Serbia, Italy's Fiat Sign 1.18 Bln Euro Strategic Partnership Deals

The first deal is a strategic agreement worth 940 million euro for the establishment of a joint venture company for the manufacturing of cars at the plants located in the central town of Kragujevac. Fiat will own 67% of the joint venture and the Serbian government will own the remaining 33%, Dinkic said at the signing ceremony in Belgrade.

Fiat will invest 700 million euro, while Serbia will invest about $200 million and will grant tax breaks to the Italian investor, he added.

Fiat’s business in Serbia will be exempt from taxes in the next 10 years. The Italian manufacturer will also be able to use land free of charge in case of an increase in the production capacity of the joint venture company, Prime Minister Mirko Cvetkovic said last week.  

The joint venture company will produce some 200,000 cars yearly until the end of 2010, with a possibility to raise ouput to 300,000, the government said in a statement posted on its website.

Dinkic said the joint venture company will export vehicles worth one billion euro annually and is expected to hire about 4,750 employees under the deal with Fiat. Serbia's current exports total around 6.5 billion euro a year. 

Zastava, a communist-era manufacturer of buses and cars sold mainly in the former Communist bloc, has been best known for its Fiat-based Yugo compact passenger car model.

Also on Monday, Zastava signed a 240 million euro memorandum to set up joint venture companies with Fiat’s Iveco bus and truck making unit and Magneti Marelli auto systems unit. The Italian partners will hold 70% stakes in each of the new companies and the Serbian government will own the remainder.

Serbia’s initial investment in these two companies will be worth some 60 million euro, plus tax breaks and investments in infrastructure, the statement said.

Iveco is expected to produce special purpose vehicles and more than 2,200 buses annually in Serbia by the end of 2012, while Magneti Marelli will manufacture auto parts for domestic and foreign markets. Both factories will be located in the Kragujevac industrial zone and will hire around 2,350 employees. 

In 2007 Serbia signed a five-year deal with General Motors to assemble one of its Opel models, Astra Classic, at the Zastava plant. Production is slated to start in the last quarter of 2008.  

($ = 0.6962 euro)