Workers have voted overwhelmingly to privatise what was once the biggest industrial group in the Balkans, even though it means that most of its workers will lose their jobs.
Zastava was known for making everything from Kalashnikovs to the Yugo car—often the target of jokes—until it was bombed out of production by Nato in 1999.
The sale of the company is a key part of an IMF-sponsored privatisation and economic restructuring package for the Yugoslavian countries, particularly Serbia.
The Zastava group, made up of 45 businesses, will now be broken up into separate companies, but the Yugo car unit and related industries will remain as one entity.
Selling off Zastava is seen as the one of key goals for the Serbian government, which is trying to rebuild the country after the Nato bombing and years of economic mismanagement by former President Slobodan Milosevic.
Finance Minister Bozidar Djelic described the vote to sell the company as “a key moment and a turning point for Serb economic reforms”.
“The Serbian government will at its next session, which is scheduled for Friday (3 August), start its implementation,” Serbian Privatisation Minister Aleksandar Vlahovic was reported as saying on local radio station B92.
The Yugo, ranking alongside the Lada, Skoda and Trabant, has for years been the object of jokes and putdowns.
Over 36,000 people were once employed at Zastava's headquarters in Kragujevac, producing over 30,000 cars a year.
But the factory was bombed twice by Nato and sustained heavy damage after which production ceased.
A recent government study showed that Zastava had some 15,000 surplus workers, many of whom were being paid a token wage after their factories and jobs disappeared in the war.
In the car plant about 8,000 people are expected to lose their jobs, leaving 3,500 to produce an upgraded version of the Yugo.
The workers voted on proposals, outlining government support for Zastava and compensation for workers made redundant, agreed by the government and trade union leaders on Monday.
But not everyone is happy with the decision.
“I do not want to lead the factory into bankruptcy,” the head of the Independent Trade Union of the Zastava, Zorica Djurdjevic, said on Monday when he resigned.