Exports to North America will be controversial, if it is part of the deal.
Fiat S.p.A. and Sollers announced in Naberezhnye Chelny, Russia, today the establishment of “global alliance,” which initially will include a joint venture for the production of passenger cars and sport utility vehicles.
Vadim Shvetsov, CEO of Sollers and Sergio Marchionne, CEO of FIAT Group, in the presence of Vladimir Putin, the Prime Minister of Russia, signed a memorandum of understanding. Ownership will be split 50%/50%.
Planned production capacity of the new JV will be 500,000 vehicles per year by 2016. Nine new models in the C and D segments and SUVs will be marketed on the Russian market.
Fiat said up to six will be made from a new global compact Fiat-Chrysler platform. Chrysler will receive some of the income for intellectual property rights and the sale of Jeep kits or components.
Sollers already assembles Fiat Albea cars and Ducato vans.
Sollers already assembles the Fiat Albea car and Ducato van, and has annual sales of about $2 billion.
At least 10% of the produced vehicles will be shipped to export markets.
It was not immediately clear if this includes North America, where Canadian and U.S. taxpayers have bailed out Chrysler.
The Russian auto market has been hit unusually hard by the Great recession, with annual sales running at 1.4 million units, which is down more than 50%.
The factory will be located in Naberezhnye Chelny, about 1,000 Km East of Moscow in the Republic of Tatarstan.
An existing Sollers production site will be expanded, and a technology park added for component production, including engines and transmissions.
Development and technical adaptation to the Russian market of the new vehicles will be carried out at the Engineering Technical Center of the JV, with intellectual property rights for the platform owned by the JV.
The Russian government will support the raising long-term loans at a “favorable subsidized interest rate” for the whole amount of the investments required, estimated at € 2.4 billion, or ~$3.3 billion.
“The plans to implement a full-scale joint project reflect our confidence about the future development of the Russian automotive market. By establishing one of the global production centers specializing in the development and production of FIAT and Chrysler Group vehicles in Russia, we will be able to offer our customers the most desirable products in the most attractive passenger car segments and to occupy leading positions in the growing Russian market in forthcoming years,” said Vadim Shvetsov, CEO of Sollers.
“This is one of the largest alliances signed by our Group in one of the world’s most important markets,” said Sergio Marchionne, CEO of Fiat Group and Chrysler Group.