The European Commission has opened a formal investigation under EU State aid rules into Polish plans to grant aid towards a project by the Fiat group to produce a new generation of petrol engines in the Silesia region.
At this stage, the Commission has doubts the aid meets the EU guidelines on aid to large investment projects in relation to the market shares and production capacities of the Fiat Group. The opening of a formal investigation gives interested third parties the possibility to comment on the proposed measure. It does not prejudge the outcome of the procedure.
Commission Vice-President in charge of competition policy Joaquín Almunia said: "The Commission welcomes aid to encourage investment projects in less-developed or high-unemployment regions. However, we have to be careful that the resulting distortions of competition do not outweigh the benefits of the aid, especially in sectors with overcapacity or other problems."
The Commission has opened a formal investigation into plans by Poland to grant aid towards an investment project to be carried out by Fiat Powertrain Technologies Poland Sp. z o.o. in Bielsko-Biała, in the south-western region of Silesia. This area is eligible for regional aid of up to 40% of Gross Grant Equivalent under Article 107(3)(a) of the EU Treaty as a region with an abnormally low standard of living and high unemployment. For large investment projects, i.e. projects with eligible investment costs of more than €50 million, the maximum aid intensity allowed is decreased in line with the provisions of the Commission's regional aid guidelines.
The investment concerns the production of new generation petrol engines. The investment costs to be taken into account for the calculation of the aid amount to €180 million (circa PLN 732.7 million). Poland intends to grant aid of €40.9 million (PLN 166.4 million) in the form of a tax allowance, a grant under the Operational Programme Innovative Economy, a direct investment grant and a direct grant for employment costs. The investment aid project was notified to the Commission for clearance early last year.
EU state aid rules require the Commission to be watchful of aid to large investment projects above certain thresholds because they may carry a greater risk of distorting competition (see Communication on the In-Depth Assessment of Regional Aid to Large Investment Projects, see IP/09/993). The Commission opens a formal investigation procedure for projects where the aid beneficiary has a market share of more than 25% or the production capacity created by the project exceeds 5% of the market while the growth rate of the product market concerned is below the EEA GDP growth rate. This is to avoid distortions of competition in markets which are struggling with overcapacity or low growth problems.
A preliminary investigation revealed that the 25% market share threshold would be exceeded in one of the markets for passenger cars according to the market definition used in previous cases (see for example IP/09/660 Fiat Sicily and IP/08/666 Ford Craiova). The Polish government contends that the passenger cars and light commercial vehicles are part of the same product market. These are aspects that will be investigated further during the formal investigation procedure. The Commission has also doubts concerning the joint treatment of certain market segments for the determination of the capacity increase generated by the project.
The in-depth assessment will also seek to ascertain whether the aid is needed to incentivise the beneficiary to carry out the investment in an assisted region and whether the benefits of the aid in the assisted region outbalance the distortion of competition which it creates.
