Kragujevac Mayor Veroljub Stevanović has moved to counter rapidly growing local speculation that the deal with Fiat Group to start producing a range of cars on the site of the former Zastava car factory in the Serbian city could fall victim to the current global economic downturn.

In an interview with Belgrade's Večernje Novosti daily, reported by B92, Stevanović said that communication with the Italians is "constant, especially between Minister [Mlađan] Dinkić and the Fiat leadership." Stevanović was also quoted as saying that "some kind of an official confirmation that the deal with Fiat continues" is expected before the end of the year.

Kragujevac-based Zastava carmaker and Fiat are planned to embark on a strategic partnership arrangement, but concern has been raised lately that the deal will fall through due to the global economic crisis. However, the Kragujevac mayor says that "benefits that Kragujevac offers to the Italian company" are also a part of the guarantees.

Asked whether the state, or the city of Kragujevac, have a Plan B in case the arrangement does not materialize, Stevanović said that "plan A is for Fiat to start producing a new model, some 200,000 cars each year by 2010, while 100,000 B-class cars will be produced in a year and a half." If that does not happen due to the financial crisis, which in my opinion is not very likely, Plan B will be activated," he said, and explained that this means the factory will be "completely reconstructed, with appropriate infrastructure built".

Serbia has, according to Stevanović, pledged some 300 million euros for this purpose. When the Novosti reporter inquired about Plan C – in case Fiat withdraws from the deal altogether – the mayor said that this "would not happen." Stevanović also revealed that the state will continue to pay the wages of all Zastava workers until the end of next year, "regardless of whether they stay, join a new company or take redundancy money."

Report: B92