The Good and Bad of Audi - Case Study Example

THE GOOD AND BAD OF AUDI Audi AG is a German premium brand automaker and a subsidiary of the German carmaker Volkswagen. The company headquarters are in Ingolstadt, Bavaria, in Germany. Audi is owned 99.5% by the Volkswagen Group. HISTORY The beginning of Audi was in 1899, when the pioneering engineer August Horch set up his own business following his three year occupation as head of Carl Benz auto production in Mannheim, Germany. The first car was produced by 1901. In 1909, August Horch left the company that bore his name, Horch, and set up a new business using the name Audi, which is a Latin translation of the name Horch. It means as much as "listen" in German. August Horch entered his cars in motor sport competitions and won many prizes. To this day Audi's cars are very successful competitors at such events. During World War II Audi supplied the Nazi regime with vehicles and also participated in forced labour. After the end of World War II the company known as Auto Union AG was expropriated: the company's plants were located in Saxony, which had fallen under Soviet Russian regime. The founders then moved to Ingolstadt in Bavaria and formed the Auto Union in 1949, with loans from the Bavarian state government and Marshall Plan aid. In 1958 Daimler-Benz acquired 100% of Auto Union and in 1964 Volkswagen bought the Ingolstadt factory together with the trademark rights of the Auto Union company. Traditionally the company produced front wheel drive cars with two stroke engines. The big breakthrough came when Audi produced the first car with a four stroke engine in 1965. In 1969 Audi Union merged with the world's largest motorcycle producer, NSU - the company was now known as Audi NSU Auto Union AG. Audi emerged as a separate brand. Then Volkswagen introduced Audi 1970 models to the United States. During the 1990s Audi developed from an admired brand to a desired brand. Nowadays Audi is a global developer and producer of high quality cars with production sites in Germany, Hungary, China, Belgium and India. In 2008, Audi sold a total of 1,003,000 cars, setting up a record for the thirteenth consecutive year. Audi currently employs 57,000 people worldwide and annually invests more than 2billion euros to sustain the company's technological lead. This was the status in January 2009. At the same time Audi announced six days of reduced hours for 25,000 Audi employees in Germany in February. PRODUCT AND TECHNOLOGY Audi is a premium member of the Volkswagen Group and it is interesting to note that technologies are first introduced into the mass market in Audi vehicles. Thereafter they conveyed to the more value oriented brands such as Volkswagen, Seat and Skoda. Audi is aware of the fact that consumers do not buy cars for rational reasons. Therefore, Audi moved ahead as a serious competitor in the global luxury segment in the early 1990s and now offers a wide variety of premium vehicles, the most famous of which is the Audi TT, launched in 1999. This car was designed for people with passion. There were other Audi models that appealed to the emotions, like the Audi A8, which was launched in 2003. In 2004 Audi launched the S4 convertible with a soft top and a 4.2 litre V8 engine for outstanding performance. The Audi A6 was also launched in 2004 and was extremely competitive in the executive segment. A more recent technology introduced by Audi is that of the Fuel Stratified Injection (FSI) engines and the quick shifting dual-clutch gearbox (DSG). Currently, Audi is launching the most efficient standard sized sedan, the A4 2.0 TDT e with fuel consumption of 4.6 litres per 100 km and a carbon dioxide exhaust emission of 119 grams per hundred kilometers. This sedan features stop/start technology and a brake recovery energy system and comes with low resistance tires. QUALITY PROBLEMS In 2003 and 2004 the Volkswagen group ordered massive recalls involving various brands. One of these cases was a recall of 850,000 vehicles of VW, Audi, Skoda and Seat with 1.8 litre turbo engines, V5, V6 and V8 engines (models 2001, 2002 and beginning of 2003). The reason for this recall was a faulty ignition coil, which could cause non-performance of one of the cylinders and consequently the drop in engine performance. On another occasion, 300,000 vehicles were recalled in USA after the Volkswagen group discovered faults that could lead to a fuel leakage. The recall related to VW, Audi, Seat and Skoda cars with diesel engines manufactured between March and August 2004. When we read customer reports and reviews on various Audi models, then we come across a chain of rather harsh customer complaints. In addition to the recalls mentioned above there are many quality issues faced by owners of the slightly older vehicles. A popular reference here is the JD Power Customer Service Index which s published at regular intervals. It is here that we can see that Audi has been able to improve its customer satisfaction rating. The JD Power CSI 2009 shows Audi rank 12 and classified "better than most". For mechanical reliability Audi received only a three out of five star rating. For dealer service the rating was also three out of five stars. SPONSORSHIPS AND PROMOTION There are three big Audi sponsorships; Audi Medcup, Audi Sydney Harbour Regatta and the Audi Hamilton Island Race. In addition to the big sponsorship events, Audis are seen in various films. An example is the movie "Iron Man" from 2008, where Tony Stark drives an Audi R8 to the Fireman's benefit dinner. CRISIS AND STABILITY Audi is the premium brand of the Volkswagen Group. The current global financial crisis is also felt here. End of April the company in Ingolstadt reported a 29% drop in operating profit for the first quarter of 2009. This was due to a sales decrease caused mainly by TT sports car and the Q7 sport-utility vehicle. Just previously Volkswagen, Europe's biggest carmaker reported a drop in income of 74% due to an 11% sales decline. ENVIRONMENT For some years now, car manufacturers are urged to reduce carbon dioxide emissions. According to the Kyoto Protocol transport is the worst performing sector and the European Environment Agency suggests that cars are responsible for 14% of the carbon dioxide emissions. In 1994 Germany presented the ambition to reduce the fuel consumption of petrol cars to 5 litres per 100 kilometres and diesel consumption to 4.5 litres. The original target date was 2005 and was since postponed several times and is now 2010. The carbon dioxide emission from a European fleet of cars is limited to 120 grams per kilometre. Some volume manufacturers of smaller cars are already quite close to the target. Smaller volume manufacturers like Mercedes, Saab, Porsche and Audi are a long way from reaching this target. CONCLUSION Audi shows a great measure of stability which may be due to the fact that it is a subsidiary of the Volkswagen Group. At this point it should also be mentioned that the Volkswagen Group's second largest shareholder is Lower Saxony, with two seats on the board and a blocking minority. Audi is a leader in research and development as well as in design. Audi sports cars excellent performers at many events. The bad points about Audi are the fact that there is still quite a long way ahead to satisfy the requirements of the European Commission regarding carbon dioxide emissions. Bad; engines are not economical or do they meet the exhaust emission limits prescribed. Yet as a group there is a chance to meet the limits towards 2012. Regarding customer satisfaction the JD Power CSI has shown constant improvement over the years. BIBLIOGRAPHY Audi.com. (2009). AutoGuide.com. (2009, January 26). bloomberg.com. (2009, April 27). focus.de. (2008, January 08). FT.com. (2009). monstersandcritics.com. (2009, May 06). T&E. (August 2008). Reducing CO2 Emissions from New Cars. Brussels: T&E. Read More