Will Volkswagen AG buy AB Volvo or just try to put it out of the car business? VW and Volvo admit to high-level talks, but both sides insist a complete merger or takeover is not in the cards. That won't stop VW from trying to take away Volvo's market share, however - via Czech-built Skodas. Don't laugh. Thanks to an injection of VW technology, Skodas are starting to make a favorable impression on auto industry cognoscenti. Three years ago, the most powerful Skoda packed a scant 75 hp. Today's top-of-the-line Octavia, based on the VW Golf, has 125 hp, with 150 hp in the pipeline. And the upward trend doesn't end there; a new 250-hp V-8 model also is planned. The Czech carmaker - by one interpretation, the third oldest in the world behind Mercedes-Benz and Peugeot - is now Europe's fastest growing volume marque. Sales rose by 29% in 1997 and are on track to increase by 22% this year to more than 410,000. Worldwide sales already are up 18% this year. Clearly, Skoda is doing something right. The new Octavia has been a sales hit all over Europe. Originally targeted at 90,000 annually, Octavia production should hit 110,000 in '98.