Report: GM, Zastava seal Opel deal

Report: GM, Zastava seal Opel deal

"They will sign on Thursday," one source said. "The production of the first Opel Astra vehicles is expected to start in 2008," the source said.

A second source close to the negotiations also confirmed the deal.

The state-owned Zastava plant, which last year made 15,000 cars, well under its annual capacity of 60,000, also has a deal to assemble Punto cars for Italy's Fiat.

It markets them in Serbia and neighboring Balkan countries under the "Zastava 10" brand.

It also has permission to start selling the cars on the Russian market.

"The deal with General Motors will enable Zastava to work with modern technology, raising its chances of fully benefiting in the coming privatization process," a government source told Reuters.

Earlier this month, the Serbian government said a tender for the sale of Zastava would be called by December 2007.

The factory was damaged in 1999 NATO air strikes on Serbian industrial sites and reconstruction has been slow.

The plant currently employs around 4,000 workers, from the over 11,000 employed before Zastava restructured in 2001.