By February 2006, Zastava claims 450 preliminary orders for the new Zastava 10. The car officially goes on sale across Serbia in March 2006. By the end of the year, Zastava hopes, the car will be sold across the ex-Yugoslavia, Slovenia excluded.

In a quick comparison of the future and present national car, the Zastava 10 is initially available for 7,990 euros; the Koral In, for 4,343 euros. With a 40% downpayment on the former, and 20% downpayment on the latter, monthly payments are 85 euros and 62 euros respectively, for 84 months.

The Zastava 10 climbs the sales charts

By June 22nd, 2006, Zastava has repaid its entire debt to Fiat, and has taken stock of 1,334 cars from Italy, with 811 sold.

Toward the end of June, Zastava has begun selling spare parts for both the Zastava 10, and for the outgoing Fiat Punto. By August, the Zastava 10 claims 10% of the Serbian market per month. From its mid-March entry through October 31st, 2006, 2,383 Zastava 10 cars will be sold; 481 in October alone.

I'd rather drive a Yugo...

The Summer of 2006 sees the Zastava Koral In become the subject of controversy.

On a visit to Kragujevac, Croatian pop star Severina Vukovi states to TV Kanal 9 that she'd like to drive a Yugo (aka Koral In). She's thrilled when Zastava promptly offers her one.

Croatia's Mercedes importer - who has a deal with Vukovi - promptly threatens to sue the pop star.

Florida In is voted Zastava's best car

A 37% majority of voters in a June 17th Zastava-Info Internet poll vote the Florida In Zastava's best ever car.

Exporting Zastava know-how

On July 27th, 2006, a technical team of about ten experts from Kragujevac begin consulting for the United Arab Emirates, the objective being to enable a local factory in the U.A.E. to begin producing freight vehicles. In this first phase, the deal is worth more than $100,000.

Exporting the Zastava 10

Zastava hopes to move 70,000 Zastava 10s through 2010. This will require export agreements. September 15th, 2006, sees Zastava negotiating with Croatian distributors over the possible entry of the Zastava 10 to the Croatian auto market.

In early November, Zastava signs an agreement with Croatian HD-Auto that forsees approximately 200 Zastava 10 cars being sold in Croatia by the end of 2006. By November 29th, 2006, Zastava has exported 40 Zastava 10 models to Croatia. Zastava Automobili Director Zoran Bogdanovi expects that between 2,000 and 3,000 Zastava 10s will be exported to Croatia in 2007.

"Croatia will be among our best markets," predicts Bogdanovi, noting that approximately 85,000 new cars are sold each year in the former Yugoslav republic.

HD-Auto Director Hrvoje Dujni notes that there is indeed room for the Zastava 10 on the Croatian market, particularly if Croatian auto parts manufacturers are invited to produce parts for the car. Indeed, Zastava begins investigating that possibility; by January 2007, it is talking to twenty, many of them former Zastava suppliers under Yugoslavia.

Zastava also signs an agreement with Banja Luka, Bosnia-based importer Samaks, which begins selling the Zastava 10 across Bosnia-Hercegovina. The Republika Srpska's Ministry of Economy in Bosnia is the first customer, buying two Zastava 10s in mid-November.

Zastava hopes to begin exporting the Zastava 10 to Bulgaria by the end of November.

Politics

By Autumn 2006, April - the month by which Zastava is to have received either the promised 15 million euros for the purchase of the Fiat equipment required to build the Zastava 10, or credit guarantees to that amount - has come and gone. Still, there is no word.

Pre-election fever in Serbia begins driving talk of Zastava to a fever pitch. A mid-November copy of Blic newspaper carries a story which blatantly asks, "who lied to the citizens of Kragujevac? Who told them that next year, 7,000 Zastava 10s would be produced here?"

The story comes after Serbia's Minister of Economy Predrag Bubalo tells a Kragujevac TV station that Zastava, and Zastava alone, must find the wherewithal, in selling its assets, to afford the production program.

Kragujevac major Veroljub Stevanovi is incredulous. The Minister, he recalls, had until very recently been adamantly supportive of the domestic automotive industry. Stevanovi warns that it would be dangerous for Zastava to sell any more of its assets.

It is through the very sale of its assets that Zastava has paid Fiat back 11.5 million euros.

It was also through the sale of these assets, Blic reports, that Zastava had received the 2.6 million euros with which it had already purchased the first batch of new equipment.

Nonetheless, Zastava remains typically defiant. Zastava Director Zoran Bogdanovi, while noting that offers of even one hundred million euros had been thrown around loosely enough by the government at times, tells Blic simply, "we never asked for money - just for the government's guarantee, so that we might be able to get reasonable credit terms.
"Our factory will continue to work, simply slower than it had planned."
The political maneuverings of election season were, quite simply, minimally disturbing to an automaker which in the last fifteen years had seen far worse.

By and by, the government does right

On September 10th, 2006, the Serbian Ministry of Trade; Tourism, and Services buys 46 Zastava Skala 55 cars - worth 13.5 million dinars (approximately 170,000 euros) - from the Kragujevac factory. In refreshing a quarter of his ministry's car pool with domestic vehicles, Bojan Dimitrijevi, ministry head, invites other Serbian government agencies and enterprises to buy Zastava automobiles, adding that they will not find such quality in a new automobile for 300,000 dinars anywhere.

On December 26th, 2006, with funds secured from the national investment plan, the Serbian government signs a contract to purchase 167 Zastava 10 cars, as well as 140 Zastava trucks, for 450 million dinars, 120 million of which is for the Zastava 10s.

The contract is signed by Minister of Labor; Employment, and Social Policy Slobodan Lalovi; Zastava Automobili Director Zoran Bogdanovi, and Zastava Kamioni Director Ðore Nestorovi. Lalovi's Ministry will use 118 of the cars; 49 will go the Ministry of Tourism.

The government reverses its position

On December 5th, only weeks after having appeared to back away from a promise to help Zastava invest in the production of the Zastava 10, Serbian Economic Minister Predrag Bubalo restates that the Serbian government will support the company in its goal.

Zastava responds that it has already raised 4 million euros from the sale of underutilized facilities. Now, the company hopes for between 8 and 11 million euros in guarantees from the government.

While Bubalo now confirms that the government will indeed guarantee credit, he also indicates the government's hope that Zastava will be able to raise further capital in the sale of other unnecessary facilities that it might hold.

Christmas in Kragujevac

On December 20th, after an ongoing political battle over whether the Serbian goveernment will guarantee the remaining 7-8 million euros required to build the Zastava 10 in Kragujevac, the Serbian automaker confirms that it will begin producing the Zastava 10 in its Kragujevac factory, starting in June 2007. The money and government guarantees required to purchase the necessary machinery from Fiat have been duly procured.

Zastava itself has provided more than 5 million euros of the approximately 13.5 million euros necessary, through the privatization of some of its holdings, and through the sale of two floors in its Zastava Impex building in Belgrade. This latter sale has net some 800,000 euros.

Representatives of Zastava begin talks with Komau, the supplier in charge of equipment procurement and transport. The first packages are to arrive on January 10th, 2007.

The equipment will be assembled by both Zastava and Fiat experts from January through May 2007, and production of the Zastava 10 will then begin.

News of the successful conclusion of negotiations between Zastava and Fiat is particularly well received in Kragujevac, where more than 1,000 jobs are believed to directly depend on this deal.

2006 production results

Zastava in 2006 has sold 14,060 automobiles, including 3,060 Zastava 10 models. 11,000 Skala 55s; Koral In cars, and Florida In cars have been sold.

9,212 Zastavas are sold for cash, which leads Marketing Director Vladeta Kosti to again question the availability of credit for Zastava buyers.

1,698 cars have been exported: 1,500 Zastava 128s (CKD) to Egypt, while 190 Zastavas have found homes in Bosnia-Hercegovina; Macedonia, and Bulgaria.

The company has produced 10,250 automobiles in 2006.

Zastava plans to sell 13,500 automobiles in 2007, of which 3,200 are to be exported. The figures do not include the Zastava 10, whose production will begin in mid-'07.

Addendum

In November, Zastava announces the completion of a homologation process involving multinational supplier ATI. Zastava has begun producing ATI's calcium-based Viner batteries for use in its vehicles. The batteries, which offer up to 30% better performance than their predecessors, will also be available through Zastava's dealer network. Spokesperson Slobodanka Nikoli expects that up to three thousand batteries will be produced and sold this Winter.

Consumers will find three types of batteries on the shelves - 45 amp; 55 amp, and 66 amp units - priced at 2,100 dinars; 2,560 dinars, and 3,074 dinars, respectively. Each battery is warranted for 24 months.

Fiat - with which, of course, Zastava has enjoyed a longstanding partnership - also uses ATI batteries.

On December 3rd, 2006, Zastava announces the introduction of factory natural-gas installations in the Zastava 10. The equipment, including a 40-liter bottle and produced by Italian firm Landirenko, can be installed by Zastava service centers in Belgrade; Kragujevac; Sevojna, and Sombor, at a cost of 950 euros, without the loss of the car's 2-year standard warranty.

Zastava also hopes to begin installing compressed natural-gas bottles in the Zastava 10. The company shows a CNG version of the Florida In, which boasts average consumption of just 6kg of gas per 100 kilometers.

At least twenty-eight workers will leave Kragujevac for the Czech Republic after Christmas, to work for Czech metalworking firm KD from Kutna Gora. They are the first of 4,800 former Zastava workers to emerge from retraining. The group expects to receive between 2.5 and 4 euros per hour, over a ten-hour day. Housing and one daily meal will be paid. KD will also cover one trip home and back every six months. All could receive between 650 and 950 euros per month, not counting bonuses and overtime. KD, which produces steel components for railways and employs 2,300 workers, has been primarily interested in Zastava's welders, but may also hire other workers who specialize in metal, as it currently has 200 open spots for qualified employees.
(C) 2007-2008, Miroslav Pai & Dragan Romevi. All rights reserved/ sva prava zadržana.
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