Fiat on Monday signed an agreement to acquire a two-thirds stake in Serb automaker Zastava - more than 50 years after the then-Yugoslav state auto firm became Fiat's first partner beyond the Iron Curtain.
Under the deal Fiat will take 67% of Zastava and create a joint venture with Serbia, which will hold the minority 33% stake.
Fiat will invest some 500 million euros in Zastava's carmaking division while Serbia will pump in an additional 200 million euros over the next two years.
A further 240 million, evenly split between Turin and Belgrade, is to fund a future deal on trucks and buses involving Fiat's truckmaking unit Iveco and its high-tech components division Magneti Marelli.
The two sides signed a memorandum of understanding on the second deal.
Fiat CEO Sergio Marchionne said the deal was a good example of cooperation between the private sector and public institutions.
Earlier this year, when the deal was set up, Marchionne said it was ''a demonstration of our confidence in Serbia, in its industrial sector, managerial and worker capacity, as well as in the Serb automobile market''.
''Fifty-four years ago we signed our first accord with Zastava to build the Kragujevac factory where today our Fiat Punto is produced.
''Through our partnership with Zastava, we believe we have played a key role in the development of Serbia's automobile industry and we are proud that many Serb technicians and engineers have been trained by Fiat,'' Marchionne said in April.
Monday's agreement was signed at the Serb presidential palace by Marchionne and Serb Economy Minister Mladjan Dinkic.
Also on hand were Serbian President Boris Tadic, Serbian Premier Mirko Cvetkovic and Italian Foreign Minister Franco Frattini.
Italian sources said the deal consolidated Italy's position as top Western investor in Serbia and main backer of its bid to join the European Union.
The April accord came one day after Belgrade signed a stabilization and association agreement with the European Union, which opened the door to EU membership in the future.
Belgrade announced at the end of last year that it would privatize Zastava's automobile division.
The company also has a division which is Serbia's only producer of military and sporting weapons.
Fiat's relations with Zastava date back to the 1950s when the then-Yugoslav automaker began to produce Fiat models for the Eastern European market under its own name.
In the late 1960s Zastava also began to produce Fiat trucks.
Relations were interrupted in the 1990s during the Balkans crisis which followed the break-up of Yugoslavia. However, ties quickly resumed after EU sanctions were lifted in 2000.
In 2005, the Serb and Italian carmakers signed an agreement to produce cars under the Fiat marque for sale in Europe.
Aside from producing Fiat's Punto model, Zastava also makes the Opel Astra under license from General Motors' German subsidiary.
