BELGRADE, Serbia (AP) -- Italian carmaker Fiat on Wednesday signed an agreement to take over the Zastava car factory in Serbia, with an initial investment of euro100 million ($142 million) and plans to make up to 200,000 cars per year, officials said.
Fiat Group Vice-President Alfredo Altavilla, Serbia Project Executive Giovanni De Filippis and Serbia's Economy Minister Mladjan Dinkic signed the deal which establishes Fiat's ownership over 67 percent of Zastava once the down payment is made.
Fiat is expected to pay another euro100 million next year.
The deal is part of a euro700 million ($999 million) joint venture agreement that Fiat Group signed with the Serbian government last year, but which has been slowed because of the global economic downturn.
The agreement was designed to revive Serbia's only automobile factory, including setting up the production of new Fiat car model at the plant in the central Serbian town of Kragujevac.
The deal with Fiat was hailed as the biggest foreign investment in years in Serbia, which is struggling to revive its economy after years of wars and international sanctions. The country on Tuesday submitted a formal application for membership in the European Union, a move it hopes would attract more investors.
Serbian government minister Dinkic said Wednesday that the production at Zastava will be 200,000 cars per year. He said production of two new Fiat models will be launched in 2011 for export to European and U.S. markets.
Zastava briefly exported its boxy Yugo cars to the United States in the 1980s, but with little success.
The plant has steadily deteriorated since the start of the wars in the former Yugoslavia, producing less and becoming an economic loser supported by the state.