Russian carmaker ZiL and US supplier Venture Industries plan to to jointly produce a new low-cost compact car in Russia.
Venture, the parent company of plastic parts supplier Peguform of Germany, will receive a E250 million investment in the joint project from Gosincor, a financial institution controlled by the Russian government.
ZiL is one of Russia's largest manufacturers of military trucks, commercial vehicles and buses. The company, owned by city of Moscow authorities, has also built limousines for the Russian government.
The deal was finalized late last month, a year after Venture showed a prototype entry-level hatchback model to the ministry of industry in Moscow.
The prototype used a 1.2-liter, three-cylinder, two-stroke, direct-injection engine supplied by Australia's Orbital Engine Corp. The production model will use a derivative of this engine.
The new budget car would be built at ZiL's Likhachev plant in Moscow at a rate of 150,000 units a year. Production could begin within two years, said Venture, with a likely retail price of E5,000. Venture said it would use Russian suppliers and sharply limit electronics content to control costs.
The deal puts family-owned Venture into the vehicle production business. The company has sales of about E3 billion a year.
Until now, Venture has specialized in producing injection-molded plastic auto components. Products include interior systems, cockpit modules, front-end systems, exterior trim, closures and panels.
German plastic parts supplier Peguform, the Venture subsidiary, supplies interior fittings for the Porsche 911 and Boxster.
Two years ago, Venture and Matra Automobile of France agreed to jointly manufacture components for the Renault Espace and Avantime at Matra's plant in Theillay, France.
Venture is believed to be interested in buying Matra. The French conglomerate Lagardère is trying to sell Matra and last month asked French investment bank Natexis for help in its disposal.