Nizhegorod Motors

Nizhegorod Motors (ZAO Nizhegorod Motors) was the joint company set up by FIAT and the Russian carmaker Gaz — the Gorky Automobile Plant of Nizhny Novgorod, 430 kilometres east of Moscow — to produce and sell cars on the Russian market[1][2]. Fiat and Gaz each held 40%, with the remaining 20% held by the EBRD, the European Bank for Reconstruction and Development[2][5]. Announced in the autumn of 1997 as the largest foreign investment in the Russian car industry, the project called for $850 million and 150,000 cars a year, sold under the joint Fiat and Gaz brand[1][3][5]. The plant never went into production.

The 1997 agreement

The letter of intent was signed at the end of September 1997 by Fiat's chief executive Paolo Cantarella and Gaz's chairman Nikolai Pugin, in the presence of Italian prime minister Romano Prodi and Russian premier Viktor Chernomyrdin[1]. The plan called for $850 million, more than 1,500 billion lire, 4,200 employees working two shifts and the start of production by the end of 1998; the early years would also provide work for Italian plants, since components would be imported from Italy to get production going quickly[1]. For Fiat it marked a return to Russia thirty years after the Togliattigrad plant built for Lada: in 1998 the Turin-based group was selling four or five thousand cars a year in Russia[1][3]. The Turin carmaker's presence in the country had begun in 1913 with the Fiat-Marek dealership in Moscow and had gone on to include an aviation-engine foundry in 1931 and a ball-bearing plant in Kyiv, built by Riv, the Agnelli family's bearings company.[7]

Gaz was at the time Russia's second-largest carmaker and the leader in light commercial vehicles, with 60% of the market thanks to the Gazelle van; privatised in 1992 and led by the former Soviet minister for the car industry Nikolai Pugin, it had also been courted by Toyota, Daewoo and Peugeot[1]. The protocol giving the green light to the joint company was signed in Moscow on 22 December 1997 by the two executives before the EBRD's representative Reinhard Schmoelz, who brought $240 million in financing: the partners had turned to the London-based bank after failing to resolve financial and insurance issues with Italian banks[2]. "It is the logic of globalising Fiat's operations," Cantarella explained, "building an integrated production system in various countries": the Russian project was also to involve Teksid and Marelli[2]. The company's formal incorporation was planned for the first half of February 1998, during Boris Yeltsin's official visit to Italy[2][3].

The Russian crisis and the scaling-back

The Russian financial crisis of August 1998 arrived before the factory did. On the eve of the Moscow Motor Show, Fiat nonetheless confirmed the deal: Fiat Auto's chief executive, Roberto Testore, spoke of investments worth $800 million and a line-up made up of 20% Marea, 50% Siena and 30% Palio Weekend models, with the first two thousand cars due within the year. "We cannot deny that Russia is going through a very difficult economic moment, but we believe the country's potential remains significant," he told reporters; he called the joint venture a "fundamental strategic step" in the Turin carmaker's eighty-five years of presence in Russia[3].

In May 1999 Testore and Pugin were discussing a start-up by the end of June with semi-knocked-down cars shipped from Italy and Poland and assembled on site, while Cantarella specified that the actual production plants would come "in a second phase", only after checking how the market was developing[4]. By 2000 the project had already changed: the investment fell by about 40%, to $500 million and then to €400 million, annual capacity was halved to 75,000 cars, the Siena was replaced by the two-box Palio — considered better suited and cheaper for Russian customers — and the kits were to come from Turkey's Tofaş; in March 2000 the Marea gave way to a long-wheelbase Siena, the "Maxi-Siena". The start-up, originally planned for autumn 1999, slipped to 2002[5]. On 21 March 2000, in Nizhny Novgorod, the investment agreement was finally signed by the joint venture's chief executive Franco Grimme and Gaz's chairman Nikolai Pugin, in the presence of the acting president of the Russian Federation, Vladimir Putin, and Fiat's chief executive Paolo Cantarella: three models from the "Family 178" — Palio, Palio Weekend and Siena — were to come off the production line starting in 2002.[7]

What became of it

The Nizhny Novgorod plant was never built. When, ten years later, Fiat again went looking for a production site in Russia, that road turned out to be closed: in July 2011 the business daily Kommersant, picked up by the trade magazine Just Auto, wrote that the Turin-based group had abandoned the Nizhny Novgorod plan after failing to reach an agreement with the Gaz group, and that it was considering the Caucasus or St Petersburg[6].

Sources

  1. La Fiat torna in Russia — La Stampa, n. 264, p. 20, 25 September 1997
  2. Firmata l'intesa Fiat con i russi della Gaz — La Stampa, n. 348, p. 26, 23 December 1997
  3. «La Russia ce la farà». La Fiat conferma la joint-venture — La Stampa, n. 234, p. 3, 27 August 1998
  4. Forse entro giugno Fiat prodotte dalla Gaz — La Stampa, n. 145, p. 18, 29 May 1999
  5. La produzione di automobili in Russia: prospettive per gli investimenti stranieri — Just Auto, 14 August 2000
  6. La Fiat cerca un'alternativa allo stabilimento di Nizhnij Novgorod — Just Auto, 18 July 2011
  7. Al via la joint venture Fiat in Russia — La Stampa, n. 77, p. 21, 19 March 2000

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