EU official queries industry subsidies on Nokia's German closure

20th January 2008, Comments 0 comments

EU probes policy after the Finnish company announces closure of mobile unit in Germany.

Berlin (dpa) - European Commissioner Guenter Verheugen has placed a question mark over using public money to subsidize industry, following Nokia's announcement last week that it was closing its mobile phone facility in Germany's Ruhr region.

"The Nokia case is reason to reconsider state subsidy policy as a whole," the Enterprise and Energy commissioner told the Sunday edition of Germany's Welt newspaper.

"I believe that it makes no sense for the state to pay subsidies to lure business," said Verheugen, who also serves as commission vice president under Jose Manuel Barroso.

There was always a risk if investment paid off for companies only on the basis of additional taxpayer funding, Verheugen said, adding the money could be better spent on training and infrastructure.

Verheugen, a member of Germany's Social Democratic Party (SPD), was critical of the management of the Finnish mobile phone maker, saying that sudden decisions to change site pointed to "serious management mistakes."

"Strong management anticipates change and restructures in time," he said.

And he lashed out at what he termed "the new religion that deifies shareholder value."

On Tuesday, Nokia, which makes almost 40 percent of the world's mobile phones, said it was closing its plant in Bochum in the state of North Rhine-Westphalia and moving production to Cluj in Romania on grounds of wage costs.

The decision provoked outrage, with state politicians threatening to seek the repayment of some the more than 80 million euros (120 million dollars) in state and federal subsidies the company had received over the 20 years of the plant's existence.

North Rhine-Westphalia Economics Minister Christa Thoben queried whether the company was receiving a subsidy from the European Union to set up in Romania. Germany is the largest contributor to EU funds.

And state premier Juergen Ruettgers suggested the company was behaving like a "subsidy locust."

More than 4,000 jobs were reported at risk, with most of the 2,300 full-time employees likely to be dismissed, along with a further 2,000 working for supplier companies or on a part-time basis.

One German government minister said he would throw away the Nokia he uses for private phone calls.

Nokia insisted its decision was soundly based and that it was final, pointing to the highly competitive market.

Industry insiders in Germany said the factory-gate price of a no- frills phone had fallen to less than 10 euros, although others noted that wages made up just 5 percent of the cost of a mobile phone made at the Bochum plant.

Nokia is to hold talks with German politicians and worker representatives on a social package to ease the closure.

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