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Fiat, Severstal to build Fiat vehicles in Russia, Renault and Peugeot eye Russia

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MILAN, Italy (AP-CP) _ Fiat is forming a joint venture with Russia's Severstal Auto to build and sell Fiat brand cars and commercial vehicles in Russia.

The deal was announced on the sidelines of the Frankfurt Auto Show where officials of the French car makers PSA Peugeot-Citroen and Renault SA said Tuesday they are considering investing in Russian production facilities.

And late last month, Canadian auto parts giant Magna International (TSX:MG.A) won the European Union's blessing to sell a large stake in the company to Russian billionaire Oleg Deripaska for US$1.54 billion.

Deripaska's Russian Machines, like Magna, sells interior mirrors for light commercial vehicles in Europe.

The deal has received shareholder approval.

Under the 50-50 Fiat-Severstal joint venture, production of Fiat vehicles is to begin in the first quarter of 2008, Fiat Group Automobiles SpA said Tuesday in announcing a signed letter of intent.

``All of the vehicles produced in Russia will meet the quality standards of the Fiat Group,'' Fiat said, adding that it will decide the product range.

While details of the Severstal deal were still being worked out, it is part of Fiat Group CEO Sergio Marchionne's strategy seeking industrial alliances and joint ventures to share costs and enter key markets.

``Severstal Auto's knowledge of the Russian market will reinforce Fiat's investment and efforts in the region,'' Marchionne said in the statement.

Severstal Auto's CEO Vadim Shvestov called the deal ``an important step on the road to a strategic collaboration between Fiat and Severstal Auto.''

Severstal Auto, the carmaking division of Russian steel group OAO Severstal, recently announced a joint venture with Japan's Isuzu Motors to build trucks in Russia. It already has licensing agreements with Fiat SpA and South Korea's Ssangyong Motor Co.

Meanwhile, Peugeot-Citroen chief executive Christian Streiff said he is nearing a decision on the location of an assembly plant that could produce up to 300,000 cars a year.

Renault CEO Carlos Ghosn said the company's board has yet to make a decision on its planned industrial venture. One possibility is a joint venture with Russian automotive company Avtovaz, with whom Renault is holding talks, he told reporters.

Fiat Auto's chief executive said Tuesday he was optimistic about increasing the company's market share through 2007, but warned it may taper off in 2008.

Luca De Meo said a new model lineup, ongoing cost cuts and plans for international alliances should help it expand its share of the competitive automotive market this year.

``I believe we'll gain market share this year,'' he told reporters, but said that ``2008 will be a year of consolidation.''

He said that the sales of the Grande Punto had helped drive sales, while the Bravo family sedan, launched in February, was performing ``in line with expectations.''

As for Magna, it was expected to seek immediate final court approval for the agreement with Russian Machines, likely to close Sept. 20.

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Fiat, Severstal to build Fiat vehicles in Russia, Renault and Peugeot eye Russia
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