The government of Serbia and Italian carmaker Fiat will sign a joint venture deal on the Zastava car plant on September 29, the Serbian Economy Ministry said in a statement Friday.
The signing will be the official confirmation of a memorandum of understanding signed between the two partners in April, which stipulated that Fiat would own 70 percent in the joint venture and Serbia 30 percent.
After the meeting with Serbia's Economy Minister Mladjan Dinkic, Fiat's vice-president Alfredo Altavilla said the Italian company was planning to invest “several hundred million euros” in Serbia, according to the ministry statement.
The deal, described by the economy ministry as “the highest investment in (Serbia's) car industry,” will be signed in Belgrade, with Fiat chairman Sergio Marchione, and Italian Foreign Minister Franco Frattini present at the ceremony.
Serbian President Boris Tadic and Prime Minister Mirko Cvetkovic will also be present at the signing ceremony, it added.
According to the memorandum, Fiat would invest 700 million euros (one billion dollars), while Serbia would invest 100 million in a joint venture.
Fiat would launch production of a new car model by the end of 2009, with 200,000 vehicles produced per year, while another model would be produced in 2010.
Zastava, Serbia's only car plant, was already partnered with Fiat, assembling under a separate deal, its Fiat Punto model under the name Zastava 10 for the Balkan market.
Once a pride of communist industry, the Zastava plant, known for its last successful model Yugo, had been gradually collapsing during a decade of economic mismanagement and international sanctions imposed on Serbia during the 1990s.
The plant, based in Kragujevac, 120 kilometres (72 miles) south of Belgrade, was also severely damaged during NATO bombing campaign in 1999, launched to end late Serbian strongman Slobodan Milosevic's crackdown on Kosovo.
The reconstruction of the company began following Milosevic's ouster in 2000, with Zastava producing some 15,000 vehicles per year, four times fewer than its its average capacity.
In 2007, it signed a deal with General Motors to produce Opel Astra for the local market, with the first vehicles expected to come out by the end of this year.
Serbia's Finance Minister Milos Cvetkovic said around 3,500 workers were currently employed in Zastava.
