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RUSSIA: Ford Sollers JV MoU inked after Fiat exit

By Simon Warburton | 18 February 2011

An almost complete Focus on the St Petersburg line in this 2006 file photo

An almost complete Focus on the St Petersburg line in this 2006 file photo

Ford's Russian joint venture announced today (18 February) with Sollers came on the same day as Fiat ended negotiations with the company.

While details are sketchy as to why Fiat and Sollers stopped talks, tough new Russian automotive production regulations coupled with significant growth opportunities appear to have been factors behind Ford's announcement.

News of Ford's major tie-up comes on the same day as Fiat and Sollers announced they would "pursue independent strategies" following talks about their Russian activities.

A Ford Europe spokesman in Germany told just-auto Russia will require foreign automakers to have the capability, if not production, of around 350,000 vehicles per year, while locally produced engines and/or transmissions will have to be in 30% of everything built in the country.

As well as those stringent parameters, the spokesman added Russia will also considerably strengthen its automotive industry by insisting on a 60% requirement for localised content, in addition to the establishment of R&D centres.

"What we are doing is merging our existing opportunities in Russia with Sollers and creating a 50:50 stand-alone joint-venture," said the spokesman.

"It is a great opportunity and will [allow] us to build the business in Russia. Sollers has a very strong presence."

The spokesman added by the middle of this decade it was "very likely" Russia would be Ford of Europe's largest market, following the country's emergence from recession that "really knocked the market."

At the moment, Ford manufactures 125,000 vehicles in Russia - including the Focus and Mondeo -  at its St Petersburg plant, while the new Focus is scheduled for production later this year.

In a brief statement Fiat said: "Following the signing of a memorandum of understanding in February 2010 for the establishment of a Russian joint venture to produce passenger cars and SUVs, Fiat and Sollers have now determined to pursue independent strategies to further develop their respective presence in Russia.

"To this end, both parties have consequently agreed to end their current negotiations aimed at enlarging their existing Russian activities."