Serbian economy minister Mladjan Dinkic and Fiat chief executive Sergio Marchionne signed an agreement in Belgrade on September 29 2008 opening the way for a $1 billion joint venture, in which Fiat will have a 67 per cent stake, to revive Serbian motor vehicle maker Zastava, international and Serbian news agencies reported.

The $1 billion initial investment includes $300 million support from the Serbian government.

The Voice of America quoted Dinkic as saying that the venture was Serbia's biggest investment so far, while Marchionne said that the deal demonstrated the company's confidence in Serbia.

Under the deal, Zastava is expected to produce 200 000 cars a year initially and expand production later.

Serbian president Boris Tadic, prime minister Mirko Cvetkovic and Italian foreign minister Franco Frattini attended the signing ceremony.

The new company will take over the assets of the Kragujevac-based Zastava factory.

Kragujevac mayor Veroljub Stevanović told Serbia’s B92 that Kragujevac and Serbia would benefit from co-operation with Fiat. He said that by 2010 car exports from Serbia should reach a billion euro.

Tadić told Radio Television Serbia that Fiat’s arrival in Serbia was a great economic move for the company that showed that Serbia was moving towards Europe and was stable enough for investments.

Tadić said that Serbia had great potential in the motor vehicle industry, adding that the production of cars and spare parts was the future of Serbian industry, and would lead to the creation of about 30 000 new jobs in the next few years.

Serbia’s Beta news agency reported that Marchionne and Dinkic also signed a memorandum of understanding on the future co-operation of two members of the Fiat Group, Iveco and Magneti Marelli, with the Serbian government in the production of buses, special vehicles and vehicle components.

According to the memorandum, two more joint companies will be formed, which will be under 70 per cent Italian ownership, with the Serbian government owning the remaining 30 per cent. The starting investment for those companies is 240 million euro, of which Serbia will invest 60 million euro.

Under the memorandum, it is envisaged that Iveco, as a co-owner of Zastava Trucks in Serbia, will be manufacturing special vehicles and about 2200 buses each year by the end of 2012. Magneti Marelli will manufacture components and parts for the domestic and foreign markets.