VW targets India, Russia; 2008 pretax profit to hit $6.92 billion

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He also said the German automaker famous for its Beetle will become more involved in the Indian and Russian markets and outlined plans to expand production and sales in both countries, which are seeing a burgeoning demand for new cars.

Winterkorn, speaking at the automaker's annual meeting, did not lay out an earnings goal for this year, which the company said earlier would likely surpass the 4.4 billion euros earned in 2006.

"The Volkswagen group has experienced 12 eventful months," he told the meeting. "The collective wage agreement in October and the return to a five-day week represent a big step toward more competitive labour costs, higher capacity utilization and secure jobs."

The company has spent nearly two years cutting some 20,000 jobs from its German workforce as it strives to become more nimble in the face of rising competition from European and Asian rivals.

Because of the restructuring, the company's workforce was reduced by seven percent to 94,000 employees. Workers at six plants in western Germany also extended their workweek to 35 hours from 28.8 hours.

Winterkorn said the company, which is establishing production in India and Russia, is "working hard there to build a sound position" in both markets.

"India is one of the fastest growing automotive markets worldwide. We are intent on playing a key role in shaping this growth," he said, noting that Volkswagen sells Audis in the country and that some models from its Skoda unit are already built there.

"We will also soon be more heavily involved in the Indian market with the Volkswagen brand. Because of the high tariffs on imported vehicles, however, we will only be able to build a satisfactory presence in India if we also manufacture there directly," Winterkorn said.

He said that is why VW will build a plant near the city of Pune at which it will start producing models including a small car "tailored to the needs of our customers in the Indian market, beginning in 2009."

Volkswagen expects to start assembling Volkswagen and Skoda models at its new plant in Kaluga near Moscow by the second half of this year, but is aiming to eventually have a complete manufacturing presence.

"As in India, our objective in Russia is a full manufacturing process. Once the body shop, paint shop and assembly line are ready, we will be able to start manufacturing Volkswagen and Skoda models in Russia in 2009," he said.

Winterkorn said Porsche AG's decision to recently increase its stake in VW was a sign of "continued strengthening of the cooperation between the two companies. Porsche has faith in Volkswagen's potential."

Last month, the German luxury automaker raised its holding in Volkswagen to 31 percent in a move that it said was aimed at protecting VW from a hostile takeover. Porsche is now VW's biggest shareholder, followed by the German state of Lower Saxony, which holds nearly 20 percent.

A German law that limits Volkswagen shareholder voting rights to a maximum of 20 percent appears likely to be ruled unlawful by European Union judges, but these holdings would leave the automaker shielded.

The meeting came a day after the Wolfsburg-based company said it earned 740 million euros, or just over $1 billion, in the January-March period, compared with 327 million euros a year earlier.

Sales rose 5.1 percent to 26.6 billion euros, or $36.1 billion, from 25.3 billion euros.

Big gains in China and eastern Europe, and a modest gain in the United States, helped offset a dip in sales in Volkswagen's German home market after the country increased its value-added tax rate in January.