Fiat Group has
announced its latest strategy to enter the Russian
market, this time as part of its plan to go it alone in
this market, it hopes to sign a deal with giant Russian
bank, Sberbank, to build a new factory to produce Jeep
vehicles with the institution taking a stake in the
project.
This new two pronged
approach will see Fiat establishing a new factory,
possibly near St. Petersburg, and also contract out
further production to automaker ZIL.
A statement issued in
Turin yesterday, read: "Fiat has signed a Letter of
Intent with Sberbank in relation to a new project for
the production and distribution of passenger and
commercial vehicles in Russia. The Russian bank intends
to finance the project and also take a minority equity
interest of up to 20 percent in the joint venture."
This is the latest
step in Fiat's continuous attempts to gain a foothold in
this potentially lucrative new vehicle market. Last June
after talks with Russian automaker Sollers had collapsed
in February 2011, Fiat announced that it would now try
to go it alone to set up new production ventures in
Russia.
At the time
Sollers said that it was jilting Fiat's overtures to
sign up instead to a new joint venture with the Ford
Motor Company. Ambitious plans for the Fiat-Sollers
joint venture (which had been announced on February 12,
2010 through an MoU) had called for the production of
500,000 vehicles in Russia by 2016. The loans were to
have been subsidised by the Russian government. That
attempted deal in fact came after a previous plan to
move into Russia by acquiring a minority stake in the
country's largest automaker, Avtovaz, fell through when
the Italian firm was outbid by its French rival,
Renault.
Since those two
abortive bids Fiat has instead pursued a path of going
it alone in Russia and forging a relationship with the
hugely influential Sberbank, along with central
government approval which it has already gained, could
help steer it through the many pitfalls of trying to
enact this option. Sberbank (which stands for "Savings
Bank of the Russian Federation") is the largest bank in
Russia.
The new plan will focus around
the Jeep brand which Fiat hopes will be an ideal 'fit'
with the demands of the Russian market. "The product
range is expected to be based on Jeep vehicles and could
subsequently be expanded to include other models and
engines which will be produced and assembled locally,"
read the statement issued yesterday which added that:
"Production capacity of 120,000 vehicles will be
established." However that line doesn't make quite clear
if the 120,000 unit capacity refers just to its new
plant or also includes any contract manufacturing that
will be farmed out to ZIL. "Total investment in the
project could reach €850 million," the statement adds,
which is under the 1.1 billion euros Fiat said it was
looking to invest in its Russian project last year when
it first announced plans to go it alone. The production
target is the same however, and slightly more realistic
than the continuous wild numbers that Fiat has plucked
out of the air in relation to its Russian hopes before.
The statement continued: "The
project encompasses a main plant - the preferred option
for now is to locate it in the St. Petersburg area - and
also the assembly of vehicles, SUVs and potentially
light commercial vehicles in Moscow via contract
manufacturing to be entered into with ZIL (Zavod Imeni
Likhachova) thanks to the cooperation with the
Government of Moscow." It also notes that while this is
a Fiat project, Chrysler Group may also provide funds
towards this initiative as well as licencing its models.
However this plan is still only
at the "letter of intent" stage and the factory site is
still only a "preferred option" meaning this latest idea
hasn't progressed that far. However, a tie up with
Sberbank is very significant, if Fiat has been able to
negotiate preferred terms, and the press release
suggests a final agreement could be announced soon,
concluding: "Parties will continue discussions and will
seek for all customary corporate approvals, ahead of
entering into binding agreements, which will be
finalized during the first half of 2012."
