Italian auto maker Fiat SpA (>> Fiat SpA) and Russian state bank OAO Sberbank (SBER.RS) have agreed to form a partnership to build vehicles under the Jeep brand in Russia, whose market is growing faster than the rest of Europe, according to a Sunday report in Italian newspaper Corriere della Sera.
Fiat and Sberbank have signed a letter of intent to assemble vehicles in two factories, the report says, without citing sources.
They will invest EUR850 million in the first one near St. Petersburg where it will eventually produce 120,000 vehicles a year. The second factory will be near Moscow, where the luxury Zil cars for Kremlin officials used to be made.
Although the factories will be able to produce different models, most of them will be sport- utility vehicles, or SUVs, according to the report. Jeep is best known for its SUVs. It belongs to Chrysler Group LLC, the U.S. auto maker majority-owned by Fiat.
Under the terms of the letter of intent, Fiat will own 80% of the partnership, while Sberbank will hold the other 20%, according to the report, adding that Sberbank will provide it with all the financing.
Fiat declined to comment.
The partnership is the outcome of an initiative by the Russian government to promote direct investment in its automotive industry.
In June 2011, it received proposals from various manufacturers, including Fiat, which offered to invest $1.1 billion to build two factories.
Fiat had previously tried to form a partnership with OAO Sollers (SVAV.RS). It failed, losing out to Ford Motor Co. (>> Ford Motor Company).
-By Gilles Castonguay, Dow Jones Newswires; +39 348 596 5667; email@example.com