Thursday, February 28, 2008

EU says Romania undersold car plant to Ford Motor Co.

Wednesday, February 27, 2008

BRUSSELS, Belgium: The European Commission said Wednesday that the Romanian government undersold a car plant to Ford Motor Co. last year and should reclaim millions in lost revenue from the state-owned company that sold it.

EU regulators ruled that Romania imposed conditions on the privatization of the Craiova plant that led to a lower sales price. It required the new buyer make at least 200,000 cars within the first four years of the sale and keep on all 3,900 workers.

U.S.-based Ford was the only bidder for the plant last September, paying €57 million (US$77.9 million) for a 72.4 percent stake in the state-owned Automobile Craiova and vowing to invest another €675 million (US$923 million) to upgrade and expand car production.

The EU executive said the stake was actually worth €84 million (US$125 million) and the Romanian state lost €27 million (US$40 million).

Regulators ordered the government to demand Automobile Craiova pay the state the lost revenue from the sale.

The Romanian government took over the debt-laden factory in 2006 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.

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 European Union make it an attractive location for making cars.

The plant is currently not turning out any cars and now only sells spare parts.

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