last update March 28th, 2013

Zastava Automobili: 4 years after the Fiat handover

Very few cars at the ongoing Belgrade International Auto Show are available for under €8,000. The Fiat Punto II.5 (€5,890), Škoda Citigo (€6,950), and Dacia Sandero (€7,790) are in a select group that has grown significantly smaller since the demise of Zastava Automobili in November 2008.

All of Zastava's four cars, last built in 2008, were card-carrying members of this class.

All of Zastava's four cars, last built in 2008, were card-carrying members of the sub-€8,000 budget class. Pictured are the Skala 55 (from €4,500), Koral In (from €4,400), and Florida In (from €4,900). Zastava also sold the Zastava 10, a rebadged Fiat Punto II.5, for €7,500.

Zastava today would have continued to sell in Serbia

"I have no doubt that there would be a run on the dealership if we suddenly put a few hundred new Yugos out front, with five-year financing," Miloš Prokić, manager at Kragujevac's Arena Motors Fiat/ Opel dealership, told Press newspaper in 2010.

“Last year we sold 2,600 Puntos... but we could have sold 10,000 Yugos.

“If the Yugo were as subsidized as the Punto, we would not have been able to meet demand, even if they'd raised the price.

“People come in to buy a new Yugo and leave disappointed.”

Still more shocking was one dealer's contention, printed in the same article, that the dealer profit on the Yugo had been three to four times higher than on the doubly expensive Punto.

By its November 2008 end, Zastava was using just 20% of its 60,000 annual production capacity (par with Italy's Carrozzeria Bertone of Turin).

But, together, Zastava's four models reliably sold 1,000 copies per month, which coincidentally is about as many vehicles as were sold - in total - in Serbia in February 2013. That the car market has collapsed is of no surprise in a country where the average monthly salary is €300.

It is also no surprise that, over the past decade and until the factory was handed to Fiat, Zastava held between 25% and 35% of the market. Up until the end of production, the Koral In (aka Yugo) was the best-selling new car in Serbia, through a 65-strong dealer network.

Zastava from 1991 through 1999 survived an embargo, a civil war, and wanton destruction by NATO jets curiously determined, but ultimately unable, to demonstrate superiority over the line that built what is quite possibly the world's most famous/ notorious postwar budget car (i.e.: excluding the prewar Bug).

Up until the end of production, the Koral In (aka Yugo) was the best-selling new car in Serbia, through a 65-strong dealer network.

Evergreen in its purpose (if not its design) as a simple car for the masses, the 1980-2008 Yugo was no different to the Renault 4, Citroen 2CV, and Austin Mini, built largely unchanged for thirty, forty, and fifty years respectively. By corollary, Zastava in Serbia stood firmly for low-cost, sub-€8,000 cars, low-cost motoring, and easy servicing with easy access to parts. More dependable than its perceived quality might suggest, the Zastava was a car that people could realistically own outright in little to no time; run for pennies on the dime; sell on in five years, and replace with another brand new car.

A new clutch for a Yugo costs 5,000 dinars (about €45); for a Fiat Punto, you pay five times as much.

It also bears noting that 72% of Zastava buyers in 2007 (according to company figures) paid up front, in full. It's much easier to save up €4,000 for a car than €8,000; and it is undoubtedly better for the domestic economy that €4,000 stays within it, than for the vast bulk of €8,000+ to be sucked out. In a country whose annual foreign debt has in the past twenty years never been under €2 billion (and has generally been much higher), capital investment rather than consumerism should have been a priority.

With its €3,000 subsidy, the Serbian government is paying Fiat to drop the price of a (largely) foreign-built, locally-assembled car, which even after the price drop remains within the realm of relatively few.

This week, the move to subsidize domestic 500L sales to the tune of €3,000 apiece continues to call Serbia's priorities into question. For all intents and purposes, the Serbian government appears to be paying Fiat to drop the price of a (largely) foreign-built, locally-assembled car, which even after the price drop remains within the realm of relatively few.

The 500L “Nacionale” comes with A/C, ABS, ESP, side and curtain air bags, cruise control, reach/ rake-adjustable steering, remote central locking, and electric windows. €10,990 buys the gasoline 1.4-liter model (95 horsepower), with prices rising to €12,900 for the 1.3-liter Multijet diesel (85 horsepower) and to €13,900 for the 1.6-liter Multijet diesel. Both diesel versions come with start/ stop technology, to save fuel at traffic lights.

To assuage detractors, the government has protested that it is not subsidizing Fiat but, rather, relinquishing the 20% sales tax which it would not have earned at €13,900 (since the car would have then been out of reach). However, this of course assumes that someone who can buy a €10,900 Fiat 500L has no interest in any other similarly priced new car on the market.

On March 25th, under pressure from both distributors of other brands and foreign ambassadors, Finance Minister Mlađan Dinkić noted that the €3,000 would go not to Fiat, but toward subsidizing 1,400 additional employees of Fiat Automobili Srbija, who would be hired by the end of 2014. Each job would be subsidized to the tune of €10,000, enabling the government to claim that it was not favoring a brand, but rather, creating jobs. Like previous contracts between the government and Fiat Automobili Srbija, this one would not be made available to the public.

The Zastava factory was handed over to Fiat on May 6th, 2008.

Disingenuous marketing on Fiat's part

When at the 2009 Belgrade car show the media asked why the Punto Classic was more expensive, and had less equipment, than the Zastava 10, Giovanni De Filippis (former Fiat Automobili Srbija CEO) seemed confused. Why, he asked, were they comparing a new model to an old one? This despite the fact that the 2009 Punto Classic had no more than a new grille to differentiate it from Zastava's 2006-08 clone.

De Filippis regularly and steadfastly refused to comment on the amount that Fiat had invested, in one instance retorting that Fiat's greatest investment a team of 50 experts who were assisting "production" of the Punto Classic.

By 2010, the Zastava factory in Kragujevac, Serbia, had turned into a parking lot for Punto Classics.

By 2010, the factory had turned into a parking lot for Punto Classics. No attempt was made to export the car, despite lingering ties between Zastava, North Africa, and Syria.

In a rare moment of candor, an official of the Serbian Central Bank, speaking in 2009, called the Fiat Punto Classic (also assembled) a political gimmick. "The main thing Serbian about this car is the air in its tires," he mused, estimating that local assembly added just €700 of value, while imports of spare parts added to the current account deficit.

“The funding must come either from local deposits or foreign borrowing - both difficult these days.”

The B-segment, “lifestyle” 500L finally launched in 2012. It is certainly more expensive - and as such, less well suited to both the Serbian market and to Zastava's traditional markets - than an A-segment car might have been.

Even if the promised “140,000” annual figure materializes, the 500L is made - nay, assembled - for foreign consumption and foreign profit. And Serbian internet forums devoted to business discussion, generally recoiling at the barrage of “srpski fijat, srpski fića” publicity, regularly bear remarks along the lines of the new Fiat 500L being no more Serbian - and likely far less - than the iPhone is Chinese.

A cursory glance at more general discussions might suggest that the public would appear to have bought the idea that, in a 33:67% joint venture between the Serbian government and Fiat, a third of the profits from each 500L sold stay in Serbia. It is certainly a common refrain for the less informed.

It is also, of course, is in no way true. The Serbian government holds a 33% share in Fiat Automobili Srbija, a joint venture set up by Fiat, which owns 67%. Fiat designed and developed the 500L, selected the suppliers who would provide parts, and coordinated the sending of those parts to Serbia.

Despite assertions that more than 50% - according to some sources, more than 60% - of the 500L is produced in Serbia, this seems impossible. Certainly, the metalwork, engine, gearbox, and glass are all of foreign origin.

Thus Fiat Automobili Srbija is an assembly operation which can - at least currently - likely add no more than 20% in value to the finished product. Moreover, given the secluded nature of the contract, there are no guarantees that Serbia is entitled to 30% of the profits from even this eventual figure. Indeed, going by the tax breaks that have been given to Fiat, it is almost certain that the contract with Fiat Automobili Srbija is quite complex.

There have been recent noises to the effect that (an estimated) €100 million might be invested in the Smederevo steel plant, at which point it might theoretically be able to supply Fiat with the galvanized metal required for the 500L. This would certainly and dramatically improve the situation. However, given the nature of most news surrounding Fiat Automobili Srbija, there is reason to be skeptical.

To be frank, the majority probably does not genuinely believe that a third of the profits of each 500L sold goes to Serbia.

However, it could be ventured that the majority - paradoxically enough - believes that whatever the actual figure is, Serbia deserved no better.

Over the past twenty years, the country has been unable to assert the basic human rights of its population across the former Yugoslavia; has been largely unable to maintain the industrial might left to it by that country and, by corollary, has been unable to maintain the much vaunted Yugoslav standard of living. Amongst a weary public, a defeatist mentality has taken hold, one that is could easily be abused by both the government and opportunistic foreign companies.

It is this defeatist mentality that has enabled the signing of a completely censored document under which a factory in the public domain was given to Fiat, the vast majority of its employees thrown out, and virtually all of its suppliers sent to the verge of bankruptcy.

All of this is generally couched in populist, disgracefully vague assertions of "Euro-Atlantic integration" and various other catchwords and slogans that have no practical meaning. The Fiat deal came at a time when Serbia signed the Stabilization and Association Agreement (SAA) with the European Union, and the two quickly became inextricable in the language of the country's politicians. In the run up to the 2008 general election, government officials even breathlessly cited Volkswagen as a contender for a 300 million, 400-hectare investment in the vicinity of Kragujevac.

Ever present is the equally vague notion that somehow the presence of Fiat bodes well for a "European future." If, however, it was hoped that Fiat would bring European salaries to Kragujevac, then assembly-line workers being paid €300 (as opposed to the €1,000 and €1,200 of their Polish and Italian counterparts, respectively) have surely had such hopes dashed.

Similarly, if it was assumed that Fiat would bring (vaguely defined) European standards to Serbia, then to disparage this one need look no further than at a recent ad for the Punto (née Grande Punto), in which a fully-equipped car is displayed next to a tantalizing base price, with no mention of the disparity. Such advertising would be penalized in the West.

Fiat's "European values" run amuck in this Serbian ad, which displays a fully-equipped car next to a tantalizing base price, with no mention of the disparity.

In the meantime, the media has failed to convincingly take up its watchdog role.

When Fiat was handed the Zastava factory in 2008, no mention was made of the value of Zastava's assets.

Fiat continued to build the Zastava 10, rebadged as the "Fiat Punto Classic." No mention was made of the €13.5 million that Zastava and the Serbian government had invested in the line.

It is rarely mentioned, too, that Fiat in 2011 sold half as many cars in America as it had planned.

Most egregiously, in the case of the Fiat 500L, the Serbian media regularly confuses "production" and "assembly." There is a great deal of difference. A recent article by University of Kragujevac economics professor Dragovan Milićević suggests that although Fiat Automobili Srbija exported €282 million in 2012, it imported an estimated €220 million. No mainstream Serbian media outlet has discussed this.

Promises, promises

In 2005, Serbia gave Fiat roughly 80 government papers each worth $1.15 million in guarantees, putting the issue of Zastava's debt to the Italians to rest. At roughly the same time, an American auditing house hired by the Serbian government valued the Zastava plant at between €25 million and €32 million.

For reasons unknown, NATO destroyed Zastava's computing center on Easter Sunday, 1999. IBM CATIA equipment was chosen to restore the facility in 2005.

Next, Zastava chose IBM CATIA equipment to upgrade its computing facilities, destroyed during the NATO bombing.

Zastava then bought from Fiat a license to build the Fiat Punto II.5 as the Zastava 10. A total of €13.5 million (€8 million of which from the sale of Zastava assets) was invested in a new line to assemble the car. In two reports (October 2007 and February 2008), and following a January 2008 visit to the factory, which had been ISO 9001 compliant since 2000, Britain's Autocar magazine confirmed that the line met the highest standards.

All of this was turned over to Fiat in November 2008, as the last Zastava left the line.

Following a January 2008 visit to the factory, which had been ISO 9001 compliant since 2000, Britain's Autocar magazine confirmed that the €13.5 million Zastava 10 line met the highest standards.

Serbian Minister for Economic Development Mlađan Dinkić declared Kragujevac a customs-free trading zone. 700 million euros ($1.1 billion), he vowed, would be invested in Zastava, with an additional 500 million euros going to a supplier network. This despite preliminary figures that Fiat's investment would employ just 10,000 people in total.

All of this was turned over to Fiat in November 2008, as the last Zastava left the line. t Fiat's investment would employ just 10,000 people in total.

In the heady days of 2008, it was projected that the agreement would see 150,000 vehicles “produced” per year by 2010. Then, the government announced that 50,000 could be “produced” as soon as 2008, 90,000 in the first full year, and 300,000 by 2010. 200,000 of the planned 300,000 units, Dinkić said, would be a new A-segment vehicle, while the remaining 100,000 would be a B-segment car, slated to launch in 2010.

In 2009, Dinkić announced that, by the autumn of 2009, an addendum to the contract with Fiat would be signed for the “production” of a new A- (250,000 per year) or B-segment (140,000 per year) model (which, Fiat would decide), plus 50,000 Punto Classic models.

In late 2011, Dinkić promised that 80% of parts (“excluding the engine”) would be produced in Serbia.

These items were all published by serious news outlets (random tabloid pieces had Fiat building a new Seicento, 500, Palio, and Grande Punto in Kragujevac).

In late 2011, it emerged that Kragujevac would be restricted to a replacement for the B-segment Fiat IDEA and Lancia Musa mini-MPVs.

Fiat in 2011 said that it would invest a total of 950 million euros in the project. To date it has been difficult to reliably ascertain how much has been invested by Fiat (and to what end), and how much by the Serbian government. The most recent citation comes from Fiat Automobili Srbija CEO Antonio Cesare Ferrara, who says that €1.2 billion has been invested in Serbia, of which €350 million in rebuilding the factory, and €850 million in factory equipment.

In 2011, 1,100 people worked at FAS, a dramatic reduction over the 4,000+ employees who manned the Zastava factory in 2008. Company plans at the time called for 2,400 to be employed at the plant by 2012, which is par with what is claimed today (2,435). Fiat today says that another 600 people will be hired at the plant by the end of 2013 with another 800 to follow (for a total of 4,000) in 2014. To date and since July 2012, the 500L has been assembled and exported in 43,000 copies. Fiat's target for 2013 is between 110,000 and 150,000 vehicles, with exports to America to begin in May.

Questions remain about Fiat's abilities

In 1990, as Yugoslavia found itself on the cusp of civil war, Fiat ranked second only to Volkswagen in Europe, with sales of 1.9 million cars and a robust market share of 13.8%.

But by 2005, the $27 billion outfit was Europe's weakest, with sales in 2004 falling to 1 million – nearly half the level of 1990 – and European market share hovering at 7.6%. Fiat factories were operating at between 65% and 67% of capacity.

There is no denying that Fiat has made tremendous strides in a very short period of time. In 2005, Italy's largest automaker was on the verge of bankruptcy. Yet Fiat shareholders did better in (financial year) 2007 than counterpart stockholders in any other European company.

The founding Agnelli family had, in 2002, been forced to sell off key assets to recapitalize the carmaker. Things looked so bleak that, on February 13th, 2005, General Motors paid the Italians $2 billion simply to get out; to terminate a 5-year-old put option which gave the Fiat Group the right to sell Fiat Auto to GM for a fair market price.

For Fiat, the race was on to reverse a cash-burn rate of $1.9 billion a year. GM's injection helped but, from 2000 to 2005, the Turin-based automaker had accumulated a considerable $14 billion in net losses. Fiat would enter 2006 carrying some $6.4 billion in net debt.

The first Fiat to turn things around was the second-generation Panda, an A-segment crossover which reminded the world what Fiat was best at: small cars. Sales in 2004 outstripped expectations, reaching 250,000. The 2005 Grand Punto and 2007 Fiat 500 followed.

Through 2007, the Fiat Group - Fiat, Alfa Romeo, Lancia, and Fiat Professional trucks - had built more than 95 million passenger cars and light-commercial vehicles, counting more than 450 models, since 1899, when the company was founded in Turin.

As it began recovering, Fiat reached out to former partners, including its Polish outfit (which built the Panda) – and Zastava.

Fiat and Zastava are inextricably tied. It was Fiat who got Zastava's lines rolling, sixty years ago; Fiat who supported the production (rather than simply the assembly) of automobiles at Zastava in 1958; Fiat who provided Zastava engineers the technical facilities to, later, develop their own cars (the 1988 Yugo Florida/ Sana being the company's most independent model) - and it was Fiat who, with the Punto II.5 in 2005, gave Zastava a new car to build.

Roughly at the same time as it was gifted Zastava, Fiat also got a windfall in Chrysler, which had virtually completed development of its popular and profitable 300C and Grand Cherokee. But Fiat still wanted to return its own brand to the United States, which it did in 2010.

However, Fiat in its first full year (2011) sold half as many cars in America as it had planned; largely because the company had set its targets with surprising naïveté. In one interview, CEO Sergio Marchionne said that he'd taken BMW's figures for the MINI launch in 2001 and lopped them in half. The combination of poor market research, and a poor marketing campaign which appeared to suggest that if you liked cappuccino, you'd love an Italian car, made for the disappointing relaunch of a brand that was poorly remembered in America. A conflict-of-interest scandal surrounding Fiat/ Chrysler's soon deposed marketing manager did not help matters.

Fiat in its first full year (2011) sold half as many cars in America as it had planned; largely because the company had set its targets with surprising naïveté.

Then there is the Lancia issue. Fiat CEO Sergio Marchionne was recently attacked on Facebook by angry enthusiasts of what was one of the world's most pioneering car brands.

Today, Lancia is a Chrysler by another name. Rumors of its impending demise generally blame consumers, but the idea that the market has rejected Lancia is ridiculous. No, the market has rejected counterfeits.

A brand is a promise of a certain image and characteristics. For a long time now, Lancia has not consistently fulfilled anything resembling a well-defined promise.

Lancia is today not the marque it was in the ‘20s, ‘30s, and ‘50s, with a slew of innovations to its name; no less than the first unibody! It is not the marque it was in the ‘60s, with recognizable avantgarde elegance; nor in the ‘70s and ‘80s, with a record number of rally wins and a beloved hot hatchback.

Lancia's legendary Delta Integrale was killed without replacement.

But the legendary Delta Integrale was killed, while the Golf GTi continued to evolve; and today the Ferrari-engined Thema is no more than a blur.

No, Fiat appears to have decided that it can profit best from Lancia if it only peripherally recalls the brand's tradition, with a few cynical design cues. As Jaguar found with its Mondeo-based X-Type, this only works for a year or two. The two-step flow model of communication means that when the brand loses credibility with opinion leaders - which can happen fairly quickly - this eventually trickles down to the general public.

Lancia is not on life support but, rather, it is being bled for veal; slowly, for maximum suppleness or perhaps flexibility at the end. We will likely be told that there was no other way; that the brand was simply dead despite all attempts to save it. In the meantime, sticking Lancia badges on Chryslers costs significantly less than making a serious go of it.

It all recalls the way Serbia has tended to handle privatization, right down to the veal analogy. In both cases, the implied inevitability tends to hide the opportunity cost of what might have been.

Fiat may not know what to do with Lancia, but that hasn't stopped it considering adding yet another brand to its portfolio; alternately, Autobianchi or Innocenti. For a brand with (it is assumed) access to “Yugo,” this would seem quite ill advised.

"Yugo" today would be more relevant than ever

Fiat pulled out of the United States in 1983, selling fewer than 10,000 cars in its final year. Indeed, somewhat traumatized, the Italians warned Zastava not to venture into this most demanding market.

A commendable 145,511 Yugos were sold in America before the start of the Yugoslav Civil War in 1991. 20% cheaper than the next most expensive car, the Yugo became synonymous with low-cost motoring.

In December 1985, Americans could buy a Yugo for just $3,990. Its closest rival was the Subaru hatchback ($4,989), followed by the $5,151, three-cylinder Chevrolet Sprint, a rebadged Suzuki which GM had in a knee-jerk reaction frantically brought in to compete with the Yugo. The Ford Festiva (a Kia-built Mazda), and various budget versions of more common models, would follow.

As it turned out, a commendable 145,511 Yugos were sold in America before the start of the Yugoslav Civil War in 1991. 20% cheaper than the next most expensive car, the Yugo became synonymous with low-cost motoring.

In February 2013, Automotive News published an article that Fiat was considering the relaunch of Autobianchi or Innocenti. The low-cost brand would apparently wage war against Dacia, Renault's Romanian arm, and would be in line with industry trends by which Nissan is gradually relaunching Datsun, and Volkswagen has bandied about the resurrection of “Wartburg.” No less than BBC Top Gear's James May has been rabidly enthusiastic about the back-to-basics approach that Dacia represents. “Yugo” would be a far better bet than “Autobianchi” or “Innocenti.” It is a known low-cost brand, a synonym for affordable motoring, across the world and especially in the United States (where Fiat and Renault are weak and unrepresented, respectively).

The Yugo brand deserves better

Some might argue that the Yugo’s fame could better be described as notoriety. Well, as Volkswagen has found with Škoda, notoriety is better than no image at all. $250 million is considered minimum marketing expenditure for a new brand to have an effect on the American market.

With more than 700,000 Zastava vehicles exported (of 4.2 million built), to 74 countries, the notoriety of the Yugo brand, particularly in the United States, lay more with politics than with any fault of the car itself. Although Yugoslavia was more Socialist than Communist, and though it had since 1948 been independent of the Soviets and the Eastern Bloc, the media's laziness, combined with the American public's general revulsion toward anything that hinted at Communism, tarred the car with an undeserved brush11. It matted not that, as even U.S. Ambassador to Yugoslavia John D. Scanlan said, factory decisions "come from the bottom up, not from the top down."

Secondly, consumerism is an integral part of the American Dream. To be content with basic transportation is almost un-American; rather, one keeps up with the Joneses. An endearing design like the Volkswagen Beetle might have, with the benefit of ‘60s counterculture, been able to fly in the face of this. But a simple car like the Yugo, which made no attempt to disguise the mundanity of mass production, had a harder time of this in the go-go '80s.

As far as the car itself is concerned, dissecting it would require a separate paper all to itself. However, it is worth briefly pointing out that more than 500 design changes had been made for the American market. Few competitors had independent rear suspension, and when fuel injection was introduced in 1990, the base Toyota Corolla was still using a carburetor. The Yugo even proved itself in the One Lap of America endurance run, winning its class. Moreover, there is the following citation (one of many from the period), from a test in Britain's Motor magazine:

"The Yugo 55 GLS is no less convenient than most £4,000 superminis, among which we can include the Austin Metro, Daihatsu Domino, Fiat Uno 45, Nissan Micra, and the Seat Ibiza. Nor is it as quick or efficiently packaged or frugal. But the Yugo does have a number of things going for it, not the least of which are its grip, handling and ride comfort, all of which are excellent."

Sure, the Yugo had a long-throw gear-change that took some getting used to; but take that Italian-bred 1.3-liter engine to 6,000 rpm and back. Now try the same with a Ford Festiva (aka Kia Pride); or a Hyundai Excel.

It is also true that Americans tended to view the Yugo as a second or third car, one whose low price meant that adhering to the maintenance schedule seemed counterproductive. Several instances of customers driving their Yugos into the ground with minimal or no maintenance, before buying a new one, were recorded.

Of course, in countries like Yugoslavia, where the concept of fixing things was more prevalent (either culturally, or by way of sheer necessity), you just maintained the one you had. These cars were certainly more durable than their reputation suggests, as hundreds of thousands of Yugos across the former Yugoslav republics (where many of the roughly 750,000 built between 1980 and 2008 continue to run) will attest.

Despite the validity of these points, some might argue that the Yugo's fame could better be described as notoriety. Well, as Volkswagen has found with Škoda, notoriety is better than no image at all. Volkswagen did not can Škoda in 1991; rather, it saw the company's brand recognition as an advantage. Building a new brand with similar recognition would have been far more expensive, and VW saw in Škoda the potential to attack a lower-end market.

It is important to compare any perceived value of the Yugo brand with the $250 million that is considered minimum marketing expenditure for a new brand to have an effect on the American market. And, love it or hate it, the Yugo was - is - an icon and a symbol for its category. The nine-minute video for the 2008 cover single of Metallica's tenth album, “The Day Which Never Comes,” featured a Yugo front and center. Seventeen years after the Yugoslav Civil War had forced Zastava out of the American market, and more than a decade after its appearances in Drowning Mona, Diehard 3, Bowfinger, Inspector Gadget, and Moonlighting, this unlikely film star was continuing to evoke extreme affordability, even among audiences who weren't even born during its heyday. Yet there is absolutely no indication that Fiat ever conducted any valuation of the Yugo brand.

The Zastava factory deserved better

Zastava's roots date to 1851 when a foundry to make cannons was established in Kragujevac. Some 30 years later, the foundry was named the Military Engineering Works and, among other weapons, it built precision rifles, which it still makes today (and which are highly prized in the United States).

Zastava's roots date to 1851. After prewar production of Chevrolet trucks, the company began building (Fiat) cars in 1955.

Automobiles. Trucks. Buses. Architecture and construction. Horticulture. Zastava did it all. Well before World War II, 400 Chevrolet trucks rolled off Kragujevac lines, slated for the Yugoslav Army. Postwar production began in 1953, when Zastava built 162 Willys jeeps, before inextricably tying itself to Fiat. 1955 saw the first fruits of this agreement: the Zastava 600D ("fića"), a car for the people, and the Zastava AR-51, the truck which would drive Yugoslavia's postwar reconstruction.

In 1958, legendary Zastava CEO Prvoslav Raković convinced Fiat that Yugoslav production from start to end would be beneficial for both companies. By 1971, toward the end of Raković's reign, Zastava was building a bespoke, more practical, hatchback version of the Fiat 128 (Europe's Car of the Year, 1970).

CEO Prvoslav Raković saw to it that the company would build, rather than simply assemble, Fiat cars. This led to its own models, derived from Fiats but ever more different, most notably in the case of the 1988 Florida.

This transverse-engined, front-wheel-drive vehicle, with its rack-and-pinion steering, overhead camshaft, and independent rear suspension, was technically superior to the Lada, Moskvich, Škoda, Trabant, and Wartburg, and it would serve as the basis for the Yugo.

During the time in which Zastava exported cars to the United States, between 1985 and 1991, Fiat, Lancia, and Citroen were long gone. Rover/ Sterling would enter and pull out. Peugeot would pull out. Alfa Romeo, too, would disappear a year or two after the war and sanctions had forced Zastava's withdrawal. Of these brands, only Fiat has returned, and although things have recently improved, its initial numbers were considerably lower than predicted.

Turning out between 12,000 and 15,000 vehicles per year since 2002, Zastava's engineers and assembly-line workers held out in the worst conditions any postwar European auto plant has experienced.

What automobile factory might have kept it together after the dissolution of its country and 1,400-strong supplier network; followed by almost a decade of sanctions and, as a final touch, being used for target practice by the most powerful militaries the world has ever known?

Immediately after World War II, Toyota made fish paste. BMW turned out pots and pans. Volkswagen built nothing. The British invested in Volkswagen, as did the Americans in Japan, to kick start production. The first vehicles that emerged from Toyota's factory were laughably bad; and yet, the Japanese government knew, as it knows today, how important a strong domestic automotive industry was to its economy.

Zastava in 1999 did not look much different to the aforementioned factories, each of which is so prized today. Despite it all, without a dime in foreign investment, production was up and running three months after the devastation.

Zastava's engineers forged an alliance with PSA/ Peugeot-Citroen, and developed Europe's most affordable diesel car; a five-door hatchback which was praised by Autocar in the last throes of the company's independence. Zastava R&D engineer Milan Marković patented the Oktopus Finiss, the world's fastest professional-driver training device.

In the years that followed, the Serbian government alternated wildly between promising to independently restore Zastava to its former glory and, conversely, viewing it as a social problem rather than an automaker.

With Zastava Automobili's demise in 2008, roughly 100,000 people across 56 towns in Serbia were directly or indirectly employed by the company. Their fate remains unclear.

Today, Zastava's workhorse trucks - Zastava Kamioni - are more solid than their perceived quality might suggest, and its (Zastava Inpro) trailers have found encouraging interest in France and Greece. But the vertically-integrated giant, which at its peak directly employed more than 50,000 people, has by and large been dismantled, its vast supplier network left to fend for itself. Quality parts for Zastava cars can be hard to find, despite promises by the government in 2008 that they would be plentiful for a good long while.

Meanwhile, there is no doubt that the privatization of vertically-integrated Zastava was conducted in reverse; and thus, in error. The logic of privatizing the suppliers first, and then the company, is open to question, as it created severe problems for Zastava's procuring department (cue the veal analogy, again). It was also entirely unrealistic to leave 240 suppliers to fend for themselves; to expect a plastics supplier to invest roughly €1.5 million to, for instance, purchase the machinery required to produce a plastic bumper cover for the Punto II.5.

No matter; it is worth being cautiously optimistic. That's a position which Kragujevac, known for stoic resilience in the face of the gravest circumstances, has practiced well, through the ages.

It is also important to wish Fiat and Fiat Automobili Srbija every possible success in their future endeavors! As history has shown, there is no shame in starting (over) with CKDs.

However, there is more than one way to skin a cat. Any success Fiat may see in Serbia does not imply that things could not - should not - have been done differently. By the same token, the Fiat handover is regularly cited as an example of the way things should be done across the country; even as such lack of transparency should not set standards.

When Prvoslav Raković, the man most responsible for building the modern Zastava, went to Kragujevac on assignment from Tito in 1945, there were (as he later wrote) three cars in the entire city. The Nazis had burned what they could not take with them.

If an entire industry could arise from such dire circumstances, then surely there is hope for the future. However, turning that hope into reality will require more than populist catchphrases and a series of documents shrouded in secrecy. No, Kragujevac, and indeed the country as a whole, will require, as in 1945, the vision to imagine a better day, the will to implement the plan, and the transparency to ensure its viability and realization.

Artist’s rendering of a potential, new Fiat 127 (independent designer David Obendorfer).