Zastava car plant pins its hopes for survival on foreign deal

BELGRADE – Serbia’s troubled Zastava car plant will start talks with Italy’s Fiat next month on possible cooperation that could help it survive, Zastava, the nation’s sole producer of passenger vehicles, said yesterday. Previous government plans to privatize the company and talks with the Peugeot-Citroen Group, Toyota and Volkswagen have flopped after Zastava opposed offers to be sold cheap and then get investment to develop. With 4,500 workers who produced three cars each in 2003, the maker of the Yugo hatchback hopes Fiat or another foreign carmaker would at least agree to sell a platform to Zastava to develop its own model if not let it manufacture a foreign model. «This is the most delicate time for Zastava because we need to make decisions and find a way out of years of idling,» said the chairman of Zastava’s board, Miodrag Savicevic. «We plan to cooperate with strong foreign partners. The current political and economic situation is not very favorable, but we are nearing talks with Fiat,» he told a news conference. «I personally believe we need to talk with Fiat, which is geographically close and has no production in other nearby countries. We simply must join the club of big international carmakers to survive.» The company’s bid to survive comes more than two years after the government split up the Zastava Group, spinning off more than 20 companies in sectors from guns to trucks. Although the state has aimed to end handouts to the once-successful factory, it has subsidized Zastava with 4.745 billion dinars ($81.97 million) over the past three years. Hopes on Fiat despite debt Located in the central Serbian town of Kragujevac, some 130 kilometers (80 miles) south of Belgrade, Zastava suffered an estimated 175 million euros ($212.2 million) in damages during NATO’s air strikes in 1999. It produced 13,100 cars in 2003 and plans to make 31,000 this year, still well below its capacity of 60,000 vehicles. Savicevic said talks with Fiat were due by early May in Turin. «By that time we also need instructions from our Finance Ministry on how to present a debt-rescheduling plan.» Zastava owed Fiat some $30 million. Fiat was expected to write off more than 66 percent, as granted by the Paris Club of sovereign lenders to Belgrade in late 2001. In the meantime, Zastava’s team would travel to Paris on Monday for talks with Renault, which already operates in Slovenia and Romania, he added. «It does not look realistic that talks with Renault would result in a deal, but there are always possibilities such as exchanging cars for spare parts,» Savicevic told Reuters. He said Zastava also hoped to talk to Hyundai on possible future cooperation. If any of the companies agrees to sell its platform to Zastava, the Serbian firm said it would launch a brand new car by 2007. By that time, it would start phasing out production of its cheap-and-cheerful Yugo launched in the 1980s.

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