Fiat signs preliminary deal to produce cars in Russia

Maximum investment was estimated at 850 million euros ($1.14 billion) with Sberbank holding a 20-per cent stake in the mooted joint venture, which comes after Fiat was replaced by Ford last year in another Russian deal.

"Fiat has signed a letter of intent with Sberbank in relation to a new project for the production and distribution of passenger and commercial vehicles in Russia," the Italian group said in a statement.

The deal was set to be finalised in the first half of this year, Fiat said.

"The Russian bank intends to finance the project and also take a minority equity interest of up to 20 per cent in the joint venture," it added.

"The product range is expected to be based on Jeep vehicles and could subsequently be expanded to include other models and engines which will be produced and assembled locally," Fiat said.

It added that US partner Chrysler could participate as an investor and by providing production licences for certain models.

The project foresees the construction of a new plant in the Saint Petersburg region -- a major Russian auto hub -- and the setting up of an assembly plant inside the ZIL factory in Moscow.

The production estimates are far more conservative than previous forecasts.

Fiat had planned to produce 500,000 cars by 2016 with Russia's second-largest auto assembly company, Sollers, before Fiat was replaced by US auto giant Ford in that deal last year.

Fiat then said it planned to produce 300,000 vehicles a year but Russia's economic development ministry said the figure was unrealistic.

Fiat and Chrysler have a major presence in Europe, Brazil and North America but are now aiming for markets like Russia and China to reach their target of producing six million cars a year by 2014 from four million now.