In a written statement issued this morning by the EU announcing the launch of the investigation, it said: "At this stage, the Commission has doubts the aid meets the EU guidelines on aid to large investment projects in relation to the market shares and production capacities of the Fiat Group. The opening of a formal investigation gives interested third parties the possibility to comment on the proposed measure. It does not prejudge the outcome of the procedure."

Commission Vice-President in charge of competition policy Joaquín Almunia said today: "The Commission welcomes aid to encourage investment projects in less-developed or high-unemployment regions. However, we have to be careful that the resulting distortions of competition do not outweigh the benefits of the aid, especially in sectors with overcapacity or other problems."

The investment project is to be carried out by Fiat Powertrain Technologies Poland in Bielsko-Biała, located in the south-western region of Silesia. This area is eligible for regional aid of up to 40 percent of Gross Grant Equivalent as it is a region with an abnormally low standard of living and high unemployment. For large investment projects, i.e. projects with eligible investment costs of more than €50 million, the maximum aid intensity allowed is decreased in line with the provisions of the Commission's regional aid guidelines.

The investment concerns the production of new generation petrol engines. The investment costs to be taken into account for the calculation of the aid amount to €180 million (circa PLN 732.7 million). Poland intends to grant aid of €40.9 million (PLN 166.4 million) in the form of a tax allowance, a grant under the Operational Programme Innovative Economy, a direct investment grant and a direct grant for employment costs. The investment aid project was notified to the Commission for clearance early last year.

EU state aid rules require the Commission to be watchful of aid to large investment projects above certain thresholds because they may carry a greater risk of distorting competition. The Commission opens a formal investigation procedure for projects where the aid beneficiary has a market share of more than 25 percent or the production capacity created by the project exceeds 5 percent of the market while the growth rate of the product market concerned is below the EEA GDP growth rate. This is to avoid distortions of competition in markets which are struggling with overcapacity or low growth problems. A preliminary investigation revealed that the 25 percent market share threshold would be exceeded in one of the markets for passenger cars according to the market definition used in previous cases. The Polish government contends that the passenger cars and light commercial vehicles are part of the same product market. These are aspects that will be investigated further during the formal investigation procedure. The Commission has also doubts concerning the joint treatment of certain market segments for the determination of the capacity increase generated by the project.

The in-depth assessment will also seek to ascertain whether the aid is needed to incentivise the beneficiary to carry out the investment in an assisted region and whether the benefits of the aid in the assisted region outbalance the distortion of competition which it creates.