‘Product is everything for image'

Going into this year's race, Audi had won eight of the previous 10 Le Mans 24-hour endurance races

Going into this year's race, Audi had won eight of the previous 10 Le Mans 24-hour endurance races Audi

Audi plans to again be in the black this year, helped mightily by a rash of new models and product development

Jeremy Cato

LE MANS, FRANCE From Thursday's Globe and Mail

Rupert Stadler, the economist who heads Audi's board of management, is not promising a repeat of Audi's handsome €3.2-billion ($5.1-billion) pre-tax profit in 2008 – a profit that meant a €5,300 bonus for all employees.

But he is confident that Audi will not suffer the kinds of losses being endured by so many other global auto makers, particularly German rivals Daimler AG (the Mercedes-Benz and Smart parent) and BMW AG.

Audi plans to again be in the black this year, though the profit will be down, as will volumes. But sales will be helped mightily by a rash of new models (again) and product development will not stop. It must not stop if all the open niches in its range are to be filled, he says.

Audi needs to add models and they must, in turn, be technologically advanced, beautifully styled, fast and reliable. Audi's remains the weakest of the three main German premium brands, therefore it must try harder.

Still, the new models will carry on and the image-building continues.

“Product is everything for image,” say Stadler.

Audi is now a powerful player in the mainstream premium market, with global sales last year passing one million for the first time. In Canada, Audi is the No. 5 premium brand with 2008 sales of 9,271. But Audi is far behind the top four. In 2008, No. 1 BMW sold 23,244 vehicles in Canada and even No. 4 Lexus had sales of 15,001.

More and newer products will help boost sales in Canada and the world, if all goes according to plan, says Stadler. In Canada, that means there is the new Q5 mid-size crossover and the Q7 diesel larger SUV to promote. There is also the R8 V-10 super sports car, the new 2009 A4 mid-size, the updated A3 and other models to push.

Audi also has other models sold elsewhere that might work well in Canada. Stadler suggests the upcoming Q3 crossover might be something Audi would consider for Canada. It would take the high-riding approach of the Q7 and Q5 down to the middle market. Audi is also preparing a new A8 luxury car and a hybrid version of its Q5 crossover.

And there is also talk of expanding the diesel line in Canada. In addition, the new Audi TT RS is another model that seems ideal as an image-booster in Canada. Same for the Audi S5 Cabriolet, a more powerful version of the A5.

Moreover, the upcoming RS 5 would give prospective BMW M3 buyers plenty of pause, too. With it, expect around 500 horsepower, rear-biased quattro (four-wheel-drive), a torque-vectoring rear differential and huge brakes from Audi's stealthiest four-seat coupe.

Stadler, the chief executive, is cautious when commenting on the future given the current state of the world's economy. “No one really holds a crystal ball in his hands that gives a reliable look into the future.”

Stadler, though, also says “that risks and opportunities always go together,” so it seems likely that Audi – flush with cash and possessing a solid balance sheet – will keep driving ahead with its aggressive product push.

The fact is, Audi AG, a unit of Volkswagen AG, is slashing spending on everything but product development. At its annual meeting in March, Stadler and other Audi officials said product development will account for 90 per cent of planned investments in 2009, up from 70 per cent in years past. The product development budget will be €1.8-billion, unchanged from last year.

“We want to continue to develop our products, and we'd rather scale back other investments before we touch our products,” says Peter Schwarzenbauer, the Audi board member for sales and marketing

So while other auto makers are cancelling or delaying programs, Audi refuses to slow down. Over the next seven years, Audi plans to expand its current lineup of 28 models and trim levels to 40 worldwide.

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