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The Government of the Republic of Serbia

In the service of citizens

Serbian government, Fiat sign agreement on joint investment in Zastava

Belgrade, 29 September 2008

Representatives of the Serbian government and Fiat signed today in Belgrade an agreement on joint investment in Zastava worth approximately €950 million, which will enable opening 4,750 new jobs.

Sergio Marcionne, left, and Mladjan Dinkic sign the contract

Deputy Prime Minister and Minister of Economy and Regional Development Mladjan Dinkic and Fiat President Sergio Marchionne signed the contract at the government building.

The contract specifies that Fiat will be the owner of 67% of shares whereas the state will have the stake of 33%. The new joint company will also take over Zastava’s assets, while Fiat’s investment will be approximately €700 million.

The overall investment of the Serbian government will be €200 million, out of which €100 will be investments and incentives, €50 founder’s loan and €50 million various tax breaks and incentives.

The factory will produce 200,000 cars a year before the end of 2010, with a possibility for the production to be increased to 300,000.

Dinkic and Marchionne also signed today a Memorandum of Understanding between the Serbian government and Fiat Group subsidiaries Iveco and Magneti Marelli on the production of buses, trucks and components for the car industry.

This document envisages setting up two new joint companies. Italian partners will be the owners of 70% of shares, while the Serbian government will have the stake of 30%.

The initial investment of these companies will be approximately €240 million, out of which Serbia will participate with €60 million, along with adequate tax reliefs and infrastructure investments.

The Memorandum envisages that before end-2012 Iveco, as a stakeholder of truck factory Zastava Kamioni, produces trucks and more than 2,200 buses a year, while Magneti Marelli will produce components for domestic and foreign markets.

The factories will be in Kragujevac’s industry zone and will take on 2,350 workers.

Italian Minister of Foreign Affairs Franco Frattini, Serbian President Boris Tadic and Serbian Prime Minister Mirko Cvetkovic were present when the agreement was signed.

The ceremony was also attended by First Deputy Prime Minister and Minister of Interior Ivica Dacic, Deputy Prime Minister in charge of EU integration Bozidar Djelic, Deputy Prime Minister Jovan Krkobabic, Minister of Foreign Affairs Vuk Jeremic, Minister of Finance Diana Dragutinovic, Minister of Defence Dragan Sutanovac, Minister for the National Investment Plan Verica Kalanovic, Minister of Telecommunications and Information Society Jasna Matic, and Minister of Youth and Sports Snezana Samardzic-Markovic.

Cvetkovic, Marchionne, Dinkic and Mayor of Kragujevac Veroljub Stevanovic then departed for Kragujevac, where they visited car factories.

Addressing a press conference held at the Kragujevac City Assembly, the Prime Minister expressed satisfaction over the signing of the agreement with Fiat and stressed that this is an important investment because it will contribute to Serbia’s macroeconomic stability through imports and will open doors to new foreign investments and more employment.

He said that cooperation with Fiat will be of special importance for local administration because it will influence the general development of the city, services and other areas related to the realisation of the investment.

Marchionne said that Fiat had several offers for joint cooperation, but there were two crucial reasons because of which Zastava was chosen.

The first was the speed and manner in which everything sought for was done, the second was the people of Kragujevac who welcomed Fiat with open arms, explained Marchionne.

Dinkic talked about details of the agreement signed today in Belgrade, and said that Kragujevac and Sumadia will receive investments ranging from €1.3 billion to €1.5 billion.

It will take from 15 to 16 months for the production of a new model to begin, which will be better looking and more modern than the popular Fiat Cinquecento, and 95% of the production will be placed on the EU market, said Dinkic.

He added that equipment for production of the new model will be installed in two phases. In the first phase 200,000 cars will be produced, and in the second phase, within a year, production will rise by 100,000, said Dinkic.

Kragujevac Mayor Stevanovic presented Marchionne with the key to the city and an icon of St George the patron saint of Kragujevac, marking the end of the ceremony for signing the agreement on cooperation between Fiat and the Serbian government.