VW, Europe's largest auto maker, bought 70 per cent of Skoda in 1991 and is now seeking to acquire the remaining 30 per cent, a person close to Skoda said. He declined to comment on how much VW might pay for the remaining Skoda stake, but local news reports quoted deputy finance minister Jan Mladek as saying the Government could receive more than eight billion Korunas ($240.53 million).

The timing of a possible deal is thought to have hinged partly on an engine plant Volkswagen will build near the Skoda Auto headquarters in Mlada Boleslav, north of Prague. Last week, the European Commission approved Czech Government incentives totaling $21.9 million (20.4 million euros). The plant, which should produce at least 5,00,000 engines per year, has been valued at $562 million.

A Volkswagen official declined to comment on the state of talks, but industry analysts said the company probably wants to take over Skoda because the Czech auto maker's financial outlook is brightening. ``Skoda has been making a profit and there is no reason for VW to share it,'' said John Lawson, autos analyst at Salomon Smith Barney in London. ``It would be unusual for VW to allow a sleeping party that is not helping to build Skoda up.''

Boosted by its popular Octavia and Felicia models, Skoda sales climbed 7.9 per cent during the first eight months of this year from a year earlier. In 1998, the company made a profit of $65 million and paid a dividend for the first time since VW took over.

Over the past eight years, VW is believed to have invested $900 million in Skoda and has incorporated the Czech models into its platform-sharing plan.

The Wall Street Journal