Fiat Nears Deal on Russian Plant

VIENNA – Fiat is expected to sign an agreement in June that will clear the way for its planned new assembly plant in St. Petersburg, Russia.

The Italian company will ink the deal at the St. Petersburg International Economic Forum, which takes place June 21-23, Alexei Chichkanov, chairman of the Committee for Investment and Strategic Projects of St. Petersburg, tells local media.

Fiat signed a letter of intent in late February calling for Sberbank Rossii to finance the project and take a minority equity interest of up to 20% in the joint venture.

Plans are for production of up to 120,000 vehicles a year.

The project will create more than 2,000 new jobs, the committee says. Fiat also plans to establish a research and development center in St. Petersburg.

The city administration’s press office says Fiat will build its factory in the Pushkinsky district.

In addition to the new plant in St. Petersburg, Fiat and Jeep vehicles also are expected to be assembled via contract manufacturing at the Moscow-based factory of commercial vehicle manufacturer Zil.

St. Petersburg’s committee says the investment will be about RR40 billion ($1.35 billion). It is not clear if the entire amount is earmarked for the St. Petersburg plant or includes the activities in Moscow as well.

The first vehicles to be assembled are expected to wear the Jeep brand.

Initial plans call for assembly from semi-knocked-down kits in Moscow, with completely knocked-down assembly to be added later when the new St. Petersburg plant is ready.

“Obviously, we will start with SKD (production) as soon as we possibly can and then get on to full CKD manufacture,” Jeep President and CEO Mike Manley told WardsAuto last month. SKD assembly may start next year, he said.

There is no official announcement on which Jeep models will be made in Russia, but the Grand Cherokee is expected to be assembled there.

“There are options for us to manufacture more than one vehicle,” Manley said.