Italy's Fiat and Russian carmaker Sollers on Thursday formed a joint venture expected to build up to 500,000 cars per year, in a welcome piece of good news for Russia's struggling auto industry.
The deal, which has the backing of Russian Prime Minister Vladimir Putin, will lead to investments of 2.4 billion euros (3.3 billion dollars), the two companies said in a joint statement.
Putin and Fiat head Sergio Marchionne attended the signing ceremony in Naberezhnye Chelny, a city 1,000 kilometres (620 miles) east of Moscow in Russia's Tatarstan region where the cars will be produced.
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.
Putin said his government could make a major loan to the new joint venture, which Russia hopes will help the country's 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 (2.9 billion dollars)," Putin said in televised remarks.
The joint venture represents the first major foreign investment in Russia's car industry since the crisis triggered a collapse in demand on the country's once-booming auto market.
Car sales in Russia dropped by 49 percent last year compared to 2008, according to the Association of European Business in Russia.
The deal is in line with Fiat's push to increase its presence in emerging markets by forging alliances with local automakers.
Full story
