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Audi's Turnaround (Article from Automotive Industries)
Here is a column written by Ken Gross in the December '96 Issue of
Automotive Industries, a US automotive trade magazine.
by Ken Gross
IF YOUR SALES DROPPED 80% IN SIX YEARS, WOULD YOU STAND AND FIGHT -- OR GO
OUT OF BUSINESS? HERE'S WHAT AUDI DID.
It's taken a long time, but Audi has turned the corner. Paced by its hot
new A4 sedan, Audi has finally overcome the disastrous sales effects of
"Unintended Acceleration" debacle. The company eliminated persistent
quality problems and re-named, re-priced and sensibly positioned a fresh
product lineup against BMW and Mercedes-Benz. Clever new ads focus on
Audi's key advantage - the Quattro all-wheel-drive system - and it backs it
all up with the best warranty in the business.
Audi of America president Gerd Klauss, himself a Mercedes-Benz North
American graduate, says that what Audi went through - dropping from a peak
of 74,061 units in 1985 to a low of 12,283 units in 1991 - "was more
insidious than outright failure."
"We had to act boldly," he insists, and after trying to sell on a parity
with Mercedes-Benz and BMW, Klauss convinced management overseas that the
brand simply did not command the cachet of its home rivals. And he
reminded company boss Dr. Ferdinand Piech, "If you lose America, you lose
So Audi has become the "affordable German luxury car." That's more in line
with American market perceptions of the brand and it's a great way to
differentiate the marque from the Japanese competitors.
For year, Audi pussyfooted about its front-wheel-drive versus the
rear-drivers from Munich and Stuttgart. Finally, as Klauss, puts it, "We
grabbed hold of our great differentiator, Quattro." Audi developed a
bare-bones pricing strategy for its unique all-wheel-drive system, a key
factor of which was the elimination of dealer markup on Quattro. Surprise!
The Quattro mix doubled to nearly 50 percent. Audi's timing was
fortuitous: A parade of bad winters saw Americans switching to
sport-utility vehicles (SUV) in droves. But not everyone wants a truck.
Audi offers sedans (and wagons) with snow-going capability - yet another
good reason to buy.
BMW began its present sales uptick with the current 3-series, launched 4
years ago. Audi's A4 is the same type of car: great looks, affordable
sticker, rave reviews. "With this car, we're and in-demand franchise
again," crows Klauss. But he knows more is needed.
Fortunately, Audi's owner loyalty rates are rising, just in time for Phase
2 of the A4 offensive. For 1997, there's a hot little A4 Turbo that
starts at $22,900, nicely equipped. Sporting the brand's highest conquest
rate, Audi expects A4 will attract Honda Accord owners.
Can Audi keep its momentum against stronger, better financed rivals? U.S.
sales will exceed 25,000 units this year, but BMW and Mercedes-Benz are
each flirting with 100,000 units. Naturally, Klauss has another bold plan:
elevate Audi to mainstream luxury status. "If you only play chopsticks," he
says in his colorful style, "you're clustered in mid-keyboard."
Stretching his piano analogy, Klauss thinks Audi should perform "from
chopsticks to Chopin," with prices from the low $20,000s to the
With the A4 Turbos on the lower end. Audi will update its A6 next year
with a 30 valve V6 and fresh styling. It also sells snazzy Cabrio; it will
keep the A6 wagons, and add sport versions. It may sell the bold TT coupe
and roadster by 1999.
Meanwhile, Audi's high-tech A8 sedan underprices BMW, Jag and M-B
competitors. While providing halo over the entire range. Klauss insists
Audi will not enter the SUV fray; smart thinking when half of your units
Audi will up the media weight to improve its visibility, offer competitive
leasing, and they're planning innovative internal programs to upgrade their
260 U.S. dealers. Sure, they're ambitious, but Audi is living proof that no
matter how bad things look, honestly face who you are as a company, you can
turn around your business.
Ken Gross is an automotive writer and marketing consultant located in
'87 5ks 5-speed
'97 A4TQ manual (on it's way!)