Fiat Said to Seal Deal to Build Russia Plant by End of 2012

Fiat SpA has agreed to build a factory in Russia to expand in the country’s fast-growing car market, three people familiar with the matter said.

Fiat will finalize the deal for the factory, which will be located near St. Petersburg, by the end of the year, said the people, who asked not to be identified because the discussions are private.

Russian authorities expressed concern that the Turin, Italy-based carmaker may delay plans to invest 850 million-euro ($1 billion) in a factory that would build 120,000 vehicles a year, because the sales slump in Europe freed up capacity that could be exported to Russia.

Sergey Vyazalov, the vice governor of the St. Petersburg region, said earlier this month that Fiat hasn’t contacted the regional administration for three months and hasn’t presented an investment plan.

Fiat is seeking to expand in Russia with the European car market set to contract for the fifth straight year and Fiat losing market share as it halts development of new models. By contrast, Russian demand for cars and light vehicles jumped 14 percent in the first nine months of 2012. Sales of Fiat’s Jeep models more than doubled to 3,455 vehicles, while demand for the Fiat brand plunged 72 percent to 6,263 cars. Fiat plans to build Jeep models at the new plant.

“We are working to close the deal,” Chief Executive Officer Sergio Marchionne said today in London. “I’m really interested” in Russian expansion.

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