Astras will be built in Serbia

General Motors and Serbia automaker Zastava have agreed to build Opels in Kragujevac, Serbia, sources close to the deal told Reuters.

General Motors declined to confirm that the deal would be announced Thursday.

"If and when we are ready to announce anything, we will inform the appropriate people in the appropriate way," said GM spokesman Marc Kempe in Budapest, Hungary.

Last week, Chris Lacey, GM executive director of central and eastern Europe, told Automotive News Europe that GM and Zastava were negotiating about Zastava assembling Opel cars from kits "in the low thousands" annually.

"The production of the first Opel Astra vehicles is expected to start in 2008," a source told Reuters.

Zastava, 100km south of Belgrad, which last year made 15,000 cars in a plant with capacity for 60,000, also assembles Fiat Puntos under license from Fiat.

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

The Serbian government has said it will try to sell the plant to private investors starting late this year.

The factory was damaged in 1999 NATO air strikes on Serbian industrial sites and reconstruction has been slow. The plant currently employs about 4,000 workers, down from more than 11,000 employed before Zastava restructured in 2001.