ZF English

Ford has to pay 27 million euros on top of the 57 million euros agreed for Automobile Craiova

28.02.2008, 20:03 12

The price Ford will pay to the state for the stake in Automobile Craiova remains unchanged at 57 million euros - the sum decided on after privatisation negotiations, Nadia Crisan, Ford Europe's consultant for the privatisation process told ZF.
"The acquisition price is still 57 million euros for the 72.4% stake that the state owns in Automobile Craiova. As soon as we have analysed the European Commission's answer, we will discuss the position of the European institution with the representatives of Automobile Craiova's privatisation commission," Crisan said.
The 27 million-euro state aid illegally granted for the privatisation of Automobile Craiova was the difference between the market price and the amount paid by US Ford group (57 million euros) to take over the automotive plant, European Commission's spokesman Johannes Laitenberger explained.
The sale of the majority interest in Automobile Craiova by the Romanian state did not comply with EU legislation because the State Assets Resolution Authority offered certain terms that provided a lower price, the spokesman said. "The illegal 27 million-euro aid represents the difference between the market price and the amount paid by the buyer," Laitenberger told a news conference called to announce that the EC had finished its investigation.
The European Commission completed the investigation on the privatisation of Automobile Craiova, started in October 2007, and found that Romania had imposed conditions on the sale that aimed at ensuring a certain level of production and employment, accepting in exchange a lower sales price, a release from the institution reveals.
"The higher production and employment level achieved for Craiova through the conditional sale and the lower revenue Romania had conversely earned constitute state aid. In order to avoid that companies receive unfair advantages over competitors, aid can only be granted under strict conditions. None of these conditions applied to the privatisation and the aid is therefore incompatible with the single market," the release says.
In order to redress the distortion of competition caused by the unlawful aid, the Romanian Government must recover 27 million euros from Automobile Craiova, the quoted source adds.
"The Commission's investigation revealed that the conditions had lowered the sales price. The market value of Romania's 72.4 % stake in the core industrial assets bought by Ford was estimated at 84 million euros. Consequently, Romania, in imposing several non-economic conditions on the tender, forewent 27 million euros of revenue," the release explains. "Since the conditions ensured the achievement of a certain production, employment and investment level, the conditional tender gave an economic advantage to Automobile Craiova and Daewoo Romania. This advantage was financed by the revenue that the state foregoes through the sale."
The European officials say that the granting of the aid was not conditional on the achievement of any of the many common interest objectives for which aid can be authorised in the EU.
European Commissioner for Competition Neelie Kroes said in the release, "Imposing conditions on a privatisation normally lowers the sales price, so that the state loses revenue and the privatised activity gains a selective advantage."

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