Wall Street Journal

Fiat To Benefit From Serbia-Russia Free Trade Deal-Berlusconi

13 November 2009

By Guglielmo Valia, MF Dow Jones and Jennifer Clark, Dow Jones Newswires

ROME (MF-Dow Jones)—Italian companies with investments in Serbia such as Fiat SpA (F.MI) will benefit from a free trade agreement signed by Russia and Serbia, Italian Prime Minister Silvio Berlusconi said Friday.

Fiat bought a 67% stake in Serbia’s sole car maker, Zastava, in September 2008. The Serbian government owns the remaining stake. Fiat will invest a total of EUR700 million in Serbia, Berlusconi said Friday.

"Serbia offers a huge advantage for Italian entrepreneurs" because of low cost labor and low taxes, Berlusconi said at a press conference following a visit with a Serbian trade delegation lead by Serbian President Boris Tadic.

Moreover, Berlusconi said, he believes that Italian businesses "will be able to exploit a series of free trade agreements" that Serbia has signed with surrounding countries (including Russia) "that will soon include Ukraine."

Fiat will unveil its plans for its Serbian factory in December, it said Thursday. It plans to manufacture vehicles in Serbia to export to North America, Russia, Eastern Europe and Western Europe, it said.

It didn’t say whether it would make models like Jeep, manufactured by Chrysler Group LLC, of which Fiat took management control earlier this year.

Auto industry analysts are speculating that Fiat could use the Serbian factory to make Fiat and Chrysler vehicles to export to Russia in particular, which charges hefty import duties on foreign-made cars. Such a situation would give Fiat a strong competitive advantage in penetrating Russia’s car market.

Russia and Serbia’s free trade accord doesn’t extend to foreign-made cars, a Russian minister was quoted by the BBC as saying in April.

Berlusconi said Friday that Fiat has assured him that its Serbian factory will not suck jobs out of Italy.