Ford Motor Co. plans to team up with a Russian automaker to make and distribute cars in the country. The announcement came shortly after Italian automaker Fiat SpA backed out of a potential partnership with the same Russian company.
Fiat and Russian automaker Sollers had signed a memorandum of understanding last year to produce up to 500,000 vehicles a year in Russia in a bid to become the country’s second-largest car maker. The two companies said in a joint statement Friday that they would “pursue independent strategies.” Fiat owns U.S. automaker Chrysler.
Following the Fiat announcement, Ford and Sollers disclosed they had signed a memorandum of understanding. The companies said they will have equal stakes in their Russian joint venture called Ford Sollers.
Ford’s stock slipped 7 cents $15.90 in early trading on Friday.
Local plants in the St. Petersburg region and Tatarstan will make Ford passenger cars and light commercial vehicles as well as engines. The venture will also run a stamping facility that will provide local parts for Ford vehicles made in Russia, create research and development activities and import and distribute Ford products, parts and accessories in Russia. Financial terms of the deal weren’t disclosed.
The joint venture, which is expected to start operations by year’s end, will help strengthen Russia’s auto industry and its local supply base, said Stephen Odell, Chairman and CEO of Ford of Europe.
Russia has poured millions of rubles into its stagnant domestic car industry over the past decade in an attempt to resuscitate it. Last year, the government announced that the Russian car industry would survive only in partnership with global players.
Fiat’s proposed partnership with Sollers had been viewed as a key joint venture, with Prime Minister Vladimir Putin overseeing a high-profile ceremony last February that announced the potential deal. But the joint venture fell into a financial limbo for months after VEB, a Russian state-owned bank which was expected to give the car makers a 2.1 billion euro ($2.85 billion) loan, said in December that Fiat and Sollers had not provided enough documents to support the application for the loan.
The unraveling of the Fiat Sollers joint venture gave Ford an opportunity to step in. The Dearborn, Mich., company began making cars in Russia in 2002, and like many car makers is eager to expand business there as demand improves.
While domestic auto companies in Russia have been struggling, the market itself has been gaining strength. Car sales in Russia rose by 30 percent last year, according to the Moscow-based Association of European Businesses. Nine of the 10 best-selling models were produced locally, while Ford Focus was in the top five of best-sellers.
Ford is not the only automaker angling for more of the Russian market. General Motors Co. increased its sales 12.4 percent in Russia last year. Russia’s largest automaker, AvtoVAZ, is partly owned by France’s Renault SA.
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