Bloomberg News

Fiat Said to Near Russia Deal With Sberbank to Build Jeep SUVs

February 27, 2012

Fiat SpA (F), the Italian carmaker that controls Chrysler Group LLC, is nearing a deal with OAO Sberbank to build Jeep models in Russia, two people familiar with the matter said.

The announcement of a preliminary agreement is expected this week, said the people, who asked not to be identified discussing private talks. Fiat will produce Jeep sport-utility vehicles at a new plant near St. Petersburg, the people said.

Chief Executive Officer Sergio Marchionne, who runs both Fiat and Chrysler, aims to boost sales in fast-growing economies to counter losses in Europe. Ford Motor Co. (F), Volkswagen AG (VOW) and General Motors Co. signed deals with Russian partners last year to expand production in the country.

“Russia seems to have enormous demand for passenger cars and SUVs”, said Hans-Peter Wodniok, an analyst at Fairesearch GmbH in Kronberg, Germany. “The factory could become a success if Fiat and Chrysler produces not just a single model there. I see as essential that this facility will be flexible.”

Sales of new cars and light commercial vehicles in Russia may rise to 2.8 million this year, the Association of European Businesses estimated last month. Deliveries climbed 39 percent last year to 2.65 million vehicles, the organization said.

Fiat and Sberbank signed a letter of intent on Feb. 25 aimed at setting up a partnership in the country, Corriere della Sera reported yesterday. The agreement includes building a plant with an investment of 850 million euros ($1.14 billion) close to St. Petersburg for the production of 120,000 vehicles a year, the Italian daily said.

Sollers Deal Scrapped

The Turin, Italy-based carmaker has been developing a new plan for Russia since scrapping a 2.3 billion-euro joint venture with OAO Sollers last year.

Fiat and Chrysler were seeking to complete plans in the first half of this year to build Jeep SUVs in Russia, Mike Manley, head of the Jeep brand, said last month in an interview in Detroit.

The effort is part of Chrysler’s drive to boost Jeep sales outside North America. The brand’s deliveries in other parts of the world climbed 41 percent to about 105,000 in 2011, Todd Goyer, a spokesman for Auburn Hills, Michigan-based Chrysler, said last month.

Jeep may build a vehicle in China as soon as 2013 or 2014, Manley said, and will start production of an SUV at Fiat’s Mirafiori plant in Turin, Italy, Manley said Jan. 10.

Fiat, which owns 58.5 percent of Chrysler, is in the process of building its first China factory in a joint venture with Guangzhou Automobile Group Co. (2238) and will start selling its first sedan in the country in the second half of this year.

To contact the reporters on this story: Tommaso Ebhardt in Milan at tebhardt@bloomberg.net; Craig Trudell in Southfield, Michigan at ctrudell1@bloomberg.net.

To contact the editors responsible for this story: Chad Thomas at cthomas16@bloomberg.net; Jamie Butters at jbutters@bloomberg.net,


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