-- Fiat, Sberbank in EUR850M JV to build cars, vans -- JV will enlist help from ZIL -- Chrysler could join JV (Adds official comment, details throughout.) By Gilles Castonguay Of DOW JONES NEWSWIRES MILAN -(Dow Jones)- Fiat SpA (F.MI) will form a joint venture with Russian state bank OAO Sberbank (SBER.RS) to build cars and vans under Jeep and other brands in a EUR850 million investment, marking the Italian automaker's latest effort to establish a bigger presence in the country's quickly expanding market. Fiat and Sberbank signed a letter of intent to build one plant--most likely in the St Petersburg area--and contract out the use of a second one in Moscow, according to a statement Tuesday. The second plant is run by ZIL, or Zavod Imeni Likhachova, best known as the maker of limousines for Kremlin officials in the Cold War era. The joint venture will have a production capacity of 120,000 vehicles per year, the statement said. It didn't specify whether the capacity applied to one or both plants. "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," it said, without mentioning the other brands. Fiat and Sberbank expect to finalize the agreement by July, and Fiat Chief Executive Sergio Marchionne told reporters earlier in the day in Brussels that he aimed to start production within the next 24 months. Sberbank will finance the joint venture and take a minority stake of up to 20% in it. Chrysler Group LLC, Fiat's U.S. subsidiary that owns the Jeep brand, might take part in the project as an investor as well as license out the production of some of its models, the statement said. It didn't say how much of the EUR850 million would be put up by each partner, nor did it say whether it was earmarked just for the first plant. This letter of intent is the outcome of an initiative by the Russian government to promote direct investment in country's automotive industry. In June 2011, it received proposals from various manufacturers, including Fiat, which had offered to invest $1.1 billion to build two factories. Fiat had previously tried to form a partnership with OAO Sollers (SVAV.RS). It failed, losing out to Ford Motor Co. (F). Other manufacturers have also had more luck in finding partners. Renault SA (RNO.FR) owns a 25% stake in OAO AvtoVAZ (AVAZ.RS), while Daimler AG (DAI.XE) is working with Russian truck maker Kamaz. Fiat is already present in Russia through CNH NV (CNH), the tractor and combine maker owned by Fiat Industrial SpA (FI.MI), a sister company to the Italian automaker. After growing by 37% last year, Russia's car market is expected to grow at a much more tempered pace in 2012, up 5% to 2.7 million units, according to industry figures. -By Gilles Castonguay, Dow Jones Newswires; +39 02 5821 9908; gilles.castonguay@dowjones.com; Twitter: @GRCastonguay (Alessandro Torello in Brussels contributed to this article.) .
