Ford, Sollers sign production deal in Russia

ERJ staff report (AN)

Moscow (Bloomberg) -- Ford Motor Co. and OAO Sollers, Russia's second-biggest automaker, signed an agreement yesterday to produce cars in Russia to expand in a market that grew 60 percent in the first five months of the year.

Production may reach 350,000 vehicles a year in 2015, Sollers CEO Vadim Shvetsov told reporters today at a signing ceremony attended by Prime Minister Vladimir Putin in Moscow. The partners will also build a factory to make 200,000 engines a year, he said.

The joint venture will assemble six Ford models, including the Focus, Mondeo, Transit and new models to be launched in 2012 to 2014, according to a Russian government factsheet distributed to reporters. In six years, at least 60 percent of the components will be made locally.

"There will be a number of new models, some of which will be exclusively built in Russia," Stephen Odell, Ford's European chief, told reporters.

Ford and Sollers also signed a letter of intent today with VEB, Russia's state development bank, for a 39 billion-ruble loan ($1.4 billion) to develop the project. Total investment is estimated to reach 74.5 billion rubles, according to the government. By the middle of the decade, Russia's car market may exceed 4 million vehicles, making it the largest in Europe, Odell said.

Russia's sales of new car and light commercial vehicles expanded 60 percent in the first five months through May to 989,013 units, the Association of European Businesses said today. The group last month raised its full-year forecast to 2.35 million vehicles and said today it may boost it again.

Sollers dropped a planned partnership with Fiat, agreeing in February to set up the 50-50 venture with Ford because of the importance of distribution as well as an industrial alliance, the Moscow-based company said at the time. Sollers is ready to produce Fiat cars while its plants have free capacity, Shvetsov said today.

From Automotive News (A Crain publication)