The Czech government is accelerating efforts to sell off its remaining 30 percent stake in Skoda Auto to Volkswagen AG.
The sale of the stake in the Czech Republic's largest exporter has become a major priority following a recent European Union approval of aid for a new Skoda engine plant. The $555 million plant will be built in Mlada Boleslav in the Czech Republic.
Volkswagen already owns 70 percent of Skoda. The aid package is seen as a signal that it is now safe for the Czech state to pull out of Skoda altogether.
'We hope negotiations with Volkswagen will be finalized by the end of this year or at the start of next year,' said Deputy Finance Minister Jan Mladek.
Should Volkswagen turn down the option to buy, the Czech government said it will hold on to the stake and will not seek outside investors.
'Our relationship with Volks-wagen is much more important than this stake,' Mladek added.
Volkswagen refused to comment on whether it would buy the remaining Skoda stake now or keep its options open.
If the sale - which, according to some estimates, could net around $141 million - goes ahead, then state bank Konsolidacni stands to be the biggest winner. The bank holds the government's 30 percent stake.
'We think the proceeds should come to us,' spokesman Tomas Kones said.
Brussels pared back an original $128 million package of government incentives for the engine plant - including a tax break, duty-free imports of crucial Western technology and help in training employees - to around 75 percent of that amount.
The European Union has particularly tough rules governing auto industry subsidies and has cracked down on Volkswagen for breaking these rules in the past. Even so, the reduced subsidy is enough for Skoda to push ahead with the new plant.
'We are getting less government help than we hoped for,' Skoda Auto spokesman Milan Smutny said. 'This will not affect the overall investment, but it will mean we have to step up our efforts to find economies elsewhere.'