"Zastava” and "Fiat” to sign contract, up to 8,000 Punto automobiles, with both diesel and gasoline engines, from Kragujevac

The most important event in the history of Serbian automobile industry is about to happen. The management of Kragujevac-based "Zastava” still keep their mouth shut about that, but well-informed sources say that the deal with Torino-based "Fiat” is practically for sure.

According to available information, 95% of the future commercial contract have been agreed on, according to which Kragujevac-based automobile factory, during the first year of project realization, will assemble between five and eight thousands "punto” vehicles. There will be two models of small "punto” – one equipped with gasoline-powered engine with piston displacement of 1,200 cubic centimeters, and the other equipped with diesel engine with piston displacement of 1,900 cubic centimeters. The price of both models will amount to about €8,000, which would make Kragujevac’s "punto” one of competitors to French-Romanian "logan” whose price with full equipment amounts to €7,800.

Agreement between "Zastava” and "Fiat” should, as we found out, be signed by the end of July, whereas its realization could begin already in September 2005. Of course, that is under condition that nobody changes mind.

Management of "Fiat”, although different information could be heard, did not condition "Zastava” with the number of vehicles that will be assembled in Kragujevac. Amount of 5,000 to 8,000 "punto” vehicles on annual basis was determined by experts of "Zastava” on the basis of market demands. These estimates, most likely, did not include potential export capacities, first of all, to countries of former SSSR, so that it can be expected that the number of assembled vehicles will soon be exceeded.

There were certain problems related to the name of the future vehicle, but that thing has been solved in favor of our side, so that, as we find out, Kragujevac’s "punto” will also bear "Fiat’s” symbols. However, there is still unsolved problem concerning location for assembling of "punto” vehicles.

According to some information, the Italians asked that their car be assembled in separate unit where every worker would know his job. In general, that was not the problem for management of "Zastava”, but concerning the fact that factory lines are mutually connected, there is still question whether it can be done. In case "Fiat” does not give up that condition, the management of Kragujevac-based factory will have to react quickly and carry out necessary works on production units. At the same time, the entire job will have to be backed by Government of Serbia.

After writing off of 72% of debt, "Zastava” still owes about €11.5m to Italian partner. The plan is that that money be returned from the privatization of certain "Zastava’s” parts, but if it is taken into consideration that the starting price of "Kovačnica” and "Alatnica” amounts to about 400 million CSD, the debt will not be returned easily. At the same time, "Zastava” needs €15m for rehabilitation of "Lakirnica”, which was damaged during the NATO bombing.

On the occasion of recent visit to Kragujevac, Minister of Finance, Mlađan Dinkić, promised that the Government, if the agreement with "Fiat” became actual, would provide necessary means.