Fiat is steadily working towards a joint venture (JV) which will take over the Zastava plant in Serbia.
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Fiat Group Automobiles (FGA) and the government of the Republic of Serbia have signed an agreement to form the JV to buy the assets of the Zastava plant at Kragujevac, located about 90 miles (140km) south-east of Belgrade. The two parties had signed a memorandum of understanding last April.
The JV, 67% owned by FGA and 33% by the Serbian government, will take over a plant able to build about 200,000 cars a year by the end of 2010. Capacity could be increased by another 100,000 cars.
Fiat said the plant would become part of its global manufacturing network and would meet its production standards.
Initial JV investment is about EUR700m, including around EUR200m from the Serbian government, comprised of EUR100m in cash, a shareholder’s loan of EUR50m and other incentives.
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By GlobalDataUnder the MOU signed in April, the city of Kragujevac will provide infrastructure and utilities.
As well as signing the JV agreement, Fiat Group CEO Sergio Marchionne and Serbian deputy prime minister and minister of economy and regional development Mladjan Dinkic also signed a MoU for potential cooperation between Iveco and Magneti Marelli and the Serbian government to make buses, special vehicles and automotive components.
Under this MoU, the three parties will set up joint teams to explore options in greater detail.
The MoU foresees the establishment of two new JV companies which would be owned 70% by Iveco and Magneti Marelli, and 30% by the Serbian government.
If successful, these discussions will lead to the signing of definitive agreements in the near future, Fiat said in a statement.
By the end of 2012, Iveco could produce approximately 2,200 buses yearly, while Magneti Marelli could manufacture plastics, suspensions, lighting and exhaust components for both domestic and foreign markets.
Both facilities will be located in an industrial zone on the outskirts of Kragujevac.
Direct investment required by the JV companies would be about EUR240m including a cash contribution of EUR60m from the Serbian government plus other incentives, infrastructure and utilities. The companies would emply 2,350 people.
Marchionne said: “Today’s announcement further strengthens our presence in Serbia. Our operations here will provide Fiat Group with the means to widen its customer base and to support its expansion and volume aspirations from a strategic region while at the same time contributing to Serbia’s industrial and technological development.
“This initiative will enhance the economic and social growth of the area. Over more than half a century, Fiat and Zastava have played an important role in developing the Serbian automotive industry. Moreover, our commitment demonstrates our confidence and trust in Serbia especially in view of the strong determination of its government and the far-sightedness of president Boris Tadic, to enable the country to advance on its European Union path.”
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