Serbia said on Thursday its sole car manufacturer Zastava could soon be assembling the Fiat Punto, getting a new lease of life after a decade of failing to find a strategic partner, Reuters reported, adding that talks began a year ago after Fiat agreed to write off 72.5% of a €42 million ($US51.18 million) debt claimed against Serbia’s troubled car-to-weapons producer.

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The remaining €11.5 million debt is due to be repaid by the end of 2005, Vlatko Sekulovic, deputy minister for foreign economic relations, reportedly told a news conference.


“The partial debt forgiveness was the key precondition for Zastava and Fiat to begin talks on launching new production. We believe that talks have entered a final stage, resulting in the production of Fiat Punto in Kragujevac,” Sekulovic said, according to Reuters.


“In 1955, Zastava found rescue in Fiat, so we can optimistically look into the future knowing that this big problem, burdening our economy, will be resolved through this cooperation with Fiat,” he added.


Zastava officials declined to comment, but a source in the firm told Reuters there was “reason for optimism” on a deal.

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Zastava’s car production unit employs 4,500 workers and last year produced 13,500 cars, well below the planned annual target of 31,000 vehicles and its capacity of 60,000 cars, last reached in former Yugoslav times over 15 years ago, Reuters added.


Belgrade media have reported that Zastava would assemble between 5,000 and 8,000 Puntos a year, enough to cover Serbia’s estimated annual demand for that particular car.