View Full Version : Audi takes quality by the horns

03-03-2005, 07:21 PM
From Businessweek:<p>"Chef Sache. That's German for "the boss's business." And when it's the boss's business at Audi, watch out. Each month, Audi's compulsive chief executive, Martin Winterkorn, rolls up his sleeves and leads a trouble-shooting session with managers and engineers at the company's electronics center, zeroing in on faulty systems and problem parts. Winterkorn's rules: no shifting the blame to anyone else, such as suppliers. No phone calls to subordinates -- the brains to remedy the defects better be in the room. And no one leaves until a fix is found. <p>The boss's business extends way beyond that monthly session. Not even the smallest buttons on the dashboard escape Winterkorn's attention. At the first auto show under his watch, he summarily ordered a gorgeous Audi sedan removed just hours before the opening: The stitching on the upholstery wasn't right. (Audi staffers now bring two of each model to every show.) The 57-year-old PhD in metal physics is obsessed with creating perfect cars. "We want to be the No. 1 premium brand," says Winterkorn.<br>There's a lot riding on Winterkorn's precision mania. Audi, the $32 billion high-end car unit of Volkswagen, has been striving for two decades to move its cars upmarket. The effort has cost billions in investments in technology, design, and performance. The goal: to match the exclusive image of mighty Mercedes-Benz and BMW. Individual Audi models have been making a splash for years. The 1994 aluminum frame A8 Sedan was an industry first. The iconic Audi TT sports roadster and coupe, introduced in 1998, polished Audi's image as a design leader. The A4's cool, minimalist styling and powerful four-cylinder motor created a new generation of popular Audis, including the sizzling Cabriolet. The A4 line accounts for nearly half of all Audi sales.<br>Now, Winterkorn is presiding over the arrival of Audi into the front ranks. On Feb. 16, Detroit-based AutoWeek voted the $41,000 A6 sedan its Car of the Year. Late last year the magazine heralded Audi's flagship luxury model, the A8, as America's best luxury car. In car-crazed Germany, Auto Motor & Sport on Feb. 15 elevated Audi to No. 1 in its four key model segments, from the A3 hatchback to its flagship A8 sedan. "Audi is on the cusp of its full first turn as an international luxury brand," says James N. Hall, vice-president for industry analysis at researcher AutoPacific Inc. in Southfield, Mich.<br>WINNING CONVERTS<br>Audi is building up a roster of famous customers, from Spain's King Juan Carlos to musician k.d. lang. It's also luring buyers from rival German auto makers. Bernd Pooch, chief executive of a Berlin machine tool maker, was a diehard BMW fan. But last November, turned off by the avant-garde styling of the latest 7 Series, the 64-year-old test-drove a $100,000, 275-horsepower Audi Quattro A8. Smitten by the smooth handling and finely crafted interior, he quickly signed a lease. "It's a dream of a car," he says. "People just don't know how good Audi really is."<br>The numbers track Audi's upward march. Revenue per vehicle is $41,389, up from $25,125 in 1994. Sales have nearly tripled, to more than $32 billion in the same period. Profits in 2004 rose 7.4%, to hit a record $1.15 billion. The share price (a small tranche of Audi shares still trade, despite VW's ownership) has soared to $347 from $79 in 2000. In Europe, Audi nearly matched BMW's sales last year with 559,428 vehicles to BMW's 579,632. Its most powerful versions of the A8, with 8- and 12-cylinder engines, outsell Mercedes and BMW models with comparable engines. "In the last 15 years, Audi has made an incredible advance. They did a super job," says BMW Chief Executive Helmut Panke. "They wanted to be fully accepted as a premium brand, and they made it."<br>Winning a spot in the club, though, is just the first lap of a long race. Audi now must strengthen global sales outside Europe, upgrade the struggling U.S. operations, and add new models to match the depth of BMW and Mercedes offerings. Winterkorn also must make sure that the models coming off the production line make a quantum leap in long-term reliability. Like its German rivals, Audi's cars have been plagued since the late 1990s with electronic glitches as auto makers stuffed more and more microchips into their vehicles. Now, Audi and its rivals are staffing up with electronics experts and redoubling efforts to eradicate software snafus before cars arrive in showrooms. Reliability "has been our Achilles' heel," says Marc Trahan, Audi of America's quality director.<br>Audi also has a long way to go to match the revenue and profit horsepower of Mercedes and BMW. Last year, Audi clocked sales of 779,000 cars, but Mercedes and BMW sold more than 1.2 million each. By revenues, Audi is still only 55% the size of BMW and 48% that of Mercedes-Benz. Audi's profits are a fraction of its rivals' income, too, since it has fewer expensive models on the market.<br>Winterkorn's challenge is to pump Audi's profits into a steady pipeline of new hits, just as BMW did over the past six years. After adding two sport-utility vehicles, the 6 Series coupe, the inimitable Mini, and the 1 Series compact, BMW took off. To replicate his competitor's success, Winterkorn aims to spend some $15 billion over the next four years, 80% of it on new products.<br>The son of Hungarian emigrants who moved to Germany in 1945, Winterkorn admits his weakness is impatience. To get workers charged up, he exhorts his troops to act like entrepreneurs, take risks, and own up to failure quickly. "What he hates is when people cover up mistakes or problems, or shift the blame to someone else," says one manager. The trim and demanding "big boss," as Audi workers refer to Winterkorn, prowls the production line and software labs and pokes into every corner of the business, seeking intelligence from line workers and technicians. A favorite Winterkorn saying: "Don't bore me with the good news. Give me the worst."<br>MUSCLE CAR<br>In Winterkorn's race to bulk up Audi's size, 2005 is a crucial year. The new models launched in 2004 in Europe have already given Audi momentum with one of the newest fleets on the market, including the elegant new A6 sedan, the redesigned A4 sedan, and the A3 hatchback. One of the most keenly awaited products is the Q7 SUV, costing roughly $40,000 and competing with Mercedes' M Class and BMW's X5. The Q7 will be unveiled in September and hit European showrooms in early 2006, followed by a baby SUV, the Q5, one year later. Under wraps is a high-performance sports car in the $100,000 to $200,000 range, dubbed the Le Mans, which is expected to upstage BMW and Mercedes with a 610 horsepower engine that can accelerate from 0 to 100 kph in just 3.7 seconds. Based on Audi's R8 racing car, a three-time winner of the Le Mans 24-hour race, it is expected to hit the market after 2007. "It would show that anything BMW and Mercedes can do, Audi can do better," says Garel Rhys, professor of automotive economics at Cardiff Business School in Wales.<br>Read the rest in the link:<p> <A HREF="http://www.businessweek.com/magazine/content/05_11/b3924003.htm?campaign_id=rss_magzn" TARGET="_blank">http://www.businessweek.com/ma...magzn</A>