Fiat Group Automobiles (FGA) and the Government of the Republic of Serbia jointly announced today the signing of a definitive agreement for the formation of a joint-venture pursuant to the Memorandum of Understanding (MoU) signed in April 2008.

The agreement was signed by Sergio Marchionne, CEO of Fiat Group and Fiat Group Automobiles, and Mladjan Dinkic, Serbian Deputy Prime Minister and Minister of Economy and Regional Development, in the presence of the President of the Republic of Serbia, Boris Tadic, the Prime Minister, Mirko Cvetkovic, and the Italian Minister of Foreign Affairs, Franco Frattini.

The joint-venture, 67 per cent owned by FGA and 33 per cent by the Government of the Republic of Serbia, acquires the assets of the Zastava plant at Kragujevac, which is located 140 km South-East of Belgrade. With a capacity to produce about 200,000 cars yearly, at steady state by the end of 2010, and a potential addition of 100,000 cars, the plant will form part of FGA’s global manufacturing footprint and will benefit from Fiat’s production standards. The joint-venture would carry an initial investment of about 700 million euros, including a support of more than 200 million euros by the Serbian Government, encompassing a cash contribution of 100 million euros, a share-holder’s loan of 50 million euros, and a variety of other incentives. An additional wide-ranging support to the initiative will be provided by the City of Kragujevac pursuant to the MoU signed in May 2008, including the necessary infrastructure and utilities for the project’s realization at the Zastava plant.

Sergio Marchionne and Mladjan Dinkic also signed a MoU as the basis for a potential cooperation between Iveco and Magneti Marelli and the Government of the Republic of Serbia in the production of buses, special vehicles, and automotive components.

Under the MoU, joint teams are to be set up by Iveco, Magneti Marelli and the Serbian Government, which will examine the various aspects of the initiatives in greater detail. The MoU foresees the establishment of two new joint-venture companies, which would be owned 70 per cent by Iveco and Magneti Marelli, respectively and 30 per cent by the Serbian Government. If successful, these discussions will lead to the signing of definitive agreements in the course of the coming months.

By the end of 2012, Iveco could produce approximately 2,200 buses yearly, while Magneti Marelli could manufacture components and parts for both domestic and foreign markets in the areas of automotive plastics, suspensions, lighting, and exhaust. Both facilities will be located in an industrial zone on the outskirts of Kragujevac.

Direct investments required by the joint-venture companies would amount to some 240 million euros, including a total cash contribution of 60 million euros to be made by the Government of Serbia, plus a variety of other incentives as well as necessary infrastructure and utilities for the project’s realization. The total headcount of the new companies would be of 2,350 employees.

Sergio Marchionne said: "Today’s announcement further strengthens our presence in Serbia. Our operations here will provide Fiat Group with the means to widen its customer base and to support its expansion and volume aspirations from a strategic region while at the same time contributing to Serbia’s industrial and technological development. This initiative will enhance the economic and social growth of the area. Over more than half a century, Fiat and Zastava have played an important role in developing the Serbian automotive industry. Moreover, our commitment demonstrates our confidence and trust in Serbia especially in view of the strong determination of its Government and the far-sightedness of President Boris Tadic, to enable the country to advance on its European Union path."