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Peugeot Citroen and Mitsubishi Launch Kaluga Factory

KALUGA — PSA Peugeot Citroen and Mitsubishi on Friday launched a new car assembly plant in Kaluga, a region roundly praised by officials and businessmen for creating conditions conducive to investment.

The companies have invested 470 million euros ($630 million) in the enterprise, called PSMA Rus, with 70 percent owned by PSA and 30 percent by Mitsubishi Motors. PSA's Didier Aleton and Mitsubishi's Masayuki Imada will manage the plant.

The enterprise aims to assemble 90,000 vehicles by 2012 from semi-knockdown kits. The factory will assemble the Peugeot 308, which is already in production; the Citroen C4, which will be assembled starting in June; and sport utility vehicles Peugeot 4007, Citroen C-Crosser and Mitsubishi Outlander, which begin production in September.

Starting in 2012, the factory will begin fully assembling about 125,000 cars a year, about 80 percent of which will be dedicated to Peugeot and Citroen sedans. The facility will eventually have to buy 30 percent of its components and equipment domestically, according to an agreement signed with the Industry and Trade Ministry in 2007.

Prices for the popular Peugeot 308 will be cut enough to qualify for a government subsidized loan program, PSA chief executive Philippe Varin said.

Both Varin and Mitsubishi Motors chairman Takashi Nishioka were confident that the Russian market would rebound to previous levels. "The market potential is 5 million cars per year, and we expect demand to go back to its former level," Nishioka said after admitting that the rebound in the Russian auto market had been "delayed."

Mitsubishi will keep the same pricing policy on models assembled in Russia, he added.

President Dmitry Medvedev had been scheduled to attend the opening but was replaced at the last moment by his envoy to the central federal district, Georgy Poltavchenko, who praised Kaluga regional authorities for creating "the best investment conditions." He added that Medvedev planned to visit the plant once it reaches production capacity and begins full assembly.

French Ambassador Jean de Gliniasty and Japanese Ambassador Masaaru Kono said they were glad that the companies saw the project through despite difficulties brought on by the financial crisis. "It was a very difficult time for France, Russia and Japan," Kono said. "But now it seems like the situation is moving forward."

Construction on the facility began in June 2008. It will sit on 145 hectares of the Rosva industrial park, located near the regional capital of Kaluga, about 180 kilometers south of Moscow. General Electric is constructing a $25 million electric turbine plant in the same industrial park.

The Kaluga region has developed its industrial parks to attract foreign investment and has already seen Volkswagen, Volvo Trucks and Renault Trucks set up factories in recent years, producing a total of 22 car models in the region at this time. "Later this year we are launching a L'Oreal plant and beginning construction of a Lafarge plant," Governor Anatoly Artamonov said.

The PSA/Mitsubishi facility, once it reaches capacity, will be responsible for 8 percent of Kaluga region's industrial output, Artamonov said.

PSA Peugeot Citroen sold a combined 42,100 cars in Russia in 2009, occupying 2.9 percent of the market. Peugeot 308 and Citroen C4 were the alliance's most popular cars last year. Mitsubishi sold 41,000 cars in 2009, with the Lancer and the Outlander topping its list of most popular cars.

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