Approval of State aid pursuant to Articles 92 and 93 of the EC Treaty Cases where the Commission raises no objections N 475/96 - Austria
16. 1. 98 EN Official Journal of the European Communities C 12/5 Approval of State aid pursuant to Articles 92 and 93 of the EC Treaty Cases where the Commission raises no objections NØ475/96 - Austria (98/C 12/03) (Text with EEA relevance) Summary of the Commission’s decision not to oppose the aid which the Austrian Government intends to provide to BMW Steyr for the purpose of regional develÜ opment, environmental protection, training and R&D. "By letter dated 7 June 1996 the Austrian Government informed the Commission of its intention to grant aid to BMW Motoren AG for its engine plant (manufacture and assembly) in Steyr, Upper Austria, for the purposes of regional development, environmental protection, training and R&D. By letter dated 17 July 1996 the Commission asked for further infomation. The Austrian autorities submitted some of that information by letter dated 27 September 1996 and provided further details during a visit to the Steyr plant on 23 October 1996. By letter dated 5 November 1996 the Commission asked for further information so that it could continue its work and referred the Austrian authorities to various rules governing the application of the Community guidelines. The Austrian authorities replied on 9 December 1996. The Commission asked further questions by letter dated 21 January 1997. On 7 March 1997 a meeting took place with representatives from BMW, the Austrian authorities and the Commission. Lastly, the Austrian authorities submitted a final notification on 22 April 1997. The SteyrÜKirchdorf area in Upper Austria forms part of a development area within the meaning of Article 92(3)(c) of the EC Treaty; regional aid may be granted there up to a gross grant equivalent of 23Ø% (or a net grant equivalent of up to 15Ø%). The aid recipient is BMW Motoren AG Steyr, a wholly owned subsidiary of BMW ˆsterreich Holding GmbH, which is in turn a subsidiary of BMW AG München. In 1995 BMW Motoren AG Steyr achieved a turnover of ˆS 14Ø400 million and employed 2Ø272 permanent and temporary staff. At the end of 1996 the number of employees was 2Ø328. According to BMW, the firm contributes indirectly to a further 2Ø500 jobs. In round figures, the BMW group (including Rover) in 1995 produced 1,1 million vehicles, employed 116Ø000 people and had a turnover of DM 46Ø000 million. The object of BMW Motoren AG Steyr is to develop, manuÜ facture and market petrol and diesel engines. In 1995 it manufactured 419Ø000 engines, comprising: 262Ø000 four and 137Ø000 six cylinder; 315Ø000 petrol and 104Ø000 In 1996 series of measures in Steyr for some years now, and diesel. This represents around 60Ø% of the BMW group’s total production. the plant manufactured 440Ø000 engines. Therefore the sector affected by the proposed aid is engine manufacture for motor vehicles. The project in question is entitled ""Phase V’’, forms part that BMW has been of a implementing is intended to operate over the period 1996 to 2000. Phase IV, which operated over the period 1993 to 1996, was notified in 1994 and approved by the EFTA Surveillance Authority by means of a decision published in Official Journal of the European Communities C 250 of 8 September 1994. While there may therefore be a certain overlap of measures, BMW’s internal accounting is such as to exclude confusion of the projects in each individual phase. The purpose of the plan notified is to enable the BMW group to continue to build up a development centre for diesel engines at the Steyr plant. The work mainly concerns the reduction of environmentally harmful emissions and minimum consumption concepts. BMW also wishes to modernize and extend its petrol and diesel engine manufacture, particularly in order to meet the growing demand of its assembly plant in Spartanburg (USA) and of Rover. According to the notification, the objectives set are to be achieved with the help of the following investments and aid: (in ˆS million) R&D Environmental protection Training Innovation Regional investment Project costs [. Ø. Ø. ü 18 89 229 2Ø229 TotalØ [. Ø. Ø. ü Aid 76,6 4,5 20,0 15,8 228,8 345,7 The notified aid is based on the following rules: Article the General the Guarantee Law 1977, 1ØbØ(1) of [. Ø. Ø. ü Business secret. C 12/6 EN Official Journal of the European Communities 16. 1. 98 from Land Guidelines on assistance funds, and a Decision on joint funding by Steyr Town Gouncil. In the above mentioned letter dated 9 December 1996 it was stated that the local authorities had not yet officially decided on the basis for, and amount of, the aid, pending the maximum amount that the town could allocate was notified. the Commission decision. Accordingly, the investment The notification letter dated supplemented by 22 April 1997 provides for aid for industrial research and precompetitive development as well as in in the diesel engine development research equipment centre. The Austrian authorities have referred repeatedly to the fact that the objectives of the R&D programme should make it possible to go significantly further than the mandatory standards. European in each phase of the Furthermore, the only work industrial research and precompetitive development which would qualify for support would be that satisfying the additionality criterion stipulated in the Community R&D framework. emission Description Construction of new production and assembly lines for direct injection diesel M 47/57 Modernization of the production lines for crankshafts and connection rods for the four cylinder petrol engine; preparation for the EUÜ3 standards Modernization of production of the six cylinder petrol engine; preparation for the standards EUÜ3 and LEV (USA) Various structural measures Total Investment 1Ø703 144 343 39 2Ø229 In a letter dated 9 December 1996 regarding the sub projects concerned, the Austrian authorities made the following distinction (in ˆS million): The industrial research concentrates on preparatory work for the successor models to the MØ47/57 diesel engines, themselves the subject of investment in Phase V, and on the development of minimum consumption concepts. NonÜinnovative mobile investment NonÜinnovative immobile investment Total 1Ø611 618 2Ø229 The applied research element contained in the precomÜ petitive development comprises work on the Lean NOx Catalyst (LNC). The development centre for diesel engines, the only one of its kind within the BMW group, will receive new, higher performance test beds, which will enable dynamic test technology to be employed for emissions and cold starting. The requisite investment is directly connected to the research work; but the only aspect qualifying the depreciations for support are carried out during the projects undertaken by the manuÜ facturer in Phase V. Taking everything into consideration, the Austrian authÜ orities regard part of the product development notified as not receiving support as being precompetitive develÜ opment. For budgetary reasons no aid was applied for, since the project as notified already used up all the available funds. Phase V provides for various training measures. The notified aid covers part of for apprentices at the plant, subsidized at 50Ø%, and part of the practical training for approximately 1Ø500 employees at the plant (25Ø% aid intensity). Wage and salary costs for apprentices are not supported. training costs the None of the investment is both mobile and innovative. The elements concerning modernization were excluded from the mobile portion. The aid notified in the letter dated 22 April 1997 totals ˆS 228,8 million. Since only the mobile investment may be supported by regional aid, the gross grant equivalent is 14,2Ø% The total costs of the projects for innovative investment are ˆS 229 million, of which (according to the Austrian authorities’ assessment) apparently only ˆS 130 million (plus engineering costs of ˆS 28 million) represent genuine technical innovations at European level. includes measures The project also improved environmental protection. Investment for the planned period totals ˆS 18 million, but results in savings of ˆS 3 million. The bulk of the investment is for a non chemical deburring process. for Since the planned allocations in favour of a particular firm are to be financed by the State or through State resources, State aid is involved. Regional investment under Phase V totals ˆS 2Ø229 million, divided among the following four categories (in ˆS million): The aid is intended for a firm that manufactures motor vehicle engines and thus operates in the motor industry within the meaning of the Community framework on 16. 1. 98 EN Official Journal of the European Communities C 12/7 State aid to the motor vehicle industryØ(˛). In addition, the total costs of the assisted project is ECU 17 million (ˆS [. Ø. Ø. ü million are equivalent to approximately ECU [. Ø. Ø. ü million under the monthly ECU exchange rate applicable at the time of notification [June 1996ü). The programme of support within the meaning of Article 1ØbØ(1) of the 1977 Guarantee Law was approved by EFTA on 28 December 1994, on condition that each project for which aid was proposed had to be notified; this condition has been complied with in the present case. Aid granted in accordance with the Land of Upper Austria’s General Guidelines on assistance from Land funds has to be notified on an ad hoc basis. The alloÜ cation which according to the Austrian authorities, has been earmarked by the Steyr local authority is likewise aid requiring ad hoc notification. The Austrian authorities complied with Article 93Ø(3) of the EC Treaty by notifying the planned aid for the EMW project the Community framework in State aid to the motor vehicle industry. in accordance with in Steyr For the notified research and development work the industrial intensities apply: 50Ø% following aid research and an average (weighted) 27,7Ø% for precomÜ petitive development. No aid for product development. is being granted for The aid for BMW planned by the Austrian authorities satisfies the criteria laid down in Article 92Ø(1) of the EC Treaty and Article 61Ø(1) of the EEA Agreement. The notified aid, which constitutes a not inconsiderable part of the project funding, threatens to distort competition in the EU by granting BMW more favourable treatment than other firms not receiving aid. In addition, there is extensive trade between the Member States on the market for motor vehicle engines. Article 92Ø(2) stipulates certain types of aid that are compatible with the nature, the EC Treaty. geographical location and objectives of the aid are taken into consideration, none of the subparagraphs of that Article can be applied to the project. If In order to be able to assess whether the planned aid is compatible with the common market on the basis of one of the derogations contained in Article 92Ø(3), the notifiÜ cation must be examined the Community framework on State aid to the motor vehicle industry and with the Commission’s assessment criteria depending on the objectives being pursued, i. e. : in accordance with - as regards research and development, in accordance with the Community framework for State aid for research and developmentØ(ˇ), - as regards training, the Community framework on State aid to the motor vehicle industry, in accordance with The planned aid for training totals an eligible amount of ˆS 59 million excluding wage and salary costs for apprentices, which may not support. The proposed intensity is 50Ø% for the training of apprentices and 25Ø% for the training of existing staff in new applications. The weighted intensity is 33,9Ø%. receive for - as regards regional assistance, in accordance with the criteria the mobile regional aid, whereby investment is examined, on the basis of a cost benefit analysis, to see whether the proposed aid intensity is in proportion to the disadvantages of the recipient’s location, The Austrian authorities planned aid with 10Ø% intensity for innovative investment. - as regards innovative investment, in accordance with the Community framework on State aid to the motor vehicle industry, The Austrian authorities’ stated regional aid intensity is 14,2Ø% gross grant equivalent. The Commission has based its assessment on the discounted value of the aid to be paid, i. e. ˆS 202,8 million at a nominal value of ˆS 228,8 million. Taking into account the investment eligible for regional aid, the discounted aid intensity is 13,3Ø% the original maximum aid intensity is 23Ø% gge. in an assisted area in which environmental protection enables The significant in fields where there are no legal standards. The nominal intensity of the aid was set at 30Ø%. in protection improvement investment - as regards environmental protection, in accordance with the Community guidelines on State aid for environmental protectionØ(—). In the Community framework on State aid to the motor vehicle industry the Commission declares that it will adopt a positive attitude towards R&D aid. Within the meaning of the Community framework for State aid for research and development, it is above all essential to industrial research distinguish between basic research, and precompetitive development; the risk of the aid distorting competiton increases the closer the R&D is to the market. (˛) OJ C 123, 18. 5. 1989; OJ C 36, 10. 2. 1993; and C 284, 28. 10. 1995 (latest version). (ˇ) OJ C 45, 17. 2. 1996, p. 5. (—) OJ C 72, 10. 3. 1994. C 12/8 EN Official Journal of the European Communities 16. 1. 98 Under points 5. 3 and 5. 5 of the Community R&D framework, for industrial research and precompetitve development are, respectively, 50Ø% and 25Ø% of eligible costs. the acceptable gross aid intensities The aid for the project has a gross intensity of 50Ø% for the industrial research and of 30Ø%, 25Ø% or 0Ø% for the work categorized by the Austrian authorities as precomÜ petitive development. Under point 5. 10. 2 of the Community framework for State aid for research and development, a 5Ø% bonus is possible, up to the ceilings stipulated in point 5. 10. 6, if the research project is undertaken in an area as defined in Article 92Ø(3) of the EC Treaty. The Steyr area is categorized as the permissible maximum intensities are increased to 55Ø% for the industrial research and 30Ø% for the precomÜ petitive development. This is in accordance with the limits set in point 5. 10. 6. Thus the proposed intensities are in accordance with the Community framework for State aid for research and development. such an area. Consequently, As far as the aid for industrial research is concerned, the eligible costs are in accordance with Annex II of the Community R&D framework. After scrutinizing the details of each subproject notified as industrial research, the Commission, assisted by its independent experts, has concluded the these projects correspond to the definition contained in the Community R&D framework, since the research to be undertaken is thorough and structured and aimed at achieving significant technological progress in each subproject. With regard to the aid for precompetitive development (formerly applied research), the eligible costs likewise satisfy Annex II of the Community R&D framework. The Commission interprets precompetitive development industrial as meaning the shaping of the results of research into a plan, arrangement or design for new, altered or improved products, processes or services, whether they are intended to be sold or used, including the creation of an initial prototype which could not be used commercially. The details provided by the Austrian authorities letter dated 9 December 1996 and supplemented during the visit to Brussels on 7 March 1997 demonstrate that the subprojects specified in the notification enable the results of previous research work to be converted into new products and processes, up to and including the production of a prototype not suitable for commercial use. in a The eligible costs of the investment in the development centre also satisfy Annex II to the Community R&D framework. However, some items of equipment have a lifespan that extends beyond the period of the project. Consequently, the Commission takes the view that only the depreciations made in Phase V of the R&D work are compatible with the EC Treaty. The ˆS 130 million investment in the development centre is directly linked to the industrial research and precompetitive development projects described above. precompetitive development, The Austrian authorities have pointed out several times that, in thier opinion, part of the product development is but without actually substantiating this claim in detail. They add that, for purely budgetary reasons, no subsidy was planned for this. The Commission considers the activities described under ""product development’’ to be competitive work, since it mainly concerns the adaption of new engines [. Ø. Ø. ü to vehicles. The work goes beyond the stage of precompetitive development and pilot or demonstration projects. Consequently, under the Community R&D framework no aid may be granted for this product develÜ opment work. Moreover, the Commission takes the view that the competitive work undertaken in Steyr during Phase V does not contain any innovative aspects, since it is a logical continuation of the precompetitive develÜ opment work undertaken during Phase IV. The Austrian individual authorities have never maintained elements of the into competitive work. that integrated innovation are Point 6. 1 of the Community R&D framework stipulates that State aid must constitute an incentive for the firm to undertake R&D its normal that day to day operations. in addition to is According to the Austrian authorities, the number of staff and the expenditure at the development centre in Steyr are being considerably increased between 1995 (end of Phase IV) and 1997 (Phase V) [. Ø. Ø. ü. As a percentage of turnover with diesel engines, R&D expenÜ diture [. Ø. Ø. ü. that The letter dated 22 April 1997 lists individually all R&D projects that the BMW group is carrying out in Steyr. In agreement with its independent experts, the Commission considers the projects connected directly and exclusively with adaption to the EUÜ3 standards have been taken out of the eligible costs because they do not satisfy the additionality criterion. While the work on the further development of a lightweight component (ˆS 16 million) and the adaption to [. Ø. Ø. ü diesel engines with the aim of devising a minimal consumption [. Ø. Ø. ü concept (ˆS 11 million) contribute indirectly to a reduction in harmful exhaust gases, they have a more widespread effect than just adaption to the EUÜ3 standards since they are intended to enable the weight and consumption of vehicles to be reduced. BMW is not required to 16. 1. 98 EN Official Journal of the European Communities C 12/9 undertake such research work, but is carrying it out in addition to the R&D work occuring in the course of its day to day operations. Moreover, under point 6. 2 of the Community R&D framework proposed aid may also be permissible if it contributes towards the realization of a research project that would have been less ambitious without aid. The development of the Lean NOx ØCatalyst (costing ˆS 106 million) is clearly aimed at going beyond the EUÜ3 standards and considerably anticipating future environÜ mental protection objectives. Consequently, the Commission’s view BMW could not carry out an equally ambitious precompetitive development project without State aid. After all, the work being carried out by BMW carries special risks owing to its ambitious objective, since some of the subprojects being supported might not lead to findings that can be applied practically in the motor industry. in effect the Commission considers that required under point 6 of the Consequently, incentive the Community R&D framework is present in the R&D measures undertaken by BMW as part of industrial research and genuine precompetitive development. it no In the following table the compatible R&D aid for the individual categories is listed once again, with BMW’s classification being followed for the sake of simplicity, although the current longer corresponds Community framework for State aid for research and development. The applied research and the investment in the development centre count as precompetitive develÜ opment. In the Commission’s opinion, the product develÜ opment work contitutes competitive activity that is not eligible for R&D subsidies. to Description Project costs Basis for support Aid intensity Permissible aid (in ˆS million) Industrial research Applied research Investment in the Development Centre Product development 47 186 130 [. Ø. Ø. ü [. Ø. Ø. ü TotalØ 27 106 122 0 255 50Ø% 25Ø% 30Ø% 0Ø% 30Ø% 13,5 26,5 36,6 0Ø 76,6 The R&D aid of ˆS 76,6 million qualifies for the derogations contained in Article 92Ø(3)Ø(c) of the EC Treaty and Article 61Ø(3)Ø(c) of the EEA Agreement, since it is in accordance with the Commission’s policy on aid for R&D and for the motor industry. The Commission has a generally positive attitude towards training, retraining and conversion programmes. However, aid for such programmes must be examined in order to ensure that it does not simply alleviate the cost burden which companies would normally have to bear. In particular, the Commission must ensure that the training measures correspond to genuinely qualitative changes in the required qualifications of the labour force and relate to a significant proportion of the workers, so that it can be assumed that the measures are intended to safeguard employment and develop new employment possibilities for persons at risk of unemployment. in a genuine and 22 April 1997, it can be inferred that (a) the planned training results the employees’ skills, as shown by the programme submitted to the Commission, and (b) a considerable proportion of the employees at the Steyr plant are affected, since 1Ø500 of the total workforce of around 2Ø200 are receiving additional training. improvement in The wages and salaries of the staff to be trained are rightly excluded from the basis for support and the costs are broken down by type of training measure: ˆS 21 million for the training of apprentices and ˆS 38 million for practical training. The Commission has satisfied itself that the training programmes correspond the the qualifications described. In particular from the information supplied by the Austrian authorities in letters dated 9 December 1996 As a rule, in the motor industry the Commission permits aid intensities of 50Ø% for apprentice training and 25Ø% for practical training. C 12/10 EN Official Journal of the European Communities 16. 1. 98 Description Project costs Basis for support Aid intensity (in ˆS million) Permissible aid Apprentice training Practical training Apprentice wages and salaries TotalØ 21 38 30 89 21 38 0 59 50Ø% 25Ø% 0Ø% 34Ø% 10,5 9,5 0Ø 20,0 Consequently, the ˆS 20 million notified by the Austrian authorities is compatible with the EC Treaty. When examining regional aid to the motor industry, the Commission’s usual practice is to proceed as followsØ(Ñ): It to weigh up regional development. The Commission is aware that the extension of existing industrial facilities in disadvantaged areas can contribute towards therefore has a generally positive attitude towards investment aid that is granted in order to help overcome structural handicaps the Community. When assessing in such areas of regional aid proposals, the Commission must have the opportunity the regional development benefits (such as a contribution to the sustained develÜ opment of the region through the creation or retention of long term jobs and economic integration at local and Community level) against any adverse effects on the sector as a whole (such as the creation or retention of considerable overcapacity). The this assessment is not to call into question the fundamental the importance of Community, but rather to ensure that other aspects of the Community interest, such as the development of the sector at Community into account. likewise taken for cohesion regional aid purpose of level, are in The investment project will enable around 250 jobs (the number of jobs in the mobile workshops) to be safeÜ guarded, out of a total of approximately 2Ø300 jobs at the Steyr plant. In addition, Phase V contributes towards guaranteeing the plant’s economic viability for a number investment of years. BMW’s thus constitutes an the economic develÜ towards important contribution opment of the assisted area. The Commission concludes from this that the aid for the partial funding of this project will assist the development of the Steyr area. The costs for mobile investment notified by the Austrian authorities are eligible for regional aid according to the Community framework. - first, it examines whether regional aid may be granted, i. e. whether the area concerned is eligible for aid under Community law (normally within the framework of existing rules on State aid) and whether the investor has the option of choosing an alternative location for his project, so that the need for aid can be substantiated by the mobility of the project, it is is that itself intended to whose the Commission satisfies, - second, with reference to the mobile parts of the project the amount of aid is in proportion to the regional diffiÜ to resolution culties tried and tested method of costÜ contribute. The benefit a applied here. Through analysis comparison of the costs incurred by the investor in the course of implementing his project in the assisted in a central, area concerned with non assisted area, the area specific disadvantages are ascertained. The Commission’s usual practice hitherto has been to accept all regional aid that at least corresponds disadvantages the connected with investment in the assisted area, the costs locational to the investor - third, it examines, where applicable, whether top ups may be granted. These consist of increases in aid intensity designed to serve as an additional incentive for the assisted area invest concerned. These top ups are normally approved where the investment does not contribute towards worsening capacity problems in the sector concerned. In such a case, the aid is strictly limited to net compensation for the regional disadvantages, to in increase The investment mainly concerns new products, linked with an in productivity, above all due to additional supplies to Rover and to the plant in SpartÜ anburg (USA). The aspects concerning the modernÜ ization of existing products were excluded, since they proved to be not mobile. (Ñ) See, for example, the following cases: Ford/VW (OJ CØ257, 3. 10. 1991; Opel Eisenach, (OJ CØ43, 16. 2. 1993, p. 14; Fiat Mezzogiorno (OJ CØ37, 11. 2. 1993, p. 15); Jaguar (OJ CØ201, 23. 7. 1994, p. 4); FASA Renault (OJ CØ267, 14. 10. 1995, p. 13); Ford Genk, OJ CØ5, 10. 1. 1996, p. 5; VW Sachsen (OJ LØ308, 29. 11. 1996, p. 46). 16. 1. 98 EN Official Journal of the European Communities C 12/11 - the sum of the amounts ascertained in the last two steps constitutes the total amount of aid that can be approved by is normally discounted and expressed as a percentage of the investment eligible for support, in order to be able to compare it with the gross grant equivalent. the Commission. The amount This procedure was explained to the representatives of the BMW group when the Commission representatives visited Steyr on 23 October 1996. is located in Steyr The BMW plant in the SteyrÜ Kirchdorf area, Upper Austria, an assisted area within the meaning of Article 92 (3) (c) of the EC Treaty. In that area, regional aid with a gross grant equivalent of up to 23Ø% may be approved. The cumulative regional aid notified by the Austrian authorities amounts to a gross grant equivalent of 14,2Ø% (or 13,3Ø% after discounting) and therefore lies below the admissible maximum. In order to substantiate the need for regional aid, the Austrian authorities had to prove the mobility of the project, i. e. show that there is an economically viable alternative location for the project or parts thereof. If the planned investment cannot be carried out at another new or previously existing plant of the group, then the firm is compelled to carry out the project at the only possible location, with or without aid. However, where approÜ priate, innovation aid may be granted for the non mobile parts of a regional investment. the following Accordingly, the Austrian authorities divided up the categories: mobile; investment into innoÜ non mobile but vative. The Austrian authorities did not categorize any mobile part of the project as innovative. The investment that is neither mobile nor innovative is not eligible for aid. innovative; neither mobile nor from a In the case of BMW Steyr, part of the investment is apparently not mobile since technical and financial point of view it would be inappropriate to choose a location other than Steyr. As explained in the letter of 9 December 1996, five subprojects, with an investment allocation of ˆS 618 million, are classified as non mobile: modernization of existing production facilities for diesel engines (e. g. for the manufacture of housings), investment in connection with four cylinder petrol engines, two programmes for six cylinder petrol engines [. Ø. Ø. ü and a structural measure (new conveyor system). The remaining subprojects are mobile; they could also be carried out in Regensburg, Munich or Landshut. This was confirmed by the Commission’s independent experts (PLI - Price Waterhouse). The Regensburg plant, which belongs to the same group and is located in a non assisted area, was chosen by BMW, with the purpose of comparison, because this project could most the Commission’s agreement, for in Bavaria. In clearly be carried out in Regensburg. The Commission also noted that Regensburg, Landshut and Munich are located the additional costs arising due to the structural weaknesses in the SteyrÜKirchdorf assisted area can best be ascerÜ tained by comparing the project with an identical project carried out in a non assisted area. the Commission’s view, its the Commision asked Accordingly, independent experts to ascertain, by means of a detailed cost benefit analysis, the net extra costs that would arise if the mobile workshops provided for in the project were set up in Steyr instead of in Regensburg. Such additional costs can be traced back both to additional investment costs and to additional operating costs in the first three years of operation (familiarization with new work and increasing the work tempo)Ø(Ò). In the case in question, the disadÜ vantage assessed by the Commission and its independent experts the Regensburg plant has a better infrastructure for the implementation of the project than the Steyr plant. However, labour costs are lower at the Steyr plant. The resulting advantage is seen once the investment disadÜ vantages have been subtracted. The final results show that the discounted cost disadvantages amount to 14,2Ø% of the investment. investment concerns costs, since the Since the discounted cost disadvantages, at 14,2Ø% of the investment, are higher than the discounted aid intensity of 13,3Ø%, no additional payment is necessary. the that The Commission considers regional aid concerned is compatible with the EC Treaty on the basis of Article 92 (3) (c), since the aid intensity provided for by the Austrian authorities does not exceed the regional cost disadvantage and the project therefore has only a limited effect on the sector. In accordance with the Community framework on State aid to the motor vehicle industry, the Commission adopts a strict attitude to modernization and innovation is aid. examined to determine whether it really relates to the introduction of genuinely innovative products or processes at Community level. In particular, proposed aid innovation for In accordance with the Austrian authorities’ two letters of 9 December 1996 and 22 April 1997, aid is proposed to fund material investment in order to support BMW in its innovation effort. The projects in question are the three of six cylinder petrol engines and an integrated production planning system, for which a total amount of ˆS 130 million is earmarked. cold testing process’’ projects, ""crack (Ò) The Commissin’s assessment of the regional disadvantages is based on information from BMW and independent sources. C 12/12 EN Official Journal of the European Communities 16. 1. 98 The Commission asked its independent experts to assess the technical aspects of the project classified as innoÜ vative by the Austrian authorities and to compare them with the current state of the art in the European motor industry. The independent experts concluded that the integrated production planning system part, involving an investment of ˆS 69 million, is based on innovative techÜ niques; moreover, the express aim of this subproject is to pass on the results of the work to all partners of SAP. As regards the equipment for cold testing of six cylinder petrol engines, the Commission likewise acknowledges the innovative character of the project owing to the novelty of such tests and the risks connected with the laserÜ project. Cracking steel connecting rods using perforated fracturing grooves constitutes a genuine innoÜ vation, since the process enables steel components to be worked instead of castings (as practised by some manuÜ facturers). This change in material constitutes a major further development of the process. All the specified investment entails engineering or process development costs (ˆS 8 million). The maximum admissible aid intensity for innovation is 10Ø%. Description Investment eligible for support Aid intenÜ sityØ(*) Permissible aid (in ˆS million) Crack process ColdÜtesting PPS Engineering 19 42 69 28 TotalØ 158 10Ø% 10Ø% 10Ø% 10Ø% 10Ø% 1,9 4,2 6,9 2,8 15,8 (*) The intensity of innovation aid is restricted to 10Ø% in line with Commission practice: see MCC Swatch (OJ C 391, 28. 12. 1996, p. 11). For the purposes of innovation, investment aid of ˆS 15,8 million is compatible with the EC Treaty on the basis of the derogations contained in Article 92 (3) (c) of the EC Treaty and Article 61 (3) (c) of the EEA Agreement. for Within the meaning of the Community framework on State aid to the motor vehicle industry, the development of less polluting and energy saving vehicles is a standard requirement imposed by Community legislation, and should therefore be financed from the company’s own resources. Aid for general pollution control, for example, granted under the terms of framework, may still be accteptable under the existing aid schemes. the environmental aid industry, parly the In the case of investment aid to reduce or eliminate pollution and nuisances or to adapt production methods in order to protect the environment, the eligible costs must, in accordance with the Community guidelines on State aid for environmental protectionØ(Ó), be strictly confined to the extra investment costs necessary to meet environmental objectives. General investment costs not attributable environmental protection must be excluded. to Aid for investment that allows significantly higher levels of environmental protection to be attained than those required by mandatory standards may be authorized up to a maximum of 30Ø% gross of the eligible costs under the Community guidelines. In fields in which there are no mandatory standards or other legal obligations on firms to protect the environment, firms undertaking investment their environmental performance or match that of firms in other Member States in which mandatory standards apply may be granted aid at the same levels and subject to the same condition of proportionality as for going beyond existing standards, i. e. up to a maximum of 30Ø% gross of the eligible costs. that will considerably improve on In this context the Commission asked its independent experts to examine the following: - whether the costs of the investment aimed at environÜ mental protection contain no general expenditure; - whether the in mandatory national or Community standards being met or surpassed. improvements expected result independent experts concluded that the planned The investment will improve environmental protection in an area in which no mandatory standards exist. significantly The Community guidelines on State aid for environÜ mental protection also stipulate, however, that the cost savings resulting for the investor from the project must be taken into accountØ(Ô). These are to be deducted from the nominal extra costs, in order to arrive at the net extra costs and hence the eligible costs. This aspect was explained to the Austrian representatives and BMW at the meeting on 7 March 1997 in Brussels. In the letter investment of 22 April 1997 the net value of this (Ó) OJ C 72, 10. 3. 1994, p. 3. (Ô) This point is also referred to in the DG IV working paper on the revision of those Community guidelines tabled at the multilateral meeting on 15 January 1997: cost savings or other advantages derived by the capital provider on the basis of the investment are to be excluded. 16. 1. 98 EN Official Journal of the European Communities C 12/13 is given as ˆS 15 million, taking into account the savings made during a seven year lifecycle of the equipment [. Ø. Ø. ü. After detailed examination, the Commission and its independent experts are convinced that this assessment is satisfactory and that it also substantiates the need for aid, since the investment is not covered by the savings in operationg costs alone. Consequently, the eligible costs amount to ˆS 15 million with a maximum aid intensity of 30Ø%. the Commission considers Consequently, the environmental protection aid of ˆS 4,5 million specified by the Austrian authorities in the notification of the BMW Steyr case is compatible with the implementing provisions of the relevant Community guidelines. that adversely affect trading conditions to an extent contrary to the common interest and hence may be eligible for application of the derogations contained in Article 92 (3) (c) of the EC Treaty and Article 61 (3) (c) of the EEA Agreement. Third parties who prove sufficient interest may obtain a copy of this letter. Accordingly, the Commission should be informed within seven days of receiving this letter if it is thought that it contains any sensitive information that should not be passed on, and this is to be substantiated. If the Commission receives no comments within the stipulated period, it will assume agreement to the publiÜ cation of the full text of this letter. Any request should be addressed to: Since the eligible costs, aid intensity and observance of the specific criteria set out in the relevant Community guidelines correspond to Commission policy on State aid, it can be assumed that the aid concerned does not European Commission, Rue de la Loi/Wetstraat 200, BÜ1049 Brussel. ’ Commission communication pursuant to Article 3 of Commission Regulation (EC) No 544/97 of 25 March 1997 introducing certificates of origin for garlic imported from certain third countries (completion by these countries of certain administrative cooperation formalities to provide evidence of the origin of the product) (98/C 12/04) Pursuant to Article 3 of Regulation (EC) No 544/97Ø(˛) the Commission hereby informs importers and the administrations concerned that Iran has forwarded to the European Commission imprints of the stamps used by the Iranian authorities, and the names and addresses of the Iranian authorities responsible for issuing and receiving requests for post clearance checks on certificates of origin. These requirements were fulfilled on 5 NovemÜ ber 1997. (˛) OJ L 84, 26. 3. 1997, p. 8