Here in the Bavarian city of Ingolstadt, all roads lead to Audi. Literally.
In a town of perhaps 120,000 people, about one-third work for Volkswagen AG's premium brand. The rest work for those who work for Audi. As Audi's fortunes go, so go Ingolstadt's. Those who have lived in Canadian auto company towns like Oshawa and Windsor know exactly how they live and work here.
Ingolstadt, in fact, is dotted with signs directing visitors to the Audi Forum, the centrepiece of Audi's headquarters here. Some 60,000 new owners collect their Audis at the Forum each year.
The fashionable delivery centre is designed to make each new owner feel like a celebrity for a day. (And no, Canadians are not eligible to participate in Audi's overseas delivery program, though Americans are.)
With delivery comes a free gourmet lunch for the owner and everyone else he or she can stuff into a car. There is also a tour of the nearby Audi museum, and keeners can also tour the factories (about half of all the 900,000-plus Audis that will be sold in 2009 are assembled here).
Despite the global economic conditions, things are quite good here in Audi-town. For now.
Audi this year is by far the biggest contributor to VW Group earnings. In the first nine months of the year, Audi had an operating profit of €1.17-billion ($1.85-billion) and those funds provided the bulk of VW Group's nine-month operating profit of €1.5-billion.
Audi is making money, but others in the 10-brand group are suffering losses, including heavy ones at VW's bargain-brand Seat in Spain and the upscale Bentley brand in England.
In fact, thanks mainly to its strong presence in China, Audi had a 0.4-per-cent sales increase last month to 82,750 cars, although sales for the year through October were down 6.7 per cent from a year earlier to 787,900 cars.
The results are better in Canada, where sales are up 22.2 per cent on the year. In a market where Canadian new-car sales are down 13.2 per cent, and where global new-car sales are down more than 20 per cent, Audi is holding its own.
But Audi has been through enough booms and busts to know that current strengths are no guarantee of future successes.
"Our history, it has been interesting, to say the least," says Audi Canada chief Martin Sander in deadpan understatement.
We are standing in front of the very building in downtown Ingolstadt - now the local courthouse - where in 1949 the Auto Union, Audi's precursor, was recreated out of the rubble of post-war Germany. All that marks the occasion is a bronze plaque affixed beside a nondescript door.
The Audi brand is celebrating its 100th anniversary this month, but the up-and-down Audi story is complicated, filled with booms and busts, big egos and bitter rivalries that turned into alliances.
In North America, Audi has spent more than two decades crawling its way back to respectability after a series of poor management and product decisions were compounded by the celebrated "unintended acceleration" case in the mid-1980s - for which Audi was eventually cleared of any wrongdoing or malfeasance.
Today, Audi has an expanded lineup and more growth is planned. By 2015, Audi intends to be the No. 1 premium auto maker in the world, with sales topping 1.5 million units and a 42-model range. BMW AG, just down the Bavarian road in Munich, is in Audi's sights, says Canadian CEO Sander.
"We have the 2015 plan and it is working," he says, standing among historical Audis in the company museum. "When I started 19 years ago, we were a regional German brand selling 350,000 cars. We doubled that once we had a plan in place." Audi plans to double that again in about five years.
Realistically, Audi's push began in earnest a decade ago when the TT roadster and coupe were added to the traditional three-sedan lineup. In recent years, Audi has added the Q7 SUV and the smaller Q5 crossover, the R8 sports car and the A5/S5 coupe.
Audi is adding clean diesels and gasoline engines that are smaller, more powerful and more efficient. Development also is focused on lighter bodies, hybrid technology and electric vehicles.
The Q5 hybrid is expected in 2011, and there is talk of expanding the hybrid powertrain to other models. A version of an electric luxury car based on the Audi e-tron concept unveiled last month at the Frankfurt auto show is headed for production, with running prototypes due in less than two years.
Next year, the new A8 large luxury sedan is coming, along with a version of the Q5 with a smaller engine (only a V-6 is sold currently). A diesel Q5 is also a possibility. Next year, Audi will also launch the convertible version of the A8, called the Spyder. What we will not get in Canada is the next generation of the tiny A1 that will be launched in Europe.
August Horch, of course, could not have foreseen any of this, though he was a bold engineer turned businessman who was a willing risk-taker and one not entirely willing to back down from a fight. Horch, in 1899, was the 31-year-old head of the motor vehicle department at Karl Benz's firm in Mannheim, but like other auto pioneers of his age, he wanted to run his own show.
So he left Benz to found A. Horch & Cie. Motorwagen Werke, only to fall out with his partners a decade later. He left to launch a new auto maker in Zwickau, Germany. With the Horch name already tied up, he called the new company Audi, the Latin word for Horch which means "listen" or "hearken" in German.
Pre-First World War Audi soon became the talk of Europe, with victories in the Austrian Alpine Rally from 1911 to 1914. A key model was the Audi Type C 14, known as the "Alpine Conqueror."
In 1914, Audi Automobilwerke GmbH went public. The war slowed Audi's progress, but by 1921 Audi was moving ahead quickly again.
Audi Werke AG introduced the first left-hand-drive car in Germany in 1921, the 50-hp Audi 14 Type K. The Type M, with a six-cylinder engine, followed in 1923, and the Audi Imperator, the first Audi car powered by an eight-cylinder engine, was introduced in 1927.
The late 1920s were a heady time for many auto makers, Audi included. Deals were being done in Europe and North America as smaller companies were combining or being swallowed by larger ones. Audi became part of this trend.
A Dane, Joergen Skafte Rasmussen, the owner of Zschopauer MotorenWerke, acquired a majority stake in Audi in 1928 and folded the firm into his own company. But by the early 1930s, the Great Depression had devastated many auto companies. Audi's fate was in peril.
By June, 1932, the Saxon State Bank had successfully pushed for a merger of Audi, Horch and Zschopauer MotorenWerke (DKW). Those three became Auto Union AG; a fourth, the Wanderer Werke's automotive division, was added and the new firm's four-ring logo was born, surviving as Audi's logo today.
The Second World War ended Audi Auto Union's run of commercial and retail success. The last Audi model rolled off the line in April, 1940, and after the war, Auto Union's factories were dismantled.
Still, there were Auto Union vehicles in post-war Germany and they needed parts. An executive staff came to Ingolstadt in late 1945 to run a parts depot that later evolved into Auto Union GmbH.
By the early 1950s, entrepreneur Friedrich Flick had amassed a substantial stake in Auto Union and in 1958 he managed to attract Daimler-Benz AG as a majority partner. In 1964, Volkswagen bought control of Auto Union from Daimler.
VW then merged Auto Union in 1969 with another smallish auto maker (and also a motorcycle manufacturer), NSU of Neckarsulm, Germany. The new company was called Audi NSU Auto Union AG. By 1985, with the Audi brand growing and gaining recognition, the company was renamed Audi AG.
The key to Audi's success today can be traced not to August Horch, who died in 1951, but to Ferdinand Piech, the 72-year-old grandson of Ferdinand Porsche, who rose from Audi test engineer to CEO with a vision of Audi as a premium brand with a rally-racing history - one willing to gamble on technical flourishes such as all-wheel-drive, TDI (a turbocharged diesel with direct injection) and lightweight construction.
Piech was Audi's development chief in 1977 and, under him, Audi introduced quattro (four-wheel-drive) in 1980 and quattro is key to Audi's brand image nearly three decades later. Piech became CEO in 1988 and stayed there until 1993, when he became CEO of Volkswagen AG. He remains a force in the company as chairman of VW's supervisory board.
Audi, of course, shares its basic platforms with VW vehicles, so to separate its vehicles from VW's, Audi has pioneered technical innovations such as quattro. In the future, Audi is developing new lighting systems, for instance, to distinguish its models from VWs and to position Audi as a serious rival to BMW and Mercedes.
Audi's future, and that of Ingolstadt, relies on further technical innovations, along with eye-popping designs, superb interiors, cutting-edge safety and chart-busting performance. But for Audi to top BMW and Mercedes, it must also continue working on the very basics of the auto industry: quality, durability, reliability and resale value.
And there is work yet to be done, both in Ingolstadt and at Audi's operations elsewhere around the world.
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