State aid: Commission approves €31 million restructuring aid for French household appliances producer FagorBrandt

  • France
  • 10/21/2008

The European Commission has, under the EC Treaty’s rules on state aid, cleared restructuring aid of €31 million which France intends to grant to household appliances producer FagorBrandt. Following an in-depth investigation, launched in October 2007, the Commission found that the restructuring plan presented by the French authorities was capable of restoring the company’s long-term viability and that the aid was limited to the minimum necessary to implement the restructuring. The approval is subject to conditions in order to avoid undue distortions of competition. France must recover illegal aid received by FagorBrandt in 2002 before granting the restructuring aid just endorsed. Under these conditions, the Commission considered the aid to be compatible with the EU guidelines on state aid for rescuing and restructuring firms in difficulty.

Competition Commissioner Neelie Kroes said: “I am happy that we managed to find a positive solution for FagorBrandt which should allow the company to become viable in the long term, without excessive adverse effects on competition in Europe.”

FagorBrandt produces large household appliances, including washing machines, fridges, and cookers. In 2007 the Group had a turnover of around €900 million and a workforce close to 4000, most of which were located in France. In 2004, it started to register losses that increased in the following years. In October 2007, the Commission opened an in-depth investigation to assess whether the €31 million aid notified by France to support the restructuring of the firm was capable of restoring the long-term viability of the company, while remaining proportionate and necessary.

The Commission’s investigation found that the restructuring plan, focussing on high added value products and including the sale of certain activities, plant closures, a workforce reduction and development of the sourcing policy would be liable to restore the long-term viability of FagorBrandt.

The Commission also concluded that the aid is limited to the minimum necessary to allow the implementation of the restructuring because a significant part of the restructuring costs are financed by the beneficiary through capital injections from shareholders and bank loans. The Commission also concluded that the aid would not provide the firm with surplus liquidity which could be used for market distorting activities, as FagorBrandt will still have a significant level of debt at the end of the restructuring period.

In order to limit the negative consequences of the aid on competition and competitors, FagorBrandt sold one of its subsidiaries and will reduce its market presence on the French market.

Finally, in 2002, the company benefited from a French state aid scheme to the tune of €22.5 million. In December 2003, the Commission decided that this scheme constituted unlawful and incompatible aid, which had to be reimbursed. As of today, FagorBrandt has not yet paid back the €22.5 million. Therefore the Commission, in line with its normal practice and the jurisprudence of the European Courts, has decided that France can pay the notified restructuring aid only after this unlawful aid has been recovered with interest.

The non-confidential version of the decision will be made available under the case number C 44/2007 in the State Aid Register on the DG Competition website once any confidentiality issues have been resolved. New publications of state aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News.