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VW to Buy Remaining Stake in Skoda

22 May 2000

Czech Government to Sell Remaining 30%

    Prague - In 1991, Volkswagen bought 31% of Skoda, an ailing industrial 
relic of cold-war divided Europe.  The purchase surprised many, and the 
deal was the subject of derisive comments worldwide.  Then, in 1995, VW 
increased its ownership in Skoda to 70%.  Obviously, VW had not been, and 
was not, listening to the boo-birds.

    By increasing production, adding better technology and systems, and 
actually launching new models under the Skoda badge (as opposed to simply 
turning Skoda into a builder of Audi and VW vehicles), Volkswagen has 
turned Skoda into perhaps the greatest European business success story 
since the fall of the iron curtain.

    Now, after weeks of negotiating, Volkswagen AG seems set to buy the 
Czech Republic's 30% share of Skoda Auto AS, giving VW full control of the 
company.  The deal will be discussed and voted on by the government's 
Cabinet Ministers today.  While there is much support for the purchase, it 
is not without its detractors, who fear the loss of  its largest exporter, 
accounting for 1/10th of its exports.  Slightly more than 80% of the 
385,330 cars Skoda produced in 1999 were exported, primarily to West 
European markets.

    One of the other alternatives that had been considered by the Czech 
government was the selling of the state-held shares to institutional 
investors rather than to Volkswagen.  Members of the Prague stock exchange 
had favored this approach in hopes of adding a 'blue-chip' to the recently 
beleaguered bourse.

    The agreed purchase price is reported to be around $300 million.  The 
relatively low price would indicate that the government has received 
assurances about maintaining employment levels.

    Volkswagen representatives were unavailable for comment.  However, it is 
expected that VW shareholders will have the opportunity to discuss the deal 
at a meeting later this week.


MJR