The government argues it wants to save the money entailed by legal proceedings and avoid harming Romania’s image and future investments.
Ford bought Romanian car plant Automobile Craiova in 2007 and paid EUR57 million for 72.4% of the shares. Under the deal, the U.S. carmaker pledged to pay the state up to 25% of the purchase price unless it stepped up production to over 250,000 units by September 2011. It also pledged to make technological and environmental investments worth EUR675 million by March 19, 2012.
According to Romanian authorities, Ford has met investment requirements, but asked Romania to adjust the number of vehicles it must manufacture. The carmaker renounced a state aid approved by the European Commission which concerned staff training. Even so, Ford must pay penalties amounting to 25%, or EUR14.25 million, of the price paid for the stake it bought.
Romania’s privatization authority AAAS had notified Ford it had to pay the money owed by May 22, 2013 at the latest.
On the other hand, Ford filed a complaint against Romania at the International Court of Arbitration concerning environmental problems at the plant. The carmaker claims EUR15 million in penalties from the European country, almost as much as it owes Romania.
The Romanian government and Ford have reached an agreement and will sign an additional act to implement a mutual compensation mechanism, according to an official document. Romania pledges to cover costs entailed by cleaning contaminated groundwater at the plant by canceling out a part of Ford’s debt.
Once compensation is applied, Ford will withdraw its complaint filed in Paris. Also, experts will conduct an investigation regarding the groundwater contamination.
Last year, Ford said in a press release it signed an additional act to the Automobile Craiova privatization contract whereby it would manufacture fewer cars and “pay penalties.”