Fiat on Thursday signed an accord to create a new joint venture with Sollers, a holding company which controls carmaker Severstal, that will make the Italian group the second biggest foreign player on the Russian automobile market after Renault of France. Fiat's chief executive officer, Sergio Marchionne, said the 2.4-billion-euro venture marked "a turning point for Fiat's presence on the Russian market as well as that of Chrysler," the US automaker which Fiat acquired control of last year.

"This new partnership is part of Fiat's and Chrysler's strategy to bolster their positions abroad and will allow us to gain value from our know-how, expand geographically, increase our line of products and reduce costs, all at the same time," Marchionne explained. Sollers CEO Vadim Shvetsov agreed and added "the creation of a joint venture of this size is a reflection of the confidence we have in the Russian automobile market". The new joint venture, which sees Fiat and Sollers as equal partners, is valued at 2.4 billion euros and is aimed at boosting production at Sollers' Naberezhnye Chelny plant, in Tatarstan, to 500,000 vehicles a year, by 2016, from its current 75,000, with no less than 10% intended for export.

More than 50% of the vehicle parts, excluding the engine and transmission, will be made in Russia The accord calls for the joint production Fiat's Linea model and the setting up of a specialised division to develop and produce another nine models in various classes, also for sale under the Chrysler marque. "By creating a specialised division to develop and produce vehicles for Fiat and Chrysler, we will be able to offer our customers contemporary products in diverse segments in order to become leaders on the Russian market, which is set to expand in the coming years," Shvetsov said. Evidence of the importance of the new accord was the presence at the accord signing ceremony of Russian Prime Minister Vladimir Putin.

The 2.4 million euros for the joint venture will be provided by the Russian state bank VEB. The Italian group and Sollers have been partners since 2005 and the Naberezhnye Chelny plant already produces Fiat's Albea and Doblo' models, while Fiat's Ducato van is produced at another Sollers' plant. When he was in Russia last October for the signing of a joint venture between Fiat's farm and earth-moving division Case New Holland (CNH) and Kamaz, Russia's biggest producer of heavy vehicles, Marchionne told Putin he hoped Fiat in the future could produce Jeeps in Russia.

The Jeep marque is part of the Chrysler group. Sollers and Fiat also have a joint ventures to produce diesel engine for the Ducato and the the Russian UAZ Patriot SUV. The Linea is a small family car while the Alea is a low-cost sedan and both belong to the 'world car' range which Fiat produces for foreign markets. The Doblo' is a light commercial van which is also available in Italy, as is the larger Ducato van.