The negotiations were concluded by Economy Minister Mlađan Dinkić and Fiat Group Vice-President Alfredo Altavilla. Back in April, Fiat and the Serbian government signed a Memorandum of Understand that would see the government sell at 70 percent stake in Zastava's factory at Kragujevac in the south-east of the country to Fiat for 700 million euros. Under the terms, the Serbian government would retain a 30 percent stake and invest 200 million, mostly in the form of assets.

Since then both parties have agreed to invest an additional 100 million euros each. Around 110 million euros of the Serbian government's contribution will be in subsidies for redundancies and new jobs, and the pressure of this financial burden delayed the negotiations. Talks have also involved other divisions from the Fiat Group, including Iveco which is planning a new factory in the country, as well as land surrounding the factory in Kragujevac, and also a trade agreement between Serbia and Russia that could see Fiat using the factory as a springboard to export cars to the Russian market.

The inking of the final agreement between Fiat and the Serbian government on September 29th will take place in the presence of Serbian President Boris Tadić, Prime Minister Mirko Cvetković, Dinkić, Fiat Group CEO Sergio Marchionne and Altavilla. The Italian Foreign Minister Franco Frattini is also expected to attend the ceremony.

The Zastava factory at Kragujevac, which currently assembles the last-generation Fiat Punto model under licence and badged as the Zastava 10, is expected to start producing its first all-new Fiat model from late next year with a projected annual output of 200,000 units; a second new model will be added to the factory line-up in 2010 bringing production up to a full annual capacity of 300,000 units.