TURIN - Fiat Auto is negotiating a deal that would let Serbian automaker Zastava Automobili build the current Fiat Punto.
"We are in the final phase of talks that will result in assembling the Fiat Punto," Serbia's Deputy Foreign Economic Relations Minister Vlatko Sekulovic said in a news conference held in Kragujevac on June 23, according to press reports.
Fiat Auto confirmed the licensing negotiations, which started in July 2004, but did not elaborate.
The plan would allow Zastava to assemble 5,000 to 8,000 units a year of the current generation Fiat Punto small-segment car. Zastava would sell these cars under its own brand in Serbia and in neighboring Balkan markets.
Starting this autumn
According to Serbian newswires, Zastava could begin assembling the Punto this autumn. The car could be priced at around E8,000.
For Fiat Auto, the deal would generate some licensing fees and help it recover some of the back royalty fees Zastava owes it. In 2004, Fiat wrote off E30 million in unpaid licensing fees that Zastava had owed it for nearly 20 years. Zastava still owes another E11.5 million.
For Zastava, the deal would give it access to modern technology and help it recover from being bombed by NATO aircraft in 1999. NATO believed the plant was producing munitions. During fighting in the Balkans in the late 1980s and 1990s, Zastava's position went from the producer of Yugo small cars with 220,000 annual capacity to nearly idle because of United Nations economic sanctions and bomb damage.
Based in Kragujevac, 100km south of Belgrade, Zastava Automobili is the automotive arm of the state-owned Zastava group, which also builds heavy trucks, components and various types of industrial machinery.
Zastava began producing cars in 1955, building the Fiat 600 D under license.
Zastava became well known as a producer of the cheap-and-cheerful Yugo hatchback minicar in the 1980s, but was crippled by international sanctions and the NATO bombs.
Before the Balkans war, Zastava had an installed capacity of around 220,000 units. Production peaked at 180,950 units in 1989.
Since the bombing, the Serbian government has spent more than E50 million restructuring Zastava, although current capacity is just 60,000 units with 4,300 employees.
Zastava resumed production in spring 2000, but volumes never recovered.
Zastava builds three models: the Florida hatchback and a derived pickup that both were introduced in 1988 and the Fiat 127-based Koral/Yugo small car that has been built since 1981.
Over the past 15 years, Zastava had negotiated with various carmakers to sign new license contracts, including Fiat Auto, France's PSA/Peugeot-Citroen, Hyundai of Korea and Indian automaker Tata.
The closest to a deal Zastava got was with PSA: but a 1998 deal to assemble the 106 minicar fell apart after the plant was bombed.