Skoda, VW's Czech subsidiary, is suffering from the crisis in Russia. Last year, Skoda was the best-selling import brand in Russia, but sales are currently at a near standstill.
The Russian crisis has also affected Skoda sales in Ukraine, Belarus and the Baltic states.
'It means that we had to adjust our forecast for 1998,' said Wilfried Bockelmann, Skoda board member for technical development. 'We had planned a 30 percent sales increase a year ago, but now we expect ... a clear 10 percent improvement over last year.' Unit sales will be about 400,000.
Skoda forecasts a 10 percent decline in the Czech Republic, but the expected volume of 90,000 will be enough to retain a 56 percent market share. Sales in Poland, Germany and Slovakia are strong, he said, while sales in the UK, Norway and Italy are under pressure. However, he said, the company will earn a profit.
One of Skoda's challenges is that it must cope with different brand images in different markets.
'In eastern European countries. Skoda is traditionally considered a quality brand, while in some western countries we still have a long way to go,' said Bockelmann.
Within Germany, Skoda has a split personality, he said, with customers in the east having a strong positive image, while in the west its reputation is lower.
To improve its image, Skoda launched a long-term world rally championship program at the auto show.
Volkswagen Chairman Ferdinand Piech has said Skoda should compete with Volvo.
'Volvo is not our target,' said Bockelmann. 'It is more to illustrate our philosophy, to explain that Skoda does not have a Mediterranean image, but stands for robustness and functionality, like Volvo.'
He said Volkswagen has experience in improving brand images.
'It took Audi 15 years to reach its current level,' he said. 'We started to work on our new brand image in 1995, and expect to realize our goal in half the time Audi needed.'