Germany to Nokia: Give us back our subsidies

€41m plus €18m interest, thanks

By Jan Libbenga • Get more from this author

Posted in Financial News, 11th March 2008 15:58 GMT

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Germany's western state of North-Rhine Westphalia (NRW) has told Nokia to repay all its subsidies plus interest by 31 March or face legal action.

The German state paid €41m in aid for Nokia's mobile phone factory in Bochum, under the condition that at least 2,800 jobs would be created. However, the Finnish mobile giant is to close its plant by 30 June and move its operation to Romania.

The closure of the plant infuriated many German unions and politicians and fuelled a strong anti-Nokia and anti-Finnish sentiment in the country with many consumers turning their backs on Nokia products.

But Nokia says it has no choice. Labour and non-wage labour costs in Germany are not competitive enough for the mass-production of Nokia products. In Romania, the average monthly salaries will be about one-tenth of the average wage of workers at Bochum.

Nokia employed more than 2,300 people in Bochum in exchange for EU and state subsidies. The company says it fulfilled all the necessary conditions for the subsidies, but NRW believes Nokia fell short of the required numbers by 200 to 400 posts between 2002 and 2005.

On Tuesday, the state government formally demanded that the company pay back €41m in subsidies, plus €18m in interest.

The two sides are expected to negotiate in the next few days. State Finance Minister Christa Thoben has punted the idea of opening up a technology business park with Nokia as the main investor.

Nokia received more bad news today after components supplier Texas Instruments Inc warned of deteriorating conditions in the wireless industry. Nokia shares dropped below €20. ®

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