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"IMEPIEL Case" - Reference Information

According to the European Commission Decision (92/318/EEC) of 25 March 1992 on aid granted by Spain to Industrias Mediterraneas de la Piel SA ("Imepiel") one can learn, that "Imepiel" was incorporated in 1882 by the Segarra family who owned and managed the company until its acquisition to stave off bankruptcy by the Spanish State in 1976. At this date the Spanish State, through the Property Office of the Ministery of Economic Affairs ("Patrimonio del Estado"), acquired 99,94 % of the capital, the other investors being the "Caja de Ahorros de Valencia" and the "Caja de Ahorros de Castellón".

Earlier, during the post-war years, the company expanded diversifying into complementary activities such as glove making and farming. Since its acquisition by the State such ancillary activities have been eliminated. Despite this the company has always been one of the leading Spanish footwear manufacturers having the largest workforce and highest production capacity located on one site.

However, since rationalization, cuts have been made resulting in a reduction in the workforce from 3 146 in 1976 to 1 457 in 1988. Throughout the period of public ownership the company has, in general, incurred operating losses each year. Over the 10 years to 1987 these amounted to 12 700 million Spanish pesetas and a series of capital injections were made to cover these losses. In addition, publicly-funded capital investment expenditure has been incurred in an attempt to modernize the factory.

Faced with continuing losses the majority shareholder commissioned a viability plan in the mid 1980s which foresaw a reduction in capacity due to redundancies; capital injections (1987: 1 400 million pesetas, 1988: 1929 million pesetas); a managerial shakeup and a reassessment of markets and products.

The support of "Imepiel" from the side of the Spanish government caused the objection of the UK-based British Footwear Manufacturers Federation, which stressed that Spanish imports had increased in the UK and that these shoes competed at the lower end of the market where competition was price and not quality based. Therefore, any State aid enabling a manufacturer to reduce his sales price would have a negative effect on competition. The British position within the EC was supported by some other countries as well.

The Spanish authorities had long period of lettering and discussions with Commission on the matter of recovery plans details, aimed at the following objectives:

- to return the company to profitability within three years,

- a reduction in capacity: footwear from 3,2 million pairs per year to 1,74 million pairs, hides from 20 million square feet per annum to 14,1 million square feet and the closure of the rubber section,

- a decentralization of the company's organization,

- rationalization of the manufacturing premises with the sale of superfluous space,

- expansion of own brand sales and an attempt to move into higher quality products,

- the avoidance of labor disputes through detailed negotiation,

- a reduction in the workforce from 1 457 to 627.

But the company faced with really hard times - it neither earned a profit in 1988 nor 1989; in addition, subsequent plans have indicated that it will not be profitable before 1993. The foreseen reduction in capacity may have been possible but production was, for shoes, 2 million pairs in 1987 and 2 million pairs in 1988. Subsequent plans indicate production in excess of 2 million pairs in 1990 and 1991 and over 3 million for 1992.

"Imepiel" was privatized on 2 February 1990, being sold for 100 million pesetas to the highest bidder - "Circulo de Financiación y Gestión SA".

Community footwear production amounted to 1 050 million pairs of shoes and was following a declining trend which had caused a shrinkage of about 15 % since the year 1986.

The industry assembly employed 360 000 people directly and another 140 000 people for indirect and ancillary (hides and components) production; the sector was characterized by its fragmentary structure with a large number of small businesses (about 15 000 units with an average workforce of 24).

In 1986 Spain had some 14 % of the European Community market in terms of production of which 61 % was exported; as "Imepiel" was a significant producer in terms of the number of personnel employed and is an above-average shoe producer, in volume terms, it was taking a more than marginal share in the Community market.

Taking into account that "Imepiel" was granted aid by the Spanish authorities in the form of capital injections, between 1986 and 1988 amounting to 6 029 million pesetas, the EC has adopted the decision, according to which the aid was granted illegally, as it was done in breach of the procedural rules.

It is worth mentioning that the Spanish footwear market, in which the goods were produced and sold by "Imepiel", was highly competitive and still is that. The EU footwear market is described as even more "highly competitive", and the aid is deemed to distort competition even though the firm in question produces less than a third of 1% of the Community footwear market. ...If this sector is truly characterized by intense competition, then the only impact of state aid is (at worst) a waste of the member state's own tax resources, not any cross-border effect on the competitive situation faced by firms in the other member states.

The European Commission Decision 92/318/EEC is just an example showing the presentations of inter-state and inter-market competition, performed in all the possible ways.

Both "Segarra" and "Imepiel" were manufacturing boots with the out-sole tread pattern, which looks similar to the French paratrooper's boots BMJA Mle 50 of the 1950-s:

There were some Spanish-made boots, which look very similar or just the same as the French BMJA-65 combat boots. The only visible difference between the original French combat boots and the Spanish BMJA-65-type combat boots made by "Iturri" is the absence of manufacturer's labeling in round circle (name and the city, where the factory is located along with the date of production).

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