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Serbia's Zastava to fit Yugo with Peugeot engines

Reuters / April 25, 2002

BELGRADE - Serbian carmaker Zastava, long in search of a foreign partner, has signed a deal to fit engines of France's PSA Peugeot Citroen into its vehicles, newspapers reported on Thursday.

General Manager Zoran Radojevic told Politika newspaper the deal could boost its hopes to find a lasting strategic partner, having missed a tide of western tie-ups due to the Balkan wars. Using foreign engines will also help it meet emissions standards.

"We also had contacts with Toyota but chose the French because of a more favorable price," Radojevic said, adding that volumes of the French-powered models will depend on Zastava's ability to restore old markets and conquer new ones.

The company has been hit hard by the loss of markets following the break-up of the old Yugoslav federation in 1991 and NATO bombing in 1999.

Standard 1.1- to 1.6-litre Peugot-Citroen engines will be built into upgraded models of Zastava's Yugo compact and Florida hatchback, Politika daily said.

Last July, the Serbian government, its sole shareholder, signed an agreement to restructure Zastava cars, slashing about 8,000 jobs and leaving around 4,000 workers to produce an upgraded version of the Yugo.

Zastava confirmed the report. It said it produced 1,512 cars in the first three months of this year against a target of 18,000 for the whole year. It made 8,068 cars in 2001.

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