EU to examine if Romania undersold car plant to Ford Motor Co.

Automotive

The European Commission said Wednesday it will examine if the Romanian government undersold a car plant to Ford Motor Co. last month and offered to write off its debts in return for Ford’s promise to keep on workers and turn out a specific number of vehicles.

If EU regulators find that Ford was planning to benefit from a debt write-off not offered to other potential bidders, they could stop that part of the sale from going ahead.

The EU executive has ordered Romania to halt any state subsidies to the plant at Craiova — effectively freezing the sale — until it finishes looking into how the government privatized the debt-laden factory that it took over last year after the previous owner, South Korea’s Daewoo Motor Co., went bankrupt in 2000.

EU rules prevent governments from favoring one company over rivals by showering it with public money. The EU said it would look carefully at how Romania had funded the privatization and sale of the plant this year, especially how it extracted promises from the only bidder for the plant, US-based Ford, that may have seen Romania agree to write off the factory’s debts. The Dearborn, Michigan-based carmaker agreed last month to pay €57 million ($77.9 million) for a 72.4% stake in the state-owned Automobile Craiova and has vowed to invest another €675 million ($923 million) to upgrade and expand car production there.

Regulators said they would have to check whether conditions the Romanian government attached to the sale — making at least 200,000 cars within the first four years of privatization and keeping on all 3,900 workers — had lowered the price. “If this is the case, the privatization could involve elements of state aid,” it said. They also want to check reports that Romania had promised Ford the government would write off or guarantee Daewoo’s debts in the country and did not make similar commitments to other companies interested in buying the plant.

General Motors and JC Russian had signaled interest in bidding for Craiova earlier this year as Romania’s low-wage workers and membership of the EU make it an attractive location for making cars. The plant is currently not turning out any cars and now only sells spare parts. (FT.com)

ADVERTISEMENT

Industries lose billions on counterfeit products Analysis

Industries lose billions on counterfeit products

Parl't to vote on groundwork for commercial accommodation ra... Parliament

Parl't to vote on groundwork for commercial accommodation ra...

Duncan Graham reelected as BCCH president Appointments

Duncan Graham reelected as BCCH president

Budapest re-launches airport shuttle bus City

Budapest re-launches airport shuttle bus

SUPPORT THE BUDAPEST BUSINESS JOURNAL

Producing journalism that is worthy of the name is a costly business. For 27 years, the publishers, editors and reporters of the Budapest Business Journal have striven to bring you business news that works, information that you can trust, that is factual, accurate and presented without fear or favor.
Newspaper organizations across the globe have struggled to find a business model that allows them to continue to excel, without compromising their ability to perform. Most recently, some have experimented with the idea of involving their most important stakeholders, their readers.
We would like to offer that same opportunity to our readers. We would like to invite you to help us deliver the quality business journalism you require. Hit our Support the BBJ button and you can choose the how much and how often you send us your contributions.