EC Might Demand Changes In The Automobile Craiova Privatization Contract

The European Commission might raise a series of objections regarding the privatization of Romanian car factory Automobile Craiova with American group Ford, according to the president of Romanian privatization authority AVAS, Teodor Atanasiu.

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These objections could impose the change of some provisions in the contract, but not the cancellation of the transaction.

"It seems that things are clear in Brussels and we will receive an official answer in one month, so the contract might become effective as soon as the law is approved in Parliament. Our agreement with them was that, in that interval extending the validity of the contract (by 45 days, to March 14, 2008 – t.n.) we would receive the answer," Atanasiu told MEDIAFAX.

He expects the reply of the Commission to be positive, but he does not rule out the scenario in which the Commission imposes certain conditions.

According to him, the validity of the contract might be extended again, through bilateral agreement, and only if there is just cause.

"We will ask the Government to request from the Parliament the approval of the law privatizing Automobile Craiova with emergency. If the law is not approved before March 14, then we have just cause to extend the validity of the contract. Anyway, I believe that Ford will commence activity here in April," Atanasiu added.

The privatization contract for Automobile Craiova with Ford was signed in September 2007. Ford took over the shares held by the state in the car factory – namely a 72.4% stake – for EUR57 million, while the American producer vowed to make direct investments worth EUR675 million in the upgrade of the factory and additional employment.

In October 2007, the Commission initiated an investigation regarding potential state aid granted to Automobile Craiova in the privatization process, thus the government asked the parliament to suspend talks on the law draft for the privatization of the company.

Automobile Craiova directly holds control of the car factory in Craiova. The company is sole voting shareholder in Daewoo Automobile Romania, with 49% of shares. Daewoo Automobile itself holds the remaining 51%, but it does not come with voting rights.

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