Ford became the first foreign automaker to start producing cars in Russia back in 2002.
Ford Motor Company [NYSE: F] and Sollers OJSC today signed a Memorandum of Understanding to launch a new 50:50-owned joint venture called Ford Sollers for the production and distribution of Ford vehicles in Russia. Ford Sollers, to be completed by year end, will have access to Ford’s global range of new products and Soller’s distribution.
Sollers is the second largest producer of passenger and light commercial vehicles in Russia at roughly $2 billion in annual sales, and had been in talks with Fiat. The now defunct Fiat MOA, signed exactly one year ago, called for nine new models in the C and D segments and SUVs to be marketed on the Russian market. Fiat said then that up to six would be made from a new global compact Fiat-Chrysler platform, and volume would be about 500,000.
Chrysler would have received some of the income for intellectual property rights and the sale of Jeep kits or components, so in one sense this is a setback for the U.S. and Canadian taxpayer owners of Chrysler.
Manufacturers of cars and auto components that apply “industrial assembly” processes in Russia are eligible for reduced taxes and duties from the Russian Federation, and low interest loans. Under the new job creating policy, customs duties will decrease to 0 to 5% of the cost of auto components compared to 12% now. Ford Sollers will apply for the subsidies.
“We are confident that our mutual efforts on the development of manufacturing facilities, new product launches and localization of parts content will ensure success for our strategy,” said Vadim Shvetsov, general director of Sollers.
The proposed joint venture will include Ford and Sollers local production facilities in the St. Petersburg region (Vsevolozhsk) and in the Republic of Tatarstan. Ford Sollers will manufacture a range of unspecified Ford passenger cars and light commercial vehicles.
In addition to vehicle assembly, the Ford Sollers will produce engines; operate a stamping facility that will provide more local parts content for Ford vehicles built in Russia; and establish research and development activities. It also will be responsible for the import and distribution of Ford brand products, parts and accessories in Russia.
“This is a great opportunity, and will provide Ford customers in Russia with more products and better service,” said Stephen Odell, chairman and CEO, Ford of Europe.
