The Zastava factory at Kragujevac in Serbia currently produces the Fiat Punto Classic model and it recently introduced an LPG version as well as kicking off exports to the Serb populated area of Bosnia.

Serbian President Boris Tadić says Italian carmaker Fiat will by the end of this year make the 100 million euro payment in the Zastava deal. Tadić was on a trip to Turin, Italy on Sunday, and said that an annex to the contract between Fiat and the state of Serbia, concerning the Kragujevac-based Zastava car manufacturer, will be signed on Wednesday.

"Fiat will by the end of the year pay the first 100 million euro in line with the contract on joint investment between that company and the state of Serbia in Zastava," Tadić announced after meeting the Italian company CEO Sergio Marchionne.

B92 has learned from the government sources that the annex, which should see to the start of Fiat's investment, will be signed on December 23 by Economy Minister Mlađan Dinkić and Fiat Vice-President Alfredo Altavilla.

The same officials in late April 2008 signed a memorandum on understanding, strategic cooperation and joint investment, when it was announced the Italian company would invest some 700 million euro. The first payment of that sum was to be made in March 2009, but was postponed "due to the economic crisis". The Kragujevac factory is also supposed to next year start preparations for the production of a new car.

Tadić said that he was satisfied with his trip, and that "a big investment in the domestic economy would be made by the end of this year." According to him, Fiat would be producing two models in Zastava while "initial production will be around 200,000 cars a year".

"I am very satisfied that at the end of this year we have another very significant success, and that is the signing, finally, of the annex to the contract between Fiat and Zastava," said he, and added that this would mark Fiat's "big and essential" investment, that would significantly influence the situation in the economy.

Marchionne for his part said after meeting with Tadić yesterday that the production process would start in early 2010. "This is a significant step forward. Finally we're in a position to, before the end of 2009, invest money and start working in Kragujevac. The reason why this process was postponed for more than we expected is the economic crisis. The car that President Tadić will see," he said, referring to a model that was to be shown to the Serbian president, "is recession-proof."

Meanwhile, Serbian State Secretary with the Ministry of Economy Nebojša Ćirić told B92 that the negotiations with the Italian partner were nearly finished and that the 100 million euro was expected to be paid by the end of the year. Also yesterday, Tadić had a telephone conversation with Italian PM Silvio Berlusconi, which focused on "bilateral cooperation and Italian investments in Serbia," it was announced. Tadić also wished the Italian premier, who was recently assaulted in public, a speedy recovery.

Report courtesy of B92