Severstal Auto, who entered into an agreement last week to manufacture the Palio and Albea models in Russia from next year, have announced further details of the joint venture. The Fiat Palio (hatchback) and the Albea (sedan), both members of Fiat's 'World Car' family, will be assembled at Severstal Auto's plant at Naberezhnye Chelny in Tatarstan, with full production expected to commence in early 2007. The low-cost Fiat Doblò light commercial van range will be added later that year. The Palio and Albea will be competitively priced and are expected to sell for around $9-13,000, taking on the Russian-built Renault/Dacia Logan, the Chevrolet Lanos (which is assembled in neighbouring Ukraine) and the VAZ-Lada 2110, in the marketplace.

Importantly, Severstal Auto will underwrite all the start-up and running costs involved in the new joint venture, and so it seems that Fiat's CEO Sergio Marchionne has created another win-win situation for the Italian carmaker, allowing them to gain much better access to an important market that is set to post strong growth over the next few years. Annual capacity has not been specified by Severstal Auto, but later this year they will free up significant production capacity at Naberezhny Chelny once they terminate production of the Oki 'mini' sized car, which they currently manufacture in numbers of around 40,000 per year.

The joint venture is likely to see Severstal Auto become Fiat's exclusive Russian distributor in the near future. The firm is currently licensed to import and sell Fiats. At present Fiat sell the Panda, Punto and Stilo models in Russia, with the new Grande Punto having recently been added to the range, although sales are negligible and pricing is not particularly competitive. Alfa Romeo and Lancia also sell in Russia but haven't taken off. Severstal Auto will now launch a new programme aimed at promoting the Fiat Auto brands in Russia, taking on new dealers, and eventually import a comprehensive range of Fiat, Alfa Romeo and Lancia models.

The Severstal Group

The Severstal Group is today the 12th largest company in Russia, and was recently placed by Forbes magazine in their respected listings of the top 2,000 companies in the world. Throughout its half century of existence Sverstal has been primarily focused as a steel maker. The company was actually was born in June 1940 when the government of the USSR and the the central Committee of the Communist Party signed a resolution 'On Organization of Steel Making in the North-west of the USSR'. This document predetermined construction of a steel mill in Cherepovets. Delays, due to the onset of World War II, saw the first pig iron cast at the Cherepovets steel mill opening in 1955, and within five year the site contained the largest hot-strip mill in Europe.
 

In the 1980s Europe's largest blast furnace was commissioned and opened, while in 1993, according to the decree of the President of the Russian Federation, the state enterprise known as the Cherepovets Iron and Steel Complex acquired a new status. It was registered by the municipal administration of the city of Cherepovets, as Severstal joint-stock company.


During 2000-2001, Severstal took a 68 pct stake in Ulyanovskiy automobile-making company and an 88 pct share in the Zavolzhskiy engine-making company. Severstal's participation in the management of automobile assets has also proved directly useful for assuring more efficient processing and selling of steel produced. In accordance with the strategy of development of the vertically integrated group and of enlargement of the product mix both for Russian automobile producers in general and for Severstal's own automobile-making division, in 2002 the Company created, together with Arcelor, a European group, a joint venture for manufacturing coated galvanized sheets for automobile industry.

The acquisition of new assets allowed the manufacture of products with high added value, whose activity differed from steel making in the fact that they were not dependent on cycles, and swiftly transformed the company into a diversified group. These multi-profile businesses required a completely new management system which would allow for efficient development of each activity, taking into account its specific features, and which would at the same time unify different enterprises with common rules and standards applicable for the whole of the holding.

Thus the Severstal-Group was founded in the Spring of 2002. Today the group is a major industrial holding, comprising about 120 plants in 14 constituent territories of the Russian Federation with sales of $3,1 billion (in 2002). The total workforce of the company exceeds 125,000. The Severstal-Group is divided into four separate sector divisions: metallurgical, resource (Severstal-Resource), automotive (Severstal-Auto) and engineering (Severstalmash).