Opinion of Mr Advocate General Van Gerven delivered on 10 January 1991

1 Original language: Dutch.

2 OJ L 394, p. 9.

3 The structure of the Alfa Romeo group after the capita! contributions which form the subject ot the contested decision is described in the first paragraph of Part VI of the decision

4 Third paragraph of Part VI of the contested decision In 1985 the net financial liabilities of Alfa Romeo amounted to LIT I 427.7 thousand million.

5 First paragraph of Part VI of the contested decision

6 First paragraph of Part V of the contested decision

7 Second paragraph of Part VII of the contested decision

8 The principal aspects of the new production plan, which was aimed at a break-even point of approximately 30000C vehicles a year, were. (1) renewal of the model range and shortening of the production life of models, (2) an agreement with the Fiat group for the production ot common components, and (3) a joint venture with the Japanese firm Nissan for the production of a new light car (Arna) for which Alfa Romeo would supply the same engines as those used in the Alfasud (third paragraph or Part V of the contested decision)

9 Third paragraph of Part V of the contested decision

10 Fourth paragraph of Part V of the contested decision.

11 Fifth paragraph of Part V of the contested decision.

12 Fifth paragraph of Part X of the contested decision ; and see also the application, at p. 6, third paragraph. In the contested decision the Commission states that the investment plan (1986 to 1988) was also aimed at the development of new markets, but that was contested by the Italian Government during the written procedure (application, p. 49, first paragraph).

13 Fifth paragraph of Part X of the contested decision.

14 With regard to the capital contribution for 1986, see the fifth paragraph of Part X of the contested decision; with regard to the capital contribution for 1985 see the application, at p. 6, third paragraph.

15 In 1986, production capacity was still 400000 vehicles per year with a rate of utilization of 42% (second paragraph of Part VI of the contested decision).

16 Sixth paragraph of Part V and second paragraph of Part VI of the contested decision.

17 Second paragraph of Part VII of the contested decision.

18 Seventh paragraph of Pan V of the contested decision. In the contested decision the Commission does not discuss the conclusions of those assessments in detail owing to their confidentialnature. In the course of the written procedure, the Commission stated that an assessment by the First Boston Corporation showed inter aha that Alfa Romeo would incur tosses until 1996, and that the group required massive investments (LIT 4000 thousand million according to Ford and LIT 5000 thousand million according to Fiat) which, owing to the limited levels of production, could not offer an appropriate return on investment (ROI)

19 Eighth paragraph of Part V of the contested decision.

20 Twelfth paragraph of Part V of the contested decision.

21 Thirteenth and fourteenth paragraphs of Part V of the contested decision Fiat also took over LIT 700 thousand million of the net financial liabilities of the Alfa Romeo group (fourteenth paragraph of Part V of the contested decision).

22 Fifteenth paragraph of Part V of the contested decision. Ftnmilano and Sofinpar retained the possibility of utilizing tax credits accumulated through the losses, which was the main reason for the acquisition by the two banks.

23 Second paragraph of Part XI of the contested decision The decision speaks of the liquidation of Alfa Romeo SpA. which had however changed its name to Finmilanoin May 1987

24 Second paragraph of Part I of the contested decision. There is little specific information on this capital injection. The decision states that it was a capital contribution made by two legal persons, namely Finmeccanica and IRI; it is not known in what proportion. It also appears that following this capital increase Alfa Romeo SpA was owned as to 84% by Finmeccanica and as to 16% by IRI. The capital contributed is said to have been provided by the Italian state (see below, footnote 35). The money was used by Alfa Romeo to cover losses suffered during the 1984 financial year and the first half of 1985 (losses which amounted to LIT 98 thousand million and LIT 111 thousand million respectively), from which I infer that a reduction in capital of LIT 209 thousand million occurred immediately after the increase in capital.

25 Application, p. 6, third paragraph, and p. 22, last paragraph.

26 Third, fourth, fifth, sixth and seventh paragraphs of Part I of the contested decision.

27 Parts II and III of the contested decision. It appears from the decision that in 1986 Alfa Romeo Auto had to reduce its capital by LIT 316.4 thousand million in order to cover losses suffered in 1985 and in the first quarter of 1986, following which the company's capital was no more than LIT 20.2 thousand million. After the contribution of LIT 408.9 thousand million made by Finmeccanica and its subsidiary Saige, Alfa Romeo Auto was owned as to 49% by Finmeccanica, as to 33.4% by Alfa Romeo SpA, and as to 17.6% by Saige (the shareholding of Alfa Romeo SpA resulting from a contribution of LIT 200 thousand million which, if I understand the matter correctly, was made at the same time as the abovementioned contributions: see the second paragraph of Part VII). The LIT 408.9 thousand million injected into the company came from IRI, which financed that contribution by means of a loan on which the interest was paid by the Italian state (see footnote 35).

28 First paragraph of Part III of the contested decision; see also tne eleventh and twelfth paragraphs of Part VII of the contested decision.

29 Second paragraph of Part IV of the contested decision.

30 Although the two offers were not identical and were therefore difficult to compare, the Commission found that the offer made by Ford was on average a little more favourable but in contrast to Fiat's offer entailed future commercial risks for Finmeccanica. That justified Finmeccanica in opting in favour of Fiat (seventeenth paragraph of Part VII of the contested decision).

31 Last paragraph of Part VII of the contested decision

32 Article 1 of the contested decision.

33 Article 2 of the contested decision.

34 Case 303/88 llaly v Commission [1991] ECR I-1433, I 1451.

35 Judgment in Joined Cases 67, 68 and 70/85 Van der Kooy v Commission [1988] ECR 219, paragraphs 35 to 38. See also the judgment in Case 290/83 Commission v France [1985] ECR 439, paragraph 15, and my Opinion cited in footnote 33 above, at paragraphs 6 and 7.

36 The 1985 capital injection was made with part of IRI's funds which it obtained under Article 14 of the 1985 Italian budget for the recapitalization and stabilization of undertakings, in particular in the automobile sector. Finmeccanica, which itself did not have the necessary funds available, obtained the capital which it contributed from IRI. For the 1986 capital injection Finmeccanica, which again in that year did not itself have the necessary funds once more received from IRI the capital contributed by it (and by its subsidiary, Saige). IRI raised the funds by making use of the possibility provided for in Decree Law No 547/85 of 19 October 1985 and the 1986 budget of taking out loans on which the interest was paid by the State.

37 No such formal connection was present in the Van der Kooy case (footnote 34), for example, in which the aid was not in fact borne by the exchequer.

38 France v Commission [1988] ECR 4067, paragraph 19.

39 See in more detail on that point my Opinion of 11 October 1990 in Case 303/88, cited above in footnote 33, at paragraph 19.

40 Contested decision, Parts I to III

41 That, it says, is particularly true of the 1985 capital contribution According to the Italian Government tne intention to provide aid was apparent from the 1985 budget. Law No 887/84, cited above in footnote 35, which was published in the Italian official gazette and was thus presumed to be known by all (and therefore also by the Commission)

42 Case 301/87 France v Commission [1990] ECR I-307, at paragraphs 19 to 24

43 See, for example, the judgment in Joined Cases 296 and 318/82 Netherlands and Leeuwarder Papierwarenfabriek v Commission [1985] ECR 809, at paragraph 20; the judgment in Case 234/84 Belgium v Commission, Meura, [1986] ECR 2263, at paragraphs 14 and 15; the judgment in Case 40/85 Belgium v Commission, Boch II, [1986] ECR 2321, paragraphs 13 and 14; the Francev Commission judgment cited in footnote 41 above and the judgment in Case C-142/87 Belgium v Commission, Tubemeuse, [1990] ECR I-959, paragraphs 26 and 29.

44 Application, p. 18.

45 Application, pp. 18 and 19.

46 Application, p. 19, point 3.

47 Application, p. 20, point 4. According to the contested decision, Finmeccanica ultimately received LIT 1223.5 thousand million for the sale of Alfa Romeo (LIT 1024.6 thousand million from Fiat and LIT 198.9 thousand million from the Banco di Roma and Credito Italiano), which, according to the Italian Government, is much more than the amount of the capital contributions in 1985 and 1986. The Commission, however, observes that the amount to be paid by Fiat was spread over five years beginning on 2 January 1993 and consequently, discounted to 1 January 1987, amounted only to LIT 389.9 thousand million (contested decision, Part VII, eighteenth paragraph and footnote).

48 Application, p. 6 and pp. 22 to 23.

49 Application, pp. 20 to 23.

50 Application, p. 24.

51 Application, p. 24.

52 Application, p. 25.

53 Contested decision. Part VII, ninth paragraph

54 See footnotes 23 and 26 above.

55 See section 4 above and the reference there to the contested decision

56 See the judgmcnts already cited above in footnotes 41 and 42, Case 234/84 Belgium v Commission, Meura, at paragraph 14, Case 40/85 Belgium v Commission, Boch II, at paragraph 13, Case 301/87 France v Commission, Boussac, at paragraph 39, and Case C-142/87 Belgium v Commission, Tubemcuse, at paragraph 26.

57 See the judgments in Case 234/84 Meura, at paragraph 14, and Case 40/85 Boch II, at paragraph 13, already cited in footnote 42.

58 See my Opinion cited in footnote 33, at paragraph 14.

59 At the hearing the agent of the Italian Government referred to a number of private groups whose component companies had for a long period suffered losses. Such comparisons must be treated with caution. They were often small parts or subsidiary companies of groups which were profitable as a whole. The loss-making nature of a company in a group is influenced by a whole series of factors (not least those of a fiscal nature) which can lead to a situation in which as a result of transfer pricing or other income transfers, profits or losses within the group are concentrated at one point or another. There is no evidence that such transfers within IRI or Finmeccanica might have contributed to Alfa Romeo's losses; quite the contrary.

60 See the references to the contested decision in footnotes 24,28 and 13

61 Contested decision. Pan X, seventh paragraph

62 Commission Decision 88/454/EEC of 29 March 1988 concerning aid provided by the French Government to the Renault group, an undertaking chiefly producing motor vehicles (OJ L 220, p 30).

63 Commission Decision 89/58/EEC of 13 July 1988 concerning aid provided by the United Kingdom Government to the Rover group, an undertaking producing motor vehicles (OJ 1989 L 25, p 92).

64 Italy also refers to the Daimler Benz case, in which the Commission terminated the Article 93 procedure (Sixteenth Report on Competition Policy 1986, point 230). According to the Commission, that case also involved productive investments.

65 Contested decision, Part X, first paragraph.

66 Contested decision, Part IV, second paragraph.

67 Cited above in footnote 62

68 Contested decision. Part V, sixteenth paragraph.

69 Cited above in footnote 62

70 See footnote 63.

71 Cited above in footnote 61

72 See the Boussac judgment cited above in footnote 41, at paragraph 54.

73 Contested decision. Part X, sixth paragraph

74 Contested decision. Part X, seventh paragraph

75 Judgment in Case 730/79 Philip Marris v Commission [1980] ECR 2671, at paragraphs 16 and 17

76 See, for example, the Meura ludgment cited in footnote 42 above, at paragraph 16.

77 Judgment in Case 70/72 Commission v Germany [1973] ECR 813, paragraph 13.

78 See the Tubemeuse judgment cited above in footnote 42, and the judgment in Case 310/85 Deufil v Commission [1987] ECR 901, at paragraph 24.

79 Contested decision, Part XI, second and third paragraphs.

80 Contested decision, Part XI, fourth paragraph.

81 Contested decision, Part V, fifteenth paragraph.

82 In the Italian Government's application, it is stated at page 54 Moreover, Finmeccanica in fact merely took over previous debts and unforeseen liabilities of Alfa Romeo (but with the exception, it goes on, of what it calls penalties) To justify recovery of the aid from Finmeccanica the Commission refers, on page 20 of us defence, to the liability of Finmeccanica (which held more than 99% of Alfa Romeo's capital), for the totahty of Alfa Romeo's debts in accordance with Article 2362 of the Italian Civil Code In its replv, the Italian Government docs not dispute that obligation It merely asserts that in fact, it is not relevant io argue that, under Italian law, Finmeccanica is liable for Alfa Romeo's debts

83 It is not clear whether that liability is based on Article 2362 of the Civil Code, as the Commission states in us defence, cited above in footnote 81, or whether it stems from a commitment freely entered into by Finmeccanica or for which it is otherwise liable, whether or not in the context or as a result of the liquidation of the Alfa Romeo companies (sec contested decision, Pan XI, second paragraph).

84 See the Tubemeuse judgment cited above in footnote 42, at paragraph 66.