX
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2 . 2, 94 Official Journal of the European Communities No C 31 / 9

STATE AID

C 38 / 93 ( NN 43 / 93 and NN 58 / 93 )

The Netherlands

( 94 / C 31 / 05 )

( Text with EEA relevance )

( Articles 92 to 94 of the Treaty establishing the European Community )

Commission notice pursuant to Article 93 ( 2 ) of the EC Treaty to other Member States and
other parties concerned regarding aid, which the Netherlands intends to grant to truck producer

DAF

By means of the letter reproduced below, the million to DAF under the customary short-term
Commission informed the Dutch Government of its conditions and partially guaranteed by the Dutch State .
decision to initiate the procedure foreseen in Article 93
( 2 ) of the EC Treaty .

' By letter dated 2 October 1992 the Commission
requested your Government to notify pursuant to Article
93 ( 3 ) of the EC Treaty a proposal of the Nationale
Investerings Bank ( NIB ) to grant a loan of some F1 100
million to the Dutch truck producer DAF in Eindhoven .
This loan was to be guaranteed by the Dutch State .

Your Government replied by letter dated 17 November

1992 from its Permanent Representation . This letter
stated that a proposal for such a guarantee had indeed
been approved but not for the amount cited by the
Commission . In fact, a new guarantee was only granted
under the " Bijzondere financiering " scheme ( BF ) for a
subordinated loan of F1 60 million of the B-category,
which was convertible under certain conditions into DAF

shares . Furthermore, an additional F1 7 million was
covered at NIB 's own risk and an existing guaranteed
loan of F1 30 million which dated back from 1983 was
added, resulting in BF loans of in total F1 97 million of
which F1 67 million were new funds . The guarantee
premium was set at 2 %, bringing the interest rate to

11,375 % which was according to your Government in
conformity with market conditions . In the same letter
your authorities informed the Commission that the
payment of the loan was also subject to three conditions :

— the credit line of Fl 1,15 billion made available to

DAF by the principal financial backer of DAF, a
banking consortium, which had at the time more
than Fl 2 billion outstanding in the company, should
continue until at least 30 June 1993,

— a strategic alliance was to be found with a business

partner,

— the NMKN ( Nationale Maatschappij voor Krediet

van de Nijverheid ) was to provide a Bfrs 2,2 billion
loan to DAF .

Nevertheless, the Commission had information at its
disposal that the NIB granted as an advance Fl 67

By letter of 23 December 1992, the Commission
informed your Government that the financial
arrangements of the NIB and the Dutch State for DAF
constituted State aid which has been awarded without

prior notification to and approval by the Commission . It
was registered as a non-notified State aid ( Case No NN

109 / 92 ).

Moreover, the Commission requested your authorities to
be informed about all other aid measures which the
Dutch State was considering to take in favour of DAF .

Referring to its unanswered letter of 2 October 1992, the
Commission informed the Belgian authorities by letter
dated 23 December 1992 that it had registered Bfrs 2,2
billion credit which the NMKN had apparently awarded
to DAF as a non-notified State aid ( Case No NN
138 / 92 ), and that all relevant information as to this aid
and any other aid to DAF was hereby requested .

The financial situation of DAF deteriorated rapidly in

early 1993 and the company was forced to go into
receivership and to stop production on 2 February 1993 .
According to press reports DAF succeeded in obtaining a
short-term bridging loan of Fl 120 million, 50 % from
the banking consortium and 50 % from the Dutch State,
in order to allow the company to continue trading for a
month . In the meantime, the receivers in the Netherlands
succeeded in restarting production and initiated the
examination of alternative strategies for the future of
DAF . According to reports in the media, your
Government expressed its support for plans to dismantle
DAF and to salvage the core operations in the
Netherlands and Belgium in a new company to be
founded . It also expressed its willingness to become a
shareholder in this company . Shortly after, the Flemish
authorities declared a similar interest in participation in
such a rescue operation if it would allow the Belgian
subsidiary to continue its operations and to maintain a
good part of its employment .

No C 31 / 10 Official Journal of the European Communities 2 . 2, 94

On 21 February 1993, the Dutch receivers of DAF
reached agreement with the Dutch and Flemish auth ­
orities, banks and institutional investors on the creation
by 1 March 1993 of a new company, called DAF Trucks
NV, which would employ 3 500 people, or about half
the original employment, in the manufacture, devel ­
opment and sales of heavy and medium-sized trucks and
from which about 2 750 people would be employed in
the Netherlands and about 750 people in Belgium,
Production activities would comprise the assembly and
the production of the main components, namely cabins,
engines of eight and 1 1 liters and axles . This production
would take place in Eindhoven ( The Netherlands ) and
Westerlo ( Belgium ), In 1993 sales of trucks are expected
to reach 11 000 and the sales for 1994, 12 500 . Soon
after, the already existing DAF companies in the
Netherlands and Belgium were to be declared bankrupt .

On 26 February your Government informed the
Commission by telex of your intention to participate in
the newly founded DAF Trucks NV by injecting F1 155
million in the equity capital of this company and by
granting F1 40 million in risk-bearing loans on a planned
total capital . Furthermore, the loan of F1 67 million
would be repaid to the NIB . By letter dated 3 March

1993 the Commission informed your authorities that the
telex of 26 February 1993 did not constitute a proper
notification in the meaning of Article 93 ( 3 ) of the EC
Treaty and consequently the Dutch Government failed
to notify sufficiently the foreseen public support for the
new DAF company . It requested therefore a complete
notification pursuant to Article 93 ( 3 ) of the EC Treaty
of all the measures in favour of DAF Trucks and

detailed information on the losses on investments in the
old DAF, alleged to amount to more than F1 200 million .

mation concerning the public participation in the new
company DAF Trucks NV, This letter also confirmed
that the Dutch State provided a short-term bridging loan
of F1 60 million to the former DAF company in February

1993 at the customary rate, or the central bank interest
rate plus 1,5 % . At the time of your letter, this priority
loan had been partially repaid and it was still unclear
whether the proceeds of the remaining assets were
sufficient to ensure full recovery of the loan .

The new company, DAF Trucks NV, started on 2

March 1993 and, unlike the former DAF, it is not a
full-line manufacturer, but is focusing entirely on the
heavy and medium-sized trucks market segments . DAF
Trucks NV bought the core assets for F1 482 million (')
the former DAF at an agreed price based on reports of
independent appraisers and which was according to your
authorities in general between the liquidation value and
the value negotiated on a one to one basis presuming a
continued use and purpose of these assets . The price
included the assets of DAF Westerlo and the immaterial
assets, incorporating the technology for the new 75 / 85
series, which were sold for F1 100 million .

to notify sufficiently the foreseen public support for the According to your authorities, the decision to participate
new DAF company . It requested therefore a complete by the Flemish and Dutch Government was based on a
notification pursuant to Article 93 ( 3 ) of the EC Treaty business plan by external consultants and which showed
of all the measures in favour of DAF Trucks and positive prospects for the new firm if it concentrated on
detailed information on the losses on investments in the its core business coupled with a strong reduction of
old DAF, alleged to amount to more than F1 200 million . capacity . Your Government stressed that it acted with a

similar attitude as the various private investors had done
in this case and that it is of the opinion that participating
in DAF will proof a sound investment in due time, not
In their telex of 19 March 1993 your authorities only for the Dutch State but also for the other investors .
requested the Commission to consider the telex of 26
February 1993 as a proper notification pursuant to
Article 93 ( 3 ) of the EC Treaty and promised to reply to
the Commission 's request for detailed information in due
course . They also announced that they were trying to In view of the involvement of the Dutch State in the
coordinate this case with the Flemish authorities . search to restructure DAF failure the State to

At a bilateral meeting between your authorities and the

Commission, held on 30 March 1993 at your request to
explain the public participation in the new DAF Trucks,
the Commission informed your authorities that, in view
of the sensitivity of competition and the excess capacity
in this sector, the necessity of transparency and in order
to provide third parties and opportunity to submit their
comments, an initiation of the procedure foreseen in
Article 93 ( 2 ) of the EC Treaty could not be avoided .

In view of the involvement of the Dutch State in the
search to restructure DAF, failure by the State to
participate in the new company would have damaged
confidence in the company and would have delayed the
process of arranging the financing . Both developments
would have been negative for the company and its
position in the market . Moreover, your Government
considered it important to retain an innovative, techno ­
logically high-value company for the Netherlands, at the
centre of a cluster of suppliers and knowledge institutes .

(') Part of the purchase price, i.e. F1 45 million, will be repaid

with interest in 1995 and 1996 to the former bank
By letter dated 21 April 1993 your authorities provided, consortium . To that effect, the bank consortium received a
pursuant to Article 93 ( 3 ) of the EC Treaty, more infor ­ collateral on the assets of DAF Trucks NV .

No C 31 / 11
2 . 2 . 94 Official Journal of the European Communities

The new capital structure would according to your auth ­
orities be as follows ;

( in Fl million )

Shares Risk ­
bearing

AC ) B VI o bearing Total

loans

Dutch State 110 45 40 195

Flemish region 40 15 20 75

Institutional investors 65 5 70

Former bank

consortium 45 45

Other investors 77 2,5 79,5

Total 292 90 15 67,5 464,5

O Type A shares are preference shares .
( 2 ) Direct shareholding in subsidiary DAF Trucks Vlaanderen NV .

Interest on the risk-bearing ( subordinated ) loans is
8,5 % . The Dutch and Flemish Governments agreed
with the private shareholders that public shareholding
will decrease below 50 ° / o . At the start of the new
company public shareholding was beyond 50 %, but
expected participation of new private shareholders would
reduce this stake in a short time .

In their letter of 21 April 1993 your authorities also
informed the Commission that, in view of the massive
losses of the former DAF, the chance that competing
creditors would recover any part of their claim from the
bankrupt estate was very limited . As to the public losses
in the former DAF, the Dutch State expected to lose the
F1 30 million " Bijzondere Financiering " loan awarded in

1983 by the NIB with a guarantee from the State, the
shareholding of about 2 % which also dated back to the
early eighties and which then costed around F1 20
million as well as a loss of F1 199,6 million on the
outstanding debt, composed of F1 158,3 million credits
and F1 41,3 million interest charges until the date of
receivership, from development credits ( Technische
ontwikkelingskrediet or " TOK ") which the Dutch State
has granted since 1982 to finance part of the devel ­
opment costs of the company . These credits are only
repayable under certain conditions, depending on the
number of sold products or turnover within a 10-year
period . However, the " Bijzondere Financiering " loan of
F1 67 million granted by the NIB has entirely been repaid
out of the revenues of the sale of immaterial assets which

served as a security on the loan .

On 14 May 1993 the Commission sent a letter to both
the Belgian and the Dutch Government in which it
informed that it had created two aid files, respectively
the earlier mentioned NN 27 / 93 for the Belgian public
investment in the new DAF and the NN 43 / 93 for the

Dutch one and that it would withdraw the old aid

numbers NN 109 / 92 and NN 138 / 92 . The aid files
would not only refer to the public intervention in the

new DAF company but would refer as well to any
possible aid elements contained in the dissolution of the
former DAF . The national authorities were thereby also
informed of the forthcoming decision to open a formal
procedure provided for in Article 93 ( 2 ) of the EC
Treaty on these cases for the following reasons :

( i ) the public interventions concerned a company in

difficulties, operating in a sector which suffers from
surplus capacity ;

( ii ) there are serious doubts as to the claim of both

Governments that the public participations in the
new DAF company are in conformity with standard
company practice in a market economy and conse ­
quently do not contain State aid elements . In this
context it should be taken into consideration how
private and public shareholders cancelled or trans ­
ferred debts of the former DAF to the new DAF

company ;

( iii ) in analogous cases in this sector the Commission has

always opened a formal procedure to enable compe ­
titors and other interested third parties to make their
remarks ;

( iv ) since the framework on State aid to the motor

vehicle industry applies, aid could be submitted to

appropriate strict conditions . Such conditions can
only be imposed by a final decision following the
procedure provided for in Article 93 ( 2 ) of the EC
Treaty .

In order to complete the files, the Commission annexed
to these letters a list of detailed questions, the answers of
which would form the basis for a meeting between the

Belgian and Dutch authorities and the Commission .
Finally the Commission urged both Governments to
withhold from further payments to the company and
repeated that any aid granted unlawfully may be
recovered .

By letters dated 28 May 1993 the Dutch and Belgian
authorities replied to the technical questions raised by
the Commission in its correspondence of 14 May 1993 .
A trilateral meeting between the Belgian and Dutch

authorities and the Commission was held on 1 June 1993

in which the answers were discussed and further infor ­
mation was provided . From the evidence it became
apparent that the Dutch State did make losses on
outstanding public debts and in its participation in the
bankrupt company . Moreover, it was confirmed that the
capital and risk-bearing loans to the new company were
fully paid .

Moreover, it appeared from the information received
that the Dutch State had granted in 1991 and 1992
development credits to DAF under the " TOK " scheme
for an amount of F1 50 million, without respecting the
provisions of Article 93 ( 3 ) of the EC Treaty . At that

No C 31 / 12 Official Journal of the European Communities 2 . 2 . 94

moment the company was no longer repaying its
liabilities from the older development credits .

Your authorities promised to draw up a detailed analysis
of the total public losses ( principal and interest ) from the
DAF bankruptcy . In addition, your authorities were to
forward the Commission an ' updated shareholders '
agreement as well as more detailed information on the
conditions of the sale of the assets of the former DAF to
the new company . Additional details on the terms on
which public and private investors have provided capital
and unsecured loans were requested from your
Government .

On 9 June 1993 the Commission received a fax from
your Government containing some of the additional
information requested by the Commission at the meeting
of 1 June 1993 . By fax dated 15 June 1993 your auth ­
orities informed the Commission that it intended to
withdraw notified research and development aid
# measures for the former DAF ( Case No N 422 / 92 ). The

Commission had requested additional information on
this case by letter dated 22 December 1992 but never
received a reply .

By letter dated 2 July 1993 the Commission informed
your Government that according to information at its
disposal in May 1991 and again in July 1992 F1 25
million development credits were granted to the former
DAF under the " TOK " scheme . The information

received on 9 June 1993 showed that at the moment of
the receivership of DAF an amount of F1 35,6 million on
principal and interest on these credits were outstanding .
It also resulted that since 1991 repayment obligations of
past development credits were postponed or partly made
dependent on the profits of DAF, resulting in savings to
the company . Moreover, the Commission was informed
that F1 1,55 million of the proposed aid measures for
R&D ( Case No N 422 / 92 ) were paid to the former
company without prior approval from the Commission .

All these measures had to be notified both under the
framework on State aid to the motor vehicle industry as
under the framework for State aids for research and
development . Therefore the Commission registered the
measures as non-notified aid in the meaning of Article
93 ( 3 ) of the EC Treaty ( Case No NN 58 / 93 ). The
Commission added that this Case was to be included in
Article 93 ( 2 ) of the EC Treaty procedure and repeated
that all illegally granted aid may be recovered .

By letter dated 5 October 1993 your authorities replied
to the Commission 's letter of 2 July and to further oral
requests of information raised early July 1993 . They
argued that the review of repayment obligations of
earlier TOK loans was partly due to the failure of one of
two developed products which can be a reason for
cancellation of repayment of such loans . However, your
authorities wished not to annul part of the repayment

but were willing as a major exception to link further
repayment to profits under the assumption that the
downturn of the market was temporary . A quantification
of the company 's savings from this rescheduling was not
provided . As to the new TOK loans granted in 1991 and

1992 they recognize that a notification should have been
more appropriate . The research aid of F1 1 555 492 had
indeed been paid on the conditions that the Commission
would approve the project, Finally, information was
provided concerning the F1 67 million credit awarded in
December 1992 by the NIB in return of securities on the
intellectual property rights linked to the 75 - and
85-series,

The old DAF group manufactured and distributed a
complete range of commercial vehicles in six locations :

— Eindhoven ( NL ): engines, components and assembly

of medium and heavy trucks ( military and civil use ),

— Westerlo ( B ) : truck cabs and axles,

— Leyland ( UK ): engines, components and assembly of

light, medium and heavy trucks ( military and civil
use ),

— Glasgow ( UK ) : truck and van axles,

— Birmingham ( UK ): components and assembly of

vans .

The truck business was organized in a dual structure of
which Van Doorne DAF BV grouped the truck activities
on the continent while Leyland DAF Holdings Ltd
grouped the truck activities in the United Kingdom and
overseas . Further to the truck business, DAF had its own
financial subsidiary ( DAF Finance Company or DFC ), a
subsidiary producing aviation components and special
military vehicles ( DAF Special Products ), a real estate
subsidiary ( DOGM ) as well participations in several
companies ( e.g. 44 % in United Bus ) and joint - ventures

( e.g. Cabtec with Iveco-Pegaso and European Truck
Design with Renault Vehicules Industriels ).

The parent company DAF NV has been publicly quoted
on the stock exchange of Amsterdam and London since
June 1989 . Important shareholders of the company were :
VADO, DSM and Rover Group ( linked together by a
shareholder agreement ), Nationale Nederlanden, Aegon
and ABN / AMRO . End 1992 the group employed 13 300
persons ( excluding trainees ) of which some 5 500 in the
Dutch subsidiaries, 1 500 in the Belgian, 5 300 were
employed by the United Kingdom subsidiaries, 1 000
overseas . The new company DAF Trucks NV employs
around 3 600 persons of which 2 750 are located in
Holland and 750 in Belgium . This company has also
taken over the distribution centre in the United Kingdom
with 120 employees . From the receivership in the United

2 . 2 . 94 Official Journal of the European Communities No C 31 / 13

Kingdom four seperate buy-outs have been approved .
Leyland Daf Vans Ltd continues the van operations in
Birmingham with 950 persons, Leyland Trucks Manufac ­
turing Ltd continues the truck operations at Leyland
with 980 employees, Multipart Distribution Ltd with
some 300 persons and a new company has been formed
for the takeover of six African subsidiaries . Only the
future of the axle plant at Albion currently employing
some 340 workers remains uncertain in the United
Kingdom . DAF SP has also been taken over saving a
further 165 jobs . On the whole about half of the former
staff number of the former DAF group will continue the
same acitivities but now spread over many independent
legal entities .

Until its merger with Leyland in 1987 DAF was one of
the smaller truck producers in western Europe concen ­
trating on the heavy segment of the market through the
merger DAF not only acquired a much larger share in
the European truck market but was also able to offer a
full range of commercial vehicles . In the years following
the merger the new group decided to step up its
investment plans with a view to renewing its entire
product range and improving its geographic distribution
of its sales network . In fact, the new DAF group was
very dependent on the United Kingdom truck market,
where it was market leader . The company could not
have foreseen the extent of collapse of the United
Kingdom truck market as it occurred after 1989 . DAF 's
solid position in many other European markets provided
at first some compensating sales volume, but its weakness
in the German market which represented the only
buoyant sales outlet for European truck sales in 1991
and 1992 accentuated the drastic fall in its sales volume .
As a consequence of its bad fortunes, DAF — which was
only marginally profitable in its top year 1989 — accu ­
mulated heavy losses over the years 1990 to 1991 . The
restructuring efforts undertaken by the company since

total . The van market ( below six tonnes ) in western
Europe also peaked in 1989 with a volume of around
760 000 units, falling only marginally over the next
years . DAF has traditionally been strongest in the heavy
truck segment of the market, with a share of around

10 % . Its presence in the light - and medium-truck range
and in the van market has always been more modest at
about 6, 8,5 and 2,5 % respectively . While DAF was able
to maintain its market share in the latter segments during
the recession years, it has lost ground in the heavy

segment .

In their correspondence with the Commission both your
Government as well as the Flemish Regional
Government claim that the public intervention in the new
DAF Trucks company does not entail State aid . They
argue that the decision to participate was based on sound
business prospects for the new company, basically the
former DAF freed from its loss making subsidiaries, from
excess capacity and from redundant staff, concentrated
on the core business — these operations were still
profitable in the old DAF — promises sufficient viability
and profitability in due course . Consequently, public
investments in DAF Trucks are in their view compatible
with the principle of a private investor operating under
normal market conditions .

at some compensating, Since the public intervention concerned a company in
in the German market which represented the only difficulties operating in a sector which suffers excess
buoyant sales outlet for European truck sales in 1991 capacity, the Commission considers it inevitable, as it did
and 1992 accentuated the drastic fall in its sales volume .

in analoguous cases ( Rover Group, Renault, Enasa ), to

As a consequence of its bad fortunes, DAF — which was assess the measures with respect to DAF in the light of
only marginally profitable in its top year 1989 — accu ­ the Articles 92 et seq . of the EC Treaty and more in
mulated heavy losses over the years 1990 to 1991 . The particular the provisions of the Community framework
restructuring efforts undertaken by the company since on State aid in the motor vehicle industry and the

1991 and the capital increase of 1991 did not radically application of State aid rules to public authorities '
improve the results of the company in 1992 . Conse ­ holdings . In order to determine whether the public inter ­
quently, the company could not avoid serious financial vention in DAF constitutes State aid or not, the
difficulties which, as described above, caused the bank ­ Commission should examine the conditions under which
ruptcy of the company once its banks and candidate new the public participation in the new company was taken
investors could not be convinced to subscribe the latest and whether it is compatible with the behaviour of a
restructuring plans and corresponding financial private investor operating under normal market
injections . conditions . Moreover, the Commission should also take

into account the measures of your Government before
the dissolution of the former DAF and which have
enabled the company to stay in business despite its
several financial difficulties until and during its
The western European truck market of over six tonnes receivership .
peaked at nearly 300 000 units in 1989 . Subsequently, the
market fell and reached only 258 000 units last year .
This fall in sales volume would have been even larger if
the German reunification had not abnormally boosted
German truck sales after 1990 . As in 1993 the excep ­ A first analysis of the available information under the
tional German boost no longer applies, a further and relevant State aid rules came to the conclusion that the
stronger sales decline is expected . Within the truck following elements of the public intervention may
market the heavy truck segment constitutes the most contain State aid to the former or the new DAF
important part, representing around two thirds of the company :

1991 and the capital increase of 1991 did not radically
improve the results of the company in 1992 . Conse ­
quently, the company could not avoid serious financial
difficulties which, as described above, caused the bank ­
ruptcy of the company once its banks and candidate new
investors could not be convinced to subscribe the latest
restructuring plans and corresponding financial
injections .

A first analysis of the available information under the
relevant State aid rules came to the conclusion that the
following elements of the public intervention may
contain State aid to the former or the new DAF

company :

No C 31 / 14 Official Journal of the European Communities 2 . 2 . 94

as to your Government : fiable under the framework for State aid to the car
industry . As it was not notified at the time, the loan was
therefore illegally granted . At first sight, the aid appears

— the rescheduling since end 1990 of the first TOK to be incompatible with the criteria of the motor-vehicle

loan resulted in a not yet quantified important saving framework because the aided project envisaged the final
to the company, stages of the development of a new medium-sized truck

series ( 75                                      - and 85-series ). The framework provides that

— the granting of the latest TOK loan of F1 50 million vehicles the development is a standard of less requirement polluting for and the energy-saving industry and

— the rescheduling since end 1990 of the first TOK

loan resulted in a not yet quantified important saving
to the company,

— the granting of the latest TOK loan of F1 50 million

of which F1 35,6 million was outstanding,

— the granting of F1 1,55 million research subsidy ;

— the postponement by the NIB of the first repayment

of F1 2,5 million on a loan of F1 30 million,

— the granting by the NIB of F1 67 million loan

guaranteed by the State,

— the granting of a F1 60 million bridging loan,

— the contribution to the new company of F1 155
million equity capital,

— the contribution by the public bank NIB of F1 45

million risk-bearing loans of which F1 40 million were
for the account of your Government ;

as to both Governments : the sale price of the assets .

The postponement and revision of repayment conditions
on earlier TOK loans in December 1990 by which
repayment was not only postponed but also made subject
to profitability of the company added new State aid
elements to earlier aid measures which were notifiable
under the provisions of the motor vehicle framework,
given that the project cost was superior to ECU 12
million . As such, repayments of F1 26,98 million
excluding interest advantages over the years 1989 to

1991 were not executed nor was the unknown amount
for 1992 ( 1,5 % of the turnover related to the 95-series ).
Your authorities could however have known in the light
of past experience ( revision of repayment conditions of
development loans to Volvo Car BV were notified in
December 1988 ) that such charges in repayment
conditions might contain additional aid which is noti ­
fiable under State aid rules, particularly in a sector where
specific and more stringent notification requirements are
in force . It is to be verified whether the Commission
would have approved such proposal .

The latest TOK loan granted to the old DAF in 1991
and increased in 1992 to F1 50 million of which F1 35,6
million was outstanding on the moment of receivership
of DAF, enabled the company to continue its model
renewal programme at a moment when its financial
problems were imminent . The loan constitutes an
application of approved State aid schemes and was noti ­

should thus be financed from the company 's own
resources . Only to the extent that development activities
relate to the introduction of generally innovative
products at Community level can development aid be
approved in this sector . The Commission has not
received any indication to that effect .

T}ie granting of the new TOK loan is all the more

surprising given that your authorities were well informed
of the ever deepening financial crisis of DAF which
impulsed all other creditors of the company to seek
securities on their loans . Such securities were not
normally foreseen by the TOK aid scheme and your
authorities ' letter of consent of the loan refers to the
financial difficulties of the company which needed

further clarification .

In view of the precarious financial situation in which the
company was confronted with acute liquidity problems,
your Government granted at the end of last year a State
guarantee on a new loan of F1 67 million to be provided
by the NIB . In return for the guarantee the Dutch State
required from DAF to give into security its immaterial
assets for which the company had to seek the consent of
its creditors . Despite the fact that at that time the
continuity of the firm was already very uncertain and the
financial risks related to unsecured loans in the company
must have been clear, your Government omitted to limit
its exposure by also securing the maturing F1 30 million
guaranteed " Bijzondere financiering " loan . Of the latter
loan, a first repayment of F1 2,5 million was postponed
without any collateral in 1992 and has now to be added
to the State 's losses . This amount will, therefore, form
part of the State aid procedure .

Taking into account the very particular circumstances
during the last few months of the old company the
nature of the guaranteed NIB loan of F1 67 million and
the bridging loan of a maximum F1 60 million granted by
the Dutch State suggest the existence of rescue aid, all
the more since the amount of the loans granted was not
in proportion to its financial stake in the company as
compared to the secured creditors of DAF or as share ­
holder . The Dutch State held only 1,85 % of DAF NV .
By providing at this stage new loans into the almost
bankrupt company, the Dutch State engaged itself in the
outcome of the process while giving at the same time
clear signals to other interested parties as towards its
willingness to participate in the future of DAF . By giving

i

2, 2 . 94 Official Journal of the European Communities No C 31 / 15

this signal and given the circumstances at the period
directly before and during the receivership, the Dutch
Government should have presumed that the interventions
were indeed rescue aid and needed therefore to be

notified accordingly before implementation . The fact
that the principal and interest due would under any
circumstances be repaid does not exempt your
Government from its notification obligations . The degree
by which these loans have not been fully recovered in
terms of interest and principal will, therefore, form part
of the State aid procedure in this case . This appears to be
only the case for F1 7,5 million of the bridging loan
which was not yet repaid by July 1993 .

At present the Commission has insufficient information
to evaluate fully the price and terms on which the assets
of the former DAF were sold to the new company . From
the perspective of Article 92 of the EC Treaty it is
important for the Commission to appreciate all the
aspects of this sale because of the following . At an early
stage it appeared that the receivers were working
towards a solution implying the continuations of an
important part of DAF operating under a new legal
entity, freed from redundant staff and the debt burden
which finally teared up the old company . However, in
this scenario basically the same group of shareholders
were to lead the new company assisted by a substantial
financial injection in the form of equity capital and risk ­
bearing loans from public funds . If this solution excluded
other potential interested parties to bid for these assets, a
not unlikely presumption given the precarious situation
in which the former DAF found itself and the time
pressure, it is well possible that the assets of the old firm
were sold to the new set-up at a lower price than might
have been achievable in a more competitive bid . In this
case the advantage of the acquisition of production
facilities, up to date technological knowledge and stocks
( including unsold trucks ) at a price below the one
resulting from a more competitive bid should be added
to the advantage of starting to compete with a leaner
company, but essentially the same DAF . Moreover, the
purchase of these assets was made possible by the early
commitment of both the Flemish Government als well as
your Government to participate in the new company and
the subsequent payment of public funds .

The decision of the Flemish Government and your
Government to invest substantially in the new company
should be examined in conjunction with the preceding
one . The new company was basically founded by the
same partners which were already discussing the future
of the former DAF late 1992 on the basis of a business

plan already available when the company went into
receivership . During the period of receivership the plans
that existed before were finalized, except that bank ­
ruptcy of the former DAF allowed realization of these
plans without the burden of redundancy costs and debts,
whilst the potential technical capacity remained virtually

intact . The vital role of the public sector in the new
set-up makes at thorough analysis of the conditions of
the public participation indispensable . Although both the
Flemish Government as well as your Government claim
that the decision to invest in the new company was
guided by the market investor 's principle and therefore
does not entail State aid, the Commission notes that
your authorities admit that in view of the involvement of
the Dutch State in the search to restructure DAF, its
failure at that stage to participate in the new company
would have rendered the outcome of the only examined
solution very uncertain, if not impossible .

Although, public shareholding was expected to decrease
below 50 ° / o, the proportion of total public share in the
risk-bearing capital of the new company is considerably
higher than this percentage, i.e. 61 % . In this context,
the Commission wishes to verify whether the F1 5 million
risk-bearing loan provided by the public bank NIB and
considered by your Government as private investment
but by the Commission as public investment, constitutes
State aid . Moreover, the terms at which private partici ­
pations were taken may be different and more stringent .
This appears to be the case for the temporary partici ­
pation of the former banking consortium .

If the final conclusion of the analysis could confirm that
State aid was granted to the new DAF company such aid
could only be approved under the framework on State
aid to the motor vehicle industry if the aid is linked to a
satisfactory restructuring plan . In view of the current
sectoral problems such aid should be accompanied by
reductions in capacity in order to contribute to the
overall recovery of the sector . The procedure provided
for in Article 93 ( 2 ) of the EC Treaty should enable the
Commission to examine the viability of the business plan
of the new company and the effects of the aid on
unaided competitors . This may require that the restruc ­
turing plan be accompanied by an appropriate reduction
of excess capacity ( see Renault, Rover, Enasa decisions ).

Since the shareholders of the former DAF should have
been aware that non-notified aid was illegally granted
and since part of them constitute together with your
Government and the Flemish region the majority owners
of the new company, the legal successor of the former
DAF, it must be verified whether any illegal and incom ­
patible aid should be reimbursed by the new company .

The following public interventions of your Government
in favour of DAF require further analysis from the
perspective of Article 92 of the EC Treaty for the
following reasons :

No C 31 / 16 Official Journal of the European Communities 2 . 2 . 94

— the non-notified, new and rescheduled development

credits (" TOK ") awarded to the former DAF of
which F1 35,6 million was outstanding, as well as the
rescheduling of earlier development credits, of which
the effect cannot yet be quantified, may constitute
illegally granted State aid and may be incompatible
with the provisions of the framework on State aid for
the motor vehicle industry . The same holds for the
research subsidy of F1 1,55 million,

— even when it was evident that the former DAF was in

serious financial difficulties, your Government
omitted to secure its interests in the company by
means of requiring sufficient collateral before resche ­
duling old financial arrangements . The Fl 2,5 million
postponement of repayment on an earlier NIB loan,
which your Government cannot recover from the

former DAF, may therefore constitute State aid,

— given that the bridging loan was at the time not in

proportion to the involvement of your Government in
the former DAF as a shareholder or a secured

creditor, the Fl 7,5 million which has so far not been
repaid may constitute State aid,

— the sale of the assets of the former DAF to the new

company and the role of the public authorities may
imply that a financial advantage in the form of a
lower purchase price of these assets, including new
technology and a large stock of unsold trucks, at a
price lower than possible in a competitive bid, has
been conferred to the new company . This has made it
possible for the new legal entity, but essentially the
same company as before, to continue to compete
without the burden of the past,

— the terms of public participation in the risk capital of

the new company ( Fl 155 million equity capital and
Fl 45 million risk-bearing loans by your Government )
should be examined in view of the private investor
principle and be compared with the terms at which
private investors participated in the new company, To
the extent that these measures contain State aid
element ^ to the new company, the business plan
should be examined in the light of the provisions of
the framework on State aid for the motor vehicle
industry related to restructuring aid,

— if the assessment of the case should confirm that any

illegal and incompatible State aid has been granted,

the Commission will verify whether the different aid
measures, including these awarded by your
Government and which cannot be recovered from the
liquidated company to the former DAF, should be
reimbursed by the new company .

For these reasons, and because the case under exam ­
ination involves a company in difficulties, operating in a
sector which suffers surplus capacity, the Commission
proposes an opening of the procedure provided for in
Article 93 ( 2 ) of the EC Treaty . This procedure would

also give an opportunity to interested third parties to
make known their views before the Commission takes a

final decision .

Within the same procedure, the Commission gives
hereby your Government notice to submit its comments
within one month from the date of this letter, and to
provide all the information necessary for the appraisal of
the case .

The Commission is also, by means of publication of the
present letter in the Official Journal of the European

Communities, giving notice to the other Member States
and third parties concerned to submit their comments .

The Commission reminds your Government that
according to the provisions of Article 93 ( 3 ) of the EC
Treaty no aid measure can be put into effect before the
93 ( 2 ) procedure has resulted in a Commission 's final
decision .

The Commission draws the attention of your
Government to its letter of 3 November 1983 sent to all
Member States regarding their obligations as they arise
from the provisions of Article 93 ( 3 ) of the EC Treaty
and to the communication published in the Official
Journal of the European Communities No C 318 of 24

November 1983, on the basis of which any aid provided
illicitly, that is without waiting for the Commission 's
final decision resulting from Article 93 ( 2 ) of the EC
Treaty procedure could be subject to a recovery order .'

The Commission hereby gives the other Member States

and other Parties concerned notice to submit their
comments on the aid in question within one month of
the date of publication of this notice to :

Commission of the European Communities,
200, rue de la Loi,

B-1049 Brussels .

The comments will be communicated to the Dutch

Government .