The AVAS once again negotiating with "Ford"

• The Romanian state and "Ford" are discussing the conclusion of an appendix to the privatization contract, since the Americans have not completed the restructuring process of "Automobile" Craiova

"Ford" and the Romanian state have once again sat down at the negotiation table, for years after the privatization of "Automobile" Craiova. The parties are negotiating an appendix to the privatization contract which would also include modifications in the restructuring process of the Automobile Craiova group of companies, the AVAS officials said, in response to an inquiry by BURSA. They have claimed that the restructuring process assumed through the contract is difficult to implement in the form that was initially agreed upon.

The answer of the Authority comes as the European Commission recently confirmed that it has launched an investigation on a potential state aid that Ford benefits from by using several assets (plots of land, apartments and retail spaces) belonging to "Automobile" Craiova, which were supposed to be transferred to a newly created company. The investigation was opened after former minority shareholders notified Brussels that Ford didn"t fulfill some of its contractual obligations.

"Ford" acquired 72.4% of "Automobile" Craiova in October 2007, when "Automobile" owned 49% of "Daewoo Automobile" România, which in turn owned 74.89% of "Mecatim" Timişoara, according to data provided by AVAS.

Through the privatization contract, Ford pledged to launch a process to restructure the three companies, in order to separate the production activities from the other ancillary activities (real estate).

At the end of the restructuring process, the car production activity and assets that pertain to it would remain in the company focused on production, which is controlled by "Ford", whereas a new company would become the property of all the related assets and would perform real estate activities.

Ford has not completed the restructuring process so far, which caused the parties involved in the sale of "Automobile" Craiova to meet and try to reach an agreement on how they would proceed from now on. The officials of the AVAS said: "According to the terms of the contract, if the restructuring process isn"t concluded within 30 months from the Date of its Conclusion (ed. note: March 19th, 2008 - the date the privatization contract was completed), the parties will meet and review the circumstances which have prevented the completion of the Restructuring Process and will review the circumstances which prevented the finalization of the Restructuring Process in order to reach an agreement on how the procedure will continue in order to achieve the restructuring (...)"

Since the restructuring process that was committed through the contract is hard to implement in practice, in the initially agreed form, the AVAS and FMC are currently running negotiations in order to sign an addendum to the aforementioned contract for the sale-purchase of stock, which among other things also refers to the modifications of the restructuring process but without changing the purpose for which it was set, namely the separation of the core assets from the ancillary assets, in order to transfer the latter to AVAS. These changes will only be implemented in the case of passing a law that would appropriately amend art.7 of the Law no. 36/2008 and to approve the conclusion of the addendum to the contract \".

However, the officials of the AVAS did not mention exactly how the addendum would amend the terms of the privatization contract concerning the terms of the real estate assets to a new company.

• The AVAS doesn"t seem to be giving minority shareholders any second thoughts

The former shareholders of "Automobile" Craiova that have complained about "Ford" in Brussels have invoked Appendix 3 of the Privatization Contract of the Company, which stipulates that following the restructuring process, the ancillary assets would be contributed to a new company.

"(...) The new company would have as shareholders the Seller and the minority shareholders of all the entities concerned (ed. note: Automobile, Mecatim and Daewoo Automobile România") ", Appendix no. 3 states.

Thus, the Association of Capital Market Investors (AIPC) claims that the ancillary activities, valued at about 10 million Euros, should have been transferred to a company owned by the Romanian state and by the minority shareholders of "Automobile" Craiova.

However, the officials of the AVAS have mentioned that the new company, resulting from the transferring of the ancillary assets, "would be fully controlled by the Romanian state", at the end of the restructuring process.

Through the privatization process, Ford has also committed to producing 250,000 vehicles in Craiova in 2011.