Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Fiat Announces GAZ Production Deal

MILAN, Italy -- The Italian auto giant Fiat said Monday it has wrapped up a deal to build cars in Russia with the GAZ company.

Fiat and GAZ will own 80 percent of the new company, which will invest $850 million to produce up to 150,000 Fiat cars a year in Russia. The European Bank for Reconstruction and Development will own the remaining 20 percent.

Start-up is planned for late 1998 in Nizhny Novgorod. The plant will build the Fiat Palio Weekend station wagon, and the Fiat Siena and the Fiat Marea passenger cars.

GAZ is Russia's most successful domestic car maker. Last year it produced 120,000 cars and 250,000 vans and trucks. This year, car production is expected to total 125,000 units.

Analysts expect consumer demand for cars in Russia to grow rapidly in the next three years. Currently there are around 105 cars per 1,000 inhabitants, compared with 192 in Poland and nearly 500 in Germany.

In the waning years of the Soviet Union, Fiat had plans to build a giant car assembly plant in Russia capable of producing 900,000 cars a year. The 1991 Soviet collapse and the ensuing economic downturn put those plans on hold.

Fiat joins Renault SA, General Motors Corp., Ford Motor Co. and Daewoo Motor Corp. in moving into Russia. GM, Ford and Daewoo are already in production and Renault has signed a letter of intent with the city of Moscow.