EU opens inquiry into 96 mln eur aid to Peugeot-Citroen for diesel car UPDATE

EU opens inquiry into 96 mln eur aid to Peugeot-Citroen for diesel car UPDATE

	Published : Tue, 13 Nov 2007 15:21 By : Agencies Print this Story

(Updates with further comment from the commission)

BRUSSELS (Thomson Financial) - The European Commission said it has launched an in-depth investigation into whether 96 mln eur of aid earmarked by the French government for Peugeot SA-Citroen and other partners for the development of a hybrid diesel car breaches EU rules.

'The Commission fully supports the development of less polluting cars,' the commission said in a statement. 'In the present case, the Commission thinks it likely that Peugeot-Citroen... would have undertaken this project anyway, even in the absence of a state subsidy, given that other car makers have announced similar projects in relation to more environmentally friendly cars.'

France plans to grant 96 mln eur of aid to Peugeot-Citroen and 16 partners in the form of grants and repayable advances for the development of various parts of a hybrid diesel car.

The total research and development (R&D) cost of the project is 470 mln eur, out of which 271 mln eur would constitute as state aid.

The aim of the programme is to produce a car that emits less than 90g/km of CO2 and has a fuel consumption of less than 3.4 litres/100 km. At the same time, the programme aims at substantially reducing the additional costs of buying a hybrid car

The EU executive said it doubts whether Peugeot-Citroen and its partners really need this aid to produce less polluting cars and that a market failure exists in this field.

'Aid where there is no market failure would give an unfair advantage to Peugeot-Citroen and its partners,' the commission said.

The EU executive said it also doubts whether the aid to be granted via the programme would not simply help to finance R&D that the beneficiaries would have carried out in any event, even without aid.

simon.zekaria@thomson.com

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