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Ford Motor Co. in JV plans with Russian firm for manufacture and distribution of cars in Russia

US based giant car manufacturer Ford Motor Co. is mulling plans for a joint venture investment with a Russian automaker for the manufacture and distribution of cars in Russia. However, the Ford Motor announcement comes in the wake of a pullout from a joint venture the Russian firm had undertaken with Italian automaker Fiat SpA.

Ford Motor will be teaming up with Sollers if its plans materialize. Fiat and Russian automaker Sollers had signed a memorandum of understanding last year to produce up to 500,000 vehicles a year in Russia in a bid to become the country's second-largest carmaker. However, the two firms Friday announced they would be pursuing independent strategies.

But with the Fiat pullout, Ford and Sollers disclosed they had signed a memorandum of understanding for their joint venture. The companies said they will have equal stakes in their Russian joint venture called Ford Sollers.

Plants in the St. Petersburg region and Tatarstan will make Ford passenger cars and light commercial vehicles as well as engines. The venture will also run a stamping facility that will provide local parts for Ford vehicles made in Russia, create research and development activities, and import and distribute Ford products, parts and accessories in Russia. Financial terms of the deal weren't disclosed.

The joint venture, which is expected to start operations by year's end, will help strengthen Russia's auto industry and its local supply base, Stephen Odell, Chairman and CEO of Ford of Europe, said in the statement.

Russia has poured millions of rubles into its stagnant domestic car industry over the past decade in an attempt to resuscitate it. Last year, the government announced that the Russian car industry would survive only in partnership with global players.

Fiat's proposed partnership with Sollers had been viewed as a key joint venture, with Prime Minister Vladimir Putin overseeing a high-profile ceremony last February that announced the potential deal.

But the joint venture fell into a financial limbo for months after VEB, a Russian state-owned bank which was expected to give the carmakers a $2.85 billion loan, said in December that Fiat and Sollers had not provided enough documents to support the application for the loan.

While domestic auto companies in Russia have been struggling, the market itself has been gaining strength. Car sales in Russia rose by 30 percent last year, according to the Moscow-based Association of European Businesses.

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