Audi plans ‘clean-up’ to keep pace with BMW, Mercedes

Volkswagen’s Audi division will present a new plan in May to reignite momentum after falling behind rivals Mercedes-Benz and BMW amid surging technology spending and stricter emissions tests in Europe.

“We’re going to work hard on our cost structures,” said Audi chief financial officer Alexander Seitz. “But operationally we’re going to face a year of cleaning up.”

Part of the plan is a reduction of Audi’s workforce by as much as 15% over the next five years through early retirement and leaving vacant positions unfilled to help save costs.

Audi has a job guarantee preventing forced layoffs until 2025.

Its struggles from higher spending on electric models like the E-Tron affected returns last year to 6% from 7.8%, as global deliveries fell.

Volkswagen’s largest profit contributor was also hit by an €800m fine from German authorities, triggered by the diesel-emissions scandal.

Audi has widened an efficiency drive to save €15bn by 2022 after a tumultuous year that culminated with the temporary arrest of former chief executive Rupert Stadler over his role in Volkswagen’s corporate crisis.

Cost cuts will account for about two-thirds of the €15bn push. Part of this will be trimming back Audi’s bloated management ranks for savings and speedier decision-making, according to chief executive Bram Schot.

Audi is targeting slightly higher deliveries and revenue this year, and an operating profit margin between 7% and 8.5%. That should shift to between 9% and 11% as early as next year, helped by moving the accounts of some companies doing business for other Volkswagen group brands to the parent company.

Sister brand Volkswagen made similar changes earlier.

Volkswagen chief executive Herbert Diess this week singled out labour costs as a “big concern” at the main VW and Audi brands. There might be “some smoke” emanating from Audi’s headquarters and main factory in Ingolstadt, said chief financial officer Frank Witter.

Audi will launch five fully-electric and seven plug-in hybrid models within 24 months to overhaul its lineup and consider switching one of its existing model lines to battery power. It will broaden the lineup to 30 electrified cars by 2025.

Audi will invest €14bn on new technology, including autonomous driving, electric cars, and digital services, by the end of 2023 and will co-operate more fully with sister brands Volkswagen and Porsche to help lift returns and plans to put a greater focus on its largest market China.

Audi is targeting sales of 1m cars in China in the mid-term from around 600,000 vehicles at present.

The carmaker is reviewing strategic options for its joint venture in China after local rules for foreign manufacturers were eased in the brand’s largest market.

Mr Diess said earlier this week that the group plans to provide an update on its China strategy early next year.

- Bloomberg

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