Serbia Postpones Payment to Fiat for Car-Making Joint Venture
Serbia will pay part of what it owes to Fiat SpA (F) this year for their joint venture that makes 500L compacts and will roll the rest over to 2013 as the government struggles to narrow its budget deficit.
Serbia will invest 50 million euros ($62.7 million) of the 90 million euros it’s contractually obliged to invest this year in Fiat Automobili Srbija, the car plant 33-percent owned by the state, after a supplementary budget is adopted next month, the government said in an e-mailed statement today after Alfredo Altavilla, Fiat’s head of business development, met with Finance and Economy Minister Mladjan Dinkic in Belgrade.
“The Italians accepted the proposal by the finance minister” as the new government, which took office last month, explained that the previous Cabinet had failed to include the obligation in the 2012 budget.
The payment delay shouldn’t affect production of the 500L, the five-seat version of the 500 subcompact, which began in July in Kragujevac, central Serbia, the ministry said. As many as 30,000 cars will be made this year, producing revenue of 350 million euros. Output in 2013 is scheduled to rise to 120,000 units, according to the ministry.
Serbia’s economy is in its second recession in three years. The budget deficit widened to 7.2 percent of gross domestic product at the end of June and public debt rose to 54.7 percent of GDP. The Balkan nation’s fiscal rules cap the budget gap at 4.5 percent of GDP and public debt at 45 percent.
Sergio Marchionne, Fiat’s chief executive officer, will visit Serbia next week, the ministry said.
Fiat formed the joint venture in 2008 when it took over Serbia’s carmaker Zastava Automobili in Kragujevac, 110 kilometers (68 miles) south of Belgrade. Fiat renovated Zastava’s facilities, while the government pledged to provide infrastructure, including a highway to Kragujevac.
To contact the reporter on this story: Misha Savic in Belgrade at firstname.lastname@example.org
To contact the editor responsible for this story: James M. Gomez at email@example.com