Fiat and carmaker Sollers signed a deal to form a joint venture expected to build up to half a million cars per year in Russia, the two companies said.
The deal, which has the backing of Russian Prime Minister Vladimir Putin, will lead to investments of 2.4 billion euros (US$3.3 billion), the two companies said.
Putin and Fiat head Sergio Marchionne attended the signing ceremony in Naberezhnye Chelny, a city 1,000 kilometers (620 miles) east of Moscow in Russia's Tatarstan region where the cars will be produced. The main production site of the new joint venture will be at Sollers' plant in Naberezhnye Chelny, where Fiat Albea and Doblo models are already built. Some components for the cars will be built in a new technology park in Tolyatti, the hometown of Russia's number one carmaker Avtovaz, the joint statement said.
Fiat and Sollers, formerly known as Severstal Auto, "have announced the establishment of a global alliance in the format of a joint venture for the production of passenger cars and SUVs," the companies said.
"The total production capacity of the new joint venture will be up to 500,000 vehicles per year by 2016," they said.
Fiat has a long history in Russia and the Soviet Union, having designed the sprawling Avotvaz factory in Tolyatti, a city named after an Italian Communist, in the 1970s.
Putin said his government could make a major loan to the new joint venture, which Russia hopes will help the country's struggling domestic car industry after it was badly shaken by the global economic crisis. "The decision has been made to study the possibility of making a long-term loan with a term of up to 15 years of 2.1 billion euros (US$2.9 billion)," Putin said.
The joint venture represents the first major foreign investment in Russia's car industry since the global economic crisis triggered a collapse in demand on the country's once-booming auto market.
Car sales dropped by 49% last year compared to 2008, according to the Association of European Business in Russia.
Some components for the cars will be built in a new technology park in Tolyatti, the hometown of Russia's number one carmaker Avtovaz, the joint statement said.
Fiat has a long history in Russia and the Soviet Union, having designed the sprawling Avotvaz factory in Tolyatti, a city named after an Italian Communist, in the 1970s.
Copyright Agence France-Presse, 2010
