In 2005 following the resolution of past debts still owed to Fiat, a deal was struck by Zastava to assemble the Fiat Punto Mk II from CKD kits at the Kragujevac factory. Ambitious plans by Zastava to export its own-brand cars across Western Europe got underway in the early 1980s and the Yugo arrived in the United States in 1986, costing at the time under US$4,000. The Zastava factory, which is located in the town of Kragujevac, 70 kilometres south west of the capital Belgrade, has the capacity to build 60,000 cars a year.

The Serbian state-owned Privatisation Agency has announced that tenders are now being invited for the state-owned automaker Zastava Automobili, with Fiat Group expected to consider a bid. Potential suitors will have until 31st March 2008 to conduct due diligence on Zastava.

Having missed out early this month in its attempt to buy a stake in giant Russian carmaker AvtoVAZ, the forthcoming sale of Zastava Automobili represents another opportunity to be considered by Fiat. Both AvtoVAZ (through its Lada brand) and Zastava have a long history of co-operating with Fiat to build cars using the Italian firm's technology, engines and platforms.

In a statement which was posted in a national newspaper yesterday the Serbian Privatization Agency said that potential bidders would need to either be involved in the automotive industry "fully-assembled or manufacturing components" for a minimum of the last three years and with last year's revenues being of at least 500 million euros, or be financial investors registered for a minimum of three years and with managed funds of at least 2 billion euros.

Zastava Automobili began vehicle production in 1955 and is best-know for assembling a string of Fiat models including the 128, 600D, 1400 and 1500. Ambitious plans to export its own-brand cars across Western Europe got underway in the early 1980s and the Yugo arrived in the United States in 1986, costing at the time under US$4,000. Exports however ended in the 1990s as the Balkan wars and the following international isolation of Yugoslavia (then comprising of Serbia and Montenegro) hit the economy badly. The factory, which is located in Kragujevac, 70 kilometres south west of the capital Belgrade, was also damaged during the 11 week long NATO bombing campaign in 1999.

Following the wars production of the own brand Yugo models resumed, and in 2005 following the resolution of past debts still owed to Fiat, a deal was struck to assemble the Fiat Punto Mk II from CKD kits at the Kragujevac factory. The car, dubbed as the Zastava 10, is unchanged from the 1.1-litre Punto specification except for badges. A second new line, this time assembling GM Opel models, is expected to get underway next year. The Yugo branded cars still in production, including the original Bravo-engined 'Florida' model, are expected to be phased out by 2010.

However car production has been quite minimal since the war and last year around 15,000 vehicles were built, far below the factory's 60,000 capacity. The firm has 4,000 employees. The Zastava 10 is being imported to other Balkan states and to certain Eastern European countries. Zastava Automobili also exports its cars to a number of countries including Syria, Egypt, Lebanon and Tunisia.

Around 87 percent of the Zastava Group shares that are held by the Privatisation Agency along with the 11.8 percent owned by the government Development Fund will be offered for tender. The Serbian government has privatised nearly 300 companies this year, raising over 400 million euros. Next year around 750 state-owned firms will be sold off, including the national airline, Jat Airways, telecommunications provider, Telekom, department store chain, RKB, as well as a raft of companies including properties and hotels.

The full tender offer for Zastava Automobili, together with the tender starting price, will be announced at the beginning of April. "The companies will have until March 31 to demand access to data rooms allowing them three months for due diligence before the sale in April," Jelena Dancevic from the Privatization Agency said on Thursday. The Serbian government has suggested at least two major car manufacturers will be involved in the tender process. Fiat Group is expected to be one of these, while GM is also likely to show an interest in the process. Austrian engineering firm Magna-Steyr is also rumoured to be preparing to look at the books.