The EU’s executive body – The European Commission – has decided to initiate ‘detailed investigation proceedings concerning aid amounting to £17.4 million earmarked for the Ford plant in Bridgend (South Wales)’.

The Commision said in a statement that it ‘has not been able to establish that the planned aid meets the criteria of the Community framework for state aid to the motor vehicle industry and has asked the UK to forward any comments within one month’.

In July 2001, the United Kingdom notified a project of granting regional aid and training aid involving an amount of approx. £17.4 million (equivalent to £13.5 million in 2000 prices) concerning investments carried out by Ford in its Bridgend (South Wales) engine plant.

In 2000, Ford produced almost 4 million engines in Europe, of which 700,000 came out of Bridgend.

The notified project involves investments amounting to £243 million over the 2001-2004 period and relates to the creation of new capacity for 325,000 engines/year. The engines produced will be of the V6/V8 family, and will power cars of the Ford, Jaguar, Land Rover, and Aston Martin brands. Total capacity at the plant will increase to 1,075,000 engines/year.

The UK authorities claim that the Ford group considered an alternative option to investing in Bridgend. Under this option, the Ford Group would produce in Cleveland (USA) the V6 engines for the car manufactured in Europe. As for the V8 engines, part of the production could be accommodated by an existing production line in Bridgend, while additional volumes could be sourced from another manufacturer.

According to a cost-benefit analysis presented by the UK authorities, the alternative options would have been less costly for the manufacturer than the Bridgend investment. Comparing the cost in the two options, they established that the investment in Bridgend would have a cost disadvantage of 10.22%, which was sufficient to justify a reported aid intensity of 5.37%.

However, the Commision says that the cost benefit analysis does not, at this stage, prove the reported cost disadvantage of Bridgend compared to Cleveland. Among the Commission’s main doubts are: firstly, whether in this case in is justified to compare the Bridgend solution with a location outside Europe, since the engines produced are destined to final assembly in European plants of the Ford group; and secondly, the fact that the cost-benefit analysis is carried out comparing projects of a different industrial nature (in-house production of all the engines in the Bridgend option, versus partial oursourcing in the Cleveland option), even if the present rules governing the motor vehicle sector require that the cost comparison be carried out for identical projects.