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Serbian Automotive Sector

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The government of Serbia is about to reorganize the automobile industry of the country into one of the biggest automobile industries in the South-Eastern Europe. The authorities of Serbia want the leaders of the world automobile industry to come to Serbia. The serbian side offers their future partners free building land and, in some cases, infrastructure. Moreover, they are secured against tax payments and 25% share participation of the government of Serbia in the capital.

So, the government of Serbia held a tender for sale of the 98,8% shares of the automobile plant “Zastava” located in Kraguevats.

The brand “Zastava” became popular because of the car model “Yugo”. 200 000 cars were produced annually until the end of 80s. In 90s at the time of bombings, the plant was strongly damaged. Nowadays the car models “Fiat Punto” and “Opel Astra” are assembled under the license in small quantities for the inner market.

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15 000 cars were produced in 2006 while the productive capacity of the plant “Zastava” was 60 000 units. In 2007 only 12 000 cars were produced.

The share acquirement applications of the plant “Zastava” were accepted until the 15th of 2008. The companies “Volkswagen”, “GM”, “Fiat”, “Ford”, indian automobile concern “Tata” and chinese corporation “FAW” showed their interest.

The most interesting buyer was the italian group “Fiat SpA”. “Zastava” started cooperation with “Fiat SpA” in 50s of the 20th century already. The parties signed the memorandum of purpose of the automobile plant purchase. According to the memorandum terms, “Fiat” and “Zastava” should create a joint venture, 70% of which will be owned by the italian party. The italian group views the plant acquirement in Serbia as a step forward to the costs reduction.

According to the information announced by the Minister of serbian economy, Mr. M. Dinkich, the italian concern “Fiat” invests 700 million euro in the development of the plant in order to increase the production volume up to 150-200 000 cars in 2009, and by the end of 2010 – up to 300 000 units.

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The group “Fiat” wants to start manufacture of a new car model of compact city car “Fiat Topolino” in 2009. The length of this midget car, which has low fuel consumption and meets the EU requirements of CO2 atmospheric emission, is 3 meters. The car “Topolino” is designed for 3 persons but can seat 4. The novelty will be produced on basis of the “Fiat 500” platform.

The volume of output is calculated in such a way that it will be supplied not only on the serbian market but also abroad, including the Russian Federation. It is possible, that after the lowering of custom duties on import of serbian cars in the Russian Federation the sales of assembled in Serbia, cheap car models «Fiat Punto» and «Fiat Topolino» of the “Fiat-Zastava” joint production will rise.

The russian “AMS-Group” company (Ulyanovsk) won the tender for sale of the 39,22% government share holding of the serbian plant “Ikarbus” (Zemun). The sum of the deal is not announced, but the market capitalization of the plant comes to only 42 million dollars. The serbian plant is not an attractive asset; today its debts almost equal its capitalization – 40,25 million dollars. The losses of “Ikarbus” were more than 10 million dollars in 2007. The plant owns two assembly shops and two office buildings, but the most part of the real estate is mortgaged in banks as a mean of credit security.

The tender for sale of the government share holding was announced at the beginning of 2007, but in the end there was only one candidate – the producer of auto parts “Autodetal-service”, a part of the “AMS-Group”.

After the agreement on government share holding was signed, the shareholders fund, owing the biggest 39% share holding together with the plant pension fund (each one of the other shareholders owns no more than 6%) offered to sell their shares to the winner of the tender.

The “AMS-Group” began to assemble chinese lorries “BAW” 2 years ago. The russian group is interested in buying of “Ikarbus”, because it plans to produce the whole production line of commercial transport. The serbian producer of buses will have the best of the bargain in the Russian Federation than the chinese one.

100 buses were produced in 2007 while the productive capacity of the plant was 1 000 units. It is planned to produce 600 units in 2008.

According to the information of the serbian press and the plant direction, “Ikarbus” struck an agreement with the moscow plant “Tushino-Auto” (the company reequips buses “Ikarbus” and “LiAZ”) on supply of 300 middle buses “IK-107 Moskovit” to the sum of 18 million euro in April, 2008.

“Ikarbus” struck an agreement with the company “Harington” (the UAE) on supply of 350 city buses “IK-107 Moskovit” to the sum of 27 million euro in 2007. The contract provides partial manufacture of buses in Serbia and transmissions, engines, windows and seats will mounted in the UAE by the buyer. The first bus was sent in Dubai in February 2008. The end of supply is expected in September 2008. As a result of these and remaining contracts, the production is organized into two shifts after a long time.

The plant “Ikarbus” won the tender on supply of 100 city buses with low road clearance, including 55 articulated buses, to the sum of 27 million euro for Belgrade until the end of May 2008. Other machinery supply contracts are being performed in other cities of the country.

The strategic partnership contract with the bus plant “Bredamenarinibus” (Bolnia, Italy) came into force. The term of the contract lasts until 2017 with a possibility of continuation. The contract provides joint manufacture of buses, industrial cooperation, technology transfer, joint development of new products and auto parts, joint sale of buses and auto parts on the world market. “Ikarbus” and “Bredamenarinibus” plan a joint manufacture up to 200 buses annually, that will be assembled in the shops of the plant “Ikarbus”. Within the framework of the cooperation with the new strategic partner, the plant began to produce a new small bus “M231”, which meets the requirements, set by the European Union.

Under the license of the company “TIB” (Brezol, France) the plant “Ikarus” began to manufacture ambulances, intended for reanimation and surgical operation. With the help of the license agreement the plant was given the right to export these automobiles in the ex-countries of Yugoslavia as well as in Hungary, Greece, Romania, Slovakia, the Ukraine, the Russian Federation, Turkey and in the Middle East countries.

“Ikarbus” also signed the letter of intent with the car body builder “Heuliez” (France) about manufacture of trolley buses, and trams in the future. The serbian plant is to produce car bodies and the french party is to produce engines, other mechanics and auto parts. Belgrade will be the main buyer.

The german concern “Volkswagen” can also use the abolition of duties on automobiles of the russian-serbian trade, which views the possibility of a plant construction in Serbia.

The direction of the german automobile concern “Daimler AG” (the trade mark – “Mercedes Benz”) received an offer on cooperation from the government of Serbia, which applies to the acquirement of the lorries plant “FAP” located in Priboy. The offer was made by the Minister of serbian economy Mr. M. Dinkich at the meeting with the delegation “Daimler AG”.

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