Europe quizzes £17m Ford grant

Ford is investing heavily in its Bridgend plant

Plans to create up to 600 jobs at a Ford plant in south Wales may be at risk following a European Commission investigation.

The commission claims it is not satisfied that a £17m grant to the motor engine manufacturer from the Welsh Assembly complies with EU rules.

Ford said the money is essential if the plant at Bridgend is to build a new V8 engine for luxury Jaguar cars.

We believe the case is robust, but obviously it's not easy to overcome these objections

First Minister Rhodri Morgan

The money was given to stop production in south Wales switching to the United States where it would be cheaper for the firm to build engines.

The commission said it has not been able to establish that the cash meets the rules governing state aid to the motor vehicle industry.

In a statement, the executive branch of the European Union said, 'on the information currently in the commission's possession, the aid in question does not appear likely to benefit from a derogation' from EU rules.

It has given the UK government one month to provide more details.

The new engine work will create up to 600 jobs

In February last year, Ford announced it was putting £240m into boosting capacity at the Bridgend plant, which is best known for making the V8 engines for Jaguar cars.

The investment is in an area of south Wales which is hard-hit by plant closures, particulary in the steel industry.

A spokesman for Ford said that the proposed investment in Bridgend was 'always on the basis that the £17.4 million grant would be paid'.

He said the investment for extra production of the V6 and V8 engines has not yet taken place, nor has the work ceased in Cleveland, Ohio, although it is scheduled to do so later this year.

The spokesman added that it was not unusual for the commission to conduct further inquiries but Ford were confident that it had 'met all requirements' and would fulfil all the terms and conditions.

Ford also produced the Zetec Se engine in south Wales

Welsh Assembly First Minister Rhodri Morgan has said he was surprised at the EC's investigation.

He said: "We believe the case is robust, but obviously it's not easy to overcome these objections."

A union spokesman for the Ford workers at Bridgend described the EC inquiry into the grant aid as 'a bit rich' given some of the state aid deals done elsewhere in Europe.