When even the mighty Toyota is popping out numbers that show 2008 as a year of red ink, it would have been rude to do anything other than show up for Audi’s triumphal 2008 results conference in Ingolstadt this week.

Audi has become the world’s most bumptious brand. It may have said that it will not repeat its handsome EUR3.2bn pre-tax profit on sales of EUR34bn this year, but it is certain that while all around is descending into heavy loss, Audi will again be in the black this year. The profit will be down by more than the 10% volume decline because there is to be no associated reduction in costs – and no compulsory redundancy.

There will be short-time working. But Audi has bravely said that it will not consider cutting jobs before 2011. Add that to the EUR5,300 bonus given to all employees and the picture is of some very happy campers working in Audi factories.

Its confident forecast for the year ahead is that its 10% volume reduction will be within a global market reduction of between 15 and 20%. That’s very self-assured.

There will be a rash of new models (again) and product development will not stop; indeed it must not stop if all the open niches in its range are to be filled.

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Alex Strotbek, 45, is described as the member of the board for finance and organisation – rather than a plain and simple chief financial officer.

He is not just a gatekeeper and number cruncher. He gets involved in costing new product three years before the car is going to be made. The engineers and designers may reckon that they take full advantage of all the bits and pieces that can be shared within the VW Group. But Strotbek is sitting there with them just to make sure that the cost is as carefully considered as performance and style.

There is absolutely no doubt that Audi is now a powerful player in the mainstream premium market. And there is no doubt that Audi knows it, knows that a single slip can be fatal (remember the self-engaging automatic transmission that wiped them out in the US for the best part of a decade?) and knows that the new product needs to keep on coming.

His important disclosures were that the imminent A1 which will do a fun and cheerful Mini/Fiat 500 job at the entry level; a Q3 will take the high-riding approach of the Q7 and Q5 down to the middle market; and there will be a new A8 luxury car and a hybrid Q7.

The growth of the premium market has been a global phenomena over the decade of plenty and Audi has generated substantial share of that by carefully refining its brand image. In the UK, market share has grown by 50% in just five years to 4.5% which makes it a faster than both BMW and Mercedes and the fastest mover in the top ten.

In Germany it has shuffled up to 8.1% in the same period while the score for Western Europe is market share growth every year in the last five years to 4.8%.

In the US it has 7.1% of the premium market. In China, now one of its top four markets worldwide, market share has remained comparatively stable at 2% as the market boomed. The UK, China and Europe have been the major profit centres. America has been less kind.

The core of the success is the growth of the image which is driven by the growth of the product variety. Product is everything for image, say Strotbek: “We will try to push, and try to roll out all the cars as planned.” That is as close as he gets to a note of caution in his forecasts.

Strotbek says that the three key performance indicators that he takes note of are order intake, market share and internal budget control. The indications are good so far. There is a strong order book and a full pipeline. In fact it has reached the point where some within Audi would be glad of a waiting time that was a bit more acceptable to customers, he concedes.

Engines being ordered are smaller and the SUVs are under pressure, but other than that there are some positive signs – particularly on specification which remains comparatively rich. The challenge now will be to roll out the new technologies at the speed that people want them and at the price they can afford.

Everything will be sacrificed to product. No refurbished property or renewed machine tools until the product development plans have been paid for. Audi is on a roll and unless there is a substantial change for the worse in the global economy, Audi will just go on rolling.

Rob Golding


See also:

GERMANY: Audi reports record 2008 profit; warns on ’09

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