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Audi sees rise in 2010 profit, not out of the woods

Audi sees rise in 2010 profit, not out of the woods
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First Published: Tue, Mar 09 2010. 05 20 PM IST
Updated: Tue, Mar 09 2010. 05 20 PM IST
Ingolstadt, Germany: German luxury carmaker Audi contributed the bulk of earnings and cash in 2009 to parent Volkswagen and expects better results this year as it launches a dozen new models, including the A1 subcompact. “The worst of the crisis appears to be behind us, but we are not yet able to give the all-clear for 2010,” Audi chief executive Rupert Stadler said on Tuesday.
“It would be a classic case of counting our proverbial chickens if we were to claim now that we had survived the global financial and economic crisis. There are signs that this is going to take much longer to improve than is widely being assumed.”
VW’s entire warchest of €10.6 billion ($14.42 billion) at the end of last year — which it will dip into to pay for an acquisition spree — would have effectively been zero were it not for Audi’s net cash position.
Despite a severe slump in car markets that particularly hurt premium carmakers last year, Audi slimmed down its inventories to help boost net cash flow by 21% to €2.32 billion.
Audi finance chief Axel Strotbek forecast higher revenue and operating profit as the brand exceeds the one-million mark in vehicle sales this year.
In its annual report, the Ingolstadt-based carmaker expected retail volumes, turnover, earnings and margins to improve next year as well.
Although operating profit slumped by 42% last year, income from interest on its huge cash pile as well as financial currency hedges lifted its earnings to €1.93 billion before tax — exceeding even that of parent VW by nearly 670 million.
By comparison, Daimler’s luxury arm Mercedes posted an operating loss of half a billion euros last year and BMW has said only it was profitable.
“Times have changed. We are no longer the hunter, we are the hunted,” Stadler said, reaffirming Audi’s goal to be the number one premium carmaker in the world in the next five years.
That would help VW achieve its goal of dethroning Toyota Motor Corp as the world’s top carmaker before the decade is out.
Moving Downmarket
Unlike rivals Mercedes and BMW, Audi can share development and production costs for its fleet with over 5 million other vehicles built elsewhere within the massive Volkswagen empire.
This becomes increasingly important as premium carmakers are forced to move downmarket, offering smaller models and engine families to cut their carbon footprint and boost fuel efficiency ahead of ever-stricter emission regulations.
Audi expects to produce around 50,000 A1 subcompacts in 2010, which it also hopes will rejuvenate the brand by targeting younger customers when it arrives at dealerships in August.
It has hired US popstar Justin Timberlake to help ensure it sells 80,000 to 100,000 units of the car in its first full production year.
Mercedes and BMW by comparison are looking for larger partners such as Renault and Peugeot Citroen to help cut costs for their compact car models.
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First Published: Tue, Mar 09 2010. 05 20 PM IST