FIAT - Zastava Agreement
Face
the crisis with small car
Last
September the Italian Fiat and Serbian Zastava signed an agreement worth 940 million
euro. Fiat group chief executive Sergio Marchionne reports great satisfaction
but however warns about the future of car industries. 'There could be only six
survivors in the global volume sector' he reports
By
MARCO RICIPUTI
from Ravenna, ITALY
Fiat and Zastava are very important companies in
their countries. Zastava is an old car, weapons and equipment factory founded
in 1853 in the city of Kragujevac. Its main job for almost a century was the construction
of weapons. The Italian Fiat, based in Turin, saw the world in 1899 and became
a multinational company in the 60s.
A long story of collaboration
The partnership between them dates back to the 50s. The first agreement was
signed in 1953 when Zastava acquired the license for the production of 'Fiat Campagnola'.
After that several models were inspired by the Fiat design and the well known
Zastava Yugo 45 - exported also in the USA - had a Fiat engine. The golden age
of Zastava begun in the '60s and reached its climax in 1989 with 220,000 cars
per year and 53.000 people employed.
Zastava
precipitates into the abyss with Yugoslavia in the nineties. Hit by the effects
of war and by NATO bombing the industry is half destroyed and maintains fewer
than 4,000 employees and the annual production is reduced to 10-15,000 cars. Attempts
to re-launch the production started after the fall of Milosevic with the search
for foreign partners.
The agreement worth 940 million euro
The agreement provides that Fiat purchases 67% of Zastava leaving the remaining
33% in the hands of the Serbian government. The initial investment will be 700
million Euros, of which 200 million up to Belgrade.
The start of the
operations is scheduled for 2009, with production of model 'Fiat 500' at a rate
of 200 thousand cars every year. The production will be expanded in 2010 with
the construction of the Fiat Punto' and with the goal of 300 thousand vehicles
produced every year.
The
investment, in reality, reaches 940 million Euros if we take into account 240
million for a parallel project involving Zastava, Iveco and Magneti Marelli. The
three companies signed memorandum for the production of special vehicles, buses
and spare parts.
Getting bigger with a small car
The joint
venture with Zastava is a part of Fiat strategy. The Italian company was looking
for a site as a European production base for the launch of its project on the
market of the small cars. To respond to the economic crisis and fall in car sales,
Fiat is planning to offer the low cost car - originally designed for the Central
and Eastern Europe - to the markets of Western Europe, too.
As the Polish
factory in Tychy - which produces 'Fiat Panda' and 'Fiat 500' - is saturated,
and the investment in the Italian factory of Termini Imerese is slowed down by
the bureaucracy, the necessity to find a new spot as soon as possible and the
need of the Serbian government to find a new impulse for the Zastava made a quick
deal possible.
According to Fiat group CEO Sergio Marchionne, the economic
crisis will trigger a big cut in the number of global automakers. He thinks that
the only way for companies to survive is making more than 5.5 million cars per
year and at present, only five automakers - Toyota, General Motors, Volkswagen,
Ford Motor and Renault-Nissan - have that kind of scale.
'The business
is going to be completely different' argues Marchionne, 'it cannot continue as
it did in the past. Independence in this business is no longer sustainable.' Serbia
will be the third low cost production base after Poland and Turkey and reaffirmed
the will of Fiat to produce small cars for the European market and the close and
emerging Russian market.
(Published: 10.01.2009.)
