2005 Annual Report

2006 Financial Calendar
Vorsprung durch Technik www.audi.com
2005 Annual Report
Annual Press Conference
February 22, 2006
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China Learning from the Red Giant | Sound design Geoff Martin and perfect
sound | Management The joy of winning | Design Designers’ summit | Motor
racing The man who trumped Jacky Ickx’s record | Travel Audi on the world’s
dream roads | Finance Audi figures at a glance
Annual General Meeting
May 17, 2006
Customer Centre at Audi Forum Ingolstadt
2005 Annual Report
Interim Report
August 1, 2006
Exclusive
Paulo Coelho on the meaning of the journey
Donna Leon and the language of mobility
Audi Group Key Figures
Production
Vehicle sales
10-Year Overview
2005
2004
Change in %
Cars
811,522
784,972
3.4
Engines
1,695,045
1,485,536
14.1
Cars
1996
1998
German Commercial Code
Production
2000 1
1999
2001 1
2002 1
2003 1
2004 1
2005 1
IFRS
Cars
491,501
557,777
619,030
626,059
650,850
727,033
735,913
761,582
784,972
811,522
Engines
620,603
763,928
1,241,351
1,266,896
1,187,666
1,225,448
1,284,488
1,342,883
1,485,536
1,695,045
1,045,114
1,045,114
971,832
7.5
829,109
779,441
6.4
Vehicle sales
Cars
492,046
546,436
599,509
634,973
919,621
991,444
995,531
1,003,791
971,832
Germany
247,125
235,092
5.1
Audi
Cars
492,046
546,436
599,509
634,708
653,404
726,134
742,128
769,893
779,441
829,109
Outside Germany
581,984
544,349
6.9
Germany
Cars
217,858
238,735
244,127
257,686
239,644
254,866
243,650
237,786
235,092
247,125
Audi
Lamborghini
Other Volkswagen Group brands
Employees
Average
1,600
1,592
0.5
Outside Germany
Cars
274,188
307,701
355,382
377,287
413,760
471,268
498,478
532,107
544,349
581,984
214,405
190,799
12.4
Outside Germany
Percent
55.7
56.3
59.3
59.4
63.3
64.9
67.2
69.1
69.8
70.2
Market share, Germany
Percent
6.1
6.8
6.5
6.8
6.9
7.5
7.4
7.4
7.2
7.4
Lamborghini
Cars
–
–
–
265
296
297
424
1,305
1,592
1,600
Other Volkswagen Group brands
Cars
–
–
–
–
265,921
265,013
252,979
232,593
190,799
214,405
52,412
Revenue
EUR million
26,591
Profit before tax
EUR million
1,310
Profit after tax
EUR million
Percent
53,144
24,506
– 1.4
8.5
Employees
1,143 1
14.6
824
871
– 5.4
4.9
4.7
Average
34,529
37,761
41,011
45,800
49,396
51,141
51,198
52,689
53,144
52,412
Revenue
EUR million
9,616
11,458
13,918
15,146
19,952
22,032
22,603
23,406
24,506
26,591
Cost of materials
EUR million
6,365
7,568
9,578
10,155
14,539
15,860
16,726
17,163
17,676
19,139
Personnel costs
EUR million
1,663
1,973
2,111
2,291
2,542
2,660
2,739
2,938
3,072
3,125
Personnel costs per employee
Rate of return before tax
Capital investments
EUR million
Development expenditure
recognised as an intangible asset
Depreciation and amortisation
EUR million
EUR
48,173
52,251
51,485
50,022
51,456
52,018
53,496
55,763
57,798
59,627
Depreciation and amortisation
EUR million
455
556
885
945
1,179
1,412
1,614
1,833
1,852
1,930
Profit before tax
EUR million
441
569
861
839
971
1,286
1,219
1,101
1,143
1,310
EUR million
154
188
237
324
725
747
752
811
871
824
1,708
2,056
– 16.9
Profit after tax
543
652
– 16.7
Share price (year-end price) 2
EUR
48.06
70.81
75.16
61.20
59.59
160.00
191.00
225.00
220.15
308.00
Compensatory payment
EUR
0.46
0.61
0.77
0.77
1.20
1.30
1.30
1.05
1.05
X3
Added value
EUR million
2,157
2,606
3,039
3,198
3,590
3,892
4,000
4,287
4,585
4,801
Capital investments
EUR million
739
1,006
1,620
1,516
2,378
2,084
2,342
2,047
2,056
1,708
Cash flow from
operating activities
EUR million
765
1,020
1,213
1,163
2,058
2,393
2,440
2,786
2,690
3,252
Non-current assets
EUR million
1,978
2,412
3,126
3,679
7,039
7,685
8,308
8,588
8,970
8,597
Current assets
EUR million
2,914
3,182
3,359
3,024
3,219
3,437
4,342
5,475
5,934
7,515
Equity
EUR million
1,014
1,109
1,231
1,441
3,749
4,222
4,761
5,487
5,828
6,104
Liabilities
EUR million
3,878
4,485
5,254
5,262
6,509
6,900
7,889
8,576
9,076
10,008
Balance sheet total
EUR million
4,892
5,594
6,485
6,703
10,258
11,122
12,650
14,063
14,904
16,112
1,930
1,852
4.2
Cash flow from operating
activities
EUR million
3,252
2,690
20.9
Balance sheet total at Dec. 31
EUR million
16,112
14,904 1
8.1
Percent
37.9
39.1 1
Equity ratio at Dec. 31
1
1997
Adjusted in the context of the retrospective application of changes to IAS 19 “Employees Benefits”.
1
2
3
Financial data adjusted in the context of changes to IAS 19 and 38.
Year-end price on Munich Stock Exchange.
In accordance with the resolution to be passed by the Annual General Meeting of Volkswagen AG on May 3, 2006.
Editorial
Dr. rer. pol.
Jochem Heizmann,
Production
Dipl.-Kaufmann
Ralph Weyler,
Marketing and
Sales
Dear Readers,
Dear Shareholders,
Prof. Dr. rer. nat.
Martin Winterkorn,
Chairman of the Board
of Management,
Technical Development
Dipl.-Ing.
Erich Schmitt,
Purchasing
We have decided to adopt a
new approach for Audi’s 2005
Annual Report, and have interpreted “Vorsprung” – the competitive
edge that is the essential ingredient of our brand – in a radically new
way for this, our most important corporate publication. The result is
a professional magazine comprising reportage, articles and interviews that focus on diverse facets of the very topic that concerns us
day in, day out: mobility.
From the notion of stirring design and the particularities of the
burgeoning car market in China to the connection between mobility,
performance and personnel policy. From the challenge of navigating
a taxi through a pulsating metropolis such as Tokyo to the fascination
of being at the wheel of a Lamborghini. The dynamism that our
brand and company demonstrated throughout 2005 is reflected in
the magazine section of our Annual Report.
This time we did not want to be tied down by the introspection
that normally characterises an Annual Report. An external observer
will see the world of premium cars through the eyes of an explorer,
will want to probe hidden details and will discover unusual perspectives. For that reason, many of the articles in this publication have
been penned not by Audi employees, but by renowned authors from
the worlds of journalism and literature. Their ranks include high-
Dipl.-Betriebswirt
Rupert Stadler,
Finance and
Organisation
Dr. Werner Widuckel,
Human Resources
Dr. h.c.
Andreas Schleef,
Chairman of the Board
of Management of
SEAT, S.A.
profile business editors. An eminent authority in the world of motor
journalism. Two writers with a worldwide following. And even a
theologian who evidently has petrol coursing through his veins.
Perhaps our innovative approach will set a new trend. But how
fitting: after all, our sales figures for last year likewise bucked the
trend – and enabled Audi to post a new record for vehicle sales. You
will find further details of this achievement in the second part of this
Annual Report, the financial section, which we have made even
clearer and easier to read this year.
Mobility and dynamism, the leitmotifs of this publication, are
consequently also the hallmark of our accounts. This is something
we can be proud of – and we will do all in our power to make the
most of the competitive edge that they provide.
I hope that you enjoy reading this publication.
Prof. Dr. rer. nat. Martin Winterkorn
1
Audi maintained its successful
course of growth in the 2005 financial year, achieving new record
figures for production, revenue and
unit sales. Within a context of predominantly difficult economic conditions, the Audi Group built on
its comprehensive premium product
range, thus captivating customers
worldwide. The systematic further
development of the Audi brand is
Dr.-Ing. e.h. Bernd Pischetsrieder,
now reflected above all by a
Chairman of the
renewed improvement in the quality
Supervisory Board
of its financial results. The company
owes this success to the dedication of its management, workforce
and the employees’ elected representatives. The Supervisory Board
takes this opportunity to thank and congratulate all concerned.
Throughout the past financial year, the Supervisory Board
considered the development of sales markets and the situation and
business progress of AUDI AG and of its principal subsidiaries at
quarterly meetings and with the aid of detailed written and oral
reports.
Following preparatory consultations, the financial, personnel and
investment plans were approved on December 7, 2005. The Supervisory Board furthermore kept track of the company’s progress
outside the context of its meetings and supported the work of the
company’s management in an advisory capacity. The members of the
Presiding Committee held in-depth consultations before the Supervisory Board meetings.
PwC Deutsche Revision Aktiengesellschaft Wirtschaftsprüfungsgesellschaft was commissioned with the task of auditing the Annual
and Consolidated Financial Statements and the management reports
2
of AUDI AG and the Audi Group and subsequently signed these
off without qualification. The examination conducted by the Audit
Committee and Supervisory Board likewise revealed no cause for
objections, with the result that the Supervisory Board was able to
sign off the Annual and Consolidated Financial Statements at its
meeting on February 17, 2006. The annual accounts are thus established. The Audit Committee met on three occasions in 2005 and
was informed in depth about the Consolidated Financial Statements
for 2004, the risk management measures within the company and
the current situation at the end of 2005. The focus of its attention
was on detailed analyses of the tapping of further markets and
extensive discussions concerning the consequences of rising mineral
oil prices on vehicle sales.
The principal topics of the Supervisory Board’s consultations in
the 2005 financial year were the further development of the Audi
brand group (Audi, SEAT, Lamborghini brands) and detailed discussions of Audi’s market prospects based on the current and future
model range.
Following in-depth discussions at its meeting on December 7,
2005, the Supervisory Board endorsed the remuneration model for
the members of the Board of Management of AUDI AG and agreed
on the content of the annual declaration of compliance pursuant to
Section 161 of German Stock Corporation Law.
There were the following changes to the composition of the
Supervisory Board, Audit Committee and Board of Management in
the past financial year:
Dr. Peter Hartz surrendered office as a member of the Supervisory Board with effect from August 4, 2005. The Supervisory Board
would like to thank Dr. Hartz for almost twelve years of service as a
non-executive director of the company. Upon the application of the
Board of Management, the Registration Court at the local court of
Ingolstadt appointed Dr. Horst Neumann as supplementary member
Report of the Supervisory Board
of the Supervisory Board with effect from December 20, 2005,
pursuant to Section 104 of German Stock Corporation Law.
Dr. Horst Neumann resigned from the Board of Management of
AUDI AG with effect from December 7, 2005 following his appointment to the Board of Management of Volkswagen AG with effect
from December 1, 2005. The Supervisory Board would like to thank
Dr. Neumann for his successful work on the Board of Management
of AUDI AG.
With effect from December 8, 2005, Dr. Werner Widuckel joined
the AUDI AG Board of Management as Dr. Neumann’s successor,
assuming responsibility for the Human Resources Division.
Xaver Meier surrendered his offices as a member of the Supervisory Board and Audit Committee from the close of December 31,
2005 under the pre-retirement part-time arrangements. Mr. Meier
had been a non-executive director for over 17 years, including seven
years as its Deputy Chairman. He was also member and Deputy
Chairman of the Audit Committee for three years. The Supervisory
Board would like to express its sincere thanks and appreciation
to Mr. Meier for his many years of service. Upon the application of
the Board of Management, the Registration Court at the local court
of Ingolstadt appointed Mr. Jörg Schlagbauer as supplementary
member of the Supervisory Board with effect from February 7, 2006
pursuant to Section 104 of German Stock Corporation Law.
The Supervisory Board elected Berthold Huber as Deputy Chairman of the Supervisory Board with effect from January 1, 2006 and
Peter Mosch as new member of the presiding committee and Audit
Committee from the same date. Mr. Mosch assumed the role of
Deputy Chairman of the Audit Committee.
The Supervisory Board attaches particular importance to the
company management’s assessment of the future development of
the Audi Group.
The dwindling momentum of economic growth in the USA and
Asia will mean that there are no additional impulses for an upswing
in the global economy. This is also likely to have an impact on major
car markets. The Board of Management has taken account of the
global macroeconomic conditions, which are also prompting more
intense competition in the car industry, in its corporate strategy.
In order to build on Audi’s track record of success, the management and workforce are therefore working hand in hand on expanding the model range, boosting market shares in existing markets and
tapping new growth markets. 2006 will for example see a great many
new models such as the Audi Q7, the Audi A6 allroad quattro, the
RS 4 Avant and the TT Coupé appear on the market. The model
range will in addition be extended by the sporty derivative models
Audi S3, S6 saloon and S6 Avant, and the S8. The Neckarsulm plant
is preparing for the production start of the thoroughbred midengined sports car, the Audi R8.
The Supervisory Board will continue to support this progress by
doing substantially more than the legally required minimum, thus
contributing towards the further positive development of the Audi
Group.
Ingolstadt, February 17, 2006
Dr.-Ing. e.h. Bernd Pischetsrieder,
Chairman of the Supervisory Board
3
Contents
Editorial
Chairman of the Board
Martin Winterkorn on having the
courage to be unconventional . . . . . . . . . . 1
Report of the Supervisory Board
Bernd Pischetsrieder . . . . . . . . . . . . . . . . . 2
Business
Strategy
Martin Winterkorn discusses records
and rates of return . . . . . . . . . . . . . . . . . . . 6
Markets
How the boom in China has changed
the world . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Erich Schmitt on Audi’s China strategy . .11
8
Technology
News . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Automotive hi-fi
A visit to the inventor of the Advanced
Sound System . . . . . . . . . . . . . . . . . . . . . 14
What Martin Winterkorn and
Torben Ballegaard Sørensen from
Bang & Olufsen have in common . . . . . 19
Navigation
A taxi ride through the megalopolis
Tokyo . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Production
Jochem Heizmann on teamwork and
the “Digital Factory” . . . . . . . . . . . . . . . 26
Society
14
Motivation
Felix Magath, Horst Neumann and
Felix von Cube discuss the principles
of management . . . . . . . . . . . . . . . . . . . . 27
News . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Research
Nobel Prize winner Theodor W. Hänsch
ponders the future of Germany as
an industrial location . . . . . . . . . . . . . . . 32
Sports
News . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Le Mans
Why Tom Kristensen likes the number
seven so much . . . . . . . . . . . . . . . . . . . . 38
World premiere
A diesel for Le Mans . . . . . . . . . . . . . . . 45
4
38
Partnerships
On a business trip in the A8 with
adidas boss Herbert Hainer . . . . . . . . . . 46
Ralph Weyler on premium quality
and premium brands . . . . . . . . . . . . . . . 49
SEAT
First among equals: what motorsport
and customer proximity have in
common . . . . . . . . . . . . . . . . . . . . . . . . . 50
Andreas Schleef on the Spanish work
climate and life in Catalonia . . . . . . . . . 52
An exceptional sportsman
German “Wunderkind” Dirk Nowitzki
and the Audi Q7 . . . . . . . . . . . . . . . . . . . 54
Design
72
News . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Style icons
Walter de’Silva and Richard Sapper on
design as an aid to orientation . . . . . . . . 60
Lifestyle articles
Pia von Braun and Audi’s new formal
idiom . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Culture
88
© Regine Mosimann, Diogenes Verlag AG
Donna Leon
She has been a resident of Venice for several decades, a magical city
where cars have no place. Yet mobility, particularly of the intellectual kind,
plays a major role in Donna Leon’s life. Through Commissario Brunetti,
the protagonist of her detective novels, she has captivated readers
worldwide and inspired even more people to visit “La Serenissima”. Here,
the American author describes her partiality for agile, lively language.
News . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Guest authors
Contributors to this Annual Report . . . . 70
Travel
Audi on the world’s dream roads . . . . . 72
Carla Vallet . . . . . . . . . . . . . . . . . . . . . 84
Lamborghini
A manifesto for high-speed mobility
in 8000 revs . . . . . . . . . . . . . . . . . . . . . . 85
Literature
Donna Leon and the language of
mobility . . . . . . . . . . . . . . . . . . . . . . . . . 88
Paulo Coelho on the meaning of
the journey . . . . . . . . . . . . . . . . . . . . . . . 91
Finance
91
News . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Growth
Rupert Stadler argues the case for
healthy impatience . . . . . . . . . . . . . . . . . 96
IFRS
Prof. Küting on new challenges of
financial communication . . . . . . . . . . . . 99
Audi Group
Finances 2005 . . . . . . . . . . . . . . . . . 101
Paulo Coelho
He is considered the grand master of philanthropic, true-to-life literature.
Millions of people admire him for his engaging style and clear message.
Here Paulo Coehlo, driver of an Audi allroad quattro, muses on the
meaning of mobility in his typical, image-laden style.
5
“Our sensational run of new
models is set to continue for quite
some time.”
Prof. Dr. Martin Winterkorn, Chairman of the Board of Management of AUDI AG since March 1, 2002,
can look back on an extremely successful 2005. But he wants even more: the long-term goal is for Audi to
become the world’s leading premium brand.
6
Business
Dr. Winterkorn, is Audi making good progress?
Not just good progress – Audi is advancing at top speed!
How is that reflected in the figures?
In 2005, we posted record sales in 39 markets and bettered our
overall sales record for the tenth year in succession. In total, we
sold more than 829,000 Audi vehicles worldwide last year. That’s a
year-on-year increase of 6.4 percent. Our market share in Germany
grew by 0.2 percentage points to 7.4 percent. And we will continue
to grow. We are aiming to break through the magic barrier of one
million units as early as the end of 2008.
Where are the markets of the future?
China remains a huge growth market. Audi is already leading the
premium segment there, but we want to build considerably on that
lead. We have already paved the way by establishing a new sales
structure. There is still scope for improving our brand’s position in
the USA. And markets such as South Korea, Indonesia and India will
become much more important in the future.
So in international terms, Audi still has ample potential. Is it realistic
for you to aspire to overtake your key competitors?
Of course it’s an ambitious target. But I think it is entirely realistic to believe that we can become the world’s leading premium
brand within the next ten years. We have already achieved that on
several markets. And the quality and appeal of our vehicles already
serve as a benchmark.
Do customers view the Audi brand in an equally positive light?
We have achieved top image ratings in many customer surveys.
And in some of the key surveys conducted by specialist publications
last year we were actually the winner by quite some margin. Then
there are the important prizes, awards and test triumphs that our
vehicles have scooped.
Most people associate particular features with a brand. Do most
people associate Audi first and foremost with four-wheel drive?
Undoubtedly. quattro has been an important expression of Audi’s
image for more than 25 years, and will remain so. We made the most
of its 25th anniversary. In February 2005, we erected a ski jump and
ice rink on the Piazza outside our head office in Ingolstadt. But the
highlight was the new RS 4’s* spectacular ascent of a very steep ski
jump from the ice below. The successful quattro rally models from
the 1980s and their renowned drivers proved a real crowd-puller.
The RS 4 was not the only new model making its debut in 2005.
Our sensational run of new models is set to continue for quite
some time. We will be bringing six additional new models onto the
market over the next three years. The main event of 2005 was the
world debut of the Audi Q7 at the Frankfurt Motor Show – visitors
were enthralled by our high-performance SUV. It had already
scooped the Golden Steering Wheel and the Auto Trophy 2005
before it had even set foot on the roads. And the large number of
advance orders backs up its positive reception. From talking to many
customers, I have really come to appreciate just how important the
latest quattro generation with its 40:60 power distribution will be:
driving safety is maintained, but dynamism is given a real boost.
* fuel consumption figures at the end of the Annual Report
Which engines will feature in the Audi Q7?
At market launch, we will be offering a 3.0-litre TDI* with a particulate filter as standard and a 4.2-litre V8 FSI* with modern petrol
direct injection. Other attractive engine versions will follow, including a hybrid drive. The Audi Q7 hybrid, which we exhibited as a
study vehicle at Frankfurt, combines an FSI direct injection engine
with an electric motor.
Were there other highlights at motor shows?
The new A4 Cabriolet likewise made a big impact at its world
debut at the Frankfurt Motor Show. Our customers particularly
appreciate the fact that we have not jumped on the bandwagon of
metal-panelled tops and have opted instead to combine classic
design with progressive concepts in our acoustic soft top. Other
highlights were the unveiling of the Shooting Brake Concept and the
Audi S8* at the Tokyo Motor Show in October 2005, and of the S6*
and the Roadjet Concept study at the Detroit Motor Show at the start
of this year.
And what other new models await us this year?
The new Audi A6 allroad quattro comes in response to requests
from many customers for an even more dynamic successor model.
The RS 4 Avant* and Cabriolet* will appeal in particular to sporty
drivers. The same applies to the Coupé and the Roadster versions of
the new TT, which many Audi fans have been eagerly awaiting. The
new S3, too, will undoubtedly prove a big hit. And a spectacular
event at the end of the year will be the world debut of the R8 sports
car, an occasion that I am especially looking forward to.
Audi’s production models incorporate a wealth of expertise gleaned
from motor racing. You were quite successful in that domain in
2005 …
You can say that again! Tom Kristensen won the Le Mans 24
Hours for the seventh time, thus beating the long-standing record of
Jacky Ickx. Together with JJ Lehto and Marco Werner, Kristensen
scooped Audi’s fifth victory in the Audi R8. That’s an achievement
that you really can’t predict. This year, we will be participating with
a revolutionary vehicle concept: the R10 will feature a 12-cylinder
diesel race engine developing over 650 bhp and around 1,100 Nm.
Something quite unprecedented in the entire history of Le Mans.
With fuel prices on an upward spiral and ever more stringent emissions standards being introduced, the topic of sustainable mobility is
becoming increasingly important. What is Audi doing to merit the
tag “premium” in the field of environmental protection?
Whether hybrid technology proves a market success will ultimately depend on the consumer. We have already substantially cut
fuel consumption and emissions with our technical innovations. The
improved efficiency of diesel and petrol engines thanks to direct
injection is just one example. TDI technology demonstrates that
environmental compatibility and commercial success can enter into
a successful alliance. And our new TFSI engines demonstrate that
there is no inherent contradiction between sportiness and environmental awareness. We are also conducting intensive research into
environmentally compatible fuels and alternative drive concepts.
| The interview was conducted by Iwan Zinn
7
Business
Cracking
the
China Code
8
Epoch-making changes have one disagreeable attribute: their radical
nature is not immediately perceived as such. While Germany still wallows in
nostalgia for the good old days, China is tackling head-on the challenges
presented by globalisation.
In addition to being a production base that keeps the Western world
supplied with shoes, shirts, mobile phones, notebooks and even container ships, China is more: it is the most important growth market
in the global economy, offering the most favourable blend of size,
quality and price.
China’s influence on global change goes deeper than many
people think. The Chinese are well on their way to beating us at our
own game. This is a highly surprising turn of events at the start of the
21st century – and one that presents us with a huge dilemma.
Because the steady and unrelenting shift in the global economy’s
focus to Asia, with China as its epicentre, means that China believes
it is increasingly entitled to make its voice heard when the rules of
the global economy and international politics are being debated.
The changes are enormous: at no other time in history has more
money been pumped so rapidly by the First World into developing
and threshold countries than as a result of foreign investment in
China. Industrial nations have invested 530 billion US dollars in
China, excluding Taiwan and Hong Kong, since it opened its markets; the figure for 2004 alone was 60 billion US dollars. What is
more, the country earns revenue from every product that is “Made in
China”. In 2004, exports amounted to almost 600 billion US dollars,
up 35 percent on the previous year. Although the economic boom in
China is not evenly distributed, “even the income of the poorest
has quadrupled over the past twenty years,” remarks World Bank
chief economist François Bourguignon. The country now has an
average per capita income of more than one thousand US dollars a
9
Business
Cars instead of rickshaws
China’s roadscape, once dominated by bicycles and
rickshaws, has been transformed: especially in the
major cities Beijing, Shanghai and Guangzhou, cars
increasingly dominate the scene. Annual car sales rose
from around 440,000 to 3.3 million in the period from
1996 to 2005 alone. Although the growth rate eased
off after the government imposed credit restrictions in
2004, the trend is now once again upwards.
There are over 50 brands endeavouring to woo
potential customers in China. Local, Japanese, Korean,
American and European car companies have built up
considerable production capacity there in recent years.
The battle for market shares is tough, especially since
many dealers and customers expect high discounts.
Yet the experts believe that premium brands such as
Audi enjoy outstanding long-term prospects in China:
perhaps rather unexpectedly, Chinese consumers are
less interested in budget-price cars than in midsize
and premium-class products. The archetypal Chinese
car buyer is a first-time buyer who is more often than
not making one of the biggest purchases of their life.
They regard comfort, status and safety as more important than the price. However, the experts have exposed
the much-publicised claim that there are 1.3 billion
potential car buyers in China as a complete myth: even
by 2010, only around 170 million Chinese are likely to
be earning enough money to be able to afford a
new car.
10
The Chinese are
well on their way
to beating us
at our own game.
year. As recently as 25 years
ago, famines were not uncommon; now they have been all
but eradicated. One of the few areas of unanimity among winners of
the Nobel Prize for Economics – a species not noted for consensus –
is that China’s emergence will result in a fairer distribution of the
world’s wealth over the coming fifty years. Even Joseph Stiglitz is
convinced: “Though China will not maintain quite the rate of growth
that it has enjoyed over the past 25 years, the disparity between
China, the EU and the USA will be largely ironed out.”
How has China achieved this? The Chinese are not simply following in the footsteps of the West and modernising in order to make up
ground. Rather, China’s political leaders have succeeded in guiding
China along its own stable path of development: the country is
using capitalism adeptly for its own ends, leaving traditional Western
capitalism in the starting blocks. China is able to do so because it
has identified a functioning business model: it is selling market
share in return for the transfer of technology and expertise. Its quasimonopoly as a growth market permits China to dictate the terms
on which foreign enterprises are allowed into the country.
Beijing’s economic planners
have found a system that could
China is using
be described as a “concubine
capitalism
economy”: competing foreign
adeptly for its
own ends.
companies, predominantly from
the West and Japan, are
obliged to set up joint ventures with a Chinese parent company. They
then have to seek the favour of the parent company, like concubines
seeking the favour of an emperor. This system is commonplace in
many sectors of global economic significance, such as the car, steel
and chemical industries. It is a game that the Chinese cannot fail to
win; the foreign partners, on the other hand, will always have to be
content with the role of runners-up. The concubines at an imperial
court at least had the chance of becoming dowager empress if they
succeeded in bearing the emperor a child.
Meanwhile, we are still failing to grasp the fact that all this is
actually happening. Because according to our established view of
the world, China’s combination of a population of over one billion,
along with corruption, dictatorship and capitalism, ought to be a
powder-keg that a single spark could ignite. The world has been
awaiting the collapse of the Red Giant for 25 years. Yet the opposite
has happened. China is becoming more and more stable, and prosperity is growing. It is time we adjusted to the fact that macroeconomic stability and social chaos, boom and corruption, dictatorship
and liberty will continue to coexist in China in the longer term. The
country is unlikely to trip up over its own feet.
The global risk society is confronting Germany with new
challenges. There will be no simple solutions. Nevertheless, we need
not merely witness this global upheaval as passive bystanders. As the
contours of new developments take shape, new opportunities simultaneously emerge. Germany is in fact particularly well placed to
become one of the first nations to identify new opportunities. No
other Western nation feels the impact of global change sooner.
As almost one-quarter of jobs in Germany and one-third of gross
domestic product depend on exports, the impact on Germany of
international power shifts is particularly marked. As well as its
material sensitivity, Germany exhibits intellectual sensitivity. More
than any other country, Germany’s sense of national identity stems
from its economic role as the
world’s top export nation
Market share
rather than from its culture or
in return for the
history. This is something Gertransfer of
many can turn to its advantage.
technology and
Germany has already been able
expertise.
to adjust to European unity more swiftly than nation-states with
stronger traditions. Why should we not be able to match this
achievement with regard to global integration? | Frank Sieren
Whoever is “ahead” in China
will also be ahead worldwide.
It was in these terms that Erich
Schmitt, AUDI AG Board Member for
Purchasing and, for many years,
responsible for Audi’s activities in
China, described Chinese customs
and the challenge of growing in a
country of such contrasts.
There is no stopping China’s ascent
to the pinnacle of the global economy, as Frank Sieren compellingly
outlines in an article supported by
numerous facts and figures. It is
foreseeable that China’s influence
on the world will be substantial.
Audi recognised this trend at the
time when the politics of reform was
still cutting its teeth in China, and
capitalised at an early stage on
the opportunities that the Chinese
market offers the car industry.
Our presence in China dates back
to 1988, since when we have been
the undisputed Number 1 in China’s
premium market. Today, Audi is
perceived by Chinese luxury-class
customers as both a burgeoning
national premium brand – since
products are manufactured locally –
and an established international
one. We are manufacturing ultramodern products in China – at a
much faster pace than we could have
anticipated when we first embarked
on the venture. In contrast to
Germany during its own economic
miracle, the phases of development
in China are coming in much more
rapid succession – thus supplying
yet further evidence of the country’s
incredible dynamism.
This vast potential nevertheless
goes hand in hand with major
challenges: the Chinese market is a
market that operates according to
its own rules. Not only do products
need to be tailored to the specific
requirements of Chinese customers;
interpersonal dealings necessitate
intercultural sensitivity in view of
the distinctive, deeply rooted business approach of the Chinese.
Audi’s long-standing local knowledge and successful association
with its Chinese partners again give
it a certain edge thanks to its profound knowledge of local factors.
Yet it is difficult to speak of
China as if it were a uniform entity.
There are many different “Chinas”,
with contrasts that could not be
more glaring: the Communist Party
and the MTV generation, the rigid
control of central government and
economic liberalism, clay huts and
skyscrapers. In no other country in
the world do past and future, tradition and modernity lie so closely
cheek by jowl.
Consequently, our activities in
China enable us to tap into a highly
heterogeneous market that almost
has the proportions of an entire
continent.
Facing up to the challenges of
the global market in general, and
the Chinese market in particular, will
ultimately safeguard our competitiveness and therefore also protect
jobs back home. Our current activities in China will thus have a lasting
impact on other markets all over
the world.
11
news
Remake of the Audi
ski jump commercial
An 80 percent incline, temperatures well below zero.
Somewhere in northern Finland, an Audi stands on the
base of a ski jump. Facing uphill, ready for a very
special kind of challenge. This would not be the first
time an Audi had conquered the ski jump. 20 years
ago, an Audi 100 CS achieved precisely that – climbing
the slope with the power of its four wheels alone. Now,
to mark “25 years of quattro”, it was time to shoot a
sequel to the legendary ski jump commercial. The car
in the starring role this time: the Audi A6 4.2 quattro*.
And for the second time, quattro drive succeeded in
conquering the ski jump. The A6 drove effortlessly up
the 80 percent gradient at about 60 kilometres an hour.
After just nine seconds, it had reached the ski jump’s
starting platform, coming to rest 47 metres above the
frozen forest ground. The A6’s ascent was observed
from a helicopter, serving as a vantage point from
which the remarkable feat was captured on film. The
spectacular results were broadcast from March 2005 in
the “25 years of quattro” TV commercial.
Duel on ice
Man versus machine, two muscular legs versus four
driven wheels. A rather unusual duel took place on the
skating rink in Berlin-Hohenschönhausen in March
2005: Olympic champion ice speed skater Claudia
Pechstein accepted the challenge to race against an
Audi RS 4* driven by DTM driver Frank Stippler. The 33year-old skater accomplished the 900-metre course in
an impressive time of 1:15:81 minutes. But with only
the blades of her skates to grip the ice, she stood little
chance against the 420 bhp (309 kW) horsepower of the
Audi RS 4. Stippler swooped confidently round the icy
bends, crossing the finishing line after only 1:13:67.
Gathering of experts
Football matches are traditionally analysed by self-styled
experts in pubs up and down the country. Latterly, the
Audi Forums in Ingolstadt and Neckarsulm have been
playing host to professional pundits by doubling up as
the studio for “Doppelpass”, the football programme
on the German channel “DSF”. During the Bundesliga
season, leading football experts such as Udo Lattek and
Felix Magath appear on the Sunday talk show hosted
by Jörg Wontorra to review the weekend’s games.
12
Winter wonderland in Ingolstadt, DTM in Neckarsulm
The Piazza of the Audi Forum in Ingolstadt: normally a
recreational area for the many thousands of visitors
and customers collecting their new car. But as soon
as the temperatures head towards zero, the Piazza
is transformed into a fairytale winter wonderland.
Where better to celebrate “25 years of quattro” than
on ice and snow? The Audi employees congregated at
this icy setting in February 2005 for their very own
workers’ day. For fans of drifts and lateral acceleration,
racing driver Emanuele Pirro demonstrated spectacular manoeuvres in an Audi RS 4* on a vast ice rink,
before visitors were given the opportunity to try out
their ice skates. For those preferring grass pitches to
slippery ice, FC Bayern Munich footballers Sammy
Kuffour, Roque Santa Cruz and Vahid Hashemian were
there to sign autographs. Technology enthusiasts were
able to take a closer look at an Audi A4 cut open
lengthwise and an aluminium space frame, as well as
the Audi brand group’s current model range.
A day’s celebrations for Audi employees at Neckarsulm followed in autumn 2005: the site of the Audi
Forum in Neckarsulm was transformed into a racetrack
on which Audi DTM drivers demonstrated overtaking
* fuel consumption figures at the end of the Annual Report
manoeuvres and pit stops with wheel changes in
racing cars developing more than 460 bhp.
As well as the roar of engines, gentler tones filled
the airwaves, too. Xavier Naidoo captivated the 40,000
visitors to the workers’ day with a one and a half hour
long concert of expressive German soul.
13
He is known as “The Ear”, the master of perfect sound. At first he was only mildly
enthusiastic about the task of creating a car hi-fi system – until he got to know the Audi A8.
A visit to see Geoff Martin, one of the fathers of the Advanced Sound System.
Geoff
14
Technology
When Geoff Martin looks out of the window, he sees lush green
meadows, grazing sheep and the cobalt blue Limfjord nearby. The
Canadian is a sound engineer at the Danish hi-fi specialist Bang &
Olufsen, whose name enjoys an excellent reputation worldwide. Yet
there is little evidence of the big wide world in this modest little
town. Here in Struer, a community of some 11,000 inhabitants “in
the middle of nowhere”, or in north-west Jutland to be more precise,
Bang & Olufsen ticks along to a harmonious rhythm, without the
slightest hint of ear-splitting beats: this is not how pulsating life
looks. And yet – this is where the most advanced high-end systems
in the world are created, including the Advanced Sound System for
the Audi A8.
We have come in search of the man whose acoustic signature
is on the 1,100-watt acoustic marvel in the Ingolstadt carmaker’s
in Ideas Land
15
flagship model. His astonishing ear for acoustics earned him the
privilege of “spending three months living in the A8,” as he puts
it. He has a doctorate in sound engineering and is therefore a
musician, studio technician and programmer rolled into one. He
completed his undergraduate pipe organ degree, including choral
conducting and ear training, at the Memorial University of Newfoundland.
mare. The car body acts as one huge, dull acoustic object, and the
driver and front passenger are always seated too close to one of the
speakers for the sound pattern to be symmetrical. But the biggest
problem is the constantly changing driving noise that is superimposed on the music.” The ambitious challenge facing the premium
system from Bang & Olufsen was to make it possible to experience
perfect sound in this acoustically hostile environment.
Geoff Martin in the sound workshop. In the background:
The exclusive Danish brand boasts decades of experience in the use
Bang & Olufsen’s top speakers, on whose technology Audi’s Advanced Sound
of aluminium. The speaker covers for the A8 are finished to a precision of
System is modelled.
hundredths of a millimetre.
The teams at Bang & Olufsen and Audi already had three years’
The sign on the frosted glass door in the unassuming red brick
development work behind them when Martin came on board.
building, tucked away behind the glazed facades of the main buildThe system’s technology was mature and it had already been tried
ing, says “Ideas Land”. Here, at Bang & Olufsen’s powerhouse of
out in the first few vehicles. Martin was to take care of the fineideas, is where we have arranged to meet Martin. It is in the oldest
tuning. At first he worked exclusively with Bang & Olufsen’s
part of the plant that the visions of the future take shape; this is
acoustics engineers; communication with colleagues in Ingolstadt
where the company’s designers and creative specialists are at work.
was done by phone and computer. After a few weeks, Martin packed
Martin awaits us with a roguish smile. The man is wearing a knithis suitcase and flew to Germany. He wanted to speed up the
ted sweater, jeans and designer glasses. “How the devil did you find
exchange with his counterparts at Audi. And he wanted to experime?” he grins, alluding to the remoteness of Bang & Olufsen’s main
ence the product at closer quarters.
base. The Canadian knows how to keep an audience. Unworldly is
The Canadian clocked up
the last word you would use to
countless laps at the AUDI AG
describe him, and yet he lives in
“I’d always regarded a car radio as
proving ground. And even more
his very own acoustic world. He
the epitome of poor sound.”
kilometres on the autobahn durseems to treat certain facts that
ing the three months he spent in Bavaria. He was often accompanied
ought to be downright obvious as rather tangential. When asked how
on these trips by his counterpart at Audi, sound engineer Wolfram
old he is, he counters with a question of his own: “What year is it?”
Jähn. Martin explains: “First of all we had to eliminate all sources of
We reply: “To the best of our knowledge, 2005 …” Martin: “2005?
noise interference. Wolfram has an amazing sense of hearing, noth(Pause.) OK, then I must be 36.”
ing escapes him. We completed an untold number of trips together,
Geoff Martin is an expert in flawless studio sound. When Bang &
listening closely while accelerating, braking or driving over different
Olufsen recruited him for the Audi A8 project, he had quite a few
types of surface. Whenever we detected noise disturbance, we took
reservations. “People who’ve worked in studio technology tend to be
the car to pieces and rectified every part that was causing unquite snobbish,” explains Martin. “I didn’t have high expectations of
desirable vibration.”
the sound in a car. To be honest, I’d always regarded a car radio as
The things that Martin and Jähn deemed “a disturbance” are
the epitome of poor sound.” Peter Blum, Head of the Advanced
virtually imperceptible to the ordinary ear. One day, when working
Sound System project at AUDI AG, understands why he had such
indoors, they scoured every millimetre of the A8’s interior in search
reservations: “The acoustic conditions in a car are actually a night16
Technology
of a rattling noise that they were detecting when the system was
reproducing particularly high notes. The source actually lay outside
the car: both men had picked up the trembling of a light bulb on the
ceiling of the room they were working in, through the car’s closed
doors.
Acoustic “cleansing” of the car was the first step. But their real
work began once there was no longer anything to distract them from
A technician fits the covers for the door speakers.
The perforated aluminium shells are then tinted to match the
interior colour.
the system’s sound. Together, the engineers had to define what
“advanced sound” actually means: probably the biggest challenge
that the team faced. “At first, the live experience was my ideal,”
comments Martin. The Ingolstadt-based team of Blum and Jähn,
on the other hand, had clear notions of what qualified as the sound
of an Audi model, and what did not. “Particularly at the beginning,
our different ideas clashed. Sound is something utterly subjective.
Everyone experiences a piece of music differently and concentrates
on different aspects. What’s more, our response to sound is very
emotional,” adds Martin.
And perfect sound – what
does that sound like? Back in
“Our response
Ingolstadt, Jähn described to us
to sound is very
how he listened out for the
emotional.”
naturalness of notes. He goes
into raptures about the “transparency” of the system’s sound: “The
Bang & Olufsen system enables you to hear the wood of a percussion
instrument. With guitar music, I hear the twang of the strings and the
contact of the fingers before they are plucked. That opens up
entirely new dimensions!”
In the frenzied final phase, Jähn set out on test drives all over
Germany, complete with his private CD collection in tow. “Those
trips were incredibly exciting. The Advanced Sound System is a true
mentor, it trains the ear. You suddenly discover pieces that you
thought you knew by heart in an entirely new light.”
17
The Advanced Sound System of
the Audi A8 at a glance:
Martin the studio professional was able to contribute his appreciation of acoustic three-dimensionality, the precise positioning of
the instruments and singers in the room. “Perfect sound: for me,
that means getting as close as possible to the live experience. At a
classical music concert, I have to be able to picture the orchestra in
front of me, with my eyes closed. The stage has to be acoustically
right in front of me, with all the instruments arranged in order.”
•
•
•
•
Summit talks at Audi: Martin Winterkorn (left) and Torben Ballegaard
• Two acoustic lens tweeters which are automatically extended from the instrument panel
when the system is activated
Sørensen (2nd from right) discuss the final details of the Advanced Sound
System with technical and marketing experts.
It had hitherto been technically impossible to realise the sheer
acoustic power of a studio recording in a car until the combination
of DSP (digital signal processing), ICE Power, a new type of
amplifier technology, and the acoustic lenses from Bang & Olufsen’s
BeoLab 5 speakers came along.
“Perfect sound: for “A car hi-fi system was virgin
territory for both Bang & Olufsen
me, that means
and myself as a studio engineer.
getting as close
as possible to the Perhaps that is why the system
turned out to be so innovative.
live experience.”
Throughout the entire process I
sought above all to raise expectations of an in-car sound system and
push up the benchmark. For me, that benchmark was ultimately
not the music system of another car, but the best sound that
Bang & Olufsen has ever produced in the sphere of home entertainment.” The results are certainly there for all to hear! | Eric Felber
18
14 speakers
Speaker grilles in anodised aluminium
1,100 watts output
Two amplifiers: one classic linear amplifier and
one switching amplifier (ICE Power)
• Digital Sound Processor (DSP)
• Surround sound reproduction
What is ICE Power?
ICE Power combines the advantages of the classic
linear amplifier with the benefits of the switching
amplifier. For instance, a linear amplifier with an
acoustic output of about 250 watts generates around
500 watts of heat in the form of power dissipation.
This high power dissipation is a problem in a vehicle,
because this is power that first has to be produced
by the alternator and then cancelled out again by the
air conditioning system. If a switching amplifier is
added to the system, the power dissipation is
reduced to 50 watts.
What is a lens tweeter?
The acoustic lens tweeters combine the freedom
from tonal discoloration of tweeters with the
pulsed reproduction of horn speakers. The way the
sound is guided by the lens is also very important.
This prevents the reflections that used to occur, thus
guaranteeing a new quality of spatial reproduction.
Technology
Two men in tune with each other: Martin Winterkorn, Chairman of the
Board of Management of AUDI AG, and Torben Ballegaard Sørensen, President
and CEO of Bang & Olufsen a/s, are on the same wavelength. Not just as
a result of their partnership for the Advanced Sound System in the Audi A8.
What can have inspired each of them to sing the praises of the other
so highly? Sørensen says of Winterkorn: “He is a very straightforward
person. That, combined with his considerable expertise, makes him a
person who keeps a project moving forward and transforms visions
into reality.” And Winterkorn says of Sørensen: “I was profoundly impressed by his views of innovative technology, excellence in design and
superlative quality, and how he implements them within his company.”
“I have already spent hours at the aluminium workshop in Struer.
It’s utterly fascinating what they achieve there,” enthuses Winterkorn. An engineer by background, he studied metallurgy, so metallography is something of a hobby-horse to him. Sørensen has fond
recollections of meetings that were moved into the production shop
following the brief preliminaries: “Winterkorn is just like me, he is
passionate about his field. He would look over our employees’ shoul-
Two men on the same wavelength
ders while they worked, and have every step explained to him in
The brands Bang & Olufsen and Audi have much in common,
detail. We then jointly decided on the surface structure and colour of
too. This is illustrated by the way the Advanced Sound System came
the speaker covers there and then, at the plant.”
about. Without any prior arrangement the Danes started work on
The acoustic acceptance process for the sound system was a simirealising the crystal-clear sound of a Bang & Olufsen home system in
lar affair. “I took a seat in the A8 and could have believed I was in a
a car. They installed the prototype of such a system in an Audi A8
concert hall,” remarks Winterkorn. “Mr. Sørensen and I chose a few
and then presented the results to Winterkorn in Ingolstadt. But why
pieces of music, then listened to
choose Audi? “Our designers
them together in the A8. There
were adamant about that,” ex“The prototype – pure emotion even
was some Santana, and a few
plains Sørensen. “They chose
in its first unfinished version.”
classical pieces. But the one that
this brand to demonstrate their
really stood out for me was a fantastic live recording of ‘Hotel Calidevelopment because of their respect for Audi product quality and
fornia’ by The Eagles. The sound quality was phenomenal. When I
design.”
was flying back to Ingolstadt, I knew that I simply had to have a
When the team from Bang & Olufsen presented its results, their
counterparts at Ingolstadt were instantly captivated. “B & O demonBang & Olufsen system at home, too.” Sørensen adds: ”I had a similar
strated to us what was possible – and whetted our appetite for more,”
experience in Kitzbühel. Last winter I took part in an Audi Driving
adds Winterkorn. “The prototype was highly impressive – pure emoExperience, to learn how to drive on snow and ice. It became clear
tion even in its first unfinished version.” The man at the helm of
to me that my next car just had to be an Audi with quattro drive.”
Audi espoused the cause as his personal mission. “The best premium
A harmony that is almost eerie. The two CEOs wonder whether
cars in the world also deserve the best sound system in the world –
this spontaneous affinity between them has its origins in their similar
that was what I wanted to demonstrate.”
experiences as young drivers. As chance would have it, the two men
As well as their philosophy – premium quality and innovation –
once happened to swap notes on their first car radios. Winterkorn
explains: “The radio in my Beetle basically produced nothing more
Bang & Olufsen and Audi also have a core skill in common: both manthan a crackle on VHF, interspersed with the odd note of music. So I
ufacturers are experts in the field of aluminium processing – a subject
usually had to listen to medium wave.” Sørensen adds: “And my 2CV
that is particularly close to Winterkorn’s heart. While Audi focuses
was so noisy that you couldn’t hear the radio at all.” So even unpalaton lightweight construction technology using high-strength alloys,
able experiences can foster fruitful partnerships. | Eric Felber
Bang & Olufsen is above all interested in the metal’s surface finish.
19
Technology
Tokyo by memory
Reportage on how a taxi driver negotiates
the jungle of Tokyo’s road network
Driving a car in Tokyo can soon turn into a nightmare. Even for many taxi drivers, finding their way around a
city where most streets do not display names is no easy matter. Many of them get their passengers to guide them
through the megacity to their destination; others rely entirely on electronic navigation systems. Only few of
them know the city so well that they can set out without a map and on-board computer. Tooru Hakomori is one
of this rare breed.
20
Born in the centre and having grown up on the edge of Tokyo, he has been
driving a taxi for ten years, always for the same company, and has never had
an accident. He chauffeurs sports stars and TV celebrities, passing trade
and regular customers. His order books are full, and his shifts already spoken
for. He took the aptitude test at the start of the 1990s. Traffic code, first aid,
local knowledge. Child’s play, he says. Hakomori has since been the proud
driver of a saloon taxi. The city is his workplace, and preoccupies him night
and day.
The Ginza, Tokyo’s most famous shopping street: abuzz with traffic every
hour of the day or night. The Ginza also means business for Tokyo’s taxi
drivers – anyone who can afford to shop here can also afford to hire a taxi.
21
Technology
Tooru Hakomori knows Tokyo by memory. All of Tokyo. Every
district, every street, every lane. Quite a feat in this metropolis of
30 million inhabitants, where a single district is often bigger than the
whole of Frankfurt and the streets rarely display names. He knows
the big junctions and the narrow rat runs; he knows where and when
the traffic is heaviest, and how best to avoid it. His taxi is yellow, his
suit black, his tie grey-striped. He wears gloves that are so white that
they look as if they are fresh from the cleaners. Hakomori drives in
style. But he is not the only one to do so.
Tokyo’s taxi drivers are the best-dressed in the world. It can be a
complete nightmare out on the multi-level highways and the megacity may be transformed into a perfectly organised chaos at rush-
hour, but the immaculately dressed chauffeurs of the common man
can always be relied on to keep up appearances. They are never to be
seen wearing pullovers and jeans, but are always clad in jacket and
tie. In a society that sets great store by status, every flaw costs
customers. The driver only speaks if he is spoken to, only switches
on the radio if the passenger so wishes, and will put on a film in the
DVD player if requested. But competition is tough, the market tight
and the competition razor-keen. Hakomori looks tired. He must
be on one of those eighteen-hour shifts that are commonplace in his
line of business here. One day on, one day off – every month.
Business is best early in the morning and late at night, when a fare
to Yokohama or Chiba is nothing unusual. That’s when he can clock
Intuitively to your destination
Programming destinations, changing radio stations, phoning – Audi
A6 and A8 drivers can manage
entertainment and information via
a compact control panel on the
centre console. In the guise of the
Multi Media Interface (MMI), Audi
has created an integrated operating concept that makes it easy to
control vehicle and infotainment
components. The MMI consists
of the MMI terminal in the centre
console and the MMI display, a
screen in the instrument panel.
The central element of the terminal
is a combined rotary control/pushbutton with four control buttons
arranged around it. An integral
voice control brings added convenience. “For all the potential
complexity of its functions, our
development priority was ease of
operation,” explains Dr. Werner
Hamberger, developer at Audi. The
driver is consequently in a position
22
to control all functions intuitively –
and can therefore concentrate
on the road. The navigation system
is integrated into the MMI. The
system features dynamic route
guidance and takes account of all
current traffic reports in calculating a route. Navigation DVDs are
available for a great many regions
of the world. Audi presented an
innovative means of navigation at
last year’s Tokyo Motor Show.
Drivers could soon be able to find
their way to their destination via
touch screen. They can activate the
basic architecture of the MMI screen
directly by touching the function
panels in the display. And they will
no longer need to program in
destinations one letter at a time,
because they will simply be able to
write a destination on the monitor
with their finger. Audi’s developers
are facing a veritable challenge
in adapting these systems to the
specific requirements of individual
markets. In the USA, for instance,
it is customary to enter the street
name first rather than the destination town or city. In Japan, the
Latin alphabet cannot be used but
there are simply too many kanji
characters in Japanese for it to be
practicable to incorporate them in
a user-friendly manner. Audi therefore uses a phonetic alphabet of
around 50 characters that is widely
used in Japan. Meanwhile in China,
where the market launch of the
navigation system is scheduled for
the first quarter of 2006, there is no
such alphabet. Someone in Shanghai or Beijing therefore makes an
input using the English phonetic
alphabet that is customary there.
A principle that the Chinese are
already familiar with – for example
when typing on computers or
texting with mobile phones.
A new quarter has been built between Tokyo Bay and the Hama Rikyu Gardens: Shiodome was home to the station on Japan’s oldest railway line, which links
Tokyo and Yokohama, for almost a century. A few years ago, the district was redeveloped as a business quarter. Media companies in particular have now moved
in. Together with the skyscrapers, the rebuilt old station is one of the attractions of Shiodome.
Consisting of several thousand characters, the Japanese and – pictured here – Chinese alphabets pose a particular challenge for the MMI operating system.
23
Technology
up a decent distance and make money. Others know that, too. Each
day, there are sixty thousand taxis on Tokyo’s streets – ten times
more than in Berlin, and five times more than in New York.
High-tech and lace covers
Unlike elsewhere, every taxi here is an immaculate affair with
enough high-tech to run a whole office. The first surprise is the rear
door: it opens even before you can take hold of its chrome handle.
The next surprise is the rear seat: it is decked in finely worked lace
covers reminiscent of your great-grandmother’s sofa. The air carries
a fresh scent of jasmine. The floor mats are softer than a Berber
carpet. The engine growls like a teddy bear.
Once Hakomori has set off in his doll’s house on wheels, he gets
a move on. Clutch, accelerator, first gear. The car pulls away. The
taximeter starts to run. Minimum charge: 660 yen. That includes the
first two kilometres. Second, third, fourth gear. He is faster than
most, and swifter than the rest. The little green lights displaying the
price change rapidly as the fare tots up. All the doors are locked centrally. Tokyo is an expensive place. A watermelon can cost as much
as fifty euros in the major stores’ delicatessen departments, and a
taxi ride through the city twice as much as a gondola trip in Venice.
Hakomori goes with the flow. The wave of traffic is interrupted
by red at every set of traffic lights, and set in motion again by green.
He drives past the museums of Uneo Park and the gardens of the
Imperial Palace at the heart of the city, the huge City Hall in
Shinjuku, the Roppongi skyscraper and Tokyo Tower, the main
points of orientation. We are now reaching the banking quarter of
Marunouchi and the central station, which every day is frequented
by more people than live in the whole of Munich. He passes the
gaudy neon lights of the Ginza shopping district, the old stone
Nihonbashi Bridge and the new Rainbow Bridge, that architectural
marvel that leads to the man-made island of Odaiba.
Top-quality service, but no tipping
It is the location of a Statue of Liberty – a smaller, half-hearted
replica of the real thing. Hakomori describes how he has seen the
original, tall and beautiful. New York impressed him, though not its
taxis. He hailed one of those yellow cabs only to decide after just
three hundred metres that he preferred to go on foot. The driver was
friendly, but they spent the whole time stuck in a traffic jam with the
radio blaring away and the air conditioning off. The leather of the
seats was cracked, and when he came to pay up he waited in vain for
his change. Inconceivable in Tokyo. Tipping is unheard of here.
24
The traffic slows down and finally grinds to a halt. Hakomori sits
bolt upright behind the wheel, accelerates, brakes and manoeuvres
his car with that polite Japanese ruthlessness into every gap that
presents itself. He switches from one lane to the next, turns his car at
right-angles to the traffic flow, weaves into the long chain of lights
formed by the cars and remains constantly on the lookout for a chink
of opportunity to edge his way forward more effectively than the rest
of the pack. Use of the horn is rare, cursing out loud utterly unheard
of. If someone else beeps at him, he does not so much as bat an eyelid and just sits there poker-faced. He turns into a side road.
The traffic is lighter here, the road barely as wide as a farm track.
He proceeds down narrow lanes; once or twice Hakomori has to
manoeuvre to get round the hairpin bends, before getting back onto
the main drag. The door mirrors seem to miss the dark walls and
crooked lampposts by a whisker. There are no kerbs; pavements are
marked out by pale lines. Houses stand barely an arm’s length apart.
The streets have no names. The buildings are numbered. Its principal
landmarks aside, Tokyo is identified only by numbers, not names.
Every attempt at finding your way is something of a guessing game.
Yet Hakomori is well acquainted with the city’s road network.
Even the municipal authorities have a tough time finding their
way around the patchwork quilt of two dozen districts and countless
boroughs. The past hundred years have seen the world’s largest city
spring up across a muddy hotchpotch of paddy fields the size of a
pocket handkerchief. The farmers’ small patches of land were
preserved as their surroundings were developed. Scarcely any old
buildings remain, but the site plans are imbued with the spirit of old
Tokyo. Newly erected buildings are often numbered according to
their date of construction, not their location. Number 59 may be next
to number 13. A baffling system that only few can grasp.
Hakomori switches on the high beams and accelerates. He knows
where he is heading. He does not need any map, atlas, satellite-based
navigation system or traffic management system. He has everything
he needs on board. A city guide as thick as a telephone directory in
the glove box, a folded-up city map on the front passenger’s seat,
and a flat screen the size of a paperback book shimmering next to
the speedometer. Against a green background, a bright red arrow is
edging its way up a bright yellow line. The red marker is the car and
the yellow line the road, he explains. He does not so much as glance
at either of them. He knows the way without them. He is a child of
this city. | Stephan Finsterbusch
Composure, a touch of kitsch and a photographic memory for the city’s streets enter into a fascinating alliance in the taxi drivers of Japan’s capital city.
Their self-esteem forbids them from heeding the permanently active navigation system. Or so it would appear to their passengers. A taxi ride is a means of
locomotion and a cultural experience rolled into one.
25
Technology
We are involved from the very first
pencil-stroke on
At what point does added value arise within a car company? As early as development – or only when the production
line makes a product? Dr. Jochem Heizmann, Member of the Audi Board for Production, believes both areas
contribute towards added value. In this interview, he discusses core skills, innovations and a philosophy that runs
counter to the trend.
Heizmann: We’ve been strongly promoting the idea of the
“Digital Factory” for quite a few years; that counts as one of our core
skills. We instigate virtual concept studies at a very early phase of
the product process. Simulations also play a role in toolmaking:
for example, we conduct forming simulations to check whether the
panels in question can actually be produced in the manner envisaged
and will satisfy our quality requirements. In body manufacturing, the
paint shop and assembly, we even simulate entire plants – or represent the flow of materials virtually. In other words, simulation
encompasses the entire process chain, long before a physical production plant has taken shape.
Dr. Heizmann, how far are you allowed to get involved in the development of a new car?
Heizmann: It’s not a question of being allowed to, but of having
to. We are obliged to help with its creation from a very early stage of
product development, and that level of involvement is set to rise.
Teamwork is essential if a product is to be “production-friendly”,
satisfy the highest standards of quality and be producible as economically as possible. From a production viewpoint, there are four
factors that need to be taken into account in every new vehicle concept: assured quality, production times, investment cost and logistical complexity.
Here’s a radical proposal: is it not conceivable that outside service
providers could take charge of the production side in future, leaving
Audi to concentrate on the development and marketing aspects?
Other industries have gone down that road …
Heizmann: It would make life simpler, that’s for sure. But that’s
actually a dead-end. In the case of premium vehicles specifically, the
interplay of development and production is essential. We’re involved
in new vehicle projects from the very first pencil-stroke on, and it’s
our job to ensure that the designers’ and developers’ ideas can actually be built. That will only be the case if considerable production
expertise is available in-house. In my opinion, contract production
only works for niche models. And even then, only for limited production totals. Wherever the critical know-how and core skills are
what matter, we prefer to build up the necessary capacity specifically
within the company. Our philosophy deliberately goes against the
trend.
You mention skills: vehicle development at Audi is now performed
to a very high degree on a virtual level. What role do simulations
play in production?
26
A costly affair – so how does it benefit Audi?
Heizmann: Ten years ago, the toolmaking shop needed about
15 months to build a volume-production tool for a very complex
component such as a side panel frame. Today, thanks to the “Digital
Factory”, we can achieve that in seven months. We are faster, so we
can produce more tools in the same time – and, at the end of the
day, that means lower costs.
Apart from simulations, what other innovations can we expect to see
in the near future in production?
Heizmann: We have quite a few things in the pipeline: for
example, we’ll be using aluminium to an increasing degree in vehicle
manufacturing. In terms of know-how we enjoy quite a lead over our
competitors, which we intend to build on. I believe there is considerable potential for multi-material concepts – in other words combinations of steel, aluminium, plastic and other materials. That of course
also means that the demands on the production concepts, above all
joining techniques, will change. We are making advances in the field
of electronics, too: we are working intensively on production and
testing concepts and on process reliability. Electronics expertise will
increasingly emerge as a key skill. We therefore need highly qualified electronics specialists in production.
Innovations cost money. And Germany is one of the most costly
production locations in the world. How do you reconcile the two?
Heizmann: We don’t see it as a conflict. It makes it all the more
important that we exploit innovations in striving to compensate for
the higher cost of labour here. We also need to make advances in
flexibility and productivity in order to keep Germany competitive as
a production location. But we know that low-cost locations, for
instance in Eastern Europe, will likewise be improving in this
respect. In other words, we need to maintain our efforts to carve out
an advantage over other production locations. An advantage in terms
of flexibility, productivity and technical innovation. But that advantage is precisely Audi’s recipe for success.
| The interview was conducted by Eric Felber.
Society
Felix Magath, manager of FC Bayern Munich, and Dr. Horst Neumann,
Volkswagen Board Member for Human Resources and, until December 2005,
AUDI AG Board Member for Human Resources, discuss the principles
of management with Felix von Cube, Professor of Educational Science and
management consultant.
Motivating
employees to
perform
27
Society
home to an emphatic 4-0 victory over Rapid Vienna in the UEFA
Champions League. At the same time, Audi was being presented with
the coveted “Auto Trophy” in Berlin for the Audi A6, Audi A8 and
Audi Q7.
In order to motivate employees, the world of work must first be
organised in such a way that they are able to experience a “flow”,
expounds von Cube. This term was developed by the psychologist
Mihaly Csikszentmihalyi. He describes a state in which an employee
becomes completely involved in an activity and is thus motivated by
it in its own right.
Felix von Cube stands out from the mass of guiding intellectual
forces in the sphere of management in a great many respects. His
background is in the realm of the natural sciences, more precisely in
behavioural biology. According to von Cube, one of the key errors
made by managers is that they have a completely unworkable notion
of human behaviour. Anyone seeking to motivate employees needs a
realistic picture of people as their basis. This includes a knowledge
of man’s impulse structure and behavioural programmes. In the
sphere of work, so von Cube’s core thesis goes, no desire can be
experienced without effort.
The self-professed followers of this philosophy include Felix
Magath, manager of FC Bayern Munich, and Dr. Horst Neumann,
until recently Board Member for Human Resources at Audi and now
in the same function at Volkswagen. Magath and Neumann met up
with von Cube at Bayern Munich’s base in Säbener Strasse to discuss
his management concept. The previous evening, Bayern had romped
28
So how can the world of work be organised so that employees can
develop a sense of flow?
von Cube: There really is still plenty of untapped potential for
this! There are vast swathes of corporate life in which the conditions
for employees to develop a sense of flow do not yet exist. On the
other hand, Mr. Magath, it was evident from the way your team
played last night that they were enjoying what they were doing. How
do you achieve this? And above all, how do you keep achieving this?
Magath: It’s genuinely becoming more and more difficult to
keep up such a situation for any length of time. You can’t achieve it
with external incentives, the players’ enthusiasm has to come from
within. Paying a player a 5,000 euro bonus for winning doesn’t do
the trick. Money is now a basic requirement that has to be met –
there’s no more to it than that. In the days when I was a professional
player, things were somewhat different. Your aim was to earn a million marks in the course of your career so that you could live comfortably for the rest of your life. That was a real source of motivation.
Bayern Munich’s players are first and foremost pursuing a different
Felix Magath:
“Anyone seeking
to motivate
employees needs
a realistic picture
of people as
their basis.”
objective: to come top. Coming
second counts for nothing. But
a club such as Chelsea hasn’t
won anything like the number
of titles that we have, and
that makes them much more
hungry for success. As well as
enjoying playing, a footballer
must above all enjoy winning. That’s why staying at the top is infinitely more difficult than getting to the top.
Dr. Neumann, how do you pave the way for flow among the employees of a car manufacturer?
Prof. Dr. Felix von Cube, born 1927, was Professor of
Educational Science at the Universities of Professional Education in Berlin and Bonn, as well as at the
University of Heidelberg. In 1997 he and two colleagues established the Heidelberg-based company
Prof. von Cube & Kollegen GmbH. The company
supports companies on questions relating to motivation and employee leadership. Von Cube has written
a large number of books and specialist articles.
Felix Magath, born 1953, has been the manager of
FC Bayern Munich since July 2004. Born in Sailauf,
near Aschaffenburg, he was himself a professional
player in the 1970s and 1980s, playing for Saarbrücken and Hamburg SV. Magath’s tally as playmaker was 306 Bundesliga games and 46 goals.
Magath was capped 43 times for West Germany,
winning the European Championship in 1980. He
steered VfB Stuttgart to runners-up in the league and
then, in his first season in charge of Bayern Munich,
guided his team to a league and cup double.
Dr. Horst Neumann is Board Member for Human
Resources at Volkswagen. Born in Leverkusen in
1949, he took his doctorate in Economics and Social
Sciences and began his career as spokesperson for
Neumann: We, too, believe it is important for employees to
derive pleasure from their work. The basic requirements are an interesting activity and a good relationship with colleagues and superiors.
Attitude surveys have repeatedly made it very clear that people actually rank these factors as more important than pay. The key thing is
that a person must be able to complete their work comfortably but
that it nevertheless always constitutes something of a challenge.
Then there is the organisational scope such as group work, which
Audi introduced a long time ago. It gives the individual employee
added responsibility. The regular model changeovers in the car industry confront employees with a constant stream of new challenges.
Incidentally, we also pursue the goal of coming top here at Audi!
Mr. Magath, you used to have a reputation among your players as
something of a slave-driver. Yet you are drawn to von Cube’s principles and emphasise the importance of enjoying your work. How do
you reconcile the two?
Magath: I don’t see any contradiction there. Basic physical
fitness is absolutely essential. A player must be able to push himself
physically to his limits. It’s only then that you can start enjoying
yourself.
von Cube: A person’s bond with a company also influences
their inclination to perform. An employee who identifies with their
company will perform better. Yet football players in particular are
not exactly the most loyal of employees. Does the notion of loyalty
still have any meaning in the world of professional football?
Magath: Absolutely! Italian and British clubs have much more
money to spend than we do, and consequently they are able to pay
higher salaries. We try to compensate by offering a family atmosphere. But it’s getting more and more difficult for the club to hold
the Berlin Senator for Economics. From 1978 to 1994,
Neumann worked in the Economics Department at
the head office of the IG Metall metalworkers’ trade
union in Frankfurt. At Audi, Neumann was instrumental in drawing up the company agreement “The
Future of Audi – Performance, Success, Sharing”,
which combines competitiveness and job security
through top performance.
29
Society
onto its players. Talented footballers are now being lured away even
while they are still in the youth teams. So they are less likely to
experience a longer spell with the same club, and that makes it more
difficult for them to identify with a single club. I played for Hamburg
SV for ten years, and that was important to me. I’m in no doubt that
a player will perform better if they identify with their club.
And how does the situation look at Audi?
Neumann: The bond between the workforce and the company
has traditionally been a strong one. We’ve often had entire families,
across several generations, working at Audi. We attach importance
to long-term and ideally life-long employment. Our people are truly
dedicated to the company.
von Cube: I believe acknowledgement of performance is
another important motivator. This could for instance take the form
of greater influence, higher pay, greater decision-making authority
or personal praise. How important is acknowledgement for the
success of football players?
Magath: It depends which individual player you are dealing
with. A young player such as Bastian Schweinsteiger has flow, and is
highly motivated by the game itself; other players, particularly the
more experienced ones, need more external acknowledgement. The
media can therefore have a very large influence on events. Everything that the players do is scrutinised, and every mistake laid bare
by the televised highlights. But excessive praise as well as negative
comments can be detrimental. Especially if I don’t think that praise
is merited. I then have to bring the player concerned back down to
earth.
Neumann: We attach considerable importance to performancerelated remuneration. We have extended the previous profit-sharing
30
Horst Neumann:
“We want our
employees to
derive pleasure
from their work.”
arrangements through our agreement entitled “The Future of
Audi”. Ten percent of any future
rise in earnings will be distributed among the employees.
But I am delighted to note that
Audi’s employees believe the acknowledgement for turning out
successful products is much more important than money. Simply the
knowledge of having developed and built a superb car is the biggest
incentive there is for Audi’s workforce. Audi models have scooped
an array of awards latterly. They have triumphed in head-to-head
comparisons, have won the “Golden Steering Wheel”, the “Auto
Trophy” and many other titles, including in motorsport – not least
the legendary Le Mans race.
von Cube: Other managers have had their players running over
red-hot coals. What do you think of such methods?
Magath: That’s pointless. Other things are at stake, such as
dependability. The players need to know where they stand. That’s
why I always try to make my announcements as clear as possible and
give individual players a clear idea of their position in the team, both
as a player and as an individual. | Ralf Nöcker
news
If the company is a success,
its employees are a success
Dr. Werner Widuckel has
been Member of the
Board of Management of
AUDI AG with responsibility for Human Resources
since December 8, 2005.
He succeeded Dr. Horst
Neumann, who was
appointed the Volkswagen
Group’s Board Member
for Human Resources
and Director of Personnel
with effect from December 1, 2005. 47-year-old
Widuckel, a social scientist by background, worked for
Volkswagen AG in various capacities since 1985 before
joining the Human Resources department at Audi in
March 2005 as Head of Personnel Policy and Key Issues.
In this article, he outlines the goals he has set himself.
Audi aims to succeed in competition with other car companies. If
we are to achieve our ambitious strategic goals, we have to expect
ever higher standards of performance from our employees. It will,
however, only be feasible for them to meet these rising expectations if Audi offers its employees attractive conditions in which to
perform. It is one of Audi’s strategic objectives to be a highly
attractive employer. Such an employer ensures that the success of
the company is equated with the personal success of its employees. The quality and efficiency of the work performed within a
company depends above all on the quality of its management and
organisation. Both of these factors encourage a readiness to perform
much more than incentives which, while rewarding performance,
do not in themselves provide motivation. Because people have a
fundamental urge to achieve things, performance is an essential
factor in personal development. Through performance, goals are
achieved; when the individual achieves goals, their ability to identify with their work is strengthened. Performance translates into
success. I witness every day anew the extraordinary degree to
which our employees identify with Audi, and the passion they
invest in making the company a success. They view themselves
truly as part of Audi, and are proud of the company’s tradition and
successes. What is more, the people at Audi are not merely part of
an organisation; they are part of a community of performers.
However paradoxical it may sound, this community of performers
encourages risk-taking precisely because it offers security.
The high-performance potential of the workforce needs to be
mobilised and realised through leadership. Communicating the
corporate objectives is the basis on which this is accomplished. It
means making all employees fully aware of the significance of the
company’s strategic objectives and of the consequences of intensifying competition for their own activities, together with the challenge to perform that this entails. Only when this communication
is effective will employees identify with the corporate strategy,
accept the greater challenge to deliver even higher standards of
efficiency, quality and innovation, and show commitment to the
cause. If this challenge is met with enthusiasm, it must be
acknowledged. Because acknowledging performance and commitment is the basis for appreciating what employees do and
keeping them loyal to the company. But those who demand
commitment must also allow commitment. Commitment depends
on there being a certain leeway to act. The ideal of the committed
employee who shows enterprise in the way they think and act is
not one that is based on authority and obedience. Quite the opposite: if you demand commitment, you must make allowance for
disagreement. This calls for a form of employee leadership that
is characterised by respect, dependability and trust. If every
employee is to be allowed and expected to contribute their ideas
on improving working processes in this spirit of entrepreneurial
commitment, they will also come to share responsibility for the
success of the company. This is the entrepreneurial core principle
of Audi’s goal to be the most attractive employer. An attractive
employer establishes the framework for high performance and
success, and a successful employer is an attractive one. The success of the company makes jobs safer, increases the scope for
career development and advancement, and paves the way for
sharing in the material trappings of the company’s success.
A secure future for Audi
Audi has clearly affirmed its faith in Germany as a
production base: “The Future of Audi – Performance, Success, Sharing” is the title of the agreement signed by the Board of Management and
General Works Council of AUDI AG on April 8, 2005.
This agreement gives the 45,000 employees at
Ingolstadt and Neckarsulm the assurance that
there will be no redundancies for operational reasons before 2011. The company agreement furthermore paves the way for more flexible working
hours and extends profit-sharing for all employees.
31
The precision
32
Society
Professor Hänsch, how has your life changed since winning the
Nobel Prize?
Hänsch: I was absolutely delighted to receive such an accolade,
but I regard the whole thing with rather mixed feelings. Since
December I have been receiving simply piles of invitations to speak
at events all over the world. I was starting to worry that too many lectures and receptions would get in the way of my work. I had to learn
to say “no” more often, and decline many an interesting invitation.
Why are you, a Nobel Prize winner, in greater demand than other
researchers? After all, your work hasn’t changed …
Hänsch: Fortunately it hasn’t affected my dealings with my
specialist colleagues. But for the public, it’s different. Maybe only
few people understand exactly what it is that I am researching.
As a research scientist, do you tend to think about how your findings
might subsequently be of use to industry?
Hänsch: No, not while I’m doing my research. My work is complicated enough as it is.
So when you are driving your car, you don’t find yourself thinking
about how you could simplify parking?
Hänsch: Oh yes, I do. But I concentrate on certain existing tools
that it might be possible to use. I wouldn’t embark on new research
simply for that sake. There’s little enough overlap between our
developments and industry’s applications as it is.
So are you saying that a lot of know-how gets lost in practical application?
Hänsch: Exactly. But things are different abroad. American uni-
of light
For him, the dream of every research scientist came true: last year
Theodor W. Hänsch was awarded the Nobel Prize for Physics in recognition
of his work in the field of laser technology. In this interview, the scientist
talks to us about his aspirations for Germany’s industrial future – and what
he thinks about when parking his car.
”Our development could make it
possible to park a car automatically
with millimetre precision.”
How would you explain your latest research in layman’s terms?
Hänsch: I have discovered what is known as a frequency comb.
It’s a tool that can be used to measure times, frequencies and also
lengths with unprecedented accuracy.
Why do we need it?
Hänsch: It’s quite simple. The frequency comb enables you to
measure times much more accurately than before, because you can
divide up a time into cycles hundreds of thousands of times shorter.
That’s useful in the car industry, for instance.
In what way?
Hänsch: Our development makes satellite navigation much
more accurate, for example. It could theoretically be used to park a
car automatically with millimetre precision because its precise position can now be determined exactly.
versities have technology centres that concern themselves with
applying research findings in everyday life. We don’t usually have
such facilities in Germany, which is why so much development work
gets duplicated. There is only little demand from industry. Many
large companies conduct research in-house and don’t ever consider
working more closely with academic researchers. There is too little
dialogue.
Do you already have any inventions that could be of use to industry
up your sleeve?
Hänsch: The Max Planck Institutes have all sorts of useful
developments in reserve. Take our frequency comb. It’s just one
example of many.
Why isn’t the partnership between research and industry in Germany
working?
33
Hänsch: Among other things, because the hurdles are too high.
Think of all the bureaucracy that mid-corporates in particular have
to deal with. They are often the suppliers of large companies. Here
in Germany, we tend to squander our hard-earned lead too readily.
Can matters be improved?
Hänsch: We must try to improve them. If we give up without
trying, we’re bound to lose out.
More and more researchers are going abroad, especially to America.
What are we doing wrong here?
Hänsch: Researchers are looking for an environment in which
they can work effectively. In America, there are plenty of good laboratories and a stimulating prevailing mood that responds positively
to new developments. In Germany, innovations tend to be treated
very sceptically. People often see the risks rather than the opportunities afforded by new developments. Things are different abroad.
How would you like Germany to change?
Hänsch: That’s a difficult one. This mental attitude will only
change slowly. We need more people to believe in themselves, invent
something and develop new markets.
We’ve experienced a mood like that before. In the days of the New
Economy …
Hänsch: … which failed disastrously.
Did that surprise you?
Hänsch: Not a bit. You can’t simply generate billions of euros
out of thin air.
”Here in Germany, we tend
to squander our hard-earned lead
too readily.”
34
Society
What advice do you have for Germany’s universities?
Hänsch: They need to insist on high quality when making
appointments. Universities often look for a professor in a specific
specialist area. It would be better to find the best scientist available,
whatever their specialist area. But university administrators would
first need to rethink their approach. And that would require more
money.
Is that really feasible?
Hänsch: Why not? It works for the Max Planck Society. We
need to offer particularly challenging teaching opportunities to those
with particular talent. If you only take mediocrity as your benchmark, special talents will be under-challenged. We ought to differentiate more effectively within the university landscape and prepare
the ground for elite universities to emerge through competition.
institutions in other countries, our universities are usually found
bringing up the rear.
What are the implications of that for research in Germany?
Hänsch: We used to be the ones who showed the world how to
go about science. The position has changed, and not just in America.
China, for instance, is making a huge effort to improve the standard
of research. If we don’t keep up with them, our future will be under
threat. That risk is bigger than ever.
How might we make up ground?
Hänsch: We have to become better than the rest once more.
Only then will we be able to invent products that are in demand
worldwide.
| The interview was conducted by Ulrich Reitz.
”If you only take mediocrity as
your benchmark, special talents will
be under-challenged.”
That’s easier said than done …
Hänsch: Not a bit! Every two years the Max Planck Society
conducts an evaluation to assess the work it is doing. Unfortunately
the universities don’t have any such quality control procedures.
Germany’s students have an average age of 27 by the time they start
their careers. Do we spend too long studying compared with other
countries?
Hänsch: No, German university graduates enjoy a good reputation compared with their counterparts internationally. Some colleagues regard a German degree more highly than an English
doctorate.
You used the word elite: doesn’t your call for an elite conflict with
today’s society and world of work, where ever more flexibility is
called for?
Hänsch: It depends on how you define elite. A top athlete only
belongs to an elite if they are capable of exceptional performance.
But the whole notion of key performers has become a taboo subject.
I think a lot of people in Germany have become too complacent.
Many are not even aware of how far some people are putting themselves out to ensure that we’re as comfortably off as we are.
An authority on lasers
How do I measure the frequency of light with absolute
accuracy? This was the question that Theodor
W. Hänsch (born 1941) has spent many years of
research investigating, during 16 years at Stanford
University, and now as Professor of Physics at
the Ludwig Maximilian University of Munich and as
Director of the Max Planck Institute for Quantum
Optics in Garching. He has discovered a revolutionary solution that goes by the name of the frequency
comb: only a laser and a relatively simple experimental set-up are now needed to measure times,
lengths or frequencies almost instantaneously and
accurately to 15 decimal places. This, for instance,
paves the way for improved GPS technology and the
development of ultra-precise clocks. The frequency
comb is now used in countless laboratories worldwide as the basis for optical frequency measurements. Hänsch shares the Nobel Prize for Physics
with the American researcher John L. Hall, who
works in the same area, and Hall’s compatriot, the
quantum theoretician Roy J. Glauber.
You spent 16 years teaching at the elite US university of Stanford. Is
the American system a suitable model for us?
Hänsch: I believe so. America has elite universities that accept
only the best students. Other students are educated at the other
universities. In Germany, all universities are equal. Compared with
35
news
Audi R8 to be built at Neckarsulm
36
Unveiled at the Frankfurt Motor Show 2003 as the Le
Mans quattro concept study, Audi’s first thoroughbred sports car will soon be going into production as
the R8. It will thus adopt the name of the racing car
that has scooped victory for Audi on five occasions
at Le Mans. Preparations for production of the R8 are
progressing apace at quattro GmbH, which is based at
the Neckarsulm plant. Production is due to start in the
final quarter of 2006. The market launch of the midengined sports car is scheduled for the second quarter
of 2007. AUDI AG is investing 28 million euros in the
production of the R8.
2.0 TFSI “Engine of the Year 2005”
The mystique of Lamborghini
A jury of 56 motor journalists from 26 countries
awarded the new 2.0 TFSI the title of “Engine of the
Year” in June 2005. Audi is the first manufacturer in
the world to combine petrol direct injection with
turbocharging technology in both motor racing (in the
Le Mans-winning R8) and volume production. The
award-winning two-litre engine was first fitted in the
A3 Sportback*. It is now also available in the A4 and
A6. Its versions range in output from 170 to 220 bhp.
The jury praised the engine for its “balance of technology, performance, economy and environmental
acceptability”. With FSI technology, fuel is injected
directly into the combustion chamber.
Lamborghinis populate the dreams of countless sports
car enthusiasts. The book “Lamborghini. A Tempo
Furioso” seeks to explore the mystique of these dream
cars from Sant’Agata Bolognese. Yet the authors
Stephan Grühsem and Peter Vann adopt an emotional
rather than an analytical and objective approach to
their subject. They make no secret of their fascination
for this extraordinary brand and its spectacular models. History, technology, design and public impact –
these are the focal areas of this attractively presented
work. An interesting study of the automotive highlights of a cult brand.
| Stephan Grühsem, Peter Vann: Lamborghini. A Tempo Furioso,
Motorbuch Verlag Stuttgart, 2006.
* fuel consumption figures at the end of the Annual Report
10 million engines built by Audi Hungaria
AUDI HUNGARIA MOTOR Kft. (AHM) has built its ten
millionth engine. The 1.8-litre four-cylinder turbocharged engine with an output of 165 kW (225 bhp)
was installed in an Audi TT police vehicle, complete
with front and rear flashing lights and a siren. Dr.
Jochem Heizmann, AUDI AG Board Member for Production and Supervisory Board Chairman of AHM, handed
over the TT with the engine in question to the Hungarian traffic police. Győr-based AHM is a fully-owned
subsidiary of AUDI AG. It produces around 1.7 million
four-, six-, eight- and ten-cylinder engines each year for
the Audi, Volkswagen, SEAT and Škoda brands. Győr
also builds the Audi TT Coupé and TT Roadster models
jointly with the Ingolstadt plant.
Victory in ams reader poll
Audi – sure thing!
Audi topped four categories in the 2005 reader
poll conducted by the motoring magazine
auto, motor und sport (ams). Over 100,000 ams
readers voted the A8 the best vehicle in the
luxury class. The A6 emerged as winner of the
full-size category. The A4 and A3 likewise came
top of their respective categories. “Four winners in Europe’s biggest reader poll on cars –
that shows how much people appreciate our
cars,” commented Audi boss Prof. Dr. Martin
Winterkorn at the awards ceremony in February last year.
Three different Audi models received awards during
2005 for their outstanding safety reserves – the A3, the
A4 and the A6. Audi became the first manufacturer
ever to receive the highest rating, or the “Top Safety
Pick”, three times from the Insurance Institute for
Highway Safety (IIHS) in the USA. Occupant safety in
front and side collisions was assessed. According to
the US experts, Audi is not only the most successful
manufacturer on the American market in terms of
occupant safety, but also the only European premium
brand among the award-winners. The IIHS regularly
conducts crash tests with vehicles on behalf of the
US insurance industry in order to assess their standard
of safety. The results are also widely regarded outside
the USA.
37
The magic of the
number seven
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The Le Mans record-holder is the very model of a racing driver.
Tom Kristensen: a portrait in fast-forward
39
Tom Kristensen, born on 7.7.1967 in Hobro, Denmark
1985
1991
1992–1996
1993
1997
1997–2000
1999–2005
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Nordic Karting Champion (ahead of Mika Häkkinen)
German Formula 3 Champion
Various racing formulas in Japan
Japanese Formula 3 Champion
First start and win at Le Mans (with Porsche)
F1 test driver for Minardi, Tyrrell, BMW-Williams and Jaguar
Winner of the most famous endurance races including
Sebring and Spa, and in the American Le Mans Series
2000–2005
2004
2005
Further six wins at Le Mans (in a row) with Audi, with the
exception of 2003 (with Bentley)
DTM “Rookie of the Year” with Audi and winner of the
DTM manufacturers’ championship
Third in the DTM drivers’ championship with Audi
Awards including “Best Sports Car Driver in the World” in 2001 and 2002,
“Scandinavian Sportsman of the Year” in 2002.
Tom Kristensen lives with his partner Hanne, son Oliver (9) and daughter Carla Malou (6) in Hobro, Denmark.
From left: Tom Kristensen, JJ Lehto, Marco Werner, Emanuele Pirro, Frank Biela, Allan McNish.
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Tom likes the number seven. Not
just since winning Le Mans for the
seventh time. It has always been
that way. He was born on 7. 7.1967,
competed at Le Mans for the first
time in 1997 and has a few little
secrets to his success – maybe seven.
Logically enough, then, this brief
profile focuses on seven points.
One.
The man for the moment.
Because of its runaway success, even more handicaps were
imposed on the Audi R8 for the latest Le Mans race: a narrower
restrictor, more weight and a smaller tank. Consequently the race
was building up to a neck-and-neck finish.
Four hours before the finish, Audi was in the lead but the French
were getting closer all the time. According to the projections they
were going to catch us up on the penultimate lap at the latest. What
there were of course laps where the traffic slowed him down, to 3:44
or worse. Once, the oil flags were raised and he lost seven seconds;
you simply never know at what point your opponent is going to get
the flag, whether he’s going to lose out or just slip through. Seven
seconds can make one hell of a difference, and maybe even affect
the outcome of the whole race.
Fortunately not this time. If anything, the opposite happened.
Everything came together brilliantly: racing animal Tom Kristensen’s
speed, the simultaneous care for his tyres, and how Tom coped with
the pressure and his fourth stint like a true athlete, leaping out of his
harness on the finish line and throwing up his arms in celebration.
Audi Sport director Wolfgang Ullrich remarked: “This full-throttle
marathon in stifling temperatures, with the pressure never letting up,
calls for a man like Tom. This result makes him a real legend.”
Tom kept trying to interrupt us and change the subject to the car,
the suppleness of the FSI engine, the teamwork that everything
depends on (“I’m just one spoke of a wheel”), and his fellow drivers
JJ Lehto and Marco Werner, “because a Le Mans car has three
Audi in Le Mans
An animated discussion between two living legends: Tom Kristensen and
The Audi R8 is the most successful Le Mans prototype
of all time
1999 First appearance by an Audi R8 (3rd place)
2000 One-two-three win for Audi R8
(winners Biela/Kristensen/Pirro)
2001 One-two win for Audi R8
(winners Biela/Kristensen/Pirro)
2002 One-two-three win for Audi R8
(winners Biela/Kristensen/Pirro)
2003 No works Audi took part
2004 One-two-three win for Audi R8, Team Goh Audi
(winners Ara/Capello/Kristensen)
2005 Win for Audi R8, Team Champion Racing
(Kristensen/Lehto/Werner)
Jacky Ickx at the racetrack debating ideal lines and overtaking tactics.
a dramatic climax. And then we suffered a slow puncture, forcing
Marco Werner to head for the pits. Tom Kristensen would have to
take over sooner than planned. He had his helmet on in a flash, there
was no time to think. But the situation was clear.
He would have to clock up faster lap times if the game plan was
to work out, he would have to drive very sensitively if the tyres were
to hold out, and he faced the prospect of a whole three and a half
hours in a hot car on a June day before reaching the finish line if
they were to get anywhere. Three and a half hours: four stints or four
tankfuls. The absolute limit at Le Mans – both as far as the rules are
concerned, and the most any individual can cope with.
So how was it, Tom? “I was on a mission. You focus differently,
you switch into a totally different mode of perception and concentration.”
As part of his mission – so the calculations said – he needed to
drive lap times of under 3:43, so he drove laps in 3:42, 3:41, the odd
3:40 and even 3:39, and the tyres were still looking good. But then
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captains – whichever one is sitting in it at any given time. It was
sheer coincidence that I was the one to drive over the finishing line.
In fact, it was my first finish in all seven wins.”
Obviously, you won’t get far if you don’t operate as a team. Nevertheless, we think it only fitting to focus on the only person to have
won Le Mans seven times, including five times for Audi.
Two.
Three cheers for the legend.
The Danes are noted for practical common sense and getting on
with the job, as the German football team discovered in the 1992
European Championship final. A case in point: if you phone Tom
Kristensen on his mobile and it is switched off, you hear the
message: “I’m in the car right now, so please leave a message.”
One such message left for him on June 16, started with a cheerful
burble: “I KNOW you’re in your car right now because I’m watching
you on TV, and I know you’re going to break my record so I’m very
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happy for you and – ha! – that means I’ll once more be the only
person to have won Le Mans SIX times. I’ll be a fan of yours for the
rest of my life.”
That voice belonged to Jacky Ickx, of course, and even though
Tom only picked up the message a few hours later, he was thrilled to
bits by it: “It’s fantastic that he’s such a gentleman, and his attitude is
so relaxed. We met up for lunch two days before the race and I could
sense that he genuinely wished me all the best.”
So has the honorary title of “Mister Le Mans” now passed from a
Belgian to a Dane?
“No”, says Tom Kristensen adamantly, “definitely not. You can
compare results, but not the overall achievement. He was driving in a
different era, with different conditions, often tougher ones. Jacky
Ickx created his own legend, but his success was also the making of
Le Mans. He drove everything from Formula 1 to Paris-Dakar and
acquired a charisma that I can still only dream of, anyway I’m still
too young for that sort of thing … no, you can compare results but
that doesn’t chip away at Jacky Ickx’s unique stature in any way.”
Comments that say quite a lot about Ickx, and speak volumes
about Tom Kristensen’s amiable nature.
out. Tom says he learned a lot as a person during that time and came
to appreciate much about the Japanese, including old-fashioned
values such as how to show respect, and earn it. He even picked up
a smattering of Japanese and can still speak “enough to bring a
smile to the face of a Japanese in two seconds.” Something he takes
pleasure in trying out.
A changeover of drivers by Audi Playstation Team ORECA,
The way only winners know how to celebrate: Tom Kristensen, Marco Werner,
which ultimately finished in fourth place.
JJ Lehto and the obligatory magnum of champagne.
Three.
A Japanese dimension to the
Danish character.
Now Tom starts to get concerned that we think he’s altogether too
relaxed, something that would undermine his standing as a racing
driver. “Motor racing involves immense physical and mental stress. I
expend all the energy I can get on it. If I come across as relaxed,
that’s fine. But I’m definitely NOT relaxed as soon as the heat is on.”
Is it like flicking a switch that transforms a sunny boy into a racing
animal? “Not a switch,” states Tom, “it happens automatically. You
put on your helmet, and your claws come out. You have to be
focused and aggressive. That’s precisely what I’m like. Don’t think
for one moment that I’m relaxed!”
Motor racing is not an obvious calling for a Dane. Denmark has
no car industry, no network, and little history of success in this
sport. A career with a bank would have been a much more likely
destiny, and Tom claims his mother would have been only too willing
to dress him up smartly and “sell him to a bank”. But then there
were the genes of his motor racing father and the young Kristensen’s
basic penchant for speed, as became apparent on the karting track.
From the moment he beat Mika Häkkinen to the Scandinavian
Karting Championship title, he dreamed of a career as a professional. Things began to take shape first in Germany (where he won
the Formula 3 Championship the year after Michael Schumacher)
and then in Japan. Five years in Japan!
Perhaps too long for him to think about switching to Formula 1,
but he doesn’t regret it, at least not in the light of how things turned
Four.
Sunny boy versus racing animal.
Most of the time Tom Kristensen comes across like an advertisement for a health club. He epitomises the holiday spirit, clean air and
the recuperative properties of water. How on earth does he stay so
relaxed?
Tom is pleasantly surprised, as if he had never noticed that he
comes across as rather more laid back than the average office
worker, or indeed the typical racing driver.
It must be that he relishes movement as the most natural thing in
the world, as if he couldn’t imagine a different way of life. Training
charges up his energy levels; the good feelings that then brim over
are what we notice.
Five.
The art of driving.
Someone who is asked so often (including on his website
www.tomkristensen.com) about the secrets of motor racing will tend
to answer in very simple terms. For example, Tom would say: Be
quick, consistent, reliable.
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A fundamental penchant for speed is something you simply can’t
buy. Tom Kristensen will instinctively drive fast in anything with
three or four wheels, without making a song and dance of it. He
loves diversity, which explains why he did so well in Japan, with its
wide variety of racing formulas, and he can adjust rapidly to new
circumstances. He heads straight for the limit, but once there he
probes it in small steps. Tom Kristensen is a marathon man with the
attributes of a sprinter.
Before we can discuss the question of steadfastness, Tom tries to
interrupt us again. He says the bottom line is that you have to trust
your car, your engineers, your team. And if for instance the Audi R8
and the specially developed Michelin tyres operate in perfect
harmony, you get such clear feedback that you may experience an
element of smoothness amid all this relentlessly brutal business of
racing. It, for instance, ensures that you don’t slide the car around
too much and thus incur unnecessary tyre wear. When the car is then
driven fast and smooth, by someone who is on the right wavelength
such as Tom Kristensen, the resulting fuel consumption is very
impressive. Hang on a minute, Tom would say, what about the part
played by FSI? As well as telling us how it saves five to seven percent
Six.
That extra smile.
In the old town of Le Mans before the race: drivers’ parade in historic cars,
The tension builds up even before the starting signal: the rules specialists
with the French Audi Team pictured here in a Wanderer W24.
of race organiser ACO give their technical approval for an R8.
fuel, he is the one who is best qualified to deliver an entire seminar
on the improved drivability of a racing car, the calmer response of
the accelerator and the gentle action of the cute twin turbos.
Reliable? Above all in the sense that you don’t spin the car off
the track? Tom doesn’t do that anyway. Reliability goes beyond that.
The mechanics, engineers and colleagues all know where they stand
with him. It is what those from further down south think of as typical
Scandinavian composure. America’s renowned magazine “Car and
Driver” emblazoned a five-page article about Kristensen with the
title “THE GREAT DANE”. One thing that journalists particularly
like about Tom is his easy-going approach.
one of the mechanics, then Tom took him by the hand as they went
into the press conference.
In the middle of someone’s big speech, a phone rang. How
embarrassing! It kept on ringing and ringing, and heads started
to turn. Then the boy started rummaging for his mobile and answered it with a rather uncharitable “Not now, Mum! I’m in the press
conference.”
Racing drivers tend to be somewhat reserved in public. They get
hassled enough, so why should they want to encourage even more
attention? This is what makes Tom Kristensen’s openness all the
more remarkable. He’s only too willing to give you an extra smile.
He often even beams all over his face, something that is most
unusual in his line of business.
He would attribute it to his family background – first his parents,
and now partner Hanne and their daughter and son. The boy, now
nearly nine years old, seems to be a real chip off the old block. One
particular anecdote that caused considerable amusement at the time
is worth repeating here.
A coach-load of Danish fans set off for the DTM race in Oschersleben; the boy was travelling “unaccompanied”, but was of course
fully integrated into the group. His mother had kitted him out with
50 euros and a mobile phone. During the race weekend he shared
a room with Tom, hung around with the team, was given a set of
headphones, followed the race from the pit, shared in his father’s
triumph, hitched a ride to the victory ceremony on the shoulders of
Seven.
The magic number, but not the end
of the story.
In other words, the record number of wins at Le Mans, the
slender beauty of that digit and its magical significance for that
remarkable racing driver Tom Kristensen. However, the prospect of
an eighth triumph should not be dismissed. That would be neither
courteous to the number eight nor the right thing to do, because
every record begs to be broken. So, the story doesn’t end here, You’ll
find Audi and Tom at Le Mans again in 2006. | Herbert Völker
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World debut: a diesel-powered car for Le Mans
An image with a symbolic character: the Eiffel Tower in the background,
then two lights rapidly approaching. Only once the long, flat car is
almost within touching distance does the sound of an engine become
perceptible – soft and smooth. Finally, the seven-times Le Mans winner
Tom Kristensen opens the throttle and the engine roars, providing
a foretaste of this car’s true potential. Audi will become the first car
manufacturer in the world to compete for overall victory in the renowned
Le Mans 24 Hours with a diesel-powered racing car. The Audi R10, which
was unveiled in Paris in December, will be propelled by an entirely
new 5.5-litre twelve-cylinder TDI biturbo engine that is particularly quiet
and economical.
An extremely rare species of engine in a Le Mans prototype: two
banks of six cylinders arranged at a relative angle of 90°, four-valve TDI
technology with two turbochargers – and an engine block made
entirely of aluminium.
With more than 650 bhp and over 1,100 Newton metres, the
Le Mans prototype easily exceeds the performance data of most
previous Audi racing cars – including its successful predecessor,
the R8. The R8 rates as one of the most successful racing cars
ever built: it finished 61 of its tally of around 70 races as winner.
The all-aluminium V12 engine of the R10 sees Audi take the
diesel engine into a new dimension. As with TFSI technology,
with which Audi initially scooped victory at Le Mans before
transferring it to volume production, Audi’s customers again
stand to benefit from the carmaker’s groundwork in the field of
motor racing.
“Audi already builds one of the most powerful diesel cars
in the world, the A8 4.2 TDI quattro*,” explained Martin
Winterkorn, Chairman of the Board of Management of AUDI AG,
at the unveiling of the R10. “The Le Mans project will help our
* fuel consumption figures at the end of the Annual Report
technicians to squeeze even more out of TDI technology. Over
half of all Audi cars are already outfitted with a TDI engine. We
expect the share of diesel engines to rise even further in the
future.”
The R10’s V12 engine, equipped with two diesel particulate
filters, is so quiet that it is externally barely identifiable as a
diesel engine. The special features of the TDI engine confronted
the engineers at Audi Sport with a string of challenges, including its weight distribution and cooling. The V12 engine’s injection pressure is way in excess of the 1,600 bar encountered
in production versions. The effective engine-speed range is
between 3,000 and 5,000 rpm, an unusually low level for a race
engine. Thanks to the favourable torque characteristic of the
TDI engine, the driver of the R10 need change gear much less
frequently than in the R8.
The enormous torque of more than 1,100 Newton metres
not only represents an extreme challenge to the R10’s driveline – Audi Sport’s ultramodern engine test rigs, too, had to be
converted to transmissions capable of withstanding these
exceptional loads.
Audi is re-adopting a works team policy for this year’s
Le Mans 24 Hours. At the presentation of the new racing car,
Audi Chairman Winterkorn declared: “Our goal is simple but
ambitious: we want to become the first manufacturer to take a
diesel engine to victory at Le Mans.” And Audi motorsport
director Ullrich added: “The development of the twelve-cylinder TDI and the R10 represents the biggest challenge that Audi
Sport has ever taken on”.
The Le Mans 24 Hours will take place on June 17 and 18,
2006.
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Mister adidas and
his feeling for speed
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adidas boss Herbert Hainer is priming his company uncompromisingly for growth. He has already accomplished a
quantum leap through the integration of the US-based Reebok Group. And the impending football World Cup on
home ground gives this passionate football player an opportunity as tempting as an open goal to break new revenue
records with his global brand. A business trip with Mr. adidas is a journey of contrasts. The cosmopolitan-style
company headquarters in Herzogenaurach are located in what would otherwise be a rustic Franconian backwater.
The 51-year-old CEO selects a scenic, winding route, which he accomplishes with a relaxed, defensive driving style.
Yet he loves demonstrating with equal relish that he is capable of pushing his car close to the limits of handling.
And as a boss, there are likewise two sides to this model of a manager who has scooped countless awards: he is
uncomplicated and modest, but also demanding and impatient.
Mr. Hainer, I well remember that as a teenager I would always wear
white sports shoes with three blue stripes down the side. And when
I’d grown out of them, I made sure that my parents bought me the
same model in the next size up.
Hainer (carefully manoeuvres the Audi A8 out of the parking
bay in front of the head offices): That must have been the adidas
“Rom”. I was just the same. I used to wear the “Gazelle”. They came
in brown nubuck leather, and I simply had to have that model. They
used to cost 90 marks a pair – a lot of money in those days. Like
you, I had to get my parents to cough up.
Would you ever admit to having worn PUMA sports shoes?
Hainer: Yes indeed, because there’s a photo of me wearing
PUMA boots in a football match.
for winter driving in the mountains, for instance, if you indulge in
winter sports.
Observing the way you handle this car, one could say that the brand
also suits Mr. Hainer the driver.
Hainer: For me, a car is first and foremost a means of transport.
But I am a demanding person: safety, comfort, refinement, sportiness – all those things are important to me. That’s why the A8
embodies everything I expect of a sporty touring saloon. My daughters – one is 22, the other 19 – also drive Audi cars, though a few
sizes smaller.
So were you caught off guard?
Hainer: No, even then I would test different products to confirm
that adidas makes the best ones (laughing).
You tend to drive rather defensively, and as your passenger I’m not
disposed to complain. But when it comes to football, you are very
different.
Hainer (steps on the accelerator in a wide bend, probes the handling limits and is clearly relishing the moment; I hold on tight): Oh,
I forgot to tell you – I do know where the accelerator is.
Did you test Audi’s saloons before deciding to team up with the
brand built by your Bavarian neighbours?
Hainer (waits patiently at a narrow point in the road for a ponderously-driven oncoming vehicle): Audi suits us perfectly. These
cars are sporty and highly functional, like the A8 we’re currently
travelling in. And they are the embodiment of pioneering innovativeness – just like ourselves. Audi has enjoyed a sporty image ever since
the company invented the quattro 25 years ago. I find it excellent
Let’s stick with the defensive style! Do you up the tempo like that in
your job – or do you sometimes find the responsibility of being in
charge of a global brand a little daunting?
Hainer: I’ve never had problems coping with pressure or been
unable to sleep at night. I learned how to position a brand during my
time with Procter & Gamble, day and night. The problem at adidas
was how to apply what I already knew. At the start of the 1990s, this
company was still principally a footwear manufacturer; the people
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here knew how to make the best functional footwear, but not how to
market it. Things started to improve when we repositioned the brand
under the guidance of two Frenchmen: Robert-Louis Dreyfus and
Christian Tourres. We trimmed our distribution channels, transferred
production operations, thinned out budget ranges and abandoned
certain segments altogether. I always thought: that can’t be too difficult. Nor was it, indeed (laughing).
But you are now really going for it. You are now challenging Nike, a
very professionally managed global brand that has so far successfully
barred your way to becoming world market leader.
Hainer: Of course we’d ultimately like to be the biggest – but we
can’t let that be our sole objective. Size can also be a burden. We
want to be the world’s leading sports article brand – the leader in
terms of innovation, the number of athletes under contract, and
marketing.
All that comes at a cost. At the start of the 1990s, marketing
accounted for just eight percent of revenue. Today, with your revenue
now five times as high, you invest 13 percent of it in marketing.
Hainer: Sponsorship in particular costs a lot more than it used
to. But it also brings us a lot more. The 1966 football World Cup was
watched by only a small number of people in Europe, and by nobody
in Latin America and the USA. The 2002 World Cup, on the other
hand, was watched by a total of just under 30 billion people. That
takes our worldwide reach into an entirely new dimension. We sold
four million World Cup balls for Japan and Korea, and six million of
the European Championship ball for Portugal 2004. This year, we
will sell ten million of the new World Cup ball. And our football
revenue will break through the one billion euros revenue barrier. Our
investments are paying dividends.
So the World Cup is a guaranteed success for adidas – however well
or badly Germany fares?
Hainer: Yes, because the bulk of our business will already be
generated before the World Cup even kicks off. And if Germany
reaches the final, the bottom-line figure will look even healthier!
48
Doesn’t it irritate you that your big rival Nike is now hot on your
heels specifically in the football sector?
Hainer (touches the accelerator to pull out onto a short stretch
of motorway): Nike is now a main contender in every sport that
we’re involved in, and that of course includes football. The difference is that we have a distinct performance component: we develop
footwear in order to equip athletes with a better product. And then
we make that product attractive and market it accordingly. Nike
tackles things the other way round: first comes the design, then the
function.
But Nike makes the more memorable commercials.
Hainer: It may well be that Nike adopted a more aggressive
approach in the past, and that we were more staid. But things have
changed. We’ve scooped noticeably more advertising awards in the
past two years. We have shed the mantle of acquiescence and have
cast off our typically European restraint. We are now at least as
advanced as Nike with our approach to communication.
And how do you demarcate yourselves from PUMA, your neighbour
here in Herzogenaurach?
Hainer: Once again, we are the innovation leader. PUMA, on
the other hand, wants to be the top sports fashion brand. Their
emphasis is on fashion, not function.
There’s no law that says adidas will be able to continue growing ad
infinitum – where are your limits?
Hainer: We’re far from reaching them yet. We have the scope to
grow at least as much over the next ten years as we have since the
mid-nineties. I believe the adidas brand has the potential to achieve
as much as ten billion euros in revenue, and our recent acquisition
Reebok at least five billion (turns carefully into the entrance of the
company headquarters). We are set to grow particularly in Asia and
Eastern Europe, as well as in America and in major European countries. At the moment, for example, we are enjoying an incredible
growth rate in China, India and Russia.
| The interview was conducted by Kai Stepp.
Premium and Audi
Dipl.-Kaufmann Ralph Weyler, Board Member for Marketing and Sales
Audi belongs to an exclusive group of premium car
brands – “a very special club where you have to
earn your membership credentials every day anew,”
according to Ralph Weyler (53), Audi Board Member for
Marketing and Sales. Weyler spends much of his time
visiting customers and dealers, having worked his
way right up from the bottom. But sales is just one of
two professional passions of Munich-born Weyler.
The other is to make the brand with the four rings shine
even more resplendently, and to put across Audi’s
sophistication even more emphatically. “Our cars are
already regarded as the industry benchmark in so many
respects,” states Weyler. He describes the many facets
of the epithet “premium” in this Annual Report.
We want to evoke our premium standards in all that we
do – starting with the product, our communication
work and our actions – and that means that everyone
who works for Audi has to be an ambassador of our
brand. If we can consistently maintain high standards of
this “emotional added value” in every element of our
strategic brand management activities, we will succeed
in captivating our customers in the long term. “Premium”
also means market success. That will only work if product, marketing and behaviour are in harmony, as illustrated by Audi’s dynamic growth on markets worldwide.
This success is reflected by consistent quality and
an attitude that focuses on sophistication and customer
satisfaction. Because a premium image can only be
achieved with satisfied, loyal customers.
Embracing superlative standards in our own work –
that is something we all need to exemplify. It is my experience, day by day at Audi, that virtually every employee
has inwardly digested this ethos in their work – an
attitude that is a priceless asset for the entire company.
But what does “sophistication” really mean? For me,
it is an expression of confident style – a blend of refinement, finesse and charm. Our creed is that the four
rings represent superlative standards of quality. Because
quality is the core virtue that customers expect as a
matter of course from sophisticated products. But we go
one decisive step further: our design, our sophistication
introduces sentiments and attraction into the equation.
Audi is noted for its outstanding production technology,
for authentic, high-value materials exquisitely finished.
The quality of our interiors and the precision of our
bodywork therefore rate as the benchmarks in the
industry.
But sophistication is also the yardstick by which we
measure all other processes. In the domain of communication, it means content of an excellent standard, excellently presented. Audi is consequently also renowned for
outstanding advertising – for instance the spectacular
“ski jump commercial” marking the 25th anniversary of
quattro technology, or the fascinating promotional film
to pave the way for the launch of the Audi Q7.
“Premium” must be a feeling that accompanies every
Audi customer. We attach the utmost importance to
customer centricity at our dealerships and in our service
activities. In other words we want to fulfil or exceed
customer expectations. We want to thrill our customers
with innovative technology, specialist expertise, sophistication and personal service. What ultimately transforms
a brand into a premium brand? People do.
49
Valencia, the ninth race of the WTCC 2005: the Leon managed to hold its lead all the way from the start, pictured here, to the finish.
SEAT’s motorsport philosophy is to be
as close as possible to customers:
it is all about racing cars that are recognisably similar to production models.
First among equals
Just imagine if you could buy a Formula 1 World Championship car as a production model. The version on sale would
be a little slower, but it would otherwise look just like its big brother. And it would have a number plate on its front
and rear … Just imagine it! The snag though, is that such a notion is utterly absurd. The chasm between the world of
Formula 1 and the realm of crawler lanes and stop-and-go traffic is simply too wide to be bridged.
That is not quite the case in SEAT’s approach to motorsport. Until
the end of 2005, there was a difference of just 25 horsepower
between the Spanish manufacturer’s Leon Cupra R and its speedy
racing counterpart, the Leon Supercopa – the car which has formed
the basis for several international cup series which, since 2002, has
proven to be the ideal cradle for young aspiring racing drivers.
But the tale goes even further. The new Leon WTCC, which is the
foundation for SEAT’s attack on the 2006 FIA World Touring Car
Championship title, is a lookalike of the production model, and to
enhance their resemblance both cars were presented simultaneously
early in May 2005 at the Barcelona Motor Show.
Cars like the Leon WTCC that compete in the World Touring
Car Championship (WTCC) are based on production versions. Yes,
they are real racing cars and are significantly faster than their road
50
versions, but in terms of looks only a few differences are allowed
between both.
That was one of the key reasons why SEAT decided to enter the
International Touring Car scene in 2002. Promoted to world status in
2005, together with the FIA’s F1 and World Rally Championships,
the WTCC permits every brand to be recognisable by the badge it
sports on the radiator grille or by models based on road cars that are
well known by the public. On top of that, the equal footing on which
the engines and equipment are placed guarantees an abundance of
spectacular wheel-to-wheel duels and overtaking manoeuvres.
Successful cars for motor racing, with strong resemblances to
production models: this is the essence of SEAT’s motorsport philosophy, which was decisively re-drawn five years ago. The Spanish
brand brought to an end its involvement in rallying in 2001. It turned
Sports
its back on displays of superlative performances hidden away from
the public’s gaze, in solitary battles against the clock on remote
tracks and desert trails.
The Spaniards gave up rallying even though it was a demanding
discipline that they evidently understood very well. In the seventies,
the Spanish brand won several national rally titles and even the manufacturers’ title in the prestigious Monte Carlo Rally, but it was from
1996 to 1998 that SEAT Sport shone in the international spotlight,
by grabbing three World Rally Championship titles in the FIA 2-litre
class.
Having evolved from rallying to racing, SEAT Sport now performs in venues that are undoubtedly more attractive for spectators
and, in particularly, for the television cameras that broadcast the
action to fans worldwide on Eurosport. The host circuits have prestigious names such as Monza, Silverstone and Spa, venues where
motorsport is at home. It is here that SEAT is aiming to capture its
first World Championship title in the not too distant future and
with a six-driver strong team this season, observers consider SEAT
as the “Dream Team” for the 2006 WTCC. Reinforcing the closeness
to customers, the team of drivers represents all nationalities of
Europe’s five great car markets.
At the end of 2005, SEAT presented the new Leon Supercup on the
Circuit de Catalunya.
All along, SEAT’s racing history – which started in the early
seventies and led to the creation of today’s SEAT Sport operation as
the company’s motorsport branch in 1985 – cups and promotional
formulas have always played an important role in bringing new
talent to motorsport.
Nothing has changed at that level. Those promotional activities
and talent hunting have a unique name: Supercopa SEAT Leon
(known as Cupra Championship in the UK). It now features events in
Germany, the UK, Spain and Turkey and is regarded as something
of a feeder competition for the big touring car championships. The
The international SEAT team for the WTCC: Peter Terting, Jordi Gené, Rickard Rydell, Yvan Müller, James Thompson and Gabriele Tarquini (from left).
51
Dr. h.c. Andreas Schleef, Chairman of
the Board of Management of SEAT, S.A.
SEAT: auto emoción
A native of Königsberg (now Kaliningrad), Dr. Andreas
Schleef has found his various career moves taking him
ever further southwards: first as a lawyer working for
a bank in Düsseldorf, then for many years as Board
Member for Human Resources at Audi in Ingolstadt and,
most recently, as “Presidente” of SEAT, S.A. in the
Catalonian town of Martorell since March 2002. Together
with Lamborghini and Audi, SEAT forms the sporty brand
group within the Volkswagen Group. In this statement,
he writes about the challenges that his company has
to overcome, about the myths surrounding the leisurely
siesta, and about identifying with the Mediterranean
corporate culture. As Chairman of the Board of Management of SEAT, Schleef is also a member of the Audi
Board of Management.
For me, SEAT is a brand with immense potential: we
have superb products, but we still need to spruce up
our image. Our new models, the Altea, the Leon and the
Toledo, represent a major generation shift – one that
introduces more emotion and superior quality. We can
benefit greatly from the expertise in brand management
that Audi has acquired over recent years. Motorsport
plays an important role in this: we want to establish
52
SEAT as a sporty, youthful brand. And as in real life,
only those who actually participate in sport are
genuinely sporty. We are reaching the right audience
with our Supercopa race series and our successful
involvement in WTCC races. That is because our
customers are on average ten years younger than Audi
customers.
SEAT is the only Spanish car brand. Positioning
it successfully is a substantial but tempting challenge
for me. Especially as SEAT’s significance in Spain is
similar to that of Volkswagen in Germany.
Surprisingly, I had few problems adjusting to
working in Spain. The Catalan mentality is evidently
closer to the German than the Spanish mindset. And
the distinction between Spain and Catalonia can be
compared with the difference between Bavaria and
Germany. SEAT has now been the subsidiary of a German group for a quarter of a century, and sometimes
I find myself in the paradoxical situation that I, a
German, have to remind my Spanish colleagues to
take pride in what they have achieved.
Because people at our company really do work hard.
I can get quite hot under the collar whenever I hear
other Germans going into raptures about the Spanish
siesta and what it must be like to have such an easy
life. The siesta was nothing other than an arrangement
that evolved among agricultural workers to protect
themselves against the heat of the midday sun: to
compensate, they would start working very early, then
continue right up until evening after resuming work.
There are of course also a few differences in everyday working practices: whenever there is a meeting, a
kind of personal bond is always established before you
actually get down to business. Maybe it takes up more
time, but the results of the discussion are then treated
as all the more binding.
There is one thing, though, that I will never be
able to get used to: business dinners that go on until
well into the night, something that the Spanish regard
as utterly normal. All the same, I cannot imagine a
more interesting task than steering SEAT towards a
successful future.
Sports
prestigious final test is the European Masters Final in Barcelona,
where the top four drivers from each country compete in identical
Leon Cupras to become the Champion of Champions.
Those who make the grade qualify for touring car stardom, such
as 22-year-old Peter Terting, who finished runner-up in the 2004
Supercopa Series in Germany, with five wins. Last year, he became
the youngest driver to win a World Touring Car Championship race
when he scored victory for SEAT at the Puebla circuit in Mexico.
SEAT has been staging the Leon Supercopa in Spain since 2002.
As the cars line up on the grid for the start of each race, the sight is
as intoxicating as it is perplexing: nothing but Leon Supercopas, as
far as the eye can see! When this brightly-coloured swarm of racing
cars sets off, a huge multiple pile-up at the first bend seems almost
inevitable. It appears impossible that all these racers will get through
the first bottleneck intact, too great is their number and too equal
their talents. And yet, as if by some miracle, almost all of them make
it through. Until the next bend…
For 2006 the difference between the Leon road version and the
Supercopa racing car will increase... a matter of evolution, because
the new Leon Supercopa will have 300 bhp on tap, over 100 bhp
The Leon WTCC in full flight on the Valencia circuit.
more than the most powerful Leon road car. The resemblance
between the race version and the road-going model nevertheless
remains.
In short, both motorsport programmes ensure that the SEAT in
your garage is never far from the racetrack.
The unveiling of the new Leon Supercopa: a more powerful engine, more powerful brakes and improved aerodynamics.
53
Sports
Ready for take-off
No, Dirk Nowitzki does not have the
demeanour of a superstar. Even though
he certainly is one, being one of the
best shooters in the NBA. No airs and
graces, nothing artificial in his manner.
Here is a story about someone in
touch with reality, about “Vorsprung
durch Technik”, versatility and a
broad education – and about the
parallels between the exceptional
sportsman and the Audi Q7.
54
…
…
yet feet firmly on the ground
55
Star guest at the 2005 Frankfurt Motor Show: Dirk Nowitzki came, saw – and marvelled at the
spaciousness of the Audi Q7.
He stands 2.13 metres tall and weighs 112 kilograms. Even when
standing still, Dirk Nowitzki has an imposing stature. And when
he is on the move, the Dallas Mavericks basketball player looks surprisingly dynamic and supple. So the analogy between him and the
largest post-war Audi is not as far-fetched as it may at first seem:
Nowitzki and the Audi Q7 are both all-rounders. They are a good
match, as was evident at their first encounter at the Frankfurt Motor
Show.
“In the NBA, the age of hulks dominating the game through their
sheer physical strength is over. They are a dying breed,” comments
Nowitzki. Technique, speed and versatility are now the name of the
game in top-class basketball – as in the car industry.
In another parallel to the Audi Q7, the Würzburg-born player
represents an utterly new generation of his species. He is remarkable
not simply for his explosive power, speed and body control, but
also for his versatility. “I’ve played in virtually every position during
my career. In top-class sport today, just because someone is tall
it doesn’t mean that their speed and technique will be inferior,” he
stresses.
The Audi brand claim “Vorsprung durch Technik” could therefore also apply very aptly to Nowitzki. The 27-year-old is considered
to be one of the most accomplished basketball players on the scene.
With his lithe movements, he dribbles so well through both attack
and defence that his opponents find it very difficult to predict where
he will next pop up on the court. As centre directly under the basket,
as a sure-shooter for long-distance three-point shots, as a dangerous
winger, as a defender and rebounder in his own zone, or as playmaker who distributes the balls skilfully. The NBA, the North
American professional basketball league, is considered the best and
toughest basketball series in the world. It places considerable
demands on its players. But Nowitzki is up to the challenge – he is
right at the top in almost all NBA statistics.
There are two unusual facets to his successful career: first, he
was something of a late-starter. “I didn’t take up basketball properly
until I was 13 years old. Before that, I played handball and tennis.
But that doesn’t seem to have done me any harm,” adds Nowitzki
with a wry smile.
56
The other unusual thing is Nowitzki’s training methods, inspired
by Holger Geschwindner, who fills the roles of coach, mentor and
friend. He first spotted Nowitzki’s talent in a junior match in
Schweinfurt in 1995: “Dirk showed incredible talent. That was
immediately apparent,” recalls Holger Geschwindner.
“We then trained together twice, and by then I knew that the boy
had what it takes to become a really great basketball player.”
Geschwindner adopted a new and rather unconventional method.
The mathematician and physicist literally “calculated” an entirely
new throwing technique for Nowitzki, had him trampolining, fencing, rowing, hopping up stairs on one leg, running on his hands and
performing press-ups on his fingertips. “As well as the usual fitness
and basketball training routines, I wanted Dirk to learn things that
he’d never done before. It broadens your physical horizon and body
coordination,” explains Geschwindner.
To broaden his intellectual horizon, the now 59-year-old coach
prescribed a broad-based education for his protégé. So Nowitzki
reads books such as Joseph Conrad’s “Typhoon”, plays the guitar
and is learning the saxophone. He meets up with other leading sports
personalities, such as Roger Federer, Boris Becker, Michael Schumacher, Stefan Kretzschmar or the jazz musician Till Brönner to
exchange ideas.
Nowitzki himself describes this as an “intellectual mobility that
opens up new horizons to me. I need to stay mentally agile if I’m to
remain successful at basketball.” His mentor puts it in a nutshell:
“There’s a lot more to it than just throwing the ball in the basket and
listening to music. There’s so much more to life.”
Both of them were clear in their minds what “so much more to
life” meant: getting Dirk Nowitzki into the NBA. A plan that garnered plenty of scorn and derision in Germany. He was 20 years old
when he signed for the Dallas Mavericks in 1998, making dazzling
progress after a few initial difficulties. Nobody now belittles his
ambitions back in Germany. In the USA, Nowitzki is now proudly
known as “Dirkules” and is celebrated as Germany’s top sporting
export.
Sports
Sporty and elegant
The Audi Q7 made its first public
appearance at the 2005 Frankfurt
Motor Show: the eye-catching standard-bearer of a new generation
of so-called sport utility vehicles. It
owes the “Q” part of its name to
quattro permanent four-wheel drive,
the technology that once revolutionised the Rally World Championship
and has since been the benchmark
of excellence in drive technology.
The Audi Q7’s design is robust and
sporty, and it handles like a conventional agile car both on and off road.
Off-road performance is underpinned
by an optional adaptive air suspension system, ESP special functions
and generous ground clearance. The
powerful FSI and TDI engines lend
the Audi Q7 particular agility. Inside,
it boasts the comfort standards
of the luxury class – a sense of
spaciousness, comfortable seats
and an advanced automatic air
conditioning system.
Two all-rounders: basketball star meets performance SUV.
The Audi Q7
“I never want to stop getting better,” says Nowitzki. “And there are
so many things that I need to learn and areas where I can still
improve. If people think that sounds ambitious or even a little bit
obsessive, then that’s fine by me. But since this is my profession,
I’m in the very fortunate position that I absolutely adore this job.”
Nowitzki ascribes the fact that he still has his feet firmly on the
ground, despite all that has happened, to being firmly in touch with
reality: “I can still seek a great deal of strength, support and
guidance from my family in particular. I always look forward to
spending time at home.” During the NBA close season he stays in his
old room at his parents’ house, who run a decorating business in
Würzburg. And when in Dallas, the man with the size 51 shoes lives
in distinctly modest style even though he is now one of the top-earning professional German sports stars: “I’ve bought a little house near
our stadium, the American Airlines Center. I like nice things and I’m
glad that I have the financial flexibility to be able to realise a few
dreams. But loads of money and status symbols don’t mean that
much to me. And I only drive one car. I lead a very ordinary life,
really.”
Ah yes, cars. Driving is one of Dirk Nowitzki’s favourite subjects. He likes to do the driving himself and, grinning, describes his
driving style as “brisk”.
“I like putting my foot down whenever I get the chance.”
In Germany, he regularly takes to the wheel of a long-wheelbase
Audi A8. Because as well as ample power, comfort and sporty
handling, Nowitzki expects one thing above all else in a car: space!
And after a trial sitting at the Frankfurt Motor Show, he declared:
“The new Audi Q7 is the perfect car for me in every respect.”
| Eric Felber
57
news
Audi allroad quattro concept
unveiled at Detroit
Audi unveiled a study by the name of the allroad
quattro concept at the North American International
Automobile Show 2005 in Detroit. To celebrate the 25th
anniversary of quattro drive, the study combines the
sportiness of an Avant with the all-terrain capabilities
of an off-roader. As a concept car, the allroad quattro
features an array of technical innovations that will find
their way into production models in a few years’ time.
The second generation of the Audi A6 allroad quattro
will again be built in Neckarsulm, and will be appearing on the market in mid-2006.
Ten cylinders for the S8
“Unquestionably the new benchmark for sports
saloons,” wrote the editor-in-chief of a German car
magazine after test-driving the new S8* for just a few
kilometres. 240 journalists from some 20 countries
were able to try out the new 450 bhp (331 kW) Audi in
Düsseldorf at the start of December 2005. And, judging
by the test reports, the sports version of the A8 left
none of them cold: this is the first luxury saloon in the
world to feature a ten-cylinder engine with petrol
direct injection. The S8 accomplishes the sprint from
0 to 100 km/h in just 5.1 seconds. Like all S models, it
boasts the superior traction of quattro drive. It will
appear on the market from mid-2006.
Fitness and prevention
Audi launched a programme of health check-ups for all
45,000 employees at Ingolstadt and Neckarsulm in
October 2005. The aim of the “Audi Check-Up” is to
detect and control any risk factors as early as possible.
The check-up includes health screening, advice on
keep-fit programmes and healthy living and, if necessary, further medical support. Up to the age of 45,
employees are invited for health screening every five
years, and above that age every three years. Audi’s
medical officers expect to conduct up to 8,000 health
checks a year at Ingolstadt and 3,500 a year at Neckarsulm.
58
* fuel consumption figures at the end of the Annual Report
A forum with four rings
The brand is able to present itself to maximum
advantage at Audi Forums – now also at Audi’s second
German plant, Neckarsulm. The new facility there
was opened on June 1, 2006. Glass and aluminium
dominate the building’s architecture, a homage to the
expertise of the Aluminium and Lightweight Design
Centre at Neckarsulm. Customers and visitors are able
to experience the brand with the four rings on a floor
area totalling around 11,000 square metres. As well as
the new car collection area, there is a shop for lifestyle
articles and accessories, plus high-calibre catering
establishments with a restaurant and bar, and a
conference centre. Those wishing to give their Audi a
special flavour can inspect the various options for customising their car. There is something for technology
enthusiasts, too: the company is exhibiting show cars
and other technically impressive exhibits in the “Audi
History” area.
Yellow Angel award for Winterkorn
In 2005 it was the A6, in 2006 the Chairman: Audi is
becoming a regular feature at the awards ceremony of
the “Yellow Angel”. The ADAC, Germany’s largest automobile association, chose Prof. Dr. Martin Winterkorn
as the recipient of its award in the category “Personality” in January 2006, in recognition of his “outstanding contribution”. The eulogy was delivered by the
previous year’s winner, Porsche boss Dr. Wendelin
Wiedeking. In his speech, he declared: “This tribute to
Martin Winterkorn recognises the achievements of one
of the best managers in our industry. Because he has
primed Audi for success.” Winterkorn’s spontaneous
response: “I am delighted to receive this honour – but
it has actually been earned by everyone at Audi!”
59
“If it captivates people,
we have got it right.”
60
Design
What is the essence of good automotive design? The editors arranged a meeting between two
eminent authorities in their field: Richard Sapper, who has been shaping the design of IBM
products for the past 25 years, and Walter de’Silva, chief designer of the Audi brand group since
2002. Both men have established landmarks in industrial design – and have known each other
for many years. A German-Italian summit on hidden messages, the car as a surrogate form of
accommodation and fatherly insights.
Mr. Sapper, at the start of your career you
worked at Mercedes for two years, then at
Fiat for a time. Can we persuade you to do
us an ad hoc sketch of something connected
with cars?
Sapper: (laughing) No, I’d rather not.
I’m not someone who can put creative ideas
to paper simply to order. Let’s just talk
about design.
OK. Your profession is product design. What
does design do for a product?
Sapper: Good design above all makes a
product instantly recognisable. With most
cars, you really need to see what name they
have on the back to establish what brand
they are. Yet I believe it is extremely important that people should be able to recognise
products immediately. You know straight
away when you’re looking at a laptop made
by IBM or Apple. Design has to ensure that a
good product is put on the market, which is
precisely what customers want. But then the
next most important thing is that it’s immediately recognisable. My impression is that
Audi has done pretty well in both respects.
And if it boosts sales, then all the better.
de’Silva: Thank you for the compliment! One more word on the role of design
today: Apple invented the iPod, and after
only a short time the iPod brand has
become bigger than Apple itself. That shows
how important brand recognition is. Brands
such as Bang & Olufsen have likewise experienced something similar.
What do you make of the theory that design
plays another role, too: that it provides us
with a sense of direction? Every day, we
encounter thousands of objects that mean
nothing to us, so it’s reassuring to have a
few familiar objects that appeal to us …
Sapper: That’s true. But it only works
because those very objects convey something – a theme or an idea. Or maybe the
owner’s outlook on life. I suspect that’s very
much the case with cars. Whenever I choose
a special product such as a watch or suit,
I am always making a statement about
myself. Giving a hidden message.
61
Walter de’Silva
So how strong is the designer’s position, then, if we are considering
the quality or function of a new product as well as its form?
Sapper: I believe that the technical people at car companies
largely acknowledge the position of the designer (Walter de’Silva
smiles). When I designed my first typewriter for IBM, the situation
wasn’t quite as clear. I discovered that whether their typewriters were
ugly or attractive made a difference of just two percent to net profits.
I’m sure I don’t need to tell you that I opted for the more aesthetically appealing design. Then, once my first IBM Thinkpad (the
brand’s notebook range) was ready, we conducted some market
research. I might add that technically speaking, the machine was
nothing exceptional. But surveys revealed that over 30 percent of
customers bought a Thinkpad because it looked good and was
clearly distinct from competitor products.
de’Silva: In past decades, engineers have had more say than
designers in almost every instance. Although we haven’t exactly
turned the tables on them, I would say that it’s now honours even.
Giorgetto Giugiaro once told me that he was often close to tears
when the engineers repeatedly kept changing seemingly unimportant details. Incidentally, design is one of the most important reasons
why our customers choose Audi. Or so we’re told by our market
researchers.
Sapper: Retrospective market research may or may not provide
confirmation of such matters. I always have problems with resorting
to such methods in order to find out how people will respond to
future products. It took us time to get used to so many of the things
that we now consider to be attractive or aesthetically appealing. Do
you really think the Beetle would have looked the way it did if it had
first been checked out by market research? Or the Renault R4. When
the first pictures of it came out, many people declared it too ugly for
words! Yet it proved to be a fantastic, successful car.
And how do designers know what designs will be successful in the
future?
de’Silva: I take the very sober view that designers are actually
very technically-minded people, but they have a strong sense of
aesthetics and art. I am convinced that good design has much to do
with everyday graft. I don’t believe in flashes of inspiration that hit
you like a bolt from the blue. It’s more about the intuition that you
develop from spending your whole day drawing.
Sapper: Yes. Sometimes you simply come up with a good idea.
It’s not something you can learn or teach. The Fiat 500 and Citroën
DS were created in the absence of any market studies, which would
have prevented them from becoming the icons that they are today.
62
He was supposed to become an architect, just like
his father. But Walter de’Silva, born in 1951 in Lecco,
Italy, was not so keen on the idea. Even as a child,
he loved drawing cars. As a logical consequence,
de’Silva gave up studying architecture at the age of
21 to join Fiat as a junior designer. There followed
a steep climb up the career ladder, including periods
at the famous Milan design studios, at Trussardi
Design and Alfa Romeo. In 1999, he was put in charge
of the SEAT Design Centre; since March 2002 he has
been responsible for the entire Audi brand group’s
design requirements. De’Silva has won numerous
awards for his models. If he had not opted for a
career in automotive design, he would have chosen
to design ladies’ shoes: “They are symbols of
dynamism and elegance – just like beautiful cars.”
Richard Sapper
Tizio, which can be roughly translated as “guy”,
is the name of what is probably his most famous
product, the table lamp he designed for Artemide
in 1970. Just like Sapper’s “Bollitore” kettle with
its melodic whistle, his lamp has become a design
classic over the years. Born in Munich in 1932,
Richard Sapper embarked on his career in the automotive industry in 1956 when he joined the Styling
Department at Daimler-Benz, designing the exterior
mirrors of the legendary Mercedes-Benz 300 SL
Roadster. After moving to Milan, he worked for
La Rinascente, Alessi and Fiat, among others – and
translated the diaries of the artist Paul Klee
into Italian in his spare time. Since 1980,
Richard Sapper has been working as a
consultant to the IBM Corporation
where he is responsible for the
company’s international product design and corporate
image. More than 15 of
his design objects
are exhibited in
the Museum of
Modern Art in
New York.
Richard Sapper, “Tizio”
Design
Ambassadors of style: Richard Sapper and Walter de’Silva met for a chat at the Audi Design Center.
Or take Alec Issigonis and the Mini – at its time, it was something
completely new. And despite all this, the technical substance of a car
has not changed fundamentally for decades. That’s why I wouldn’t
find it particularly difficult to draw you a car that might not appear
on the market for another three or eight years.
How much is design about art? Earlier on, Mr. de’Silva was stressing
the technical role of the designer …
Sapper: The Mexican architect Luis Baragán supplied a useful
definition: if there is one solution to a technical question that is
capable of conveying an emotion, then it’s architecture. The same
applies to design. And the famous American graphic designer Paul
Rand once said that designers transform prose into poetry.
de’Silva: I believe you can recognise good design by the fact that
it is self-explanatory. If it captivates people, then the designer has
got it right. The moment someone says: “Explain that design to me,”
something isn’t right. The question I then ask is: “Would you buy it?”
Sapper: It’s like food: if you spontaneously like the taste of
something, you don’t ask why. It speaks for itself.
Bearing in mind the volume of traffic on today’s roads, a car also
needs to perform some of the functions of a living room. What
consequences does that have for design?
de’Silva: A car is both cause and effect: we have a vital urge to
be mobile. But that also means we have to be able to cope with the
daily traffic jam. And we have grown accustomed to being permanently mobile in a figurative sense, too: by phone and the internet.
These are developments that we have been adjusting to for some
time.
Sapper: The car has never been a mere object for getting you
from A to B. It has always been a status symbol, but also always a
micro-environment. Or in the extreme, a form of substitute accom-
modation if you can’t find a hotel. Safety requirements are becoming
ever more exacting, and this is at loggerheads for example with the
idea of the car as a living room. I’d love drivers to be able to rotate
their seat while stuck in traffic congestion, so that they could play
cards with their fellow passengers.
de’Silva: Though that would completely overturn our current
concept of space inside a vehicle.
Sapper: Maybe that’s the shape of things to come, though? I
staged a project with students on the subject of cars. My question
was: “What do you expect from the car of the future?” And they
replied unanimously: “Maximum variability!”
de’Silva: It could well be that we’re adopting too traditional a
view of things. Let me give you a simple example. My 20-year-old
daughter says to me: “When I get in my car to go dancing, I always
need a second pair of shoes. I can’t work the pedals properly in my
dancing shoes. But where’s the compartment for my spare shoes? Or
why can’t I just scribble down a phone number on the dashboard and
wipe it off when I’ve finished with it?” To hear that from the mouth
of my own daughter makes me realise I’m getting old. But as designers, we have to respond to what today’s youth wants.
Sapper: We were talking earlier about the various tasks of
design. Design of course expresses the values of a brand. There’s no
doubt about that. But there’s something else, too: it can actually
enhance quality of life. Not just for the person who buys a car. For
example, I believe a Ferrari benefits the people who see and hear it
far more than the person who is driving it. With all the products Audi
has brought onto the market in recent years, it has made a valuable
contribution to our “streetscape”. I always enjoy seeing a car that’s
well made. And I can get really worked up at the sight of a (he
names a brand of small car)!
| The interview was conducted by Walter Raml.
Glossary
Thinkpad:
The IBM range of notebooks. Their design has barely changed since 1992 and is regarded as the hallmark of a corporate philosophy that focuses on
value retention.
Giorgetto Giugiaro: Italian car designer who has produced several hundred draft car designs for a wide variety of brands. His most famous designs include the original
models of the Volkswagen Passat, Golf and Scirocco.
Alec Issigonis:
British car designer (1906–1988) who came to fame as the “father” of the Morris Minor and above all that style icon, the Austin Mini.
Luis Barragán:
Mexican architect. From the 1930s, designed principally villas and apartment blocks in his home country.
Paul Rand:
Pioneer of American graphic design. Decisively shaped the visual appearance of such companies as IBM and UPS through his corporate identity
programmes.
63
The woman
with the magic fingers
As a child, Pia von Braun wasn’t a big fan of Audi. Today, she is the person responsible for the look of Audi lifestyle
articles. Here is the portrait of a woman who cannot stop designing, even when out in a restaurant.
Her hands are probably Pia von Braun’s most valuable asset. Attractive, slender and elegant. Her finely-boned fingers could be those of
a concert pianist. Although Pia von Braun does indeed play the
piano, she prefers to use her hands to communicate. She knows how
to gesticulate in a way that reinforces her body language. And she
can draw. Nothing unusual in that, because von Braun, aged 32 and
mother to a nine-year-old son, is a designer by profession. She has
been working at Audi’s Munich-based Concept Design Studio since
1999, and since 2002 in the Audi lifestyle articles department there.
Pia von Braun represents Audi’s new formal idiom, which Chief
Designer Walter de’Silva has been developing since 2002. “Nobody
can adhere unflinchingly to the same impersonal basic shapes,” she
explains, describing it as a “logical progression” to shift from the
semi-circle to the arc, for example. An eloquent testimony of this
principle is von Braun’s “Square Chronograph” watch which, despite
having four corners, is neither square nor rectangular. The edges
are actually taut arcs and the surfaces are gently convex. “A curved
line always creates more tension than a straight one,” declares the
64
Landshut-born designer, “and tension infuses an everyday object
with feeling.” A principle that applies both to the watch casing itself
and to its strap. The strap is stitched from thick brown leather,
creating a rather masculine appearance when attached to the wrist
by the chunky buckle.
Audi’s lifestyle articles advocate classic forms that exude clarity
and logic. They never come across as fanciful, let alone mannerist.
Audi’s style is nevertheless not rigidly dogmatic and purist, as
preached by the advocates of the Bauhaus. All the same, their principle that form should follow function lies at the very heart of Audi
design. On the Cross Pro RS mountain bike, for example, the power
flow upon which riding a bike depends determines the rather
unusual shape of the frame.
The fact that an exceptional product need not be dependent on
making a huge impact is demonstrated by Pia von Braun by the
rigidly geometrical shape of the Audi bag collection. “Every seam is
justified,” explains the designer, “it’s important to me that we don’t
get sick of the sight of all those things that accompany us through
Design
everyday life.” She therefore sets great store by maintaining a degree
of tension between innovation and tradition.
L’art pour l’art – art for art’s sake – would be out of place at
Audi. For the intrinsic beauty of shapes to be manifested, they must
never look superfluous, must be perfectly proportioned and must
reveal logical styling. There are few branches of industry that are as
expert at handling the interplay of taut surfaces with such virtuosity
as car manufacturers. Pia von Braun believes that precisely these
shapes appeal directly to people’s aesthetic sensitivities: “What we
perceive as beautiful depends less on intellect than on gut feeling,
coupled with how an object feels to the touch.”
So did she ever dream of one day working for a car company
when she was a child? “Certainly not,” replies Pia von Braun with
a smile, “I wasn’t a big fan of Audi when I was a girl.” This antipathy
probably stemmed from the fact that a teacher whom she was not
particularly fond of drove an Audi. “Cars are actually highly charged
with emotions, but I of course didn’t realise it at that time.” Her
affinity for design started to emerge at an early age: after taking her
advanced school-leaving certificate at a Munich grammar school,
she went on to study at the renowned Art Center College of Design
(ACCD) in Switzerland in 1994. She has particularly fond memories
of the three terms she spent at the design studio in Pasadena,
California, before taking her finals in 1998: “It was there that I practiced drawing reliably and competently under considerable time
pressure,” she explains. “We are not artists who can afford to wait
for the right idea to come along.” Industrial design is ultimately
intended to make everyday objects attractive and appealing – so
attractive that you don’t want to relinquish hold of them, and simply
can’t get a shape out of your head.
When she first joined the Munich studio in April 1999, Enzo
Rothfuss, her team leader, involved her straight away in the “Steppenwolf”, a compact off-road showcar for the 2000 Paris Motor
Show. “Enzo included me from the word go,” says Pia von Braun,
who is clearly still grateful to him for that. “I had the privilege of
outfitting the entire car with him.” The instrument cluster, the centre
console, the steering column stalks and, of course, the floor mats,
65
Individual and exclusive
quattro GmbH
Anyone wanting to customise an Audi precisely to their
personal requirements – or looking for an ultra-sporty
version of a car with the four-ring badge – will need to
get in touch with the Neckarsulm-based quattro GmbH.
This company, with 420 employees, takes its name
from the car manufacturer’s longest-serving innovation: permanent four-wheel drive. Since 1983, quattro
GmbH has been supplying custom solutions for vehicles: for example, in-car internet or fax, a free choice
of interior and exterior colours provided they can be
obtained using environmentally compatible waterbased paints, or a wide variety of leather grades and
colours. Then there are the “S line” equipment packages. quattro also offers a range of exclusive lifestyle
articles, their quality and design matched precisely to
Audi. The third cornerstone of its activities is sporty
cars: the vehicle documents of the current Audi RS 4*
state its manufacturer as “quattro GmbH”. The engineers at quattro were already responsible for developing the first-generation RS 4. And the most powerful
Audi production model built to date, the RS 6 plus,
was likewise created by Audi’s Swabian subsidiary. Its
latest project is the first Audi mid-engined sports car,
the R8, which will go into production in 2006.
66
Design
made from thick shoe-sole leather. Every detail, however unimportant it seemed, had to be consciously designed, always with the goal
of avoiding any hint of banality.
Focusing on the essentials – that is Pia von Braun’s creed. To
reinforce this statement, she opens her hands again as if inviting you
to give her a lump of plasticine for her to mould into the right shape.
First of all, however, one needs to understand a task and identify any
problems. “You then need to put three good ideas to paper as rapidly
as possible.” They all need to be workable, but one of them must
always stand out. That reduces the time spent discussing them and
subsequently facilitates the decision.
Pia von Braun draws inspiration from everyday objects. As well
as cars, she studiously examines such items as the cutlery, crockery
and glasses in a restaurant – and finds herself almost automatically
analysing how they could be improved. Her latest project is a bag
collection that is intended to combine the emotional idiom of Audi
design with the functional requirements of the traveller. “I find it
particularly interesting trying to create attractive objects that are not
exorbitantly priced.” A venture in which Pia von Braun, with her
magic hands, repeatedly succeeds. | Gerd Gregor Feth
* fuel consumption figures at the end of the Annual Report
67
news
August Horch Museum
in Zwickau extended
Historic workplaces as well as historic cars are now on
show in Zwickau: the August Horch Museum has gained
an extra 500 square metres in exhibition area. It has
all been made possible by a donation from AUDI AG,
together with financial backing from the state of
Saxony and the German government. Visitors are able
to admire historic vehicles, tour the villa of company
founder August Horch and view the technology used
for building cars in Zwickau over a total floor area of
3,000 square metres. 89,000 people visited the August
Horch Museum in the first ten months alone, making
it one of the largest tourist attractions of this city in
Saxony.
68
Audi design in words and pictures
Guest appearance by
Lang Lang at the Summer
Concerts in Ingolstadt
He is the new star in the firmament of classical
music: Lang Lang, Chinese pianist from Shenyang,
was already sitting at the piano at the tender age
of three. The 23-year-old Chinese musician, who
has already performed with the Berlin Philharmonic and Vienna Philharmonic as well as in New
York’s Carnegie Hall, is now one of the world’s top
pianists. In July 2005, Lang Lang played on the
Piazza of Audi Forum Ingolstadt as part of the
Summer Concerts series organised by AUDI AG.
During his visit to Ingolstadt it transpired that
Lang Lang is a keen Audi driver, though he did not
divulge whether he was ordering ”piano finish” for
the interior trim of his new Audi.
Shapes, surfaces, colours: the success of a car brand is
closely tied to the design of its vehicles. The impressive success story of “Audi design” is now told in a
recently published, opulently illustrated book. This
reference work sheds light on 40 years of automotive
design at Audi – from 1965 to the present day. Author
Othmar Wickenheiser includes numerous sketches and
models to introduce his readers to the mysteries of
creative automotive design.
The Munich-based Professor for Transportation
Design and former Audi designer vividly elucidates the
various phases of the design process: from draughtsman’s techniques of representation to prototype construction, and from the Audi 60 to the models of 2005.
The book affords a remarkable insight into the epochs
of automotive design from the past four decades, and
is a must for every Audi enthusiast!
Othmar Wickenheiser:
Audi Design,
Automobilgestaltung
von 1965 bis zur
Gegenwart (Audi
Design: Automotive
Design from 1965 to
the Present Day),
Publisher:
Nicolai Verlag,
Berlin 2005.
TV commercial:
“You’re just like your mother!”
Last February, Hollywood star Dustin Hoffman was
awarded the “Golden Camera” in the category
“Best Celebrity Commercial” for his appearance in
an A6 commercial. Ralph Weyler, AUDI AG Board
Member for Marketing and Sales, presented the
actor with the award, which is sponsored by the
German TV magazine HÖRZU. In a tribute to the
classic 1967 movie “The Graduate”, the two-times
Oscar winner this time rescues his own daughter
from the wrong man in the commercial bearing the
title “Just like your mother”. Just before she can
say “I do” at the altar, he whisks her away and the
pair drive off into the distance in his new Audi A6.
69
The Authors
“The Chinese are well on their way to
beating us at our own game,” remarks
Frank Sieren. He should know: the
39-year-old WirtschaftsWoche correspondent has been living in Beijing
since 1994. The Times, London,
describes him as one of “Germany’s
top experts on China”. “Der China
Code – Wie das boomende Reich der
Mitte Deutschland verändert” (The
China Code – How the Booming
Frank Sieren
Middle Kingdom is Changing Germany) is the title of his best-selling book that appeared in 2005. In
Audi’s Annual Report he explains the ingenious system behind the
rise of the red giant. > Page 8
A taxi ride in Tokyo is something
special for Stephan Finsterbusch
(39), Frankfurter Allgemeine Zeitung
correspondent in the Japanese capital. For all the pulsating rhythm of
economic life of that metropolis, its
taxis are an oasis of calm. And its
drivers need to possess three rare
qualities: a superhuman sense of
direction, calmness and the unstinting readiness to read the customer’s
Stephan Finsterbusch
wishes from their eyes. “It’s not
always all that cheap, but is sometimes the only way of reaching
your destination in this megacity quickly and safely,” comments
Finsterbusch. > Page 20
Business editor Ralf Nöcker (40)
writes for the Frankfurter Allgemeine
Zeitung on management and marketing topics, the advertising industry
and management consultancy. In his
private life, father-of-two Nöcker is a
football fan whose allegiance to Fortuna Düsseldorf goes back thirty years.
The conversation with Felix Magath,
Felix von Cube and Horst Neumann
consequently not only yielded interDr. Ralf Nöcker
esting insights into the subject of
employee leadership, but also gave him reason to hope for a better
future for Fortuna. Currently enjoying only moderate success in the
third division, Magath told Nöcker at the end of their meeting that
he expected to see Fortuna back in the first division in two or three
years. Hope springs eternal. > Page 27
“The car sector serves as a model for
a number of other industries,” says
Ulrich Reitz. The 38-year-old business editor has been managing the
editorial office of the newspaper Welt
am Sonntag for six years. From his
office in Frankfurt, he reports on the
international finance and car industries. This dual task suits him: his
meetings with bankers are often
inspired by what he has gleaned from
Ulrich Reitz
talking to car managers. For Audi’s
Annual Report, he met up with the winner of the Physics Nobel Prize,
Theodor Hänsch. The two spent some time discussing the link between
research and the car industry, continuing even after the tape recorder
had been switched off. But with Hänsch turning out to be an enthusiastic amateur investor, that was hardly surprising. > Page 32
His publication, the Austrian magazine Autorevue, enjoys cult status
among readers. Thanks to the many
exquisite turns of phrase found
therein, some even regard it more as
a literary journal than a common car
magazine. Publisher Herbert Völker
himself is described by many colleagues as the “leading light of
Austrian motor journalism”. It is
widely acknowledged among motor
Herbert Völker
journalists that a story penned in
Völker’s unique style is a unmatchable. On behalf of Audi, Herbert
Völker portrays “racing animal” Tom Kristensen. > Page 38
Kai Stepp (51) started writing articles for radio and television while still
a student, as a means of financing his
studies in Law and Communication
Sciences in Munich. He then worked
as a radio reporter for ARD. It was
then that Stepp discovered his passion
for magazine journalism, initially as
Deputy Editor-in-Chief of the WirtschaftsWoche and next as Editor-inChief of Focus Money. He was subseKai Stepp
quently appointed Editor-in-Chief of
the Cologne-based business magazine Capital. The various stations
of his career enabled Kai Stepp to become well-acquainted
with those top managers who are now responsible for determining
Germany’s future as an industrial base. Among them is Herbert
Hainer, whom Kai Stepp accompanied on a business trip through
Franconia. > Page 46
70
Sophisticated watches are usually
complicated objects. Perhaps that is
why they, together with cars, have
constituted an enduring journalistic
challenge for Gerd Gregor Feth
(50), who for many years has been the
Munich correspondent of the Frankfurter Allgemeine Zeitung. He was
therefore only too willing to talk to
Pia von Braun, the designer of the
Audi “Square Chronograph”, about
watches and the unusual situation of
a car designer who creates lifestyle
articles. > Page 64
Although he had originally intended
to become a pastor, Hallaschka found
himself pursuing a career in journalism. Instead of baptising infants and
preaching from the pulpit, Andreas
Hallaschka (43) joined the German
magazine stern after completing his
studies and attending journalism college, then became Editor-in-Chief
first of fit FOR FUN and, in 2002, of
MERIAN. Hallaschka himself has
Andreas Hallaschka
travelled along virtually all the dream
roads that he and his team of photographers portray. France,
Australia and the Southwest of the USA are his personal favourites.
He still holds a burning ambition to travel to the island of Lampedusa: his first attempt, by Interrail at the age of 16, foundered due to
a lack of funds. > Page 72
A theologian with a penchant for
speed: Dr. Jochen Wagner (48),
tutor of the Humanities Department
at the Protestant Academy of Tutzing,
regards himself as a “homo ludens”.
This is evident at every point in the
powerful essay that describes his
“transfiguring experience” – a weekend driving a Lamborghini. An affinity for Audi is almost in his genes.
Both his parents worked for the brand
Dr. Jochen Wagner
for decades, and from the tender age
of ten Wagner used to earn himself pocket money by washing cars
at a brand dealership. For all the transcendental implications of
his profession, he also worships this radical form of the here-andnow. > Page 85
His institute is widely regarded as
the leading authority on all matters
concerning accounting, and Küting
himself is frequently referred to by
the press as the “High Priest of
Accounts”: Prof. Karlheinz Küting
(62) is Director of the German Institute of Auditors (IWP) at the University of the Saarland, Saarbrücken.
The author and publisher of several
reference works on accounting and
Prof. Karlheinz Küting
member of the Board of Examiners
for Auditors was awarded the renowned Dr. Kausch Prize by the University of St. Gallen in 2000 in acknowledgement of his work. For
Audi’s Annual Report, Küting, together with Dipl.-Kfm. Christian
Zwirner (30), research assistant at the IWP, has taken a critical look
at accounting practices in Germany: what is the hallmark of modern
communication in the capital market? Where will the current
diversity in accounting practices lead us? Questions which have
preoccupied Küting for many years – and which he has repeatedly
discussed in seminars held at companies. > Page 99
Gerd Gregor Feth
71
Dream cars on dream roads
Travel broadens the mind. And few sights can be more
elegant than that of the traveller gliding across
breathtaking landscapes in an aesthetically appealing
car. The travel magazine MERIAN and Audi have teamed
up in an alliance focusing on Germany’s two biggest
pastimes. Much to the delight of the photographers
who captured the images that accompany this account.
For most of human history, travel has been anything but the stuff of
dreams. In the Middle Ages, major routes between cities were no better than today’s farm tracks. The notion of travelling for its own sake,
or of the typical Sunday outing, was inconceivable. The world was a
disc and the horizon never far away: the average person in the Middle
Ages never went more than 20 kilometres from their place of birth
during their entire lifetime. Even after the advent of the car, the notion
of travelling to far-flung places and touring around by car as the fancy
took you had simply not yet occurred to people. Less was known
about the Transamazonica than Karl May knew about the Wild West.
South America? Well yes, people knew it existed … but go there?
The earliest car journeys that I recall, in the early 1970s, were our
annual holiday trips to Neuharlingersiel, East Friesland, on the back
72
seat of a bright orange Audi 100. In those days, the autobahn towards
Denmark still petered out somewhere around Hamburg. When
the tunnel under the Elbe was finally finished and the autobahn to
Denmark opened, we then started heading to our northern neighbour
for our holidays. It was like exploring a whole new, exotic world.
Car travel was still not a particularly relaxing affair in those days.
All the same, cars as such were no longer elite or exclusive objects.
Where previously they had been the preserve of company directors,
they were now something the common man, too, could own. As
early as the 1950s, it was the ultimate adventure for most Germans to
head across the Alps and drive down to Lake Garda. By the 1970s,
Culture
Dream team
Driving along the Florida Keys in the Audi Q7, tracing the Garden Route in South Africa with the A3 Sportback
or negotiating the winding Alpine Road in the S4*: a “MERIAN extra” featuring the world’s dream roads is scheduled
for publication in April 2006. Its 170 pages portray trips by car along the most breathtaking routes in the world,
spanning every continent. The travel magazine MERIAN and AUDI AG formed a “dream team” for this partnership.
The Ingolstadt-based car manufacturer supplied a selection of its models to facilitate some of the highly involved
photo shoots – dream cars on dream roads.
some had decided that following the rest of the pack across the
Brenner Pass had become too tedious. For want of a better challenge
to their car’s technology, people consciously began to explore
the smaller, steeper, more winding Alpine passes either side of it.
Driving was now officially fun – and the era of dream roads had
dawned. Tatzelwurm, here we come!
By dint of our profession, we MERIAN editors have been at the
forefront of journalism for globetrotting Germans since the very
early days. We like travelling; the world is our playground. Our
appointments are moreover rarely so tightly packed as to leave no
opportunity for exploring intriguing side roads en route to the next
destination. After all, that is also part of our job. And as our profession is by definition loquacious, it is hardly surprising that one of
those many conversations in the corridors of our editorial offices
should have spawned the plan to treat readers to a potted collection
of our hands-on knowledge of the world’s most scenic roads. Thus
arose the project of publishing a magazine about the world’s dream
roads, something that had never been done before in quite this form
in all the previous six decades of MERIAN.
Continued on page 78.
* fuel consumption figures at the end of the Annual Report
73
Culture
The wild side
of Bavaria
King Maximilian II
is reputedly the first to
have travelled it by
coach. It was then elevated to the status
of a prestige project in
the 1930s. Today, Germany’s Alpine Road has
shed some of the aspirations of grandeur of
yesteryear. Maybe that
is what makes it all the
more wild and attractive, affording captivating panoramic views
of mountains, castles,
crystal-clear lakes and
picturesque farming
villages. The German
Alpine Road winds
along for 450 kilometres
from Lindau, on Lake
Constance, to Berchtesgaden near the
Austrian boarder. The
Tatzelwurm, or mountain dragon, is the
name given to the
section of the route
around the Wendelstein
that is believed to
epitomise what driving
in the Alps is all about.
And rightly so, believes
photographer Jan
Greune. “The bends are
truly impressive. And
it’s really worth making
a detour to the salt
mines in Berchtesgaden.” According to
traditional Bavarian
tales, the Tatzelwurm
is a small but fierce
mythical beast.
Greune’s children, who
accompanied him on
the photo shoot, were
only tangentially interested in all that – what
concerned them far
more was whether
they would be allowed
to go boating on the
nearby Forggensee.
74
75
Culture
76
On the trail
of the jeunesse
dorée
Excursions through
the mild Mediterranean
air, preferably in illustrious company, have
always been de rigueur
on the Côte d´Azur. The
routes of the Grand
and Middle Corniches,
winding roads above
Cannes and Nice,
seem to epitomise that
lifestyle. For over
100 years, they have
been snaking their
way between rocky
outcrops, past the
beaches and luxury
villas of the rich and
famous. Bizarre rock
formations line the way,
and there are vistas
across white sandy
bays out over the azure
blue sea. And who
knows, you could well
cross paths with one
of the many resident
celebrities on their way
to the nearest exclusive
seaside resort. Photographer Arthur Selbach
concentrated on the
Middle Corniche, with
its picturesque villages.
Unlike the Lower
Corniche, which runs
directly along the
shoreline, this road is
relatively quiet. Just
a few minutes away
from the hustle and
bustle of the coast, the
tranquil villages have
managed to hold on
to the charm of times
past. Selbach’s verdict:
“There can be no
doubting its credentials as a dream road.
And it was fabulous to
be able to drive along
in such a beautiful
car with its top down.”
77
Even for us journalists, who tend to
adopt a rather carefree attitude to such
matters as finances, it was obvious that
we would need a partner who shared
both our passion for driving and our
global outlook. One of my staff then
came across the Audi brochure “25 years
of quattro”: dream cars on dream roads.
From that moment on, we knew who our
ideal partner was.
There ensued two trips to Ingolstadt,
a joint brainstorming session with members of Audi’s Marketing and Press
departments, and a presentation. We had
found our partner. Dream cars on dream
roads began to take shape.
Concept work on the special edition
which was to bear the title “Traumstrassen” (“Dream Roads”) started in
summer 2005. Our plethora of ideas and
suggestions had to be condensed into a
publication 170 pages long, obliging us to take a more critical look at the routes being proposed. Kuala
Lumpur to Singapore? Tremendous by rail, but rather dull by car. The Karakoram Highway in Pakistan?
Too dangerous after the recent earthquake. Likewise the Silk Road. The bridge over Lake Ponchartrain?
Destroyed by Hurricane Katrina. Finally, we had to ask ourselves such questions as whether it was justifiable
to ship an Audi A8 out to Vietnam. Or whether a Audi Q7 were already available at that early stage.
Thus it was that we arrived at a final list of not quite a dozen stories. Perhaps surprisingly, the
Tatzelwurm – in other words the German Alpine Road – and the Corniche above Nice were chosen in
preference to a number of more exotic contenders – a clear victory for the dream roads of the 1950s! Plus
South Africa’s Garden Route, of course and the Panamericana. An absolute “must”.
Audi’s task was to consider which car we were to drive along which route. The Audi Q7 just had to
feature in New York – an important vehicle for the American market. But wait – surely it would be more
at home on the highway to Key West? The A6 Avant could then do New York. And what about shooting in
the Florida Keys? By December 2005, the task of clearing up after Hurricane Wilma was still not sufficiently advanced for us to be sure that it would actually be possible to shoot the Audi Q7 there … A real
threat to our deadline with the printers at the end of February.
Meanwhile MERIAN’s picture editors had begun to sift through examples of work from photographers
all over the world. Our first choice for South Africa: Petrus Cornelius Jacobus Oberholzer, or Obie for
short. A South African through and through, Professor of Photography at the University of Grahamstown
and stylistic doyen for many young African photographers.
For him, the commission to shoot the Garden Route along the south coast between Cape Town and
Port Elizabeth was a home fixture. He owns a beautiful house on the beach there, with a legendary wine
cellar that old friends from Germany (including MERIAN) would willingly drink empty. Obie returned
from his tour in the A3 Sportback utterly thrilled: “Think of me if you ever want to do another feature on
such an adventurous, dangerous and extraordinary African route as the Garden Route. By the way, you’re
not invited to my beach house in Nature’s Valley in December. I’ve already got three Germans coming.
That’s plenty. Otherwise I’d have a house full of people wearing sandals with socks.”
Jan Greune, too, did not have far to travel to shoot his route with the S4 – he lives in Münsing on Lake
Starnberg, just 20 kilometres from the Alpine Road. It’s like home-from-home for him. And still a dream
road that he often drives along for sheer pleasure. He knows the stretch between Königssee and the Allgäu
particularly well.
On this mission, he struck it lucky at Königssee, his visit coinciding with the cattle being driven down
from the mountain pastures in the autumn. As the cows are brought down from the mountains, they have to
be transported across the lake on a pontoon ferry because there are no roads or tracks. This was a particularly
memorable experience for Greune, even though the light was not ideal for shooting photos. There are few
places he would rather live: “I feel a close bond with nature whenever I look at the red dawn sky over the
mountains, or the fresh snow on their peaks. I feel tremendously privileged to be able to work and live here.”
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The majestic
Pacific road
“California 1”, as
Highway Number One
is also known, has
more than earned its
legendary reputation:
palm-fringed beaches,
breathtaking desert
scenery, majestic granite
crags and captivating
towns such as Carmel
and Santa Barbara are
dotted along the route
that links San Francisco
and Los Angeles.
The most memorable
features to the north
end of the route are
above all the thick forests of huge redwood
trees, spectacular cliffs
south of San Francisco
and breathtaking views
over the Pacific. No
more than a two-lane
highway in places,
the road winds its way
across deep canyons
via successions of
hairpin bends. A drive
along the Big Sur Coast
is an incomparable
experience: the route
between San Simeon
and Monterey is truly
spectacular – an
Eldorado for all who
can never have their fill
of beautiful scenery.
Klaus Bossemeyer,
who photographed the
famous bridge at
Big Sur, was nevertheless almost driven to
despair. He had to wait
for four days for a gap
to appear in the thick
blanket of fog – finally
allowing him to press
the shutter.
Culture
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Culture
Big Apple’s
Boulevard
Broadway stretches
for 33 kilometres
through Manhattan. It
presents a constantly
changing face to the
world: New York’s most
famous street ranges
from the chic to the
bustling and businesslike. The Theater District
in Midtown is home
to the stretch that most
people associate with
the name Broadway.
West of Times Square
are the glittering palaces
that host Broadway’s
musicals, as well as
more than 80 theatre
frontages, interspersed
with everything from
fast food outlets to elegant buildings from
the turn of the last century. The city that never
sleeps – Times Square
is the place that New
Yorkers have in mind
when they recall Sinatra’s famous line. The
neon signs and futuristic advertising banners
flash day and night, their
glare enough to send
the senses into overload.
After its golden age in
the 1920s and 30s, the
Theater District experienced a steady decline
until this quarter was in
the grip of drug dealers
and other dubious
characters by the end
of the 1980s. Today, the
erstwhile no-go area
has received a new lease
of life and many of the
big chain stores have
reconquered the
territory. Photographer
Johannes Kroemer now
finds the area almost
too touristy: “Sure, it’s
impressive – but it’s now
almost like Las Vegas.”
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In the midst of the Garden of Eden
South Africa’s Garden Route is a feast for the eyes. It extends over 750 kilometres from Cape Town to Port Elizabeth.
The charm of this route stems above all from its contrasts: whereas one side is bordered by rugged, shimmering purple
mountain chains, the other is edged by inviting sandy beaches and stretches of rocky coastline. Deep gorges and
lagoons, carved out by tidal watercourses, are as much a feature of this route as perpetually green rainforests. The section of the route between Mossel Bay and the mouth of Storms River in the Tsitsikamma National Park is considered to
be the most interesting. Overwhelmed with excitement upon returning from his tour, photographer Obie Oberholzer
exclaimed: “Hey, that was one wild experience!” The region’s name actually dates back to the Voortrekkers, or pioneers,
who settled here in the 18th century: they deemed this fertile land worthy of description as a Garden of Eden on earth.
His colleague Arthur Selbach from Hamburg, an expert in
lighting moods, explored the Côte d’Azur in the A4 Cabriolet. An
enviable task! “I actually know the area around Nice like the back of
my hand. When I was still a fashion photographer, I would often
come here with the models because you get such special, velvetysoft light in the South of France. But I’d never yet done a story about
the Corniche,” says Selbach. He truly relished hopping between the
three routes of the Corniche: “You keep coming across expansive,
craggy sections affording fantastic views over the Côte d’Azur’s hinterland and the Mediterranean. I was captivated.”
The sights offering themselves up to the viewfinder of a photographer on the other side of the Atlantic could not have been in
greater contrast. Johannes Kroemer, who emigrated from the
Thuringian town of Suhl to New York twelve years ago, works there
as a reportage photographer for American and German media. This
was nevertheless his first commission to shoot Broadway. His distinct
aversion to Times Square at first made the project with the Audi A6
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Avant difficult for him: “All those lights and neon signs have connotations of ripping off the tourists. I don’t really like the atmosphere
these days – it now looks like a clone of L.A. And there’s barely a
thing you’re allowed to photograph without the permission of the
many chain stores’ PR departments.” He much prefers Broadway
around where it joins 20th Street, towards Chelsea. The Photo
District with all its labs, galleries and photographic stores is his
stamping ground: “I often need to go there anyway as part of my job.
But I like it, there are still loads of small cafés and restaurants.”
While Obie Oberholzer, Jan Greune, Arthur Selbach and
Johannes Greumer were still out and about, we were busy collating
and sorting the best pictures at our Hamburg headquarters so that
our graphic designers could present them in a form that told its own
story. This took a few weeks. We wanted to publish the most attractive photos, and the most revealing ones. And we wanted to evoke a
clear sense of the fun and enjoyment that our photographers had
experienced en route. The text editors thus had the task of obtaining
Culture
the key information on the selected dream roads from correspondents all over the world. The subjects had all been distributed to
the various authors, whose accounts gradually began to trickle in by
e-mail. Everything was then given its final shape – ultimately a routine
affair, however fascinating the subject.
The hardest job ultimately fell to the photographer Klaus Bossemeyer, from Münster. He was to supply a single picture that epitomised the entire subject of dream roads. We had already chosen the
venue: Highway Number One in California, the famous bridge at Big
Sur. A black A8 saloon pictured in the Californian afternoon sun. All
fine in theory. Except that we had not reckoned with the coastal fog.
“Fortunately, Audi of America had arranged a great chap by the
name of Wolf Sommer to be my driver. A Berliner through and
through, who certainly lived up to his name – which of course means
‘summer’ in English. He was the epitome of cheerfulness, which
proved very fortuitous, as things turned out.” Because Bossemeyer
had four days earmarked for that one, vital photo of the A8 on the
legendary bridge at Big Sur in California. The only problem was that,
three and a half days into the time allocated, the coastal fog had still
not cleared. “I think I would have gone crazy had it not been for
Wolf Sommer. Dream road? You must be joking – it was an absolute
nightmare!” Then suddenly, around lunchtime on the last day, the
fog lifted. The photographer had half an hour of perfect light conditions. And then, within the space of five minutes, the fog rolled back
in and everything was shrouded in mist again. “I couldn’t help thinking about what Mark Twain once said: ‘The coldest winter I ever
spent was a summer in San Francisco’…”. Bossemeyer was infinitely
grateful to his driver for the latter’s patience and good spirits. It was
only once their mission had been accomplished that the pair realised
they had been speaking English to each other the whole time.
Finally, at the end of the four-day shoot, the weather god had
smiled on them, and they had that one, key photo in the can. The
nightmare was over, and the “dream roads” project had a happy
ending. | Andreas Hallaschka | Pictures: MERIAN issue “Traumstrassen der Welt”
83
Music for the soul
Big break for a newcomer
Carla conquers hearts
Just a year ago, Carla Vallet was a talented but still relatively
unknown singer. An attractive young talent with a big soul
voice who toured small clubs all over the world. Until, that is,
she was spotted in London by German music producer Leslie
Mandoki. Mandoki had been commissioned by Audi “to write
an exceptional song for an exceptional car”, as he puts it: the
song for the Audi Q7, the first sports utility vehicle from Audi.
“Streets of Tomorrow” had actually already been composed –
he merely needed a face and a voice for the song. And then
Mandoki crossed paths with Carla Vallet: “The moment I
heard her, her voice touched me in a very special way,” he
recalls. “I knew that I need look no further.”
His counterparts at Audi wholeheartedly endorsed his
choice. Carla travelled to Germany, where the song was to be
produced, recorded “Streets of Tomorrow” at Tutzing’s Parkstudios, and handled the live premiere on September 12, 2005
at the Frankfurt Motor Show with style. Her diary has been
filled with promotional dates ever since. She has been serenading the streets of tomorrow in Tokyo, Los Angeles and Dubai,
84
and has travelled to the Detroit Motor Show as Audi’s “house
singer”, always in the company of the Audi Q7. Carla and the
Audi Q7 have even appeared before an audience of millions in
“Xiang tiaozhan ma?”, the Chinese version of “You Bet?”. All
this travelling between cultures comes as second nature to the
28-year-old: her mother is a New York gospel singer, and her
father a French jazz pianist; Carla herself has spent many years
moving between Paris, New York, London and Tokyo.
What makes the young singer such a good match for the
Audi Q7? “She exudes fresh vitality, and her charisma and
presence are just perfect,” explains Ralph Weyler, Board
Member for Marketing and Sales. The song, too, perfectly
reflects Audi’s values. “To lead and not to follow” say the lyrics
– Audi shows the way, rather than latching onto trends set
by others. The combination of Carla Vallet and the Audi Q7
also supplies fitting proof that a new model and a music star
can be promoted in the same breath: a real innovation in cross
marketing.
Culture
Lamb
8000
The appeal of beauty in motion:
A test report in
10 0 0 . . . . . . 2 0 0 0 . . . . . . 3 0 0 0 . . . . . . 4 0 0 0 . . . . . . 5 0 0 0 . . . . . . 6 0 0 0 . . . . . . 7 0 0 0 . . . . . .
revs
Why are people so fascinated by motion, technology and
cars? How do we explain our children’s obsession with toy
cars? Is mobility a basic need, like eating, drinking or
sleeping? What is the “right” way to handle our urge to be
mobile? Such questions cannot be answered with simple
catch-phrases.
But any company that strives to comprehend the fundamentals of its business and enjoy lasting success will
have to tackle this issue – particularly when we are talking
about such an iconic brand as Lamborghini. We asked
Dr. Jochen Wagner – philosopher, pastor and car and
motorbike enthusiast – to reflect on these questions of
what gives the car such appeal. The outcome of his
musings reads more like a manifesto for mobility than a
set of clear-cut answers.
Inspiring literary insights put to paper after test-driving
a Lamborghini Gallardo* in Germany and Italy. Unlike conventional test reports, we are interested less in the car’s performance than in what happens to the driver and to his faculties of perception when a Lamborghini is brought into the
equation: an expression of the inexpressible. Or, as Wagner
says: “Fasten your seat belt, forget everything you ever
knew about cars, and let the words speak for themselves.”
* fuel consumption figures at the end of the Annual Report
85
Culture
borghini
For Jochen Wagner, a Lamborghini is far more than simply a fast car: “You literally need to take hold of the brand with the bull in order to feel
what it is truly all about,” he declares. “Of course, it's even better to explore it by driving it.”
Transfiguration
Ideas take on a tangible shape. Man, technology, nature – Lamborghini
makes sensuality emancipatory. The internal combustion engine has
been giving the world mobility for over 100 years. Distant is transformed into near, leisurely into swift, divided into united. And now,
standing before me in all its splendour, a Lamborghini – straight out
of the card game I had as a child. The stuff that dreams are made of.
Garage:
“Start with an earthquake,
then rev it up”.
Behold, touch, nestle. More than being a mere car, a Lamborghini is
the embodiment of a feeling. As a mechanical sculpture, it zooms
you in on its details then zaps you back out to the compact finish.
It blinks back at you in unconscious reflection. I yearn for power,
elegance, speed and dexterity. It reconciles reason with instinct, the
sensuous craving for substance with the rational desire for form: man
only becomes whole through leisure, and there can only be leisure
where man is whole.
3000 rpm:
Modem of driving experiences
Uti et frui, use and enjoy. Just as the shell traces the perfect body, the
engine intensifies the urge for movement. The V10 and V12 are like
amplifiers for exploring a realm of mobility. The chassis loves sporty
manoeuvres. Even aggressive stops coax a mountain-top experience
out of the brakes. Without any pussyfooting around. On Pirellis,
every extreme manoeuvre etches itself on the soul. The vehicle
becomes a companion, a siren of pleasure and danger. Excitement
focuses the mind, acceleration calms, driving fashions composure
out of distraction. To worship the goddess Velocità is to meditate.
4000 rpm:
No pleasure without effort
It takes four Ps – person, process, product, press – to apply horsepower creatively in transcribing the mechanical alphabet. Invoking
the unprecedented. The image of a bullet springs to mind, its spherical shape an archetypal image of wholeness. Body and machine
coalesce symbolically into a responsive rocket.
2000 rpm:
Form meets matter
5000 rpm:
Out-of-body experience
Every form delivers a pledge. The Gallardo and Murciélago radiate a
gentle neomania. Genuinely new creations that satisfy a primeval
craving. The design studio at Sant’Agata makes the sacred profane:
perfected beauty. It consoles us. A Lamborghini is like a metal scab
on the wound that we humans are, being imperfect. It holds more
appeal when in action than as a hermetically-preserved museum
piece. Venerate it? No. Use it, and rejoice. Eschew the command
“Do not touch”, and let passion for this machine unfurl.
Speed, style, sound – it comes down to mere thousandths of a
second. From 0 to 100, leave everything finite behind, embrace the
speedometer and rev counter. A Lamborghini teaches response: surrender no leeway, no window of opportunity. I accelerate early and
brake late, savouring the absoluteness of the present: live rather than
re-live, make rather than re-make. Grip plus drive = motion plus
emotion. The situation is the question, the movement the answer.
Here, knowledge is ability. Instead of books, you read tarmac, radii,
86
The urge for movement and speed is very important to the theologian and philosopher – it is his “passion for all things mechanical”.
He usually satisfies this hunger by playing football with his son or riding fast Italian motorbikes.
Or, if the opportunity presents itself, by driving the Gallardo.
vertices and braking points. Driving is motorised potential. Feet on
the pedals, fingers on the shift paddles, hands on the steering wheel:
in this mobile rhythm, the self now resides somewhere outside my
head.
6000 rpm:
Instinct and grace
The fact remains: we are rational, reasonable creatures. Fantastic
harbingers of power in red, yellow, orange or black provide a breath
of air hovering above the ground, a utopia on four wheels. Beast-like
in demeanour, divine in appearance. Ecology and driving fun are
still unreconciled. But what outlet is there for that insatiable restlessness of not being able to abide within your own four walls? We
shield the fragile body inside a mobile shell. In my daydream I yearn
for Icarus to escape his fateful plunge. The bull on the emblem
embodies instinct and grace. Riders on the storm.
7000 rpm:
Live/love differently
We mobilised people often live as if in a protective case. A
Lamborghini lures us out of it. Restraint is laudable, but expression
is better. Roads provide a stage for feedback. You can share passion,
if not ownership. Arc, line, arrow – sports cars are the antithesis of
a sheltered existence. Too infused with life to be imprisoned in a
showcase, the patina of fingerprints and road dust ennobles them.
Every fanomenon thrives on access. Our generation of PC kids has
yet to discover the lure of the machine. Like every passion, it too is
engendered by sensuousness. “If you drive, you’re not kept waiting,”
said Steve McQueen: born to perform.
8000 rpm:
Top form
Fortuna, Fama, Occasione, Bellezza, Accelerazione: these are
the loops of desire. One mobile object mirrored in another. A
Lamborghini burning its escape into the tarmac, as the true meaning
of active living. The meaning of life is in how you move. We kinaesthetic sympathisers need our little paradises. All physio- and psychomechanical intuition strives for top form. Wherever Lamborghini is,
that is the pinnacle. “Wicked,” says a boy to his dad. “What?”
comes the reply. “Cool,” explains the lad, because “cool” is the soulmate of “wicked”.
Arena:
Burning with enthusiasm
Lamborghini is authentic poetry: beautiful to behold, wholesome to
bestow, authentic to recite. Like a rollin’ stone, this orchestrated
freedom of movement becomes a form of confession. “Make the
most of every moment, because the whole is beyond your grasp.”
Thus the potlatch introduces the bliss of childhood sand games into
the arena of mobile exertion. With a Lamborghini, you remain permanently in touch with the key to all being: dynamics, vortex, structure, figure, chaos and poise, all at speed. Live for the “spettacolo”,
reflect on its audacity. | Jochen Wagner
87
Culture
Donna Leon
Passionate Language
© Regine Mosimann,
Diogenes Verlag AG
Works (selection):
Venetian Finale
Vendetta
Latin Lover
Doctored Evidence
Uniform Justice
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One of the most successful authors on the German and
European book market is an American-born Professor
of English Literature now living in Europe. For most of
her life, the notion of writing a book never even crossed
her mind. She left New Jersey at the age of 23 and
taught English literature and language for many years,
during which time she acquired an in-depth knowledge
of Iran, China, Saudi Arabia and other countries. The
most important relationship in her life? Language. “I am
a workaholic when it comes to language and know no
difference, make no distinction, between my emotional
life and my job,” says Donna Leon. After moving from
place to place for many years, she found a second home
in Venice, though Leon herself would probably object:
“You can only have one home!”.
Donna Leon has a different lifestyle to most Americans, Italians or quite simply other people. She admits to
being an atypical consumer. Fashion, mobile phones and
status symbols leave her cold.
Being mobile, on the other hand, has always played
an important role in her life and she once even quit a
job in order to be able to attend the opera at Milan’s La
Scala. Which brings us to one of Donna Leon’s particular
passions: opera. She wrote her first novel at the age
of 50, after visiting a public rehearsal at Venice’s operahouse La Fenice together with friends – they found
themselves concocting a story about how an unpopular
conductor might be bumped off in his dressing-room.
Thus was born the first of an astonishingly successful
series of detective novels …
By way of a finger exercise, many years ago she composed an ironic dialogue between an American car buyer
and a sales executive. She parodied technical parlance
by getting her protagonist to slip “Turboduesendrehverspritzer” into the conversation – as ludicrous a term
in German as it is in English. Now, specially for Audi’s
Annual Report 2005, Donna Leon has penned an essay
on the role of movement and mobility in novels.
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Motion
People move. Characters move. Life is filled with motion, and novels are filled with descriptions of that motion. Sounds simple enough, doesn’t it? In real life, as we sit in a streetside
café and watch people walk past, we see them move, overhear a snatch of conversation,
watch them stop to emphasize a remark. Then off they go and we forget about them and go
back to our coffee.
But characters in a novel, that’s a different thing. They walk by as the narrator sits at that
same table, and it becomes the writer’s job to make that event register on the reader. In a
crime novel, the writer must move the villain to the place where he will commit his crime,
and the good guy has to be moved around until he discovers who the villain is. But most of
the motion that is described in a crime novel, indeed, in any novel, is relatively inconsequential. Characters go to sleep, get up, go to work, eat dinner, drink coffee, talk to friends, go
back home. Readers follow along, and just as when we lose patience with a tedious narrator,
we grow bored if a writer describes purposeless events.
Thucydides said that stories happen to the people who can tell them; similarly, we are
interested in the movements described in a novel to the degree that the writer makes them
so meaningful that every event advances, however minimally, the reader’s understanding of
events or character.
I am not suggesting that every untied shoelace must cause a fall and every letter contain
a death threat or a confession. Perhaps an example would help. A woman trips and is helped
to her feet. In real life, the scene might stop there, with the woman safely on her feet and
walking away after saying thank you.
In a novel, however, the scene opens endless possibilities both for plot advancement and
for character revelation. A man helps her to her feet and offers her a coffee: three months
later they’re married. Six months later she’s dead and he inherits the lot. Or the narrator
grudgingly helps her to her feet, thinking that if she had had the sense to wear
flat shoes, she would not have fallen and caused him to worry that he’s hurt his back in bending down to help her. Or he watches another man help her to her feet and feels anger – or
envy – as the helper runs his hand across her hip and thigh as he helps her to her feet. Or the
woman either resents or enjoys the man’s treatment.
The writer here is behaving like the Romanian on the bridge who waves his hands over
the three walnut shells on the portable table, under one of which there is a pebble. Keep
your eye on THIS, while I am busy with THAT. Even if the woman disappears from the book,
the business of the book has been advanced because the reader now has another piece of
information, either about the woman, the man who helped her to her feet, or the man who
saw him do it. Or all of them.
This incremental information moves the plot forward because it advances the reader’s
understanding of why or how a character acts. Just as easily, however, the reader is being
prepared to respond with surprise when the character does something not at all in accord
with what he has previously been revealed to be: the Romanian lifts the walnut shell, and the
pebble’s not there.
Speech, too, creates motion, for the revelation of character that it causes will both enrich
the reader’s understanding and advance the motion of the plot. In life as in fiction, it is the
most common form of revelation. I once heard a man explain that, after his wife had been in
labor for seventeen hours with their first child, he was “tired of listening to her complain.”
89
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(Because my mother taught me the rudiments of polite behavior, I resisted the impulse to
express the hope that the woman would have less trouble finding a good divorce lawyer.)
Or think of someone who remarks that another person got what they deserved. His neighbor’s gay son got AIDS? Mother Theresa got the Nobel Peace Prize? Oh, my, what different
souls these remarks reveal.
In real life, most conversation doesn’t lead anywhere; most of it has the shelf life of
overripe figs. But in a novel, the writer has the obligation to select those conversations which
contain some nugget of information or revelation.
One example of the force a single remark can convey occurs in Henry James’ The Portrait
of a Lady. Madame Merle, a woman with a past, has helped manipulate the heroine, Isabel
Archer, into a marriage with a man so vile that he will destroy her every hope of happiness.
Late in the novel, she reluctantly accepts the fact that she will not profit from Isabel’s
destruction and exclaims, “Have I been so vile all for nothing?” One of the admirable qualities in the novels of Henry James is his characters’ habit of always remaining fully clothed,
but Madame Merle, had she removed all of her clothing, could not have revealed herself as
fully as with this one remark.
The spoiled, sometimes aristocratic and often wealthy women of Jane Austen’s novels
compete with one another to reveal their arid hearts. My reader’s heart, however, has always
been in thrall to Pride and Prejudice’s Lady Catherine De Bourgh. She has but to open her
mouth to reveal her head-spinning arrogance.
The great novels are filled with examples of physical motion used to express more
than the process of getting from here to there. Austen’s Lizzie Bennett rushes on foot to her
sister’s bedside, careless of how she arrives, so long as it is by the quickest route. Rash,
impetuous, she has no hesitation at “jumping over stiles and springing over puddles with
impatient activity,” after which she arrives at the home of the Bingleys, “with weary ancles,
dirty stockings, and a face glowing with the warmth of exercise.” Austen then uses her disordered state as a mirror in which to reflect the other characters. The women are shocked by
such behavior, one of the men can think only of his breakfast, but Mr. Darcy is struck by “the
brilliancy which exercise had given to her complexion”.
Or think of Vronsky’s fall from his racehorse, when Anna Karenina’s failure to suppress
her terror at his danger makes public their love to the people around her. Examples come
crowing in, don’t they? Emma Bovary’s nighttime carriage ride through the streets of Rouen,
Marlowe’s trip upriver into the Heart of Darkness, Captain Ahab’s pursuit of the White
Whale. In pursuit of their own white whales, writers cast their characters into motion,
drawing us, the readers, in their wake.
In the end, if the novel is to succeed, the reader must be moved to care deeply about the
fate of these characters. They need not be good or virtuous people: Captain Ahab, Becky
Sharp, or Patricia Highsmith’s Ripley are strangers to virtue. Nor must they triumph, just as
those three characters do not triumph. But they must be so completely and convincingly
drawn that they move in the reader’s mind from being characters in a book to people who
are as vibrant as people in real life. Emily Dickinson wrote, “Love is like life, merely longer.”
In the hands of the great novelists, characters are like real people, merely realer.
| © Donna Leon and Diogenes Verlag.
Û
Ò
Ò
90
Culture
Paulo Coelho
The Traveller
He has been a scriptwriter, lyricist and publisher
of an underground magazine. As a youth he spent
a short time as a patient in a clinic for nervous diseases, and later in life was the Director of Polygram
and CBS Brazil. He has even taught acting. And
toughed it out in Brazilian military prisons. Paulo
Coelho, one of the most influential literary figures
around today, is renowned for many things. Why
does he now feature in Audi’s Annual Report?
Because he, more than scarcely any other author,
can translate the feeling of movement and mobility
into language.
He has always been a great traveller, having
crossed whole continents – in fact, it was during
precisely one such time of movement, on his pilgrimage along the way of St. James to Santiago de
Compostela, in Spain, that he found the inspiration
to write. As the member of an ancient Spanish
order he learned to explore his inner self through
travel. He has remained faithful to the motif of the
journey, because it crops up repeatedly in his
works. His heroes are on a journey of exploration to
find themselves, seek love or discover the meaning
of life. Wherever they are headed, they are always
in motion: for Coelho, the journey is an end in itself;
life is one big pilgrimage.
He experiences no aversion for the world of
business. “The business world is not the work of
the devil. I am convinced that dialogue with it is
helpful and effective,” he once opined. His contribution to this Audi Annual Report: a tale of movement,
of course.
Born in 1947 in Rio de Janeiro,
he first studied law, then entered the
music industry. He has been a
writer since 1987. Coelho lives with
his wife Christina in Rio de Janeiro.
Works (selection):
Veronica Decides to Die
The Alchemist
The Devil and Miss Prym
Eleven Minutes
The Zahir
Coelho’s works have been translated
into 56 languages to date, including
Persian and Japanese. His biggest
success alone, “The Alchemist”, has
already sold 27 million copies.
91
Culture
Always on the move
Paulo Coelho
I know that a storm is coming because I can look far into the distance and see what is happening on the horizon. Of course, the light helps –
the sun is setting, and that always emphasises the shapes of the clouds. I can see flickers of lightning too.
There is not a sound to be heard. The wind is blowing neither more nor less strongly than before, but I know there is going to be a storm
because I am used to studying the horizon.
I park my car. There is nothing more exciting or more terrifying than watching a storm approach. My first thought is to seek shelter, but
that could prove dangerous. A shelter can turn out to be a trap – soon the wind will start to blow and will be strong enough to tear off roof tiles,
break branches and bring down electricity lines.
I remember an old friend of mine who lived in Normandy as a child and witnessed the Allied landing in Nazi-occupied France. I’ll never
forget his words:
“I woke up, and the horizon was full of warships. On the beach beside my house, the German soldiers were watching the same scene, but
what terrified me most was the silence. The total silence that precedes a life-or-death struggle.”
It is that same silence which surrounds me now and which is gradually being replaced by the sound – very soft – of the breeze in the
maizefields around me. The atmospheric pressure is changing. The storm is getting closer and closer, and the silence is beginning to give way
to the gentle rustling of leaves.
I have witnessed many storms in my life. Most storms have taken me by surprise, and so I’ve had to learn – and very quickly too – to look
farther off, to understand that I cannot control the weather, to practise the art of patience, and to respect nature’s fury. Things do not always
happen the way I would have wanted, and it’s best that I get used to that.
I look at my car, parked about a hundred metres from where I’m standing. Yes, I could go over to it and drive to the abbey where I’m staying, but I know that rain, when it returns to earth, brings with it everything else that is up there in the heavens – and perhaps I need those
blessings now. Despite my fear, I know that, however bad the storm, at some point it will pass.
The wind has begun to blow harder. I am in open countryside and there are trees on the horizon which, at least in theory, will attract the lightning. My skin is waterproof, even if my clothes get soaked. So it is best simply to enjoy what I’m seeing rather than go racing off in search of safety.
Another half hour passes. My grandfather, who was an engineer, liked to teach me the laws of physics while we were out having fun
together: ‘After a lightning flash, count the seconds before the next peal of thunder and multiply by 340 metres, which is the speed of sound.
That way, you’ll always know how far off the thunder is.’ A little complicated, perhaps, but I’ve been doing that calculation since I was a child,
and I know that, right now, this storm is two kilometres away.
There is still enough light for me to be able to see the shape of the clouds; they are the sort pilots refer to as Cb – cumulonimbus. These are
shaped like anvils, as if a blacksmith were hammering the skies, forging swords for furious gods, who must, at this moment, be immediately
over the little village of Melk.
I can see the storm approaching. As with any storm, it brings with it destruction, but it also waters the fields, and with the rain falls the
wisdom of the heavens. As with any storm, it will pass. The more violent the storm, the more quickly it will pass.
I have, thank God, learned to face storms. The first raindrops fall and suddenly it is a deluge. I look up at the sky, hearing the thunder
and lightning all around me, and allow myself to become completely drenched. How good it is not to be afraid of the rain! How delicious to
drink the water that falls from the clouds, to let myself be washed clean by nature, purified by the wind, to hear the music of the leaves being
buffeted this way and that!
I remain like this for almost half an hour, and I could wait out the rest of the storm, except that one of the priests at the abbey where I am
staying has invited me to supper. I get into my car and drive slowly back. I can see the giant outline of the buildings on top of the hill. I head
straight for the cloister, where I am staying this weekend – outside, the lightning, rain and wind continue.
92
I walk along the deserted corridors of the abbey, whose earliest records date from the eleventh century. I take a bath, make my bed, and go
downstairs to meet Father Martin and Abbot Burkhard. Other friends are waiting for me too and, we should all, in principle, be going straight
to the refectory. Father Martin, however, has other ideas and leads us instead through a kind of labyrinth.
“We’re going to a place very few people know about.”
We all excitedly follow him down into the subterranean depths of this ancient building. An equally ancient door swings open and we find
ourselves in a vast room, where I see a world that is in marked contrast to the austerity of the floors above. It contains almost everything that
has been accumulated over the centuries and which Father Martin refuses to throw away. Antiquated typewriters, skis, helmets from the
Second World War, old tools, out-of-print books, and bottles of wine. Dozens, no, hundreds of dusty bottles of wine, from amongst which, as
supper progresses, Abbot Burkhard selects the best ones and gives them to us to taste. I consider Abbot Burkhard one of my spiritual mentors,
although we have never exchanged more than a couple of sentences (he speaks only German). His eyes brim with kindness and his smile
reveals immense compassion. I remember that once he had to introduce me at a conference and, to everyone’s horror, chose a quotation from
my book Eleven Minutes (which is about sex and prostitution).
While I eat, I am very aware that I am living through a unique moment in a unique place. And as if touched by a sudden revelation, I realise
that although all these things in the abbey cellars have been stored away, they nevertheless still make sense; they may be part of the past, but
they also complete the story of the present.
And I ask myself if there is anything in my past that has been stored away, but is no longer of any use to me.
My experiences form part of my everyday life, they are not locked away in a cellar, but continue actively to help me. So, to speak of my
experiences as having been stored away and useless would be wrong, but what is the right answer?
My mistakes.
Yes. Looking around at the cellar in Melk Abbey and realising that one should not necessarily discard everything for which one has no
further use, I understand that my mistakes are stored away in the cellar of my soul; once, they helped me to find the path, but once I was aware
of them as mistakes, they became redundant. And yet they still need to accompany me, so that I never forget that, because of them, I slipped
and fell and almost lacked the strength to get up again.
Although my mistakes have taught me all that I needed to learn from them, it’s important that they should remain in the cellar of my soul.
That way, when, from time to time, I go down there in search of the wine of wisdom, I can look at them and accept that they are also part
of my story, that they form part of the foundations of the person I am today and that I need to carry them with me, however neatly stored away
(or resolved) they might be.
Before going to sleep, with the storm still raging outside, I pick up a text that is lying on the bedside table in my cell:
“When I am moving, certain things appear blurred, but I am following a path which leads me to a knowledge of the world and of myself,
and, sometimes, I discover a new goal. Movement makes me uneasy, but that same unease forces me to make contact with others and to open
my soul.”
I close my eyes, thinking about the curious day I have had. I was outside, and the storm touched my body. I was inside, and the supper in
the cellar made me plunge down into myself, into the subterranean depths of my feelings.
| © Paulo Coelho, translated from the Portuguese by Margaret Jull Costa
How good it is, how very good, to be always on the move.
93
news
Golden Steering Wheel
for the Audi Q7
A special distinction for the Audi Q7: in November, the
German Sunday newspaper Bild am Sonntag voted the
high-performance SUV with the four-ring badge the best
vehicle in its class, earning it the “Golden Steering
Wheel 2005”. The “Golden Steering Wheel” jury comprised VIPs, technical experts and professional racing
and rally drivers. Thanks to its dynamic qualities, the
Audi Q7 performed as impressively in test drives as it
did in the disciplines of design, equipment and comfort.
The “Golden Steering Wheel” has been awarded to the
year’s best new car models since 1975. The award for
the Audi Q7 is the fifteenth triumph for Audi. In 2004,
the “Golden Steering Wheel” went to the Audi A6.
Dazzling array of new products at
Detroit
Audi surprised visitors to the Detroit Motor Show in
January 2006 with three world firsts. The Audi S6* kicked
off at the press conference with its 309 kW (420 bhp),
ten-cylinder FSI engine. Audi then unveiled a vehicle
with an entirely new space concept, an evolutionary
formal idiom and an array of technological innovations
in the guise of the Roadjet Concept study. The third
model making its debut was the Audi Q7, with the
newly developed 3.6-litre FSI engine*. The six-cylinder
engine develops 206 kW (280 bhp) at 6,200 rpm. The
peak torque of 360 Nm is available at just 2,500 rpm
and permits a commanding, relaxed driving style.
Two millionth Audi quattro:
The triumph of an idea
There is no stopping quattro: the two millionth Audi
with permanent four-wheel drive, an A8 6.0 L quattro*
with a twelve-cylinder engine, now has a celebrity
owner. One of the most successful German pop stars
of the past few years, Xavier Naidoo, collected the car
in Neckarsulm last December. Audi revolutionised the
car industry in 1980 by unveiling the first Audi quattro.
Four-wheel drive means greater traction, better handling and superior driving safety, as confirmed by
countless awards and test results. There are currently
74 four-wheel drive versions in the Audi model range.
94
A8: Executive Car
of the Year
Innovative brake system
in the luxury class
The Audi A8 was able to fend off its challengers in the
poll for the “Executive Car of the Year”. The Audi A6
came second in the deluxe midsize class. Around
12,000 directors, managers and self-employed people
participated in the poll, which was organised by the
business magazine Impulse. The award for the Audi
A8, the results of which were announced in September
2005, adds to the long list of awards that Audi’s top
model has scooped in recent years. The Audi A8 is
available in four engine versions and two body
designs. In the opinion of trade journalists, the luxury
saloon sets new technical and ergonomic standards,
for instance with its aluminium body and the awardwinning MMI operating system. Modern diesel and
petrol engines and quattro permanent four-wheel drive
highlight the unique status of the Audi A8.
Better braking performance, lower weight and
longer operating life: the carbon fibre reinforced
ceramic brake discs that first appeared on the
twelve-cylinder A8* offer considerable advantages
compared with conventional steel brake discs. The
innovative brake discs are made from a ceramic
material that is reinforced with carbon fibres. The
composite material is not susceptible to corrosion
and is around 50 percent lighter than steel. The
high abrasion resistance of the ceramic discs
quadruples the operating life of such a brake disc
to as much as 300,000 kilometres. The ceramic
brakes were first made available on the twelvecylinder A8 in July 2005. They are also available on
the new Audi S8*.
Audi steps up involvement in DTM
Audi will continue to focus on the DTM in future and is
even stepping up its involvement in the most popular
international touring car race series in the 2006 season. With Audi works driver Mattias Ekström capturing
the title in 2004 but Audi being pipped to the post last
season, its aim is now to wrest the title back from Mercedes-Benz. Two of the leading German premium car
brands are thus pitted directly against each other in
the DTM in 2006. This is a repeat of the duel between
the legendary “Silver Arrow” models of Auto Union and
Mercedes-Benz that captivated spectators 70 years
ago. Audi will be entering an advanced version of
the A4 DTM. In addition to modifications to its aerodynamics and suspension, it features a newly developed
V8 engine.
* fuel consumption figures at the end of the Annual Report
95
Today’s profits are
tomorrow’s success
How does a company hold its ground on the market at a time when the underlying conditions are becoming much tougher? Rupert Stadler, Board Member
for Finance and Organisation for the past three years, on weathering adverse
conditions, staying-power and a healthy measure of dissatisfaction.
96
Finance
“If you always follow in the footsteps
of others, you’ll never overtake.”
Mr. Stadler, you took charge of the Finance and Organisation department on April 1, 2003, becoming the youngest Board Member in the
process. How are you faring now?
Stadler: Excellently! Mind you, I feel like I’ve been here for
years. I have been very well received by the company and have come
to appreciate being part of an outstanding team in the last few years.
The changes in the market and also exchange rate movements
have presented us with a stiff challenge in recent years. And the
intensity of competition has increased substantially. All that has
prompted us to become very closely knit over the past few years. We
have been working very hard, and our industry has paid off. It is my
impression that Audi’s ability to weather adverse conditions has
improved substantially. That fills me with pride. But it is also clear
that we cannot afford to rest on our laurels.
It sounds as if you have had rather a strenuous time. How do you
keep fit?
Stadler: I’m something of an endurance sports fanatic. I love
riding my racing bike, and I go running. The latter is even possible
when I’m away on business if I can plan it in. But there, too, it’s
always a question of willpower and staying-power. It’s like your
work: you always have to overcome a certain pain barrier. And my
wife also knows that the whole family benefits if I can fit in an
hour’s running through the woods after a hard week’s work.
How do you rate Germany’s current fitness as an industrial location?
Stadler: In my opinion, Germany is in better shape as an industrial location than people keep making out.
But its mental constitution is somewhat ailing, and its training
condition also leaves something to be desired. In this connection, we
like to talk of the tolerability factor – and that is something that concerns every one of us. I think we’ve been a little spoiled by the many
years of prosperity. So our perception of what is genuinely intolerable and what is merely uncomfortable has become rather clouded.
As entrepreneurs, we have all been aware of the need for
reforms, both political and economic. That’s the only way the climate of consumption and investment can recover. These reforms
concern each and every one of us: a leisure society that is not capable of performing is not viable in a globalised economy. So social
responsibility should not be interpreted as meaning that we can
never change a thing.
Germany achieved success through its pioneering spirit, inventions and innovations. Some people are still sunning themselves in
the light of their past achievements.
We need a little more faith – faith in our own ability, as well
as the desire to perform. We need to make sure that we restore
Germany’s long-term competitiveness as an industrial base. I believe
the much-cited shake-up that Germany needs is long overdue.
Yet Audi has still managed to build vehicles profitably in Germany in
the past few years …
Stadler: Yes, precisely because we were never content to rest
on our laurels even though we kept bettering our own records. Our
brand thrives on moving forward. We have our products and innovations on the one hand and a highly qualified team on the other to
thank for that. These factors help us to maintain our standards of
quality day in, day out, while ensuring that we use our resources
optimally. It’s only natural that an entrepreneur should keep
reassessing processes, costs and investment. The important thing is
that customers sense our passion for quality and our attention to
detail. They will affirm the esteem in which they hold us by investing
in our brand, in other words by buying one of our vehicles. That’s
where I see a very complex cycle being completed.
It all sounds as if you can afford to sit back and relax, now that you
have everything under control.
Stadler: No, quite the contrary. Being equipped for the future
depends on having ambitious goals. There’s a nice saying that goes “if
you always follow in the footsteps of others, you’ll never overtake”.
As a sporty driver, that’s why I prefer to flick my indicator and overtake. And believe me, my colleagues on the Board are just as fond of
getting a move on as I am. Ultimately, we have set ourselves the goal
of selling around one million Audi vehicles worldwide each year
from 2008, with a return on investment of more than 10 percent …
every year, that is! We are not interested in one-off successes. That’s
also why we adopt a very long-range view in our corporate planning.
What does that mean in concrete terms?
Stadler: The basis for profitable, sustainable growth is fundamentally a product range tailored to our target group. That’s the
essential thing for our company. We will consequently be unveiling
six additional models and other new derivative products by 2008.
That will promote penetration of our existing markets and underpin
our ambitions to expand in new markets. There will also be the occasional product, such as our Audi R8, that will further enhance Audi’s
brand image and emotional appeal. As a consequence, image and
prestige will be further stimulated. We will also be doing quite a bit
to improve the range of services available to our customers.
Could you elaborate on that? In order to grow, you will first of all
need to increase your financial outlay. So how can you hope to
increase your profits during that phase?
Stadler: You know, over the past few years adverse conditions
have taught us how to use limited resources very sparingly and above
all very profitably. And we’ve demonstrated our ability to achieve
profitable growth at the same time as renewing almost our entire
product range. I think the training camp we’ve been attending has
got us into good shape as a company, but it’s still not enough. That’s
why the Board of Management has drawn up a training plan for the
next three years that we now need to implement systematically: the
spotlight is naturally on investment spending, processes, structures
and productivity. But above all on the people who then have to
manage it all.
97
“A measure of dissatisfaction has always
acted as the driving force behind performance and entrepreneurial success.”
And that means?
Stadler: Product and investment decisions will more than ever
be gauged by tougher objectives. And the intelligent, disciplined use
of modular toolkits plays a vital role in this process. The result will
be a measurable improvement in productivity, both directly and
indirectly. By focusing clearly on our core skills, we really ought to
be capable of yet further substantial growth. We can then be judged
each year by the progress we have achieved.
Mr. Stadler, it all sounds very positive. Have there been things in the
past that have not turned out to your satisfaction?
Stadler: Of course. But a measure of dissatisfaction has always
served as the driving force behind performance and entrepreneurial
success. Anything else would be contrary to our business philosophy.
We are no fair weather flyers, we prefer to tackle problems head
on. But the fact is that we’re finding the situation in the USA, for
example, more energy-sapping than we had initially supposed. We
are making steady progress with our team on the ground and are
gradually improving the business position in a very difficult context.
But as an RS 4* driver I’m no friend of speed limits. I know, however, that I am not the only person in the world. I think I, and my
colleagues too, are simply driven on by a healthy impatience.
How are you planning to narrow the gap between your sales figures
and those of your core competitors in that market?
Stadler: The thing I find unsatisfactory is the speed with which
we are moving forward in the USA. But an endurance athlete knows
his goal, and shows huge commitment to reach it. What matters is
that you must never give up. We assumed independent responsibility
for sales of our vehicles in the USA in 2004. We will be adopting a
clear strategy to manage and steer our sales activities in the so-called
“metro markets” more actively. We will continue to invest in the
quality of our team in order to do that. Another important step
upwards will be to improve our product quality in the long term –
and therefore to keep redeeming our product pledge “Made by
Audi”. In terms of brand image, too, we will make up ground in the
USA. What we have achieved in Europe in recent years will serve as
a hard-and-fast benchmark. We have already taken the first few successful steps with our new models. And the response to our latest
vehicle, the Audi Q7, is highly promising.
Mr. Stadler, to wind up this conversation could you give us a preview
of what we can expect in 2006?
Stadler: First of all, we will be launching a raft of exciting
products in 2006. Our impressive list of model launches, comprising
the Audi Q7, the new TT, the S3, S6* and S8* and the Audi A6 allroad quattro, will help us to complete the next stage of our training
programme successfully. We are absolutely convinced that they will
not only appeal to our existing customers, but also attract new target
groups to our brand. Nevertheless, the competitive arena is not going
to get any easier, and various macroeconomic indicators suggest that
the market will remain as tough as ever. That’s why we are focusing
our efforts specifically on the intrinsic productivity and efficiency of
our company and of the partners that we work with. If you want to
succeed, three factors must come together: you need to know what
you are doing, you need to love what you are doing, and you need to
believe in what you are doing. All three elements are very deeply
rooted at Audi.
| The interview was conducted by Martin Primus.
“You need to know what you are doing,
you need to love what you are
doing, and you need to believe in what
you are doing.”
98
* fuel consumption figures at the end of the Annual Report
Finance
A babel in Germany’s midst?
The story of the building of the
Tower of Babel, as recounted in the
Bible in the Book of Genesis, epitomises a human trauma: the inability
to communicate with another person
because each speaks a different
language. At a time when the world
appears to be drawing closer
together and barriers to the crossborder movement of goods are
coming down, it is becoming increasingly important to have a common,
internationally recognised language
in the sphere of accounting, too.
But is it really possible to venture
through the capital market without
a navigation system or translator?
Accounting has moved centre stage amid the array of communication measures aimed at the capital market. Once a year, companies
seize the opportunity to bare their innermost thoughts – their figures, forecasts, risks and strategies – and report on them at length.
Their target audience includes not just shareholders, but also
customers, competitors and all those interested in the company. The
annual report thus doubles up as a company’s calling card: far from
being a set of faceless accounts, the modern financial report
provides an emotionally charged but also well-founded insight into a
company, arouses interest in it and ideally fulfils the requirement
to be informative virtually as a routine affair. In other words, in such
a way that the reader does not feel overwhelmed by the plethora
of details.
More than an instrument for counting money
Every annual report is intended to provide the reader with the
relevant data and facts on the year in question. The focus of interest
is, of course, commonly on the financial results and therefore on the
company’s accounts. Yet accounting has long since ceased to be
solely the task of those who keep the books – and the balance sheet
no longer involves simply totting up various assets and liabilities. It
is more than a mere instrument for counting money, even though it
must summarise all monetary items. The objective of accounting is
99
Finance
Prof. Karlheinz Küting and the colleagues at his
institute (www.iwp.uni-sb.de) are considered the
leading authority in Germany on all matters
concerning accounting, and have been advocating
a strongly practical approach to research and
teaching for around the past 15 years. In addition,
Küting has for some years been holding seminars
on aspects of group accounting and on practical
aspects of IFRS accounting for representatives of
the profession and of companies (for further details,
visit www.leistungsakademie-bareither.de).
to provide as accurate as possible a picture of the economic reality
– this, at least, is the ambition of accounting standards and the
expectation of every annual report’s target audience.
Its primary purpose nowadays, therefore, is to take stock of
opportunities and risks, and to communicate the management’s
assessment of the company’s future. In other words, it seeks to
create order out of chaos – indeed, has been attempting to do so
for over 500 years, because in 1494 Pacioli, who is often referred
to as the founding father of modern accounting, wrote “ubi non
est ordo, ibi est confusio”: where there is no order, confusion will
arise. And that is precisely what must be avoided. It is all about
time expertise, the ability and talent to make assessments with the
necessary awareness of the temporal context.
Navigating reliably through parallel worlds
Achieving this objective is rendered more difficult by the coexistence of many different accounting systems, the differences
between which are sometimes considerable. Companies disclose
both fiscal results and the profit proposed for distribution to their
shareholders – the former based on national tax law and driven by
fiscal interests, the latter on the basis of the German Commercial
Code (HGB), which focuses consistently on the protection of creditors. As if this were not enough, the International Financial
Reporting Standards now commonly serve as the basis for communication with the capital market. If a German company is also
listed in the USA, it will in addition need to publish a set of
accounts in compliance with American law – the United States
Generally Accepted Accounting Principles (US-GAAP). Although
all these standards have the purpose of presenting information in
a “true and fair” manner, the underlying objectives of the various
accounting systems differ. And the accounting terminology used
varies along with these objectives. The result is a babel of languages
on the capital market. At present, the big challenge that companies are facing is how to obtain a reliable means of navigating
100
between parallel sets of accounts, while guiding the reader – the
recipient of the information – through the thicket of information
provided.
Uniform language – the challenge of the future
The German capital market has espoused the much-acclaimed
advantages of an accounting system that emphasises fair value, is
forward-looking and comprises a strong element of forecast: it
increasingly speaks the language of IFRS – even though IFRS is
anything but an accessible language, let alone a clear one. It is
nevertheless right and important that the capital market should
be striving to find a uniform language. As well as the commodity
markets, capital market information needs to become more readily comparable and uniform. But we still have a long way to go
before the babel-like situation in Germany is disentangled. This
can only be accomplished through a joint effort by standardsetters, companies, auditors, financial analysts and banks, and
undoubtedly also universities and accountancy teachers. This is
required if all capital market operators are ultimately to be steered
unscathed through the forest of accounting systems, and unfulfilled expectations and thus disillusionment avoided.
No real alternative to parallel systems
IFRS is the language of the future, at least as far as the capital
market in Germany and Europe is concerned. But HGB will not
disappear: it remains the predominant accounting language
among mid-corporates; by virtue of being closely dovetailed with
tax law, it will continue to dominate the individual financial statements of all companies, whether big or small, whether focused on
the capital market or not – and influence the determination of
profits in fiscal terms. But much would be achieved in Germany
if we could at least stamp some order on our babel of languages
to the extent that the only distinction required in future would
be between HGB accounting, with its focus less on the capital
market than on the individual financial statement, and the capital
market language of major corporations. This would at least facilitate navigation and communication within the annual reports
and individual and consolidated financial statements of German
companies.
| Prof. Karlheinz Küting, Dipl.-Kfm. Christian Zwirner
Audi Group
Management Report of the
Audi Group for the 2005
financial year
Consolidated Financial
Statements of the Audi
Group at December 31,
2005
Finances 2005
Corporate Governance
102
Audi shares
103
Business and underlying situation
The Group
Corporate steering
Research and development
Employee matters
Audi in society
Environmental aspects
Underlying economic situation
Business progress
Financial performance
Net worth
Financial position
Report on post-balance sheet date events
Risk report
104
104
105
106
108
110
112
113
115
121
123
125
125
126
Report on expected developments
129
Independent Auditor’s Report
132
Declaration of the AUDI AG Board of Management
133
Income statement
134
Balance sheet
135
Cash flow statement
136
Statement of changes in equity
137
Notes to the consolidated financial statements
Development of fixed assets in the 2005 financial year
Development of fixed assets in the 2004 financial year
General information
Recognition and measurement principles
Notes to the consolidated income statement
Notes to the consolidated balance sheet
Notes to the cash flow statement
Other particulars
Segment reporting
German Corporate Governance Code
Details of the Supervisory Board and Board of Management
Events occurring after the balance sheet date
138
138
140
142
146
151
157
169
169
174
175
175
178
Statement of interests held by the Audi Group
179
Fuel consumption and emission figures
180
101
Corporate Governance
Additions to Code in 2005
In 2005, the Federal Ministry of Justice announced various changes to the German Corporate
Governance Code in the version dated June 2, 2005. The Board of Management and
Supervisory Board considered the modified Code in the past financial year and passed
appropriate resolutions.
Implementation of the
recommendations and
suggestions
The Code in the version dated June 2, 2005 is complied with. However, the restrictions apply
that AUDI AG will not disclose the remuneration of members of the Board of Management
(Section 4.2.4 Sentence 2) or the remuneration of members of the Supervisory Board
(Section 5.4.7 Para. 3 Sentence 1) individually, in order not to infringe privacy rights.
The Code’s suggestion of taking long-term performance into consideration in the
Supervisory Board’s remuneration (Section 5.4.7 Para. 2 Sentence 2) and taking one-off
variable components tied to business success into consideration in the Board of
Management’s remuneration (Section 4.2.3 Sentence 2) is not currently implemented by
AUDI AG, as the debate in specialist quarters as to the specific form to be taken has still not
been brought to a close. The outcome of this debate is to be awaited.
The restriction moreover applies that the elections to the Supervisory Board do not take
the form of election of individuals (Section 5.4.3 Sentence 1). Elections by list are a common
practice in democratic elections. The following qualifications moreover continue to apply to
the suggestions made in the Code: the Annual General Meeting will not be broadcast on the
internet (Section 2.3.4) in order not to infringe individual shareholders’ right to privacy. The
scope for absent shareholders to contact the company’s proxy exercising voting rights
(Section 2.3.3 Sentence 3, 2nd half of sentence) even during the Annual General Meeting is
not relevant, as the Annual General Meeting is not broadcast on the internet.
Particulars pursuant to
Section 6.6 of the Code
No notifiable acquisition and sale transactions were carried out in the past financial year.
Stock option schemes and
similar securities-based
incentive arrangements
AUDI AG does not offer any such schemes or incentive arrangements.
System of remuneration
The basic principles of the system of remuneration for the members of the Board of
Management are described in detail in the Notes to this Annual Report, under “Details of the
Supervisory Board and Board of Management”. This information is also available on the
company’s website (www.audi.com/notes).
Internet declaration
on the Code
The joint declaration of the Board of Management and Supervisory Board of AUDI AG on the
recommendations of the German Corporate Governance Code was placed on the Audi
website (www.audi.com/cgk-declaration) on December 7, 2005.
102
Audi shares
Stock market
developments
For the first few months of 2005, share prices on most stock markets remained within a
narrow range. From the end of the second quarter, however, the market mood turned much
more positive. Driven by sustained robust growth in the global economy, high levels of liquidity and rising business profits, the markets reached new highs by the end of the year.
Nor did terrorist attacks, natural disasters or record-breaking raw materials prices succeed
in denting investors’ new-found confidence to any lasting degree.
The German Share Index (DAX) demonstrated a notable overall upward trend during the
year under review. After a lifeless start to the year, Germany’s lead index fell to a year-low of
4,157.51 points in April. As share prices gained momentum on the international markets
from May onwards, the DAX too rose steadily, reaching its highest level since early 2002 in
December, at 5,496.96 points. The DAX closed the year on 5,408.26 points.
The Prime Automobile, the sector index for German automotive shares, produced a similar performance. After starting the year on 350.81 points, the index fell to its year-low of
335.49 in April. From May, the index climbed steadily, touching its year-high of 481.19 points
in October. Following a phase of consolidation, the Prime Automobile closed the year on
453.24 points.
Audi share price trend
Audi shares started the year on EUR 219. After rising briefly to EUR 265 in February, the
share price started to move sideways, remaining within the range of EUR 230 to 240 until
October. The shares appreciated considerably at the start of November, reaching a year-high
of EUR 325. Audi shares closed the year on EUR 308.
Profit transfer and
compensatory payment for
shareholders
Volkswagen AG controls around 99 percent of the share capital of AUDI AG. On the basis of
the control and profit transfer agreement between Volkswagen AG and AUDI AG, Audi’s
outside shareholders receive a compensatory payment instead of a dividend. The compensatory payment is equivalent to the dividend paid on one Volkswagen AG ordinary share for
the same financial year. The level of this dividend for the 2005 financial year will be determined by the Annual General Meeting of Volkswagen AG on May 3, 2006.
Audi share price trend
International Securities Identification Number (ISIN): DE0006757008, German Securities Identification
Number (WKN): 675700
EUR
2001
2002
2003
2004
2005
300
250
200
150
100
50
0
Highest
Year-end price
Lowest
103
Management Report of the Audi Group
for the 2005 financial year
Business and underlying situation
The Group
Company
Audi is one of the world’s leading automotive premium brands, and builds high-quality,
innovative cars that are among the most admired on the world market. Its pioneering concepts in the domains of general company management and technological refinement constitute the basis of its success. The customers’ wishes are placed at the very heart of its
unceasing quest to find ever better solutions. Audi’s philosophy is reflected in the brand
essence “Vorsprung durch Technik” and manifested by the brand values sportiness, sophistication and progressiveness.
Customers are able to experience the brand claim in particular through the innovative
range of models. The Audi Group was consequently yet again able to consolidate its position on car markets worldwide in 2005.
Audi vehicle sales by region
2005
%
Germany
247,125
29.8
Europe excluding Germany
371,995
44.9
USA
83,066
10.0
China
58,878
7.1
Other
68,045
8.2
Total
829,109
100.0
Group structure and principal group companies
The group headquarters, with the core areas Administration, Sales and Technical Development, are located in Ingolstadt, as are substantial parts of the production operations.
Production at this location comprises the models A3, A3 Sportback, A4 saloon and Avant,
and S4 saloon and Avant. The bodies for the TT Coupé and TT Roadster are also manufactured in Ingolstadt.
The models A6 saloon and Avant, A8 and RS 4 are built at the second German location,
Neckarsulm. Production of the S6 saloon, S6 Avant and S8 is due to commence there in
2006.
AUDI HUNGARIA MOTOR Kft. develops and builds engines for AUDI AG and other Volkswagen Group companies in Győr (Hungary). Production of the TT Coupé and TT Roadster
furthermore takes place there. This company has also had its own toolmaking shop since
2005. AUDI HUNGARIA MOTOR Kft. is Hungary’s largest exporter and one of the country’s
highest-revenue enterprises.
Automobili Lamborghini S.p.A. is based in Italy. Located in the Bologna region, the company builds the extreme and uncompromising luxury sports cars Gallardo Coupé, Gallardo
Spyder, Murciélago Coupé and Murciélago Roadster.
AUTOGERMA S.p.A., a subsidiary of Lamborghini Holding S.p.A., is the company via
which the Audi Group sells both Audi vehicles and models of other Volkswagen Group
brands in Italy.
The company quattro GmbH, with operations at both Ingolstadt and Neckarsulm, currently has a workforce of around 420 and manufactures the RS range of high-performance
vehicles, such as the Audi RS 4. In addition, quattro GmbH will be building the Audi R8 midengined sports car, which will be available from 2007. Its products furthermore include a
comprehensive customisation range (e.g. S line, exclusive line) for all Audi models.
104
Principal companies within the Audi Group
AUDI AG
AUDI HUNGARIA
MOTOR Kft.
Automobili Lamborghini
Holding S.p.A.
Automobili Lamborghini S.p.A.
Lamborghini ArtiMarca S.p.A.
Lamborghini Motori Marini S.p.A.
AUTOGERMA S.p.A.
quattro GmbH
Principal sales
subsidiaries
(fully consolidated)
Audi Australia Pty Ltd.
Audi Brasil Distribuidora de Veículos Ltda.
AUDI DO BRASIL E CIA.
Audi Japan K.K.
Audi Volkswagen Korea Ltd.
Audi Volkswagen Middle East FZE
Audi Synko GmbH
The Group
Volkswagen AG currently holds around 99 percent of the share capital of AUDI AG. A profit
transfer and control agreement exists with the former. The consolidated financial statements of AUDI AG are included in the consolidated financial statements of the Volkswagen
Group.
The following changes to the Audi Group occurred in the past financial year:
Audi Volkswagen Korea Ltd., Seoul (South Korea), and the newly established Audi Volkswagen Middle East FZE, Dubai (United Arab Emirates), were included in the consolidated
companies for the first time.
The 51 percent share in AUDI SENNA Ltda., São Paulo (Brazil) was increased to 100 percent and the company renamed Audi Brasil Distribuidora de Veículos Ltda., São Paulo (Brazil). COSWORTH TECHNOLOGY LIMITED and its fully-owned subsidiary COSWORTH
TECHNOLOGY Inc. were withdrawn from the group with effect from January 1, 2005.
Profit transfer agreements exist between AUDI AG and the principal companies Audi Vertriebsbetreuungsgesellschaft mbH and quattro GmbH.
All shares in Audi Synko GmbH were transferred to Volkswagen Retail GmbH (formerly
Volkswagen Synko GmbH) with effect from January 1, 2006. The profit transfer agreement
between AUDI AG and Audi Synko GmbH was moreover terminated as a result of this transaction.
Corporate steering
Strategy
The management and employees of Audi continued to work intensively on the company’s
strategic direction last year, always with the vision of becoming the most successful premium brand in the world. 2005 saw the implementation of specific measures which sought
to underpin these strategic growth objectives.
Audi’s strategy provides answers to the major challenges of the future by tackling the following four target dimensions: attractiveness as an employer, further development of the
brand, maximum customer delight, and an enhanced quality of financial results. These targets are closely interlinked and build on each other.
Audi will only be able to develop and hold onto an expert, dedicated team of top performers if it is an attractive employer. Survey results are already indicating that Audi is re-
105
garded as one of the most attractive prospective employers, not just among university
graduates.
A very strong, desirable brand provides a sound basis for lasting success, particularly in
times of intensive competition. Audi will consequently continue to build on its current image position, focusing above all on the facets of emotion and quality. Customer loyalty and
the brand’s ability to captivate new customers will thus be further strengthened.
The growth of the brand is nevertheless fuelled not simply by more effective market exploitation, but also by tapping into new growth markets. The central success factor here is
exciting cars: new product families and derivatives are consequently being added to the
range.
An intelligent vehicle architecture helps to bring about an appreciable improvement in
the profitability of the entire company.
Internal steering system
The Audi Group’s internal steering system takes as its basis the return on investment (RoI). It
permits the assessment of investment projects of various types and magnitudes in terms of
the return on the capital employed. The return on investment thus reflects the development
in the company’s profitability and is calculated using the following formula:
Return on investment (RoI) =
operating result after tax
invested assets
x 100 %
For the purpose of calculating the operating result after tax, the tax ratio for the group is
assumed to be 35 percent, based on the varying rates of tax paid by the various group companies.
EUR million
2005
2004
Operating result before tax
1,417
1,238
– Tax (35%)
496
433
= Operating result after tax
921
805
Average operating assets
11,608
11,371
– Non-interest-bearing liabilities
2,150
2,120
= Invested assets
9,458
9,251
9.7
8.7
Return on investment (in %)
For the 2005 financial year, the return on investment for the Audi Group is 9.7 percent. Audi
is consequently on the way to achieving a long-term return on investment in excess of 10
percent, making it one of the most profitable car companies.
Research and development
Innovation and quality are important success factors. A company-wide programme with the
aim of further improving core skills in the field of vehicle development was therefore
launched in 2005.
To this end, 5,921 (5,503) people were employed within the Research and Development
area of the Audi Group at December 31, 2005, made up of 5,685 (5,272) at AUDI AG, 98 (87) at
AUDI HUNGARIA MOTOR Kft., and 138 (144) at Automobili Lamborghini S.p.A. The 7.6 percent rise in the number of employees reflects the ever stronger claim of the Audi Group to
the title of technology leader.
106
Research and development expenditure recognised as an expense
EUR million
Research expenditure and development expenditure not recognised as an intangible asset
Amortisation and disposals of development expenditure
recognised as an intangible asset
2005
2004
999
746
586
468
1,585
1,214
Technical innovations
Audi Q7 hybrid
The Audi Q7 hybrid concept study represents a logical step forward in the domain of innovative drive concepts. Audi has for the first time combined a 4.2-litre V8 FSI petrol engine with
electric drive. The vehicle’s performance is high, and average fuel consumption compared
with the basic model is as much as 13 percent lower.
Audi magnetic ride
The innovative damping system Audi magnetic ride was unveiled in the Shooting Brake
Concept design study. This system establishes the correct damping forces in every driving
situation, thus optimising road behaviour and ride comfort.
Audi drive select
Audi exhibited a further innovation in the Roadjet Concept study vehicle at the Detroit Motor
Show. Audi drive select allows several entirely independent vehicle characteristics to be
preselected at the push of a button. Three modes directly modify the steering, damping and
transmission response, as well as the engine characteristic.
New engines
The new S8, which is equipped with an evolutionary 450 bhp, 5.2-litre V10 FSI engine, combines sportiness with a high standard of comfort. The technical expertise gleaned from the
engine of the Lamborghini Gallardo served as the basis for its development. The ten-cylinder
engine in the new Audi S8 is even more compact and light, as the number of components
has been reduced. The special features of this power unit are low moving masses and reduced internal friction, in conjunction with an ultra-dynamic power flow.
Highly innovative technology from Audi also features on the racetrack in the guise of the
new R10. This is the first racing car in its class to feature a 5.5-litre, twelve-cylinder TDI twinturbo engine. With an output in excess of 650 bhp and over 1,100 Nm torque, Audi will be
entering it in this year’s Le Mans 24 Hours to challenge for yet another overall victory. Like
TFSI technology before it, Audi is thus testing a new technology on the racetrack in order to
demonstrate its high performance and reliability.
Innovations that bring greater safety
Audi side assist, Audi lane assist
Innovations in the area of safety likewise enjoy top priority at Audi. Active safety systems
help to prevent accidents from occurring in the first place. Pioneering developments in this
area are Audi side assist, which is available for the first time in the Audi Q7, and Audi lane
assist, which was unveiled at the start of 2005 in the Audi allroad quattro concept. Audi side
assist helps the driver when changing lanes and alerts them to the presence of other vehi107
cles in their blind spot. Audi lane assist, on the other hand, alerts the driver as soon as they
cross the lane markings without having set the indicator.
The American Insurance Institute for Highway Safety (IIHS) awarded its highest possible
rating of “Double Best Pick” to the passive safety of the new models launched in the USA in
2005, the A3, A4 and A6. No other manufacturer has ever achieved this triple top score, a
fact which serves to highlight Audi’s expertise in this area.
Lightweight construction
Audi fires neutrons at specimens of material in the Technical University of Munich’s research reactor. This new technique now for the first time makes it possible to establish
material strain and therefore deformations in a non-destructive manner. The research object
is an innovative material mix of steel and aluminium, held together by punch rivets. The new
measuring technique supplies valuable data on the crash behaviour of the punch-riveted
connections. The aim is to refine lightweight construction and for example to use such
punch rivets in the future in areas where they can actually enhance crash behaviour.
Intelligent LED rear lights
A further new development that boosts safety is LED rear lights, which Audi has used for the
first time on the A6 Avant. They respond faster than conventional lights and memorably
enhance the design.
Audi’s engineers are in addition working on the “intelligent rear light”. This type of light
clearly signals an emergency brake application, thus reducing the risk of a nose-to-tail collision. With the aid of sensors, it moreover automatically adapts its intensity to the prevailing
light and visibility conditions.
Refined MMI
The biggest challenge for future infotainment and safety systems is not to overburden the
driver with information and cause them to be distracted from the road situation as a result.
Audi therefore sends test candidates on a virtual drive in a new, elaborately equipped laboratory. A 250-degree screen transports the candidates into various traffic scenarios. The
driver tries out the further-developed features of the Multi Media Interface (MMI) while
“driving”.
Employee matters
Workforce
The following table shows the total number of employees at the principal companies of the
Audi Group as an average for the year:
2005
2004
44,902
44,918
Ingolstadt plant
31,236
31,150
Neckarsulm plant
13,666
13,768
5,046
5,146
Lamborghini Group*
725
726
AUTOGERMA S.p.A.
836
770
AUDI AG
AUDI HUNGARIA MOTOR Kft.
* excluding AUTOGERMA S.p.A.
108
The Audi Group employed an average of 52,412 (53,144) people in 2005. The slight fall of 1.4
percent is substantially due to the hiving-off of COSWORTH TECHNOLOGY LIMITED with
effect from January 1, 2005.
The workforce of AUDI AG remained on a par with the previous year at 44,902 (44,918)
employees. The number of employees at AUDI HUNGARIA MOTOR Kft. fell slightly by 1.9
percent due to the end of TT production. The employee total for the Lamborghini Group
(excluding AUTOGERMA S.p.A.) was essentially unchanged from the previous year.
AUTOGERMA S.p.A. experienced an 8.6 percent rise in its employee total as a result of intensified sales activities.
AUDI AG employed a total of 2,236 (2,181) apprentices at the end of 2005. Of this total,
2,061 (2,011) were engaged in industrial activities and 175 (170) in the technical/clerical area.
The proportion of people with severe disabilities in relation to the total workforce of AUDI
AG was 5.1 (5.0) percent at the end of the year.
Audi in addition awards contracts to “Lebenshilfe” workshops for disabled people in the
Ingolstadt and Neckarsulm regions.
Attendance figures
%
2002
2003
2004
2005
96.1
96.6
96.9
97.0
97.0
96.5
96.0
AUDI AG was able to achieve a new record high of 97.0 percent attendance for 2005 and
thus build on the welcome trend of recent years. This result was made possible by countless
initiatives within the company and the dedication of all employees.
Company agreement: “Audi’s Future – Performance, Success, Sharing”
The management and General Works Council of AUDI AG, in consultation with the parties to
pay agreements, reached consensus on the content of the new agreement entitled “Audi’s
Future – Performance, Success, Sharing” on April 8, 2005. The conclusion of the agreement
represents a clear affirmation of Germany’s future as an industrial base with the goal of
combining competitiveness with job security. From its position of strength, Audi is consequently taking precautionary measures for the future.
Key aspects of the agreement:
Job security
There will be no redundancies for operational reasons before December 31, 2011. The Ingolstadt and Neckarsulm plants are to be integrated into a flexible production hub in order to
assure a constant level of capacity utilisation.
109
Industry-related services
Separate negotiated working hours and pay arrangements have been agreed with employees performing industry-related service tasks, such as catering, office and security services,
in a supplementary collective agreement in order to improve competitiveness compared
with external service providers.
Flexible working hours
To increase the flexibility of working hours, so-called flexi-shifts have been introduced in
conjunction with open-ended time accounts, which replace supplementary payments with
time credits subject to certain conditions.
New Audi remuneration system
The general collective agreement on pay (ERA), which will be introduced from 2007, sets out
a new Audi remuneration system. This redefines the performance-dependent component of
the profit-sharing arrangements for employees.
Vocational training
The number of apprenticeships available has been increased by 40 percent in recent years.
Audi furthermore handles the start of a person’s career more flexibly: time spent as a “journeyman” – including, as necessary, assignments to other group companies, suppliers or
outside companies – contributes towards professional qualifications and helps to broaden a
person’s specialist and personal horizons.
Health and fitness
The “Audi Check-Up” will act as a core element in promoting the health and fitness of all
AUDI AG employees over the next few years. This scheme will gradually draw the entire
workforce – on a voluntary basis – into a diagnosis and prevention programme tailored to
the individual’s age and representing the state of the art in medicine.
Other components of the agreement include the promoting of the personal development of
all employees, of equal opportunities and of the compatibility of work with family life.
Audi in society
Promoting culture
Summer Concerts
AUDI AG has long been involved in promoting art and culture. One major aspect of this involvement is the season of Summer Concerts, now renowned well beyond the region, that
Audi has been organising at various venues in the Ingolstadt area since 1990 with a view to
enriching cultural life in and around its home city. The Summer Concerts again took “Vorsprung – Experienced Live” as their motto in 2005. The blend of different musical currents
was aimed increasingly at a younger audience. The programme ranged from classical to
pop, from jazz to hip hop, from musical to soul, with a liberal helping of cross-over, too.
European College of Arts
The “European College of Arts” in Berlin, a unique development scheme for talented artists
from seven European states, was initiated among others by AUDI AG. A high-ranking jury
selected three students to spend nine months in Berlin creatively interpreting and developing their ideas on how Europe is changing. The artists also spent some time in Ingolstadt as
part of this scheme. Audi thus built a bridge between industrial work, mobility, advanced
technology and artistic reflection.
110
Social involvement
Fundraising campaigns
The corporate social responsibility (CSR) of a company depends on its readiness to show
steadfast, lasting involvement.
A core component of Audi’s corporate culture in the social and regional context is the
Christmas appeal, first launched in 1977 by the Works Council and repeated every year
since. In 2005, the workforce at Ingolstadt and Neckarsulm donated EUR 526,848. The management topped up this amount, with the result that EUR 686,848 in total was available at
both locations for supporting local charities and organisations.
Audi’s solidarity with the victims of the tsunami disaster made it possible to send money
to aid reconstruction in the affected regions within a very short space of time.
Many employees donate the spare cents from their monthly earnings to the appeal “One
Hour for the Future”, which provides financial support for projects helping street children in
Germany and at other international locations of the Volkswagen Group. The employees and
management donated a total of around EUR 1.1 million to this cause in 2005.
Public-private partnerships
In Germany alone, there are around 45,000 people employed at Audi plants. The group consequently shares responsibility for the home towns and regions where its plants are based,
Audi’s response taking the form of various projects that promote “a spirit of neighbourliness
around the Four Rings”.
New partnership for Neckarsulm Technical Institute
Through a university-level partnership between AUDI AG and the University of Stuttgart and
the Technical University of Karlsruhe, an academic centre of expertise where research and
practical work will go hand in hand has now also been established in Baden-Württemberg.
As well as encouraging young scientific researchers, the resulting Neckarsulm Technical
Institute (HIN) will in particular enhance innovative prowess and the attractiveness of the
location. The existing university-level partnership between AUDI AG and the Technical University of Munich (INI.TUM) has already successfully established its reputation as a place of
interdisciplinary cooperation.
Exceptional, enduring technological expertise is being systematically built up in partnership with these universities. Highly qualified people will thus receive an opportunity to conduct scientific research at Audi’s locations.
Collaboration with the city of Ingolstadt
AUDI AG cooperates with the city of Ingolstadt in many areas. One topical example is the
school routes map presented to over 5,000 primary-school and pre-school children at the
start of the school year last autumn. This map is based on the municipal “Geoportal” computer system and provides children and parents alike with a vivid, printed guide on how to
get to school and back home safely.
A further example of local patronage is the support we have lent to the establishment of
the Endowed Chair of Tourism at the University of Eichstätt-Ingolstadt. The aims of this
partnership are to communicate the specialist background to the organisation of tourism at
Audi plants, to support the development of regional tourism and to develop EichstättIngolstadt as a centre of academic research.
111
AUDI AG is in addition a founder member of the Citizens’ Foundation established by the
city of Ingolstadt. By supporting social, ecological and cultural issues, this foundation seeks
to give citizens and businesses the opportunity to have a long-term say in the shaping of
their city and the way its inhabitants coexist.
Environmental aspects
Environmental management
ISO 14001 standard calls for a system audit to be conducted within the context of environmental management systems and certifies the company’s environmental performance by
means of a corresponding certificate. A validation in accordance with EU regulation
761/2001 (EMAS II) includes the requirements of ISO 14001 as well as stipulating ongoing
improvements and the compilation of a standardised environmental declaration. The Audi
Group already meets these requirements in full at its Ingolstadt, Neckarsulm and Győr locations.
Organisation of environmental protection in the Audi Group including SEAT, S.A.
Coordinating Committee for Environmental Protection
Environmental
Management Officer
Automobili Lamborghini
Holding S.p.A.
Production plant:
Sant‘Agata Bolognese
(Italy)
Steering Committee
for Ecology
AUDI AG
Production plants:
Ingolstadt,
Neckarsulm
(Germany)
Environmental
Management Officer
AUDI HUNGARIA
MOTOR Kft.
Production plant:
Győr (Hungary)
Environmental
Management Officer
SEAT, S.A.
Work group: End-of-Life Vehicles
Work group: Sustainability
Work group: Environmental Report
Work group: Environmental Management
Work group: IPP
Environmental Pact for Bavaria III
Audi is participating in the latest “Environmental Pact for Bavaria”, now in its third phase.
Under a joint venture, Audi will support an integrated product policy at its supplier companies.
As an expression of cooperation between the state and industry, working forums on focal
topics such as emissions trading, integrated product policies, renewable energies and administrative simplifications have been set up. The purpose of these working forums is to
promote incentives for environmentally compatible economic growth.
Fall in environmental pollution at group locations
The satisfying rise in production to around 812,000 vehicles in 2005 went hand in hand with
a reduction in environmental pollution at the group’s locations, thanks to the use of watersoluble paints, and intact water and waste cycles.
112
Since 2000, for example, 97 additional heat recovery systems have been installed at Ingolstadt, bringing an annual saving of around 38.5 million cubic metres of natural gas and
avoiding 76,400 tonnes of carbon dioxide emissions.
Fresh water purchases were furthermore reduced by 4.7 percent in 2005 compared with
the previous year. The water used for the production process was collected, purified and reused even more efficiently.
The company likewise succeeded in reducing VOC (volatile organic compound) emissions
by 4.3 percent.
For further detailed notes on environmental aspects, please refer to the Audi Environmental Report and the environmental declarations at www.audi.com.
Energy consumption at locations
Overall energy consumption
2001
2002
2003
2004
2005
MWh
2,037,462
2,096,823
2,069,552
2,113,741
2,138,848
VOC emissions*
t
1,662
1,564
1,677
1,338
1,280
Direct CO2 emissions**
t
181,023
176,855
165,148
161,142
170,706
Volume of waste water
m³
1,713,558
1,818,599
1,961,321
1,837,755
1,741,037
Fresh water purchased
m³
2,776,005
2,745,134
2,955,117
2,675,452
2,550,242
t
54,466
55,182
53,055
53,634
50,742
of which recyclable waste
t
31,313
31,484
29,001
28,751
28,923
of which disposable waste
t
23,153
23,698
24,054
24,883
21,819
t
245,150
267,903
266,856
288,940
295,549
Total volume of waste
Metallic waste (scrap)
Ingolstadt, Neckarsulm, Győr locations, from 2003 also Sant’Agata Bolognese
*
VOC: volatile organic compounds.
This figure comprises emissions from the paint shops, shipment preservative treatment for motor vehicles, test rigs and other facilities.
** CO2 emissions from own power generation activities.
This figure is made up of CO2 emissions from own power generation activities and CO2 emissions produced by the operation of test rigs.
Underlying economic
situation
Global economic situation
In spite of the sharp rise in energy and raw materials prices, the global economy enjoyed
stable growth in 2005, without achieving the vigour of the previous year. Low interest rates
worldwide helped to cushion the impact of surging oil prices. The USA and China acted as
the key driving forces of the global economy’s expansion. By contrast, economic growth in
Western Europe lagged behind the general trend.
In the USA, the dynamic performance of the economy and incipient inflationary tendencies necessitated a tightening of monetary policy. The economy was underpinned above all
by private consumption and capital equipment spending by companies.
The economy in Western Europe developed at a restrained pace in 2005, with noticeable
differences between the growth rates of individual countries. Weak internal demand in major national economies proved a major growth-inhibiting factor. Consumer restraint persisted in those countries as a result of high levels of unemployment and consumer unease.
Economic development was much more positive in Central and Eastern Europe, and especially in Russia.
113
With below-average economic growth, Germany found itself among Europe’s tail enders.
Whereas exports rose and yet again proved to be the mainstay of the economy, the slackness in consumption since 2002 persisted. This development was aggravated by the rising
energy prices, which noticeably diminished the purchasing power of private households.
Nor did the parliamentary elections and the new German government’s political agenda, as
set forth in its coalition agreement, provide any significant impetus to improve consumer
confidence in the remainder of 2005.
In the countries of South America, the vigorous economic upswing of the previous year
lost some of its momentum though the positive trend continued. In addition to export
growth for raw materials, certain countries also benefited from growing domestic demand.
China remained the growth centre in the Far East economic region in 2005. Despite the
rise in energy and raw materials prices, the Chinese economy expanded unchecked. In Japan, private consumption recovered, bolstering the country’s increasingly stable economic
growth.
International car market
The upward trend in worldwide demand for cars was sustained despite the sharp rise in fuel
prices in the course of 2005. Global sales of passenger cars and light commercial vehicles
amounted to 53.0 million units, representing an increase of 3.9 percent on the prior-year
figure. This development derived its momentum principally from Asian and South American
markets. In Western Europe and the USA, by contrast, car sales remained flat.
Following a weak start to the year and a phase of recovery, the Western European car
market (excluding Germany) yet again weakened and was 0.6 percent down on the prior-year
figure with 11.2 million registrations of new cars. In Great Britain, the second-largest car
market in Europe, the protracted period of growth finally came to an end in 2005. Registrations of new cars yielded by 5.0 percent there. In Italy, the figure was down 0.7 percent. In
Spain, the high market growth of the previous year was not emulated and the rate of growth
was only 0.8 percent. On the other hand, the French market provided positive news, with
growth of 2.7 percent.
In the USA, the car market in 2005 was dominated by drastic discounting campaigns
launched by US manufacturers, though this had only a short-term effect. Following growth
rates occasionally running into double figures in the summer months, car sales in the USA
finished the year just 0.5 percent up on the prior-year figure, at 17.0 million passenger cars
and light commercial vehicles. Particularly in the second half of the year, the sharp rises in
fuel prices prompted a downturn in sales.
As in the previous year, the positive development of the South American economy
rubbed off on the car sector. In Brazil, the largest market in the region, sales of passenger
cars rose by 8.8 percent to 1.4 million vehicles. In Argentina, market growth reached 36.3
percent.
The car market remained dynamic in the Asia-Pacific region. Unit sales totalled 12.4 million passenger cars, representing an increase of 8.6 percent. In the Chinese market, car
sales picked up again appreciably following a period of stagnation at the start of the year.
With 3.3 million vehicles sold, the market for 2005 as a whole was up 25.1 percent on the
prior-year figure. On the other hand in Japan, the largest market in Asia, registrations of new
passenger cars declined by 0.4 percent to 4.7 million units.
The German car market
After a weak start to the year, the German car market picked up considerably. Registrations
of passenger cars were up 2.3 percent on the previous year, at 3.3 million in the year under
review.
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The diesel share of total first-time registrations fell by 1.3 percentage points to 42.7 percent. In the early part of the year in particular, the debate concerning particulate filters unsettled consumers, preventing a better figure for diesel models, which experienced a
marked downturn in sales for part of the year.
Domestic car production likewise benefited from the development of the car market in
Germany. 5.3 million vehicles left the production lines, representing an increase of 3.0 percent on the previous year. The number of German-branded passenger cars built abroad was
on a par with the previous year, at 4.2 million units.
Exports by German manufacturers bettered the record level of the previous year. 3.8 million passenger cars, an increase of 3.5 percent, were exported. Of this total, just under 2.5
million passenger cars were exported to other Western European countries, representing an
increase of 4.6 percent. Exports to the USA, on the other hand, stagnated at just under
547,000 cars due to the adverse exchange rate.
Overall assessment by the management
The mixed performance of the global economy and rapidly rising raw materials prices have
placed key car markets increasingly under pressure and led to a further intensification of
global competition between car manufacturers.
The Audi Group initiated appropriate product, process and cost management measures
at an early stage in order to defend its long-term competitiveness despite the underlying
conditions described.
New record figures for production, revenue and sales for the past financial year already
serve to confirm the effectiveness of these measures.
Business progress
Procurement
Procurement within the Audi Group has the task of acquiring the most efficient suppliers
worldwide in terms of quality, service, innovativeness, reliability and economy. Strategic
partnerships are of considerable interest in this respect.
The cost of materials within the Audi Group amounted to EUR 19,139 (17,676) million in
2005. This comprises raw materials and consumables used as well as other purchased
goods and services.
Breakdown of the consolidated cost of materials by group company
18.0 %
Other group companies
15.0 %
AUDI HUNGARIA MOTOR Kft.
67.0 %
AUDI AG
The developments on raw materials markets represented a particular challenge in 2005.
Audi counteracts rising prices in particular through intensive partnerships with its suppliers,
as well as through long-term agreements.
China, India and Russia are of increasing interest as procurement markets. China in particular offers Audi valuable potential in view of the company’s production operations there
for the local market and its resulting knowledge of that supplier market.
115
The Audi Group continued to build on its successful purchasing instruments in the past
financial year.
Global sourcing – assessing the worldwide competitiveness of suppliers
Global sourcing is an ongoing process which seeks to secure lasting improvements in terms
of quality, service and price by scouring international markets.
Audi operates with 18 local purchasing teams (LPT) spread all over the world. These purchasing teams are the central points of contact for local suppliers in each procurement
market, and act as the interface with Audi. The task of the LPTs is to assess the potential of
the suppliers in their respective countries, and to assist them throughout the enquiry and
qualifying process with a view to developing them into suppliers for the production operations of the Audi Group.
Online negotiations
Online negotiations are used as an effective instrument alongside the “classic” negotiating
format, and accelerate the process by boosting market transparency.
Improving partner ties through supplier platform
The supplier platform www.vwgroupsupply.com now provides over 24,000 potential suppliers with the opportunity to access numerous different applications from the Development,
Procurement, Production and Logistics areas. All procurement processes are handled via the
platform according to a web-based approach. The supplier platform furthermore allows
project-relevant data to be exchanged by suppliers and AUDI AG.
116
Production
Vehicle production by model
2005
2004
Audi A2
10,026
19,745
Audi A3
70,395
121,904
150,091
52,846
Audi TT Coupé
8,368
14,753
Audi TT Roadster
3,939
8,852
Audi A4 saloon
157,320
168,621
Audi A4 Avant
155,620
144,402
22,089
31,962
Audi A6 saloon
131,344
148,034
Audi A6 Avant
73,334
33,667
Audi allroad quattro
4,295
14,796
Audi Q7
1,194
46
Audi A8
21,515
22,429
Audi A3 Sportback
Audi A4 Cabriolet
Audi RS 4
Audi RS 6 saloon
Audi RS 6 Avant
556
4
–
232
–
1,001
810,086
783,294
Lamborghini Gallardo
972
1,294
Lamborghini Murciélago
464
384
Total, Audi brand
Total, Lamborghini brand
Total, Group
1,436
1,678
811,522
784,972
The Audi Group increased car production by 3.4 percent in the 2005 financial year to a new
record total of 811,522 (784,972) vehicles. Of this total, 810,086 (783,294) were of the Audi
brand and 1,436 (1,678) were Lamborghini models.
Production of the Audi A3 rose by 26.2 percent to 220,486 (174,750) vehicles above all as
a result of high demand for the Audi A3 Sportback. Production of the Audi A4 was on a par
with the previous year’s high level, at 312,940 (313,023) units. A total of 22,089 (31,962) of the
Audi A4 Cabriolet were built last year, this downturn being due to the advanced point of the
model cycle. Production of the first vehicles of the new Audi A4 Cabriolet already started in
autumn 2005. The new model features five different engine versions together with an array
of new technical features, and has been on the market since the start of 2006. 556 (4) of the
Audi RS 4 were built.
Production of the TT Coupé and TT Roadster, which are built in Győr, declined to 8,368
(14,753) and 3,939 (8,852) units respectively as these models are now well into their lifecycle. The new model generation is waiting in the wings, with the Coupé due to be launched
first from mid-2006, followed by the Roadster at the start of 2007.
Like the saloon before it, the A6 Avant launched in the first half of 2005 is very much in
demand. The Audi Group built 204,678 (181,701) vehicles of the A6 car line at the Neckarsulm plant. This represents a rise of 12.6 percent. Shortly after the Audi A6 Avant went into
production, a very special milestone was reached – the five millionth Audi A6 left the production line.
Production of the Audi A8 totalled 21,515 (22,429) units in the past financial year. In addition, the new A8 4.2 TDI quattro, one of the most powerful diesel cars in the world, was
117
launched. From mid-2006, a sporty version will be added to the A8 product family in the
guise of the new S8.
Production of the Audi A2 in Neckarsulm was terminated during the past financial year,
and the first model generation of the allroad quattro likewise went out of production. The
Audi allroad quattro concept study was exhibited at the Detroit Motor Show at the start of
2005. This study vehicle earned Audi considerable positive feedback, not just from American
customers. The new Audi A6 allroad quattro will consequently go into production in Neckarsulm from the spring. Volume production of the new premium SUV, the Audi Q7, commenced at the end of 2005. As its market launch in Europe is scheduled to take place in
March, 1,194 (46) of this car had already been built by the end of 2005.
The Audi Group shipped 42,329 (61,128) completely knocked down parts kits of the A4
and A6 car lines to China in 2005.
In the year of the 25th anniversary of quattro, the proportion of Audi vehicles built with
four-wheel drive amounted to 27.1 percent of total production, with 219,288 (209,469) such
vehicles built.
In all, 1,436 (1,678) Lamborghini models were built at Sant’Agata Bolognese, Italy, in
2005. This total was made up of 972 (1.294) of the Gallardo and 464 (384) of the Murciélago.
Engine production
Audi Group
of which AUDI HUNGARIA MOTOR Kft.
of which Automobili Lamborghini S.p.A.
2005
2004
1,695,045
1,485,536
1,693,609
1,480,630
1,436
1,678
In 2005 the Audi Group stepped up engine production to 1,695,045 (1,485,536) units, a yearon-year increase of more than 14 percent.
Production of diesel engines in proportion to total engine production was up on the previous year, at 53.9 (53.3) percent.
Of the engines built in Hungary, 682,337 (597,095) were supplied to Audi Group companies in the past financial year. AUDI HUNGARIA MOTOR Kft. in addition built 954,282
(805,562) engines for other Volkswagen Group companies and 32,950 (39,281) engines for
third-party customers.
Automobili Lamborghini S.p.A. produced 1,436 (1,678) engines for the Lamborghini Gallardo and Murciélago models. This total included 972 (1,294) ten-cylinder engines and 464
(384) twelve-cylinder engines.
AUDI HUNGARIA MOTOR Kft. opened its toolmaking shop in September 2005. The range of
activities of the toolmaking shop encompasses not merely the manufacturing of tools and
plant, but also the production of body components and welded assemblies for small-series
parts.
At the end of the financial year, there were around 190 employees at the Győr toolmaking
shop, working in three shifts. This will rise to some 320 employees once the project has
been completed.
118
Vehicle sales
Despite difficult market conditions, the Audi Group stepped up sales of Audi vehicles in the
past financial year to 829,109 units, an increase of 6.4 percent, thus establishing a new sales
record. In its home market of Germany, the Audi Group sold 247,125 Audi vehicles. Thanks
to this disproportionately high rise compared with the growth of the market as a whole, the
market share climbed from 7.2 to 7.4 percent.
Vehicle sales in other Western European countries, one of Audi’s most important sales
regions, were very satisfactory. Whereas the market as a whole contracted slightly by 0.6
percent, sales of Audi vehicles rose by a substantial 8.4 percent. This was prompted in particular by the sharp rise in sales in Italy (up 10.0 percent), Spain (up 13.0 percent) and France
(up 10.1 percent).
The brand with the four rings was likewise successful in the intensely competitive US
market thanks to its attractive model range, bettering the prior-year total by 6.6 percent,
with vehicle sales of 83,066 (77,917). The market launch of the Audi Q7 mid-way through the
current year will further improve the positioning of the Audi brand in the USA.
Vehicle sales – largest markets
Vehicle sales
2005
Year-on-year
percentage
change
2005 market
share,
percent
Year-on-year
percentage
change in
overall market
2.3
Audi worldwide
829,109
6.4
Germany
247,125
5.1
7.4
USA
83,066
6.6
0.5
0.5
Great Britain
81,374
4.5
3.4
– 5.0
China (including Hong Kong)
58,878
1.8
25.1
Italy
55,574
10.0
2.7
– 0.7
Spain (including Canary Islands)
49,453
13.0
3.4
0.8
France
41,498
10.1
2.1
2.7
Belgium
24,337
13.1
4.9
– 1.0
Austria
17,058
8.6
5.6
– 1.1
Netherlands
16,824
11.9
3.2
– 3.9
Japan
15,388
11.9
0.3
– 0.4
Switzerland
12,830
– 9.0
5.2
– 1.9
Sweden
12,465
7.5
4.4
3.8
South Africa
11,802
17.0
2.8
27.1
7,241
12.3
3.6
3.0
Portugal
–*
* Change in the method used for counting vehicle sales in the 2005 financial year. Consequently, no direct comparison
with the previous year is possible. Application of the new method of counting vehicle sales for the previous year results in an increase of 9.6 percent in 2005.
119
Vehicle sales by model
2005
2004
Audi A2
13,321
21,452
Audi A3
75,673
142,276
139,496
37,690
10,633
15,876
5,635
9,326
Audi A4 saloon
170,379
166,232
Audi A4 Avant
154,433
144,237
Audi A3 Sportback
Audi TT Coupé
Audi TT Roadster
Audi A4 Cabriolet
23,560
30,541
Audi A6 saloon
141,059
137,305
Audi A6 Avant
64,878
35,660
7,431
14,840
Audi allroad quattro
Audi Q7
674
–
Audi A8
21,417
22,773
Audi RS 4
Audi RS 6 saloon
Audi RS 6 Avant
Total, Audi brand
Lamborghini Gallardo
Lamborghini Murciélago
Total, Lamborghini brand
Other Volkswagen Group brands
Total, Group
520
–
–
232
–
1,001
829,109
779,441
1,071
1,215
529
377
1,600
1,592
214,405
190,799
1,045,114
971,832
Market and trend research at Audi
Intensive exchanges with customers are the focus of attention of Audi’s research into markets and trends. Every year, 2.3 million interviews are conducted with car customers and
trendsetters on Audi’s behalf, through international studies. Feedback on Audi products and
services is an elementary component of product development. The indisputable objective of
this is to demonstrate customer centricity and identify customer requirements. Trend and
future studies analyse the factors that will shape customer satisfaction and customer behaviour in the future, and translate them into new products and innovations.
120
Financial performance
The Audi Group boosted its revenue by 8.5 percent in the past financial year. With revenue
reaching EUR 26,591 (24,506), a new record level was achieved for the twelfth year in succession.
The outstanding market reception of the Audi A3 is particularly satisfying. The launch of
the A3 Sportback in autumn 2004 and the changeover to the single-frame radiator grille for
the three-door version helped to boost revenue by 14.6 percent. The revenue generated by
the A4 line was also up on the previous year, accounting for 28.9 percent of total revenue.
The A6 car line enjoyed strong demand in the past financial year and played a significant
part in boosting total revenue, bringing in 20.5 percent more. The A8 achieved approximately the revenue level of the previous year, despite the downturn in the European market
for luxury saloons last year.
The sales subsidiaries AUTOGERMA S.p.A., Audi Volkswagen Korea Ltd. and Audi Volkswagen Middle East FZE sell vehicles of the VW Passenger Car, Škoda, SEAT and VW Commercial Vehicle brands as well as those of the Audi brand. The revenue from sales of vehicles of those brands was boosted by 15.3 percent in total.
The disproportionately low rise in cost of sales of 6.5 percent in the past financial year is
primarily due to the increased volume of direct materials as a result of higher unit sales.
The positive development in revenue and the modest rise in cost of sales resulted in a
25.6 percent rise in gross profit to EUR 3,162 (2,517) million.
Distribution costs rose by 7.0 percent in the 2005 financial year and totalled EUR 1,877
(1,754) million at year end. Efforts to enhance competitiveness are also reflected by the
administrative expenses, which were actually trimmed by 0.8 percent to EUR 240 (242) million compared with the previous year. The other operating result was EUR 372 (717) million.
This drop stemmed predominantly from lower income from the settlement of foreign exchange contracts.
The 14.5 percent rise in the operating result to EUR 1,417 (1,238) million thus clearly reflects the success of the improved processes and cost-cutting measures implemented.
121
Development of profit before tax and rate of return before tax
2001
2002
2003
2004
2005
1,286
1,219
1,101
1,143
1,310
5.8
5.4
4.7
4.7
4.9
1,200
900
600
300
0
Profit before tax (EUR million)
Rate of return before tax (%)
The 13.8 percent fall in the financial result to EUR -107 (-94) million is due in the first instance to the lower investment result from FAW in China compared with the previous year
and to higher costs from interest on provisions.
The Audi Group improved its profit before tax by 14.6 percent to EUR 1,310 (1,143) million. Its profit after tax was EUR 824 (871) million. The higher tax expense is largely due to a
one-off effect in 2004 amounting to EUR 122 million resulting from a credit for tax relief on
capital investments by AUDI HUNGARIA MOTOR Kft.
Key earnings data
%
2005
2004
4.9
4.7
Equity return after tax
13.8
15.2
Return on investment
9.7
8.7
Rate of return before tax
With a return on investment of 9.7 (8.7) percent, the Audi Group is well on the way to achieving its target return on investment of more than 10 percent.
122
Net worth
The balance sheet total of the Audi Group in the past financial year was well above the prioryear figure, at EUR 16,112 (14,904) million. Whereas non-current assets fell by 4.2 percent to
EUR 8,597 (8,970) million, above all as a result of higher depreciation, current assets rose by
EUR 1,581 million to EUR 7,515 (5,934) million. This change is for the most part attributable
to the increase in cash and cash equivalents (up EUR 1,346 million) and the rise in inventories (up EUR 210 million).
Capital investments by the Audi Group over the past year totalled EUR 1,708 (2,056) million. Of this total, investments in property, plant and equipment amounted to EUR 1,138
(1,236) million.
The EUR 348 million downturn in capital investments is substantially attributable to systematic investment management. As a result, investments in property, plant and equipment
alone were reduced by EUR 98 million without the extent, quality and timescale of the envisaged product and investment plans being impaired in any way.
Capital investments and cash flow in the Audi Group
EUR million
2001
2002
2003
2004
2005
Capital investments
2,084
2,342
2,047
2,056
1,708
Cash flow from operating
activities
2,393
2,440
2,786
2,690
3,252
3,000
2,500
2,000
1,500
1,000
500
0
The equity of the Audi Group rose by 4.7 percent to EUR 6,104 (5,828) million. In addition to
the capital injection by Volkswagen AG amounting to EUR 195 million, this rise was primarily
due to the allocation of the balance of EUR 362 (464) million remaining after the transfer of
profit to the other retained earnings. There was an opposite effect, for example, from the
reserve for actuarial losses of EUR -192 million, which was recorded for the first time in the
financial year. As a result of the changes to the relevant accounting standards in IAS 19,
actuarial gains and losses are now reported in a special reserve within equity with no effect
on income, after taking account of deferred tax. The equity ratio of the Audi Group consequently amounted to 37.9 (39.1) percent.
123
Non-current liabilities remained virtually unchanged from the previous year at EUR 4,202
(4,291) million.
Current liabilities rose by 21.3 percent to EUR 5,806 (4,785) million. This change is in essence due to a rise in current trade payables due.
Balance sheet structure
EUR million
2001
2002
2003
2004
2005
2005
2004
2003
2002
2001
6,104
8,142
5,828
5,487
8,430
4,761
8,263
Fixed assets
Other noncurrent assets
4,222
8,053
455
7,477
325
Inventories
Other
current assets
Cash and cash
equivalents
255
208
462
Non-current
liabilities
3,082
2,924
1,832
2,368
2,453
2,343
2,091
540
5,806
3,105
4,785 4,875 4,807
3,976
1,208 1,759
11,122 12,650 14,063 14,904 16,112
124
4,291 3,701
2,042
1,711
1,463
1,512
1,814
540
Equity
4,202
16,112 14,904 14,063 12,650 11,122
Current
liabilities
Financial position
The Audi Group boosted its cash flow from operating activities by a substantial 20.9 percent
in 2005 to EUR 3,252 (2,690) million. This development is principally due to the reduction in
working capital by EUR 595 million. The cash flow thus once again covered the entire investment spending of the past financial year, underlining the impressive financial strength
of the company. The outflow for investing activities amounted to EUR 1,712 (1,928) million.
Last year, the lion’s share of investment spending went on production capacity for the
new models Audi Q7, TT Roadster and TT Coupé.
Net liquidity at December 31, 2005 reached EUR 3,391 (2,033) million and was therefore
66.8 percent up on the prior-year figure.
Cash flow statement
EUR million
2005
2004
Cash flow from operating activities
3,252
2,690
Cash flow from investing activities
– 1,712
– 1,928
Net cash flow
1,540
762
Cash flow from financing activities
– 203
– 210
Net liquidity
3,391
2,033
Cash pooling within the Audi Group is centralised at AUDI AG. Surpluses and shortages of
cover are equalised via the cash pool at Volkswagen AG. All transactions are handled on
market terms.
There furthermore exists a credit line for EUR 100 million with Volkswagen AG. This had
not been drawn upon at the balance sheet date.
At the end of the financial year, the Audi Group had other financial commitments
amounting to EUR 1,202 (931) million. An overview of the contingent liabilities of the Audi
Group is provided in the Notes in Section 4, Other financial obligations, p. 171.
Report on post-balance sheet date events
No events of particular significance which must be reported according to IAS 10 occurred
after December 31, 2005.
125
Risk report
The risk management
system within the
Audi Group
In accordance with the risk management strategy of the Audi Group, the wide-ranging risks
that are inseparably associated with the business activities of the company are minimised or
if possible avoided in order to prevent potential losses to the company. Risks are consciously taken only where they are calculable and this course of action is unavoidable within
the context of seizing favourable business opportunities to enhance the value of the company.
The Audi Group maintains a group-wide risk management and risk early warning system.
This covers the parent company and all subsidiaries from which potential existencethreatening developments could spread to the parent company.
The tasks of risk management in the Audi Group are reflected non-centrally by organisational processes at the level of the individual corporate divisions and subsidiaries. Risk
management is thus an integral aspect of the existing business processes of the Audi
Group. Clearly defined task areas as well as reporting and recording obligations are laid
down for the corporate divisions and subsidiaries.
In the context of the defined spheres of responsibility within the risk management system, potential risks are identified, appropriate measures are elaborated and implemented
for their management and monitoring, and the success of the measures taken is constantly
monitored. The effectiveness of the management and monitoring system is constantly examined.
Within the process of identifying and evaluating risks, the probability of individual risks
materialising is estimated and the potential extent of the loss then quantified in each individual case. The lost profit contribution serves as the measure for this purpose.
Reports on key risks are submitted to the Board of Management and Supervisory Board
on a regular basis.
In the context of its business activities, the Audi Group encounters the following key risk
areas:
Risks from the economic
context and the car
industry
126
In view of its business activities, the Audi Group is highly dependent on the general underlying state of the economy. This affects the major sales markets of the group in particular
measure. These include above all Western Europe, the USA, Japan and China. A stagnating
or even recessive economy in these markets can have a direct impact on consumer behaviour in the car sector. Protracted high prices or further price rises for oil and steel on the one
hand harbour financial risks for production and on the other hand lead to consumer reticence, thus hampering vehicle sales.
The premium segment, in which the models of the Audi brand are positioned, is fundamentally less exposed to the negative impact of cyclical fluctuations. The possibility of sales
risks from a deterioration in the general economy and the consequent downturn in the market can, however, not be excluded even in that segment.
As an international player, the Audi Group generates a significant portion of its revenue
in foreign currency. This revenue is exposed to risks from exchange rate movements. In
particular, unanticipated changes in the exchange rate between the US dollar and the euro
can severely diminish revenues and the consolidated net profit.
The intensive competition in the car trade as a result of the increasing use of sales promotion measures, not least in the important Audi markets of USA and China, but also in
Germany and other European countries, is leading to price erosion and higher marketing
costs, with a correspondingly negative impact on revenue and earnings.
In launching the Audi Q7, the company has ventured into a vehicle segment that is new
to Audi. In spite of meticulous market studies that have accompanied the product decisionmaking process, not every detail of the market’s response to the new product can be anticipated.
Changes to the legal context, such as tougher statutory requirements for vehicle safety,
fuel consumption and exhaust emissions, remain a risk factor for the car industry.
Risks from operating
activities
There are diverse risks within the context of the Audi Group’s operating activities which can
substantially undermine its financial position and financial performance.
These include potential disruptions to the energy supply, technical disruptions, in particular to electronic data processing, fires, explosions and similar occurrences which could
potentially lead to high losses, but the likelihood of which is relatively low. The group counteracts such risks on the one hand through preventive measures such as fire protection, and
on the other hand by taking out adequate insurance cover.
The close, economically advantageous collaboration between car manufacturers and
suppliers that is customary in this industry and the resulting dependency inflate the risk of
production hitches as a result of delivery delays, non-delivery and quality defects. The possibility of the commercial failure of suppliers represents an added risk. The potential loss of
income from such risks is held in check within the Audi Group through appropriate contractual arrangements, the use of suitable methods of selecting and monitoring suppliers and
by taking out appropriate insurance cover.
The complex product development process for new vehicles and components goes hand
in hand with risks from delays, from changes to the product at short notice and from the
loss of expertise as a result of the involvement of third-party service providers in the development process.
Despite the presence of an efficient, systematic quality management approach within the
Audi Group, potential product liability risks cannot be entirely excluded. These can both
result in financial losses to the group and also harm its image.
127
Financial risks
The financial risks to which the Audi Group is exposed as a result of its business activities
comprise market price risks (exchange-rate, interest-rate and price risks from commodities),
creditworthiness risks and liquidity risks.
As a result of its worldwide sales markets, the Audi Group is exposed to particular risks
from exchange-rate movements, above all of the US dollar and the pound sterling.
Detailed information on the hedging policy and on risk management in the area of financial risks, in particular in relation to the use of derivative financial instruments in hedging
transactions, is provided in the notes to the consolidated financial statements of the Audi
Group from page 169, in the chapter “Other particulars” under the item “Hedging policy and
risk management”.
Overall assessment
of the risk situation
Compared with the previous year, there is no substantial change in the risk situation of the
Audi Group.
The risks described harbour the potential to undermine the financial performance, net
worth and financial position of the Audi Group to a significant degree. However, on the
basis of all known particulars and circumstances, there are currently no risks that can endanger the Audi Group’s survival for the foreseeable future.
128
Report on expected developments
Anticipated development in
the underlying economic
situation
General economic situation
The global economy will lose momentum slightly in 2006, as the higher energy prices are
having a delayed impact. On top of this comes a tightening of monetary policy, which will
temporarily dampen the economy.
In the USA, economic growth will weaken slightly as a result of lower growth in private
consumer spending. The protracted inflationary pressures and rising interest rates in particular are likely to more than outweigh the positive influences of stable trends in employment and income. Investment spending, which will rise substantially as a result of growing
corporate profits, will provide a further impetus.
In Western Europe, there are early indications of a mild recovery in the economy, resulting in the main from growth in investment activity and a continuation in the positive trend
in exports. Any growth trend in private consumer spending, on the other hand, is expected
to remain weak.
Germany’s continuing export successes will increasingly have a knock-on effect on the
domestic economy and lend momentum to corporate investment. Broadly stagnant real
wages, the continuing high rate of unemployment and the rise in the cost of living that will
result from the new ruling coalition’s policies are, however, likely to prevent any sustained
recovery in private consumption. Compared with other European countries, Germany’s economic development will therefore remain mixed.
In Asia, lower demand from the USA will cause the economy to weaken somewhat in
2006. The higher rate of expansion of private consumption in China will help to keep economic growth high despite a slight loss of momentum from investment spending. In Japan,
the moderate course of growth is expected to hold up.
The car industry
Global demand for cars is expected to rise in 2006, although this trend will lose some of its
vigour. The centre of growth will be the Asia-Pacific region, for which a steady rise in unit
sales is still expected. By contrast, new-car registrations will remain flat or slip back in the
major Western European markets and the USA. For 2006 as a whole, the Audi Group anticipates worldwide unit sales to grow by 1.1 percent to 53.6 million vehicles (passenger cars
and light commercial vehicles).
The rejuvenation of the vehicle population that has been prompted in the US car market
in recent years through discounting campaigns will have the consequence of damping the
development of the market in 2006. Various manufacturers’ perseverance with sales promotion measures will not have any impact to speak of, and merely serve to stabilise their sales
volumes. Car sales in the USA will consequently stagnate at a level of just under 17.0 million
vehicles (cars and light commercial vehicles).
The Audi Group expects registrations of new cars in Western Europe (excluding Germany)
to remain flat at around 11.1 million vehicles. Continuing consumer reticence in many countries throughout the region, in particular, will prove to be a negative factor. Of the key highvolume markets, only France will witness a rise in first-time registrations. The volume of
registrations of new vehicles is expected to fall in the Italian, UK and Spanish car markets.
In China, demand from private car buyers will continue to rise and maintain a high level
of dynamism in the market in 2006. With growth of approx. 4.7 percent to almost 3.5 million
passenger cars, the Chinese market is set to become the world’s third-biggest car market,
behind the USA and Japan.
129
The announced rise in value-added tax will dominate the German car market in 2006. The
Association of the German Automotive Industry (VDA) expects up to 80,000 new-vehicle
registrations to be brought forward to the fourth quarter of 2006. The volume forecast for
the market as a whole is 3.4 million vehicles, which would represent growth of 1.7 percent.
Anticipated development
of the Audi Group
The underlying economic situation and the market context again confront the Audi Group
with major challenges for the coming financial year. At the same time, the very good results
of the past year have established a very high benchmark against which the company’s success will be gauged. The management is nevertheless convinced that Audi will be able to
present a positive overall record of its business activities for the 2006 financial year, building
on the achievements of 2005.
Anticipated development in vehicle sales
The Audi Group has set itself the goal of maintaining its course of growth in 2006, and is
planning to better last year’s sales record. A large number of new models and derivative
versions will help by increasing the choice for customers in the premium segment, as well
as enhancing the brand’s appeal.
In the highly competitive Western European car market, Audi is well equipped to record
further successes in 2006 and achieve growth in the face of the stagnating market trend. For
2006, vehicle sales in Western Europe will probably be up on the prior-year figure. In Germany too, the highest-volume market for Audi vehicles, the Audi Group is targeting increased vehicle sales.
Audi believes it is moreover equipped to withstand the intensive competition in the USA
in 2006. The market launch of the Audi Q7 in particular will provide a vital impetus, with the
result that a renewed rise in volume is expected.
In China, Audi will share in the growth of the market and consolidate its market lead in
the premium segment. The locally built long-wheelbase version of the Audi A6 will play an
important part in boosting vehicle sales.
In Japan, Audi likewise expects a positive trend in sales of its vehicles in 2006.
Anticipated financial performance
Revenue is likely to exceed the 2005 level in the 2006 financial year. The operating result and
the profit before tax will emulate the level of the 2005 financial year, despite anticipated
pressure from persistently high raw materials prices and adverse exchange rate factors.
Anticipated financial position
The priority aim for 2006 remains to finance growth from the positive cash flow generated.
Once again, no external sources of financing will be used. The intra-group cash pool is able
to guarantee the liquidity required by all group companies.
The cash flow from operating activities will remain at a high level. Against the backdrop
of the model initiative’s longer-term perspective, higher cash outflows for investing activities are expected for the 2006 financial year. The cash outflow for financing activities will
match the level of the 2005 financial year.
The net liquidity of the Audi Group is expected to surpass the high level of the past financial year at the end of 2006.
130
Capital investments
Capital investments scheduled for the medium term are intended predominantly for customer-oriented additions to the model and engine range, the essential expansion of development and production structures, improving the productivity and quality of process chains,
and strengthening customer loyalty.
The investment volume for property, plant and equipment and for financial assets envisaged for the period from 2006 to 2010, together with development expenditure recognised
as an intangible asset, amounts to just under EUR 12 billion for the Audi Group. The 2006
financial year accounts for somewhat less than one fifth of this sum. The cash flow from
operating activities will cover investment spending in full for the entire planning period.
Capital investments principally concern direct product activities and will for the most
part be earmarked for the production areas at Ingolstadt, Győr and Neckarsulm. Capital
investments at suppliers represent a further focal area.
Anticipated development in the workforce
The number of employees in 2006 will be approximately on a par with the 2005 financial
year.
Opportunities for future development
The main determining factors behind the positive future development of the Audi Group
consist primarily in forward-looking strategies and measures designed to assure the steady
qualitative and quantitative growth of the company in the long term.
The process of rejuvenating and expanding the model range that is already under way
will be pursued methodically. The 2006 financial year will see further new models such as
the Audi Q7, the Audi A6 allroad quattro, the RS 4 Avant and the TT Coupé appear on the
market. Under the derivative models strategy, the Audi S3, Audi S6 saloon and Avant and
the Audi S8 will be launched. Audi’s new sports car, the Audi R8 based on the Le Mans quattro study, will follow in 2007.
The Audi Group will operate even more successfully in existing markets. The establishment of fully-owned subsidiaries in important sales regions will provide the basis for this
success.
Audi will in addition actively open up new growth markets.
The Audi Group expects the aforementioned measures to provide lasting prospects of
growth that will determine the development of the company’s volume figures as well as its
financial performance data over the coming years.
Over and above the strategy-related determining factors listed above, external factors may
provide additional opportunities. A slackening-off or reversal of the current upward price
trend in raw materials markets, but above all of oil, could for instance have a positive impact
on the financial performance.
Overall assessment of anticipated future developments
The Audi Group is striving for sustained, qualitative and quantitative growth in 2006 and
indeed in subsequent financial years. This objective will moreover be evident from the business figures for 2006.
Disclaimer
The management report contains statements relating to anticipated future developments.
These statements are based on current assessments and are by their very nature exposed to
risks and uncertainty. Actual outcomes may differ from those predicted in these statements.
131
Independent Auditor’s Report
This report was originally prepared in German. In case of ambiguities the German version
shall prevail:
“Independent Auditor’s Report
We have audited the consolidated financial statements – consisting of balance sheet, income statement, statement of recognised income and expense, cash flow statements and
notes – and the group management report of AUDI AG, Ingolstadt, for the business year
from January 1 to December 31, 2005. The preparation of the consolidated financial statements and the group management report in accordance with the IFRS, as adopted by the
EU, and the additional provisions stated in § 315a Para. 1 HGB are the responsibility of the
Company’s Board of Management. Our responsibility is to express an opinion on the consolidated financial statements and the group management report based on our audit.
We conducted our audit of the consolidated financial statements in accordance with
§ 317 HGB and German generally accepted standards for the audit of financial statements
promulgated by the Institut der Wirtschaftsprüfer in Deutschland e.V. (IDW). Those standards require that we plan and perform the audit such that misstatements materially affecting the presentation of the net assets, financial position and results of operations in the
consolidated financial statements in accordance with German principles of proper accounting and in the group management report are detected with reasonable assurance. Knowledge of the business activities and the economic and legal environment of the Group and
expectations of possible misstatements are taken into account in the determination of audit
procedures. The effectiveness of the accounting-related internal control system and the
evidence supporting the disclosures in the consolidated financial statements and the group
management report are examined primarily on a test basis within the framework of the
audit. The audit includes assessing the annual financial statements of the companies included in consolidation, the determination of the companies to be included in consolidation, the accounting and consolidation principles used and significant estimates made by
the Company’s Board of Management, as well as evaluating the overall presentation of the
consolidated financial statements and the group management report. We believe that our
audit provides a reasonable basis for our opinion.
Our audit has not led to any reservations.
In our opinion based on the results of our audit the consolidated financial statements are
in compliance with the IFRS, as adopted by the EU, and the additional provisions stated in
§ 315a Para. 1 HGB and give a true and fair view of the net assets, financial position and
results of operations of the Group in accordance with these provisions. The group management report is in accordance with the consolidated financial statements and provides on the
whole a suitable understanding of the Group’s position and suitably presents the opportunities and risks of future development.“
Hanover, February 8, 2006
PricewaterhouseCoopers
Aktiengesellschaft
Wirtschaftsprüfungsgesellschaft
Gadesmann
Wirtschaftsprüfer
132
ppa. Schröder
Wirtschaftsprüfer
Declaration of the AUDI AG Board of Management
on the 2005 consolidated financial statements
The Board of Management of AUDI AG is responsible for the preparation of the consolidated
financial statements and group management report. Reporting is performed on the basis of
the International Financial Reporting Standards (IFRS) and the interpretations of the International Financial Reporting Interpretations Committee (IFRIC), as well as of the predecessor
organisation, the Standing Interpretations Committee (SIC). The group management report
is prepared in accordance with the requirements of the German Commercial Code. Under
Section 315a of German Commercial Code, AUDI AG is obliged to prepare its consolidated
financial statements in accordance with the requirements of the International Accounting
Standards Board (IASB), as applicable within the EU.
The regularity of the consolidated financial statements and group management report is
assured by means of internal controlling systems, the implementation of uniform guidelines
throughout the group, and employee training and advancement measures. Compliance with
the legal requirements and with internal group guidelines, as well as the reliability and functioning of the systems of controlling, are checked on an ongoing basis throughout the
group. The early warning function required by law is achieved by means of a group-wide risk
management system that enables the Board of Management to identify potential risks at an
early stage and initiate corrective action as necessary.
PricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprüfungsgesellschaft, Hanover,
has examined the consolidated financial statements and group management report in its
capacity as independent auditor, in accordance with the resolution of the Annual General
Meeting, and issued its unqualified certification as shown on the page opposite.
The consolidated financial statements, the group management report, the audit report
and the measures to be taken by the Board of Management for the prompt identification of
risks which could pose a threat to the company’s survival were discussed at length by the
Supervisory Board in the presence of the auditors. The findings of this examination are indicated in the Report of the Supervisory Board.
133
Consolidated Financial Statements of the Audi Group at December 31, 2005
Income statement of the Audi Group
for the 2005 financial year
EUR ‘000
Notes
2005
Revenue
1
26,590,603
24,505,864
Cost of sales
2
23,428,829
21,989,159*
Gross profit
2004
3,161,774
2,516,705*
Distribution costs
3
1,876,600
1,754,315*
Administrative expenses
4
240,062
241,914*
Other operating income
5
790,118
948,501
Other operating expenses
6
Profit from operating activities
Result from investments accounted for using the
equity method
7
Finance cost
8
417,753
231,292
1,417,477
1,237,685*
– 12,407
+ 20,672
Interest expense
126,372
78,206
Interest on provisions
123,983
117,984
+ 155,286
+ 81,183
– 107,476
– 94,335
1,310,001
1,143,350*
485,868
272,229*
824,133
871,121*
Other financial results
9
Financial result
Profit before tax
Income tax expense
10
Profit after tax
Minority interests
11
Interests of AUDI AG shareholders
–
2,264
824,133
868,857*
462,000
405,000
362,133
463,857*
Appropriation of profits
Profit transfer to Volkswagen AG
12
Transfer to retained earnings
EUR
2005
2004
Earnings per share
13
19.17
20.21*
Diluted earnings per share
13
19.17
20.21*
* Adjusted in the context of the retrospective application of changes to IAS 19 “Employee Benefits”.
134
Balance sheet of the Audi Group
at December 31, 2005
ASSETS EUR ‘000
Notes
NON-CURRENT ASSETS
Dec. 31, 2005
Dec. 31, 2004
8,596,613
8,970,805*
Fixed assets
Intangible assets
14
2,685,159
2,759,332
Property, plant and equipment
15
5,220,960
5,366,040
Investment property
16
9,805
9,868
120,700
134,996
Investments accounted for using the
equity method
Other long-term investments
17
105,802
160,224
Deferred tax assets
18
402,923
458,945*
Other receivables and other financial assets
19
51,264
81,400
CURRENT ASSETS
7,515,473
5,933,600
Inventories
20
2,041,837
1,831,613
Trade receivables
21
1,497,703
1,393,050
Effective income tax assets
22
2,397
922
Other receivables and other financial assets
19
384,432
528,246
Assets held for sale
23
25,586
–
Securities
24
458,542
420,558
Cash and cash equivalents
25
EQUITY AND LIABILITIES EUR ‘000
Notes
EQUITY
3,104,976
1,759,211
16,112,086
14,904,405*
Dec. 31, 2005
6,104,250
Issued capital
26
110,080
Capital reserve
26
251,730
Retained earnings
26
5,742,440
Minority interests
27
–
LIABILITIES
Non-current liabilities
Dec. 31, 2004
5,827,812*
110,080
56,730
5,656,945*
4,057
10,007,836
9,076,593*
4,201,887
4,291,056*
Financial liabilities
28
15,568
15,281
Deferred tax liabilities
29
51,996
511,275
Other liabilities
30
80,801
126,510
Defined benefit liabilities
31
2,179,618
Effective income tax obligations
32
426,360
628,834
Other provisions
33
1,447,544
1,189,114
5,805,949
4,785,537
Current liabilities
1,820,042*
Financial liabilities
28
164,895
148,239
Trade payables
34
2,149,818
2,074,061
Effective income tax obligations
32
348,047
127,923
Other liabilities
30
1,614,688
1,038,025
Other provisions
33
1,508,123
1,397,289
Liabilities held for sale
23
20,378
16,112,086
–
14,904,405*
* Adjusted in the context of the retrospective application of changes to IAS 19 “Employee Benefits”.
135
Cash flow statement of the Audi Group
from January 1 to December 31, 2005
EUR ‘000
2005
2004
Profit before profit transfer and taxation
1,310,001
1,143,349*
Income tax payments
– 691,587
– 321,550
583,384
461,361
1,281,862
1,388,884
46,000
2,104
140
162
Amortisation of development expenditure recognised as an
intangible asset
Depreciation of and write-ups on property, plant and equipment and
amortisation of intangible assets
Impairment losses on long-term investments
Depreciation of investment property
Result from asset disposals
24,985
14,928
Result from accounting using the equity method
29,265
– 13,107
Change in provisions (excluding tax provisions)
423,895
93,551*
Change in inventories
– 204,461
– 23,033
Change in receivables
– 34,663
– 16,689
Change in liabilities
457,082
– 14,889
Other non-cash expenses / income
Cash flow from operating activities
Additions for development expenditure recognised as an intangible asset
25,666
– 25,264
3,251,569
2,689,807
– 543,239
– 652,033
– 1,161,355
– 1,355,043
Acquisition of affiliated companies and participating interests
– 10,819
– 52,889
Change in securities
– 42,772
112,832
– 33
– 101
Investments in property, plant and equipment and in intangible assets
Loans advanced
Investments in investment property
Cash inflows arising from asset disposals
Cash flow from investing activities
Capital contributions
Transfer and distribution of profit
(of which to Volkswagen AG: EUR 405 million
(previous year EUR 160 million))
– 461
– 44
47,061
19,146
– 1,711,618
– 1,928,132
195,000
–
– 407,304
– 162,441
Change in financial liabilities and in credit extended
11,192
– 42,627
Lease payments
– 2,344
– 4,802
– 203,456
– 209,870
5,109
–
Cash flow from financing activities
Effect of changes to the group
Effect of foreign exchange-rate changes
4,161
– 113
Change in cash and cash equivalents
1,345,765
551,692
Cash and cash equivalents at start of period
1,759,211
1,207,519
Cash and cash equivalents at end of period
3,104,976
1,759,211
2005
2004
3,104,976
1,759,211
* Adjusted in the context of the retrospective application of changes to IAS 19 “Employee Benefits”.
EUR ‘000
Cash and cash equivalents
Securities and credit extended
474,368
437,236
Gross liquidity
3,579,344
2,196,447
Credit outstanding
– 187,854
– 163,519
Net liquidity
3,391,490
2,032,928
136
Statement of changes in equity of the Audi Group
for the 2005 financial year
EUR ‘000
2005
2004
26,496
–
– 31,283
–
Securities available for sale
Fair value changes recognised directly in equity
Income and expense recognised from the sale of securities
Cash flow hedges
Fair value changes recognised directly in equity
Income and expense recognised from the settlement of cash flow hedges
Currency translation differences
Tax items credited directly to equity
– 198,851
41,449
14,508
– 50,481
35,863
– 14,844
193,709
62,873
Actuarial losses on defined benefit obligations
– 321,793
– 156,519
Income and expense recognised directly in equity
– 281,351
– 117,522
Profit after tax
824,133
871,121
Total expense and income recognised in the financial year
542,782
753,599
Allocable to the shareholders of AUDI AG
542,782
751,335
–
2,264
Allocable to other shareholders
137
Notes to the consolidated financial statements
of the Audi Group for the 2005 financial year
Development of fixed assets in the 2005 financial year
EUR ‘000
Gross carrying amounts
Costs
Changes
in consolidated
companies
Currency
changes
Additions
Additions
from
accounting
using the
equity
method
Transfers
Disposals
Disposals
from
accounting
using the
equity
method
Jan. 1, 2005
Intangible assets
Concessions, industrial property rights
and similar rights and values, as well as
licences thereto
279,501
256
327
24,434
–
10,113
27,495
–
Goodwill
172,491
–
–
–
–
–
–
–
Development expenditure recognised as an
intangible asset, products currently in
development
571,907
–
–
487,519
–
– 317,182
2,604
–
Development expenditure recognised as an
intangible asset, products currently in use
2,773,175
–
–
55,720
–
317,182
208,046
–
4,467
–
–
1,308
–
– 4,143
–
–
3,801,541
256
327
568,981
–
5,970
238,145
–
Land, land rights and buildings, including
buildings on land owned by others and
leased buildings
3,169,961
–
630
62,366
–
49,504
34,525
–
Plant and machinery
3,924,301
–
1,578
133,612
–
150,149
299,418
–
Furniture, fixtures and office equipment,
as well as leased furniture, fixtures and
office equipment
7,500,488
197
996
641,439
–
95,318
282,924
–
Payments on account for intangible assets
Property, plant and equipment
Payments on account and assets in
course of construction
Investment property
353,251
–
8
300,636
–
– 299,166
1,535
–
14,948,001
197
3,212
1,138,053
–
– 4,195
618,402
–
15,032
–
32
461
–
– 1,775
–
–
134,996
–
16,762
–
–
–
2,635
28,423
150,957
–
55
–
–
–
8,503
–
13
–
–
–
–
–
13
–
11,256
–
–
39
–
–
–
–
162,226
–
55
39
–
–
8,516
–
19,061,796
453
20,388
1,707,534
–
–
867,698
28,423
Investments accounted for
using the equity method
Other long-term investments
Investments in affiliated companies
Investments in associates
Participating interests
Total fixed assets
138
Reduction in gross carrying amounts
Carrying amounts
Costs
Accumulated depreciation
and amortisation
Dec. 31, 2005
Jan. 1, 2005
287,136
101,094
6
117
60,600
–
643
25,142
172,491
–
–
–
–
–
–
–
739,640
–
–
–
1,082
–
–
2,938,031
941,115
–
–
582,302
–
1,632
–
–
–
–
–
4,138,930
1,042,209
6
117
643,984
3,247,936
1,435,688
–
260
3,910,222
2,706,893
–
1,211
7,955,514
5,439,380
18
455
Changes
in consolidated
companies
Currency
changes
Additions,
scheduled
Additions,
unscheduled
Transfers
Disposals
Writeups
Accumulated depreciation
and amortisation
Dec. 31, 2005
Dec. 31, 2005
Dec. 31, 2004
–
137,318
149,818
178,407
–
–
172,491
172,491
–
–
1,082
738,558
571,907
–
208,046
–
1,315,371
1,622,660
1,832,060
–
–
–
–
1,632
4,467
–
643
233,188
–
1,453,771
2,685,159
2,759,332
123,048
–
1,379
14,297
–
1,546,078
1,701,858
1,734,273
345,603
–
674
278,968
17,367
2,758,046
1,152,176
1,217,408
769,979
–
– 1,317
266,733
–
5,941,782
2,013,732
2,061,108
353,194
–
–
–
–
–
–
–
–
–
353,194
353,251
15,466,866
9,581,961
18
1,926
1,238,630
–
736
559,998
17,367
10,245,906
5,220,960
5,366,040
13,750
5,164
–
20
140
–
– 1,379
–
–
3,945
9,805
9,868
120,700
–
–
–
–
842
–
842
–
–
120,700
134,996
142,509
–
–
–
–
46,000
–
–
–
46,000
96,509
150,957
–
–
–
–
–
–
–
–
–
–
–
13
11,295
2,002
–
–
–
–
–
–
–
2,002
9,293
9,254
153,804
2,002
–
–
–
46,000
–
–
–
48,002
105,802
160,224
19,894,050
10,631,336
24
2,063
1,882,754
46,842
–
794,028
17,367
11,751,624
8,142,426
8,430,460
139
Development of fixed assets in the 2004 financial year
EUR ‘000
Gross carrying amounts
Costs
Changes
in consolidated
companies
Currency
changes
Additions
Additions
from
accounting
using the
equity
method
Transfers
Disposals
Jan. 1, 2004
Intangible assets
Concessions, industrial property rights
and similar rights and values, as well as
licences thereto
168,990
–
– 12
117,837
–
10,037
17,351
Goodwill
367,725
–
–
–
–
–
195,234
Development expenditure recognised as an
intangible asset, products currently in
development
928,850
–
–
382,448
–
– 739,391
–
Development expenditure recognised as an
intangible asset, products currently in use
2,400,176
–
–
269,585
–
739,391
635,977
1,946
–
–
2,718
–
– 170
27
3,867,687
–
– 12
772,588
–
9,867
848,589
Land, land rights and buildings, including
buildings on land owned by others and
leased buildings
3,078,146
–
– 578
55,821
–
38,989
2,417
Plant and machinery
3,676,200
–
– 555
152,081
–
174,824
78,249
Furniture, fixtures and office equipment, as well
as leased furniture, fixtures and office
equipment
6,547,259
–
– 26
780,919
–
324,265
151,929
Payments on account for intangible assets
Property, plant and equipment
Payments on account and assets in
course of construction
Investment property
660,250
–
– 48
247,013
–
– 547,945
6,019
13,961,855
–
– 1,207
1,235,834
–
– 9,867
238,614
15,188
–
– 200
44
–
–
–
103,527
–
– 15,129
33,491
22,768
–
–
137,398
–
–2
13,561
–
–
–
–
–
–
13
–
–
–
11,256
–
–
–
–
–
–
148,654
–
–2
13,574
–
–
–
18,096,911
–
– 16,550
2,055,531
22,768
–
1,087,203
Investments accounted for
using the equity method
Other long-term investments
Investments in affiliated companies
Investments in associates
Participating interests
Total fixed assets
140
Reduction in gross carrying amounts
Disposals
from
accounting
using the
equity
method
Costs
Accumulated depreciation
and amortisation
Dec. 31, 2004
Jan. 1, 2004
Changes
in consolidated
companies
Carrying amounts
Currency
changes
Additions,
scheduled
Transfers
Disposals
Accumulated depreciation
and amortisation
Dec. 31, 2004
Dec. 31, 2004
Dec. 31, 2003
–
279,501
73,698
–
– 12
38,807
5,809
17,208
101,094
178,407
95,292
–
172,491
195,234
–
–
–
–
195,234
–
172,491
172,491
–
571,907
–
–
–
–
–
–
–
571,907
928,850
–
2,773,175
1,109,180
–
–
461,361
–
629,426
941,115
1,832,060
1,290,996
–
4,467
–
–
–
–
–
–
–
4,467
1,946
–
3,801,541
1,378,112
–
– 12
500,168
5,809
841,868
1,042,209
2,759,332
2,489,575
–
3,169,961
1,313,008
–
– 190
125,292
– 1,095
1,327
1,435,688
1,734,273
1,765,138
–
3,924,301
2,392,122
–
– 453
390,298
– 533
74,541
2,706,893
1,217,408
1,284,078
–
7,500,488
4,744,413
–
– 28
834,486
– 3,513
135,978
5,439,380
2,061,108
1,802,846
353,251
668
–
– 668
–
–
353,251
659,582
–
14,948,001
8,450,211
–
– 671
1,350,076
– 5,809
211,846
9,581,961
5,366,040
5,511,644
–
15,032
5,122
–
– 119
161
–
–
5,164
9,868
10,066
9,661
134,996
–
–
–
–
–
–
134,996
103,527
–
150,957
–
–
–
–
–
–
–
150,957
137,398
–
13
–
–
–
–
–
–
–
13
–
–
11,256
–
–
–
2,002
–
–
2,002
9,254
11,256
–
162,226
–
–
–
2,002
–
–
2,002
160,224
148,654
9,661
19,061,796
9,833,445
–
– 802
1,852,407
–
1,053,714
10,631,336
8,430,460
8,263,466
141
General information
AUDI AG has the legal form of a German share-issuing company (Aktiengesellschaft). Its
registered office is in Ettinger Strasse, Ingolstadt, and it is entered in the Commercial Register in Ingolstadt under HR B 1.
Around 99 percent of the share capital of AUDI AG is held by Volkswagen AG, Wolfsburg,
with which a control and profit transfer agreement exists. The consolidated financial statements of AUDI AG are included in the consolidated financial statements of Volkswagen AG,
which are deposited with the Local Court of Wolfsburg.
The object of the company is the development, production and sale of motor vehicles,
other vehicles and engines of all kinds, together with their accessories, as well as machinery, tools and other technical articles.
Primary accounting basis
AUDI AG prepares its consolidated financial statements on the basis of the International
Financial Reporting Standards (IFRS) and the interpretations of the International Financial
Reporting Interpretations Committee (IFRIC). All pronouncements of the International Accounting Standards Board (IASB) where application is mandatory have been observed. The
prior-year figures have been calculated according to the same principles.
The income statement is prepared according to the internationally practised function of
expense method.
The consolidated financial statements provide a true and fair view of the financial performance and financial position of the Audi Group.
The requirements pursuant to Section 315a of German Commercial Code regarding the
preparation of the consolidated financial statements in accordance with IFRS, as applicable
within the EU, are met.
With effect from January 1, 2005 all standards that had been amended within the context
of the Improvement Project were implemented. A number of amended or entirely new IFRS
were in addition to be applied for the first time, some of which had already been implemented early in Audi’s 2004 consolidated financial statements. The following amended or
newly introduced standards were in addition observed in the 2005 financial year:
– IFRS 5 “Non-current Assets Held for Sale and Discontinued Operations”
Assets and liabilities held for sale are to be treated under a separate note from the 2005
financial year. Assets are measured at the lower of carrying amount or fair value, and liabilities at the nominal or settlement value.
– IAS 19 (revised 2004) “Employee Benefits”
Losses resulting from changed actuarial assumptions are deducted from equity (retained
earnings) with no effect on income, after taking account of deferred tax, and stated under the defined benefit liabilities. The change to the measurement method was applied
retrospectively to the comparative figures for 2004. In view of the changes to IAS 19, the
figure for defined benefit liabilities recognised in the balance sheet at December 31, 2004
was EUR 258,303 thousand higher, offset by the EUR 160,174 thousand fall in retained
earnings, taking into account the increase of EUR 98,129 thousand in deferred tax assets.
The retrospective application of the new rules of IAS 19 furthermore resulted in minor adjustments to individual items in the income statement for 2004:
142
EUR ‘000
2004
adjusted
2004 prior to
adjustment
Cost of sales
21,989,159
21,989,478
Gross profit
2,516,705
2,516,386
Distribution costs
1,754,315
1,754,755
Administrative expenses
241,914
242,093
Profit from operating activities
1,237,685
1,236,747
Profit before tax
1,143,350
1,142,412
Income tax expense
272,229
271,905
Profit after tax
871,121
870,507
Interests of AUDI AG shareholders
868,857
868,243
Transfer to retained earnings
463,857
463,243
20.21
20.19
Earnings per share in EUR
– IAS 24 (revised 2004) “Related Party Disclosures”
The reporting scope of IAS 24 was extended to include a representation of business relations with the parent company and sister companies.
– IAS 39 (revised 2004) “Financial Instruments: Recognition and Measurement”
As a result of the changes to IAS 39, securities available for sale are now measured
within equity. Share price gains and losses not yet realised from the market-price measurement of shares and interest-bearing securities are now booked to a separate reserve
within equity, with effect from January 1, 2005. The previous year’s figures have not been
adjusted since the impact on the 2004 consolidated financial statements is inconsiderable.
The Group
In addition to AUDI AG, the consolidated financial statements include all principal companies where AUDI AG directly or indirectly has scope for determining the financial and business policy in such a way that other group companies benefit from the activities of the
companies in question (subsidiaries). Consolidation begins at that point in time from which
it acquires the opportunity for control; it ends when that opportunity ceases to be available.
The constellation of fully consolidated subsidiaries changed as follows in the past financial year: Audi Volkswagen Korea Ltd., Seoul (South Korea), and Audi Volkswagen Middle
East FZE, Dubai (United Arab Emirates), were included in the consolidated financial statements for the first time as fully consolidated companies. The 51 percent share in AUDI
SENNA Ltda., São Paulo (Brazil), was increased to 100 percent and the company renamed
“Audi Brasil Distribuidora de Veículos Ltda.”, São Paulo (Brazil). COSWORTH TECHNOLOGY
LIMITED, Northampton (Great Britain), was withdrawn from the group.
Companies (joint ventures) which are under joint management on the basis of the articles of incorporation, even though the shares held are in excess of 50 percent of the share
capital, are accounted for using the equity method.
Companies where AUDI AG is able to exercise significant direct or indirect influence on
financial and operating policy decisions (“associates”) are likewise accounted for using the
equity method.
Subsidiaries excluded from consolidation and participating interests are always reported
at their cost of purchase, as no active market exists for the shares of these companies and
no fair value can reliably be determined with a justifiable amount of effort. These subsidiaries are substantially dormant companies or companies with only limited business operations.
143
The following table shows the composition of the Audi Group:
Total
2005
2004
AUDI AG and fully consolidated subsidiaries
Germany
5
5
12
11
Germany
1
1
Other countries
2
2
10
10
Other countries
Enterprises whose shares are accounted for
using the equity method
Subsidiaries reported at cost of purchase and other associates
Germany
Other countries
5
7
35
36
The principal companies within the Audi Group are listed after the Notes. A list of all companies in which shares are held is filed with the Ingolstadt Commercial Register under
HR B 1, and published on the Audi website under www.audi.com/subsidiaries. This list can
in addition be requested directly from AUDI AG, Finance Analysis and Publications I/FF-12,
85045 Ingolstadt, Germany.
As a result of their inclusion in Audi’s consolidated financial statements, quattro GmbH,
Neckarsulm, Audi Vertriebsbetreuungsgesellschaft mbH, Ingolstadt, and Audi Synko GmbH,
Ingolstadt, satisfy the conditions of Section 264 Para. 3 of German Commercial Code and
make use of the exemption rule.
Consolidation principles
The assets and liabilities of the domestic and foreign companies included in the consolidated financial statements are accounted for in accordance with the standard accounting
policies of the Audi Group.
For subsidiaries fully consolidated for the first time, the assets and liabilities are to be
measured at their fair value at the time of acquisition. Thus, differences between preacquisition carrying amounts and fair values of assets acquired and liabilities assumed are
carried, depreciated or dissolved in accordance with the corresponding assets and liabilities. If the purchase prices of the shares exceed the group’s interest in the equity calculated
in this way for the individual company, goodwill arises. Goodwill acquired in a business
combination is tested for impairment regularly, at the balance sheet date, and an impairment loss recognised if necessary.
Receivables and liabilities between consolidated companies are offset, and expenses and
income eliminated. Intra-group profits and losses are eliminated from group inventories and
fixed assets.
Consolidation processes affecting income are subject to deferrals of income taxes, with
deferred tax assets and liabilities offset where the term and tax creditor coincide.
With the exception of the new arrangements of IFRS 5 – according to which the held-forsale non-current assets and liabilities of Audi Synko GmbH, which was sold with effect from
January 1, 2006, are to be disclosed and measured separately – the consolidation methods
applied remain unchanged.
144
The reclassifications required as a result of IFRS 5 comprise the assets and liabilities of
Audi Synko GmbH, the assets as well as equity and liabilities of its fully-owned subsidiary
Audi Zentrum Hannover GmbH, Hanover, and also the 51 percent share in Audi Zentrum
Stuttgart GmbH & Co. KG, Stuttgart, which was measured using the equity method.
The fixed assets of the aforementioned companies reclassified as current assets pursuant to IFRS 5, as well as the fixed assets of COSWORTH TECHNOLOGY LIMITED, Northampton (Great Britain), which were disposed of by sale as a result of the hiving-off of the company, are contained in the column “Disposals” in the consolidated fixed assets schedule.
The same accounting policies are used to determine the pro rata equity for the other
companies of the Audi Group that are measured using the equity method (FAW-Volkswagen
Automotive Company, Ltd., Changchun (China), and YANASE Audi Sales Company Ltd.,
Tokyo (Japan)). The last set of audited accounts of the company in question serves as the
basis for this purpose.
Currency translation
The currency of the Audi Group is the euro (EUR).
Foreign currency transactions in the separate financial statements of AUDI AG and the
subsidiaries are translated at the prevailing exchange rate on the date of the transaction.
Monetary items in foreign currency are reported at the balance sheet date on the basis of
the exchange rate on that date. Exchange differences are recognised in the current-period
income statements of the respective group companies.
The foreign companies belonging to the Audi Group are foreign entities which prepare
their financial statements in their local currency. The only exceptions are AUDI HUNGARIA
MOTOR Kft. and Audi Volkswagen Middle East FZE, which prepare their annual financial
statements in euros and US dollars respectively, rather than in local currency. The concept
of the “functional currency” is applied when translating financial statements prepared in
foreign currency. Assets and liabilities are translated at the closing rate. The effects of foreign currency translation on equity are reported in the currency exchange reserve. The items
in the income statement are translated using weighted average monthly rates. Exchange
differences resulting from the use of diverging exchange rates in the balance sheet and
income statement are recognised in equity with no effect on the income statement.
1 EUR=
Dec. 31, 2005
Dec. 31, 2004
Closing rate
Australia
2005
2004
Average rate
AUD
1.6109
1.7459
1.6320
Brazil
BRL
2.7608
3.6150
3.0368
3.6340
People’s Republic of China
CNY
9.5204
11.2734
10.2025
10.2900
Japan
1.6892
JPY
138.9000
139.6500
136.8482
134.3979
South Korea
KRW
1,184.4200
–
1,273.6043
–
United Arab Emirates
USD
1.1797
–
1.24409
–
Great Britain
GBP
–
0.7051
–
0.6786
As all consolidated subsidiaries have their registered offices in countries in which there is
currently no hyperinflation, IAS 29 does not apply.
145
Recognition and measurement principles
Recognition of income
and expenses
Revenue is always recorded at the time of rendering of the services or delivery of the goods
or products, in other words upon passage of risk to the customer. The percentage of completion method is only applied in exceptional cases, as the dates on which a service is commenced and completed regularly fall within the same accounting period.
Proceeds from the sale of vehicles for which buy-back agreements exist are realised not
immediately, but at a linear rate over the rental period, on the basis of the difference between the selling price and the anticipated buy-back price. These vehicles are reported under inventories.
Operating expenses are recognised when the service is rendered or at the time they are
incurred economically.
Intangible assets
Intangible assets acquired for consideration are recognised at cost of purchase, taking account of ancillary costs and cost reductions, and amortised on a scheduled straight-line
basis over their useful life.
Concessions, rights and licences relate to purchased computer software and subsidies
paid.
Research costs are treated as current expenses in accordance with IAS 38. The development expenditure for products going into series production is recognised as an intangible
asset, provided that the production of these products is likely to bring economic benefit to
the Audi Group. If the conditions for recognition as an intangible asset are not met, the
expenditure is recognised as an expense in the income statement in the year in which it
occurs.
Development expenditure recognised as an intangible asset comprises all direct costs
and overheads directly allocable to the development process. Borrowing costs are not capitalised. Amortisation is performed on a straight-line basis from the start of production, over
the anticipated model life of the developed products.
The amortisation plan is based principally on the following useful lives:
Useful life
Concessions, industrial property rights and similar rights and values
of which software
Development expenditure recognised as an intangible asset
3–15 years
3 years
5–10 years
The amortisation is allocated to the corresponding functional areas.
In accordance with IAS 36, impairment loss is recognised where the recoverable amount
(cash value of the anticipated future cash flow from the use of the asset in question) has
fallen below its carrying amount. If the reasons for impairment performed in previous years
cease to apply, impairment losses are reversed.
Goodwill acquired in a business combination is recognised pursuant to IAS 36 and tested
for impairment regularly, at the balance sheet date. If necessary, an impairment loss resulting from this test is recognised.
146
Within the Audi Group, the value in use of the cash-generating unit in question, determined according to the entity method, is used in assessing impairment of goodwill. The
planning data is compiled on the basis of available knowledge and is influenced by the prevailing macroeconomic developments, as well as by past developments. The planning period extends over five years, with plausible assumptions on future developments made for
subsequent years. The discount rate is 9.8 percent.
Property, plant and
equipment
Property, plant and equipment are measured at cost, less scheduled straight-line depreciation according to the pro rata temporis method.
The costs of purchase include the purchase price, ancillary costs and cost reductions.
In the case of self-constructed fixed assets, the cost of construction includes both the directly allocable cost of materials and cost of labour, and indirect materials and indirect labour which must be capitalised, together with pro rata depreciation. Interest on borrowings
is not included.
The depreciation plan is based on the following useful lives, which are reassessed yearly:
Useful life
Buildings
25–33 years
Plant fixtures
10–18 years
Plant and machinery
6–12 years
Furniture and fixtures, including special tools
3–15 years
Minor assets with a cost of purchase of up to EUR 410 are fully depreciated in the year of
acquisition.
Impairment loss on property, plant and equipment pursuant to IAS 36 is recognised
where the recoverable amount from the use of the asset in question has fallen below its
carrying amount. If the reasons for impairment performed in previous years cease to apply,
impairment losses are reversed.
In accordance with IAS 17, property, plant and equipment used on the basis of lease
agreements are recognised in the balance sheet if the conditions of a financial lease are
met, in other words if the significant risks and opportunities which result from its use have
passed to the lessee. Recognition is performed at the time of the agreement, at cost or at
the present value of the minimum lease payments if lower. The straight-line depreciation
method is based on economic life, or on the term of the lease contract if shorter. The payment obligations resulting from the future lease instalments are recognised as a liability at
the present value of the leasing instalments.
Investment property
Investment property is measured at amortised cost. Buildings are depreciated on the basis
of a useful life of 33 years.
Investments accounted for
using the equity method
Companies (joint ventures) which are under joint management on the basis of the articles of
incorporation, even though the shares held are in excess of 50 percent of the share capital,
are accounted for using the equity method. Companies where AUDI AG is able to exercise
significant direct or indirect influence on financial and operating policy decisions (associates) are likewise accounted for using the equity method.
147
Financial assets
IAS 39 subdivides financial assets (financial instruments) into the following categories:
– financial assets at fair value through profit or loss,
– loans and receivables,
– held-to-maturity investments,
– available-for-sale financial assets.
The classification depends on the respective purpose for which a financial asset has
been acquired, and is reassessed at each balance sheet date. No financial instruments in the
category of “held-to-maturity investments” are in use within the Audi Group.
Financial assets include both primary instruments and derivative instruments. Derivative
financial instruments are used as a hedge for items on the balance sheet and for future cash
flows.
All purchases and sales of financial assets are measured at the trade date, i.e. the date
on which the group undertakes to purchase or sell the asset in question.
The category of “financial assets at fair value through profit or loss” is subdivided into
two categories pursuant to IAS 39: financial assets that have from the outset been classified
as held for trading, and those that have from the outset been classified as “at fair value
through profit or loss”. A financial asset is allocated to this category if it has in principle
been acquired with the intention to sell it in the short term (i.e. sale probably within 12
months of the balance sheet date) or the financial asset has been designated as such by the
management. Where hedging instruments do not in individual instances satisfy the special
eligibility requirements of IAS 39 in full, they are classified as “financial instruments held for
trading”.
Financial instruments are reported at amortised cost (using the effective interest
method) or at fair value. They are derecognised if the rights to payments from the investment have expired or been transferred and the Audi Group has in essence transferred all
risks and opportunities associated with their title.
The amortised cost of a financial asset or financial liability, using the effective interest
method, is the amount at which the financial asset or liability was measured at initial recognition minus principal repayments and any impairment losses. Receivables and liabilities
denominated in foreign currencies are measured at the middle rate on the balance sheet
date. In the case of liabilities, amortised costs always correspond to the nominal or settlement value.
The fair value generally corresponds to the market value or quoted market price. If no active market exists, the fair value is determined by means of investment mathematics methods. These comprise references to recently completed transactions between independent
business partners, the use of the current market prices of other assets that are essentially
similar to the asset in question, discounted cash flow methods, and option pricing models
that take account of the specific circumstances of the issuer.
It is assessed at each balance sheet date whether there is any objective basis for impairment of a financial asset or group of financial assets.
Primary financial instruments
Investments in subsidiaries excluded from consolidation and participating interests are
generally shown at their respective cost of purchase, as no active market exists for these
companies and no fair value can reliably be determined with a justifiable amount of effort.
Loans and receivables originated by the enterprise, as well as liabilities, are measured at
amortised cost. These include in particular
– loans advanced,
– trade receivables and payables,
– other current assets and liabilities.
148
In the case of current items, the fair values to be indicated additionally in the Notes correspond to the amortised cost. For non-current assets and liabilities with more than one
year to maturity, fair values are determined by discounting future cash flows at market
rates.
Liabilities from financial lease agreements are carried at the present value of the leasing
instalments.
Available-for-sale financial assets are always measured at their fair value. In the case of
quoted financial instruments – within the Audi Group, these comprise exclusively securities
– the fair value corresponds to the market value on the balance sheet date. Under the new
arrangements of IAS 39, from the 2005 financial year the fluctuations in value of availablefor-sale securities are accounted for within a separate equity reserve with no effect on income – after taking account of deferred tax – rather than within the financial result. Unless
there is evidence of lasting impairment, the financial result now includes only gains or
losses realised from sales. However, if there is evidence of a lasting fall in the value of securities, the accumulated loss is booked against the equity reserve and recognised in the income statement; once impairment losses have been included in the income statement, they
are no longer reversed by recognition in the income statement. In the 2005 financial year –
as in previous years – there was no evidence of lasting impairment of the securities portfolio.
Derivative financial instruments
Derivative financial instruments are used as a hedge for items on the balance sheet and for
future cash flows. The hedging instruments classified as “available for sale” are likewise
measured at fair value.
In the case of hedges against the risk of changes in value of balance sheet items (fair
value hedges), both the hedging transaction and the hedged risk portion of the underlying
transaction are recognised at fair value. Changes in the value of hedging and underlying
transactions are included in the financial result.
As a means of hedging future cash flows in foreign currency, the Audi Group uses foreign exchange contracts and currency option transactions (cash flow hedges). It is the hedging policy of the Audi Group to conclude exclusively highly effective hedging transactions.
The fluctuations in the market value of these cash flow hedges used for hedging the operating result are initially reported in a special reserve within equity with no effect on income,
and are only recognised as income or expense in the other operating result once the hedged
item is due.
Where foreign exchange hedging transactions – likewise concluded in order to hedge the
operating result – do not satisfy the special eligibility definitions of IAS 39 in individual instances, from the 2005 financial year the ongoing fluctuations in market value from these
transactions are recognised directly within the other operating result, rather than within the
financial result.
149
Deferred tax
Pursuant to IAS 12, deferred tax is determined according to the balance sheet focused liability method. This method specifies that tax deferrals are to be created for all temporary differences between the tax base of assets and liabilities and the carrying amounts of them in
the consolidated financial statements (temporary concept). Deferred tax assets regarding
the carryforward of unused tax losses are in addition to be recognised.
Deferrals amounting to the anticipated tax burden or tax relief in subsequent financial
years are created on the basis of the likely tax rate at the time of realisation. In accordance
with IAS 12, the tax consequences of distributions of profit are not recognised until the
resolution on the appropriation of profits is passed.
Deferred tax assets include future tax relief resulting from temporary differences between the carrying amounts in the consolidated balance sheet and the valuations in the
balance sheet for tax purposes. Deferred tax assets for the carryforward of unused tax
losses that can be realised in the future and from tax relief are also to be recognised.
Deferred tax assets and deferred tax liabilities are offset, provided there is identity of the
tax creditors and maturities.
Pursuant to IAS 1.70, deferred tax is reported as non-current.
A reduction of the carrying amount is performed for deferred tax assets which are
unlikely to be realised.
Inventories
Raw materials and supplies are measured at the updated average cost of purchase or at the
lower net realisable value (net selling price). Other costs of purchase and purchase cost
reductions are taken into account as appropriate.
Work in progress and finished goods are valued at cost of conversion or at the lower net
realisable value. The cost of conversion includes direct materials and direct labour, as well
as a systematically allocated portion of the necessary indirect materials and indirect labour,
production-related depreciation and expenses allocable to the products from the amortisation of series development expenditure recognised as an intangible asset. Distribution
costs, administrative expenses and interest on borrowings are not capitalised.
Merchandise is valued at cost of purchase or at the lower net realisable value.
Provision has been made for all discernible storage and inventory risks by way of appropriate write-downs. Individual downward valuation adjustments are made on all inventories
as soon as the probable proceeds from their sale or use are lower than the carrying
amounts of the inventories. The estimated selling price less the estimated costs incurred up
until their sale is regarded as the net realisable value of inventories.
Securities, cash and
cash equivalents
Securities held as current assets are measured at market value, in other words at the quoted
market price at the balance sheet date.
Cash and cash equivalents are measured at nominal value.
Defined benefit liabilities
The actuarial measurement of defined benefit liabilities is based on the Projected Unit
Credit Method for defined retirement benefit plans as specified in IAS 19 (Employee Benefits). This method takes account of pensions and entitlements to future pensions known at
the balance sheet date as well as anticipated future pay and pension increases.
Other provisions
In accordance with IAS 37, provisions are recognised if an obligation existing towards third
parties is likely to lead to cash outflows and where the amount of the obligation can reliably
be estimated.
150
Pursuant to IAS 37, the other provisions for all discernible risks and uncertain liabilities
are reported at their probable cost and not offset against recourse entitlements.
Provisions with over one year to maturity are measured at their discounted settlement
value at the balance sheet date. Interest rates in real terms of between 2.80 and 3.05 percent
are used as the discount rates. The settlement value also includes the cost increases to be
taken into account at the balance sheet date, according to IAS 37.
Notes to the consolidated income statement
1
Revenue
The revenue of the group, by brand, is made up as follows:
EUR ‘000
Audi brand
Lamborghini brand
2005
2004
19,369,511
17,853,567
226,399
216,697
2,611,045
2,207,517
SEAT brand
347,430
345,827
Škoda brand
224,845
207,051
22,779,230
20,830,659
Volkswagen brand
Total revenue from vehicles
Other sales
Total revenue
3,811,373
3,675,205
26,590,603
24,505,864
Revenue is categorised by region for the purpose of segment reporting, along the same
lines as those used for internal group steering and reporting.
The other sales constitute goods and services supplied to affiliated companies and sales
to third parties.
2
Cost of sales
The cost of sales comprises the costs incurred in generating revenue and purchase prices in
trading transactions. This item also includes expenses resulting from the creation of provisions for warranty costs as well as development expenditure which cannot be recognised as
an intangible asset.
3
Distribution costs
Distribution costs substantially comprise expenses for marketing and sales promotion, advertising, public relations activities and outward freight, as well as depreciation for the sales
sector.
4
Administrative expenses
The administrative expenses include labour and materials costs, as well as depreciation for
the administrative sector.
151
5
Other operating income
EUR ‘000
2005
2004
Income from rebilling
282,497
282,427
Income from the reversal of provisions and accruals
153,325
215,252
Income from ancillary business
74,911
57,516
Income from the processing of payments in foreign currency
65,807
52,496
Income from realised derivative currency hedging transactions
43,731
156,946
Income from the reversal of reductions for impairment on
receivables and other assets
8,062
3,262
Income arising from asset disposals
7,079
3,174
Income from investment property
158
164
Miscellaneous operating income
154,548
177,264
Total other operating income
790,118
948,501
Income from the processing of payments in foreign currency substantially comprises gains
resulting from exchange-rate movements between the dates of output and payment, and
exchange-rate gains as a result of measurement at the average rate on the closing date. In
the same way, exchange rate losses are reported under other operating expenses.
The overall item of currency hedging transactions is shown under other particulars
(item 1.1).
6
Other operating expenses
EUR ‘000
Expense from realised derivative
currency hedging transactions
2005
2004
110,564
44,194
Expense from the processing of payments in foreign currency
55,669
54,544
Other expenses from foreign currency factors
46,000
–
Expenses from the measurement of derivative financial
instruments
38,634
–
Losses arising from asset disposals
32,065
18,102
Impairment losses on receivables
14,391
37,063
Miscellaneous operating expenses
120,430
77,389
Total other operating expenses
417,753
231,292
The losses arising from asset disposals include expenses from disposals of development
expenditure recognised as an intangible asset as well as of property, plant and equipment.
The other expenses from foreign currency factors relate to the write-down for currency
translation reasons of the pro rata operating assets of a Brazilian partnership.
The overall item of currency hedging transactions is shown under other particulars
(item 1.1).
152
7
Result from investments accounted for using the equity method
EUR ‘000
Income from investments accounted for using the equity method
2004
–
22,768
12,407
2,096
– 12,407
+ 20,672
2005
2004
Other interest and similar expenses
126,263
77,939
of which to affiliated companies
123,097
75,550
Expense from investments accounted for using the equity method
Total result from investments accounted for
using the equity method
8
2005
Finance cost
EUR ‘000
Interest expense
Interest expense included in leasing instalments
109
267
126,372
78,206
Interest on employee benefit obligations
99,831
96,815
Interest on other provisions
24,152
21,169
123,983
117,984
2005
2004
+ 26,307
+ 16,988
22,374
16,906
3,933
2,084
–
2,002
Total interest expense
Interest on provisions
Total interest on provisions
Interest expense is attributed on an accrual basis.
9
Other financial results
EUR ‘000
Investment result
Income from investments in affiliated companies
Income from profit transfer agreements
Impairment losses on participating interests
Income from the sale of securities
Income from the measurement at market value
of derivative financial instruments
of securities and non-current loans advanced
Expense from the measurement at market value
of derivative financial instruments
of securities and non-current loans advanced
of assets and liabilities
Other interest and similar income
of which from affiliated companies
Total other financial results
31,284
115
3
60,464
3
33,598
–
26,866
117
71,727
–
70,469
113
1,258
4
–
97,809
75,343
65,231
53,163
+ 155,286
+ 81,183
The income from investments in affiliated companies relates above all to a share in the
profits of Volkswagen Transport GmbH & Co. OHG, Wolfsburg. The overall item of currency
153
hedging instruments is shown under other particulars (item 1.1). Interest income is attributed on an accrual basis.
10
Income tax expense
Income tax expense includes taxes passed on by Volkswagen AG on the basis of the singleentity relationship between the two companies for tax purposes, along with taxes owed by
AUDI AG and its consolidated subsidiaries, as well as deferred taxes.
The prior-year figures for deferred tax were adjusted as a result of exercising the choice
to apply IAS 19 (revised 2004) “Employee Benefits” early. Effects on the income statement of
the early application of the revised standard are represented under General information on
the notes to the consolidated financial statements.
Tax expense consists of the following:
EUR ‘000
2005
2004
Current income tax expense
706,941
552,809
of which for Germany
673,363
482,157
of which for other countries
33,578
70,652
of which tax income / expense not relating to the period
– 7,628
– 18,647
of which income from the reversal of tax provisions
Deferred tax income
of which for Germany
of which for other countries
Total income tax expense
– 3,206
– 10,319
– 221,073
– 280,580
– 207,294
– 112,277
– 13,779
– 168,303
485,868
272,229
Of the current tax expense, an amount of EUR 673 (482) million was passed on by Volkswagen AG.
The current taxes in Germany are calculated at the tax rate of 38.3 (38.3) percent. This
represents the sum of the corporate income tax rate of 25.0 percent, the solidarity surcharge
of 5.5 percent and the average trade earnings tax rate for the group. Deferred taxes are likewise calculated at a rate of 38.3 percent in the financial year under review, as in the previous
year.
The national income tax rates applicable for foreign companies range from 0 percent to
40 percent.
The deferred tax assets for AUDI HUNGARIA MOTOR Kft., Győr (Hungary), for tax relief on
capital investments continue to be carried at EUR 220 million. The effects arising as a result
of the subsidising of research and development expenditure in Hungary are reported in the
reconciliation accounts under tax-exempt income.
There exist loss carryforwards totalling EUR 164 million, of which an amount of EUR 140
million can be used indefinitely. The realisation of tax losses resulted in a reduction of
EUR 15 (17) million in current income tax expense in the 2005 financial year. Deferred tax
assets totalling EUR 105 million were not carried for reasons of impairment. Unused tax loss
carryforwards accounted for EUR 11 million of this amount, and tax rebates for the remaining EUR 94 million.
Deferred tax totalling EUR 194 (63) million relates to business transactions credited directly to equity. One portion amounting to EUR 123 (59) million relates to defined benefit
liabilities as a result of remeasurement pursuant to IAS 19 (revised 2004) and another portion of EUR 71 (4) million relates to derivative financial instruments.
There are no deferred tax effects resulting from tax-rate changes.
154
The following deferred tax assets and liabilities carried in the balance sheet are attributable
to the individual balance sheet items:
EUR ‘000
Dec. 31, 2005
Dec. 31, 2004
Deferred tax assets
Dec. 31, 2005
Dec. 31, 2004
Deferred tax liabilities
Intangible assets
37,818
28,026
723,434
799,135
Property, plant and equipment
83,716
100,015
289,653
319,215
Long-term investments
91,491
70,781
–
–
Inventories
40,500
30,296
42,900
2,741
Receivables and other assets
22,389
26,878
9,734
54,303
Other current assets
220,683
220,628
33,292
18,723
Defined benefit liabilities
304,796
196,209
158
266
Other provisions
577,811
420,860
46,224
23,793
Liabilities
80,915
42,709
11,372
11,453
Loss carryforwards
35,314
29,806
–
–
1,495,433
1,166,208
1,156,767
1,229,629
1,065,758
818,587
859,102
934,949
– 1,116,540
– 716,658
– 1,116,540
– 716,658
25,132
9,395
11,769
– 1,696
404,025
458,945
51,996
511,275
Gross value
of which non-current
Offsetting measures
Consolidation measures
Reclassifications pursuant to IFRS 5
– 1,102
–
–
–
Carrying amount
402,923
458,945
51,996
511,275
Deferred taxes are explained in greater detail in the recognition and measurement principles.
155
Reconciliation from anticipated to reported income tax expense
The anticipated tax expense is above the reported income tax expense. The reasons for the
difference between the anticipated and reported tax expense are illustrated by the following
reconciliation:
EUR ‘000
Profit before tax
Anticipated income tax expense 38.3 % (38.3 %)
2005
2004
1,310,001
1,143,350
501,730
437,903
– 72,496
– 66,719
–
– 174,365
Progression:
Divergent foreign tax burden
Tax portion for:
tax relief on capital investments
tax-exempt income
– 64,731
– 17,423
expenses not deductible for tax purposes
27,749
36,608
temporary differences and losses for which
no deferred tax has been recorded
79,448
23,430
Tax income / expense not relating to the period
– 7,628
– 18,647
–
– 2,026
Effects of tax-rate changes
Other tax effects
Income tax expense reported
Effective tax rate in %
11
21,796
53,468
485,868
272,229
37.1
23.8
Minority interests
The profit previously due to the other shareholders of Audi Brasil Distribuidora de Veículos
Ltda., São Paulo (Brazil), no longer applies as a result of the acquisition of all these shares by
AUDI AG.
12
Profit transfer to Volkswagen AG
An amount of EUR 462 (405) million is to be transferred to Volkswagen AG on the basis of
the profit transfer agreement.
13
Earnings per share
Basic earnings per share are calculated by dividing the profit share due to AUDI AG shareholders by the weighted average number of shares outstanding during the financial year.
In Audi’s case, the diluted earnings per share are the same as the basic earnings per
share, as there were no potential shares in AUDI AG in existence at either December 31, 2004
or December 31, 2005.
2005
2004
Profit share of AUDI AG shareholders in EUR thousand
824,133
868,857
Weighted average number of shares (basic and diluted
totals are identical)
43,000,000
43,000,000
19.17
20.21
Earnings per share in EUR
156
Outside shareholders in AUDI AG receive a compensatory payment for each individual share
certificate instead of a dividend for the 2005 financial year. The level of this payment corresponds to the dividend that is paid on one Volkswagen AG ordinary share. The dividend
payment will be determined by the Annual General Meeting of Volkswagen AG on May 3,
2006.
Notes to the consolidated balance sheet
14
Intangible assets
EUR ‘000
Dec. 31, 2005
Dec. 31, 2004
Concessions, industrial property rights and similar rights and
values, as well as licences thereto
149,818
178,407
Goodwill
172,491
172,491
738,558
571,907
1,622,660
1,832,060
Development expenditure recognised as an intangible asset for
products currently in development
products currently in use
Payments on account for intangible assets
1,632
4,467
2,685,159
2,759,332
The goodwill results from the consolidation in full of AUTOGERMA S.p.A., Verona (Italy).
In accordance with IAS 36, impairment of this goodwill is tested at the end of the year.
The Audi Group uses the value in use as the basis for determining any possible impairment.
The planning data was prepared on the basis of available knowledge. A slight increase in
demand for cars in Italy is expected.
Research and development expenditure recognised as an expense
EUR ‘000
2005
2004
Research expenditure and development expenditure not recognised as an intangible asset
999,070
746,393
Amortisation and disposals of development expenditure
recognised as an intangible asset
585,988
467,911
1,585,058
1,214,304
Total research and development expenditure
recognised as an expense
Spending on research and development activities in the 2005 financial year totalled
EUR 1,542 (1,398) million. Of this total, EUR 543 (652) million satisfy the criteria for recognition as an asset according to IAS 38.
157
15
Property, plant and equipment
EUR ‘000
Dec. 31, 2005
Dec. 31, 2004
Land, land rights and buildings, including buildings on land
owned by others
1,701,858
1,734,273
Plant and machinery
1,152,176
1,217,408
Furniture, fixtures and office equipment
2,013,732
2,061,108
of which finance lease
Payments on account and assets in course of construction
2,512
2,304
353,194
353,251
5,220,960
5,366,040
As in the previous year, recognition of impairment losses pursuant to IAS 36 was not necessary in the 2005 financial year.
Payments totalling EUR 53 (52) million for assets rented on the basis of operating lease
agreements were recognised as an expense.
There are no significant restrictions on ownership and disposal for the reported property,
plant and equipment.
16
Investment property
Land and buildings held for the purpose of generating rental income (investment property
pursuant to IAS 40) are reported under investment property. The fair value of investment
property amounts to EUR 10,336 thousand.
17
Other long-term investments
EUR ‘000
Investments in affiliated companies
Investments in associates
Participating interests
Dec. 31, 2005
Dec. 31, 2004
96,509
150,957
–
13
9,293
9,254
105,802
160,224
The change in investments in affiliated companies stems principally from the first-time
consolidation in full of Audi Korea Ltd., Seoul (South Korea), as well as from write-downs
from currency translation.
18
Deferred tax assets
The temporary differences between tax bases and carrying amounts in the consolidated
balance sheet are explained in the recognition and measurement principles under the item
“Deferred tax”. Pursuant to IAS 1 (revised 2003), deferred tax liabilities are reported as noncurrent liabilities irrespective of their maturities.
158
19
Other receivables and other financial assets
There are no significant restrictions on ownership or disposal for the reported receivables
and other assets.
Derivative currency hedging instruments are measured at market value. The overall item of
currency hedging instruments is shown under Other particulars (item 1.1).
Non-current other receivables and other financial assets
EUR ‘000
Other tax assets
Loans advanced to affiliated companies
Loans advanced to associates
Other receivables from affiliated companies
of which from derivative currency hedging instruments
(cash flow hedges)
Other loans advanced
Other assets
Dec. 31, 2005
Dec. 31, 2004
29,221
7,465
1,106
1,198
14,399
14,322
2,778
–
2,778
–
1,494
1,887
2,266
56,528
51,264
81,400
The loans advanced have a fair value of EUR 16,549 (17,358) thousand. The non-current other
assets have a fair value of EUR 4,969 (56,428) thousand.
Current other receivables and other financial assets
EUR ‘000
Other receivables from affiliated companies
of which from derivative currency hedging instruments
(cash flow hedges)
Other receivables from associates
Other receivables from enterprises in which the company has
participating interests
Other tax assets
Assets from derivative currency hedging instruments
(currency swaps)
Other loans advanced
Other assets
Dec. 31, 2005
Dec. 31, 2004
97,679
213,586
82,059
134,099
16,858
13
–
46
67,343
131,381
3
1,085
189
229
202,360
181,906
384,432
528,246
All current other receivables and financial assets are due within one year of the balance
sheet date. The carrying amounts correspond to the fair values.
159
20
Inventories
EUR ‘000
Dec. 31, 2005
Dec. 31, 2004
Raw material and supplies
366,767
391,746
Work in progress
279,359
267,258
1,395,366
1,171,420
345
1,189
2,041,837
1,831,613
Finished goods and merchandise
Payments on account for inventories
Inventories amounting to EUR 23,552 (22,110) million were booked to the cost of sales at the
same time that revenue from them was realised.
The write-down as a result of the measurement of inventories on the basis of sales market amounted to EUR 106 (63) million.
No reversal of write-downs was performed in the financial year. There are no significant
restrictions on ownership or disposal for the reported inventories.
21
Trade receivables
EUR ‘000
Dec. 31, 2005
Dec. 31, 2004
Trade receivables from
third parties
1,010,120
686,277
affiliated companies
370,476
537,196
joint ventures and associates
117,107
169,577
1,497,703
1,393,050
The fair value of trade receivables amounts to EUR 1,497,686 (1,393,013) thousand.
The trade receivables not realised until more than twelve months after the balance sheet
date amount to EUR 2,874 (7,353) thousand.
22
Effective income tax assets
Entitlements to income tax rebates predominantly for foreign group companies are reported
under this item.
23
Assets and liabilities held for sale
The assets and liabilities held for sale comprise exclusively Audi Synko GmbH, which was
sold with effect from January 1, 2006. The accounting reclassifications performed as a result
of IFRS 5 comprise the assets and liabilities of Audi Synko GmbH (including its 51 percent
share in Audi Zentrum Stuttgart GmbH & Co. KG, Stuttgart, which was measured using the
equity method) and the assets as well as equity and liabilities of its fully-owned subsidiary
Audi Zentrum Hannover GmbH, Hanover.
160
The assets and liabilities held for sale comprise the following:
EUR ‘000
Dec. 31, 2005
Assets held for sale
25,586
Fixed assets
5,464
Inventories
11,775
Trade receivables
2,546
Other assets
5,801
Liabilities held for sale
20,378
Trade payables
5,706
Other liabilities
14,672
Disposal group
24
5,208
Securities
Securities held as current assets comprise fixed-interest or variable-interest securities and
shares. The rates of return ranged between 2.57 percent and 6.48 percent.
25
Cash and cash equivalents
EUR ‘000
Balances with banks and affiliated companies
Dec. 31, 2005
Dec. 31, 2004
3,104,594
1,758,858
Cheques and cash in hand
382
353
3,104,976
1,759,211
The rates of return for overnight money and term money ranged between 1.99 percent and
2.39 percent.
Balances existed with various banks and in various currencies. Liquid funds were invested with affiliated companies via the cash pooling arrangements.
161
EQUITY
26
EUR ‘000
Position at Dec. 31, 2003
Adjustment by application
of IAS 19.93
Changes in equity
Issued
capital
Capital
reserve
110,080
Retained earnings
56,730
Equity
Legal
reserve
and other
retained
earnings
Currency
exchange
reserve
5,368,392
– 32,074
Reserve
for cash
flow
hedges
Reserve for
marketprice
measurement of
securities
Reserve
pursuant
to IAS 19
Minority
interests
Overall
37,228
–
–
11,474
5,551,830
–
–
–
–
–
–
– 64,352
–
– 64,352
110,080
56,730
5,368,392
– 32,074
37,228
–
– 64,352
11,474
5,487,478
Currency adjustments
–
–
1,034
– 15,143
–
–
681
– 1,416
– 14,844
Transfer to retained
earnings
–
–
463,857
–
–
–
–
2,264
466,121
Changes in measurement
not affecting income
–
–
–
–
41,449
–
– 156,519
–
– 115,070
Result from settled
cash flow hedges
–
–
–
–
– 50,481
–
–
–
– 50,481
Tax items credited
directly to equity
–
–
–
–
3,459
–
59,414
–
62,873
Dividends paid
–
–
–
–
–
–
–
– 2,441
– 2,441
Position at Jan. 1, 2004
Withdrawal of holders of
minority interests
–
–
–
–
–
–
–
– 5,824
– 5,824
Position at Dec. 31, 2004
110,080
56,730
5,833,283
– 47,217
31,655
–
– 160,776
4,057
5,827,812
Currency adjustments
–
–
1,258
34,461
–
–
–3
–
35,716
Transfer to retained
earnings
–
–
362,133
–
–
–
–
–
362,133
Changes in measurement
not affecting income
–
–
–
–
– 198,851
26,496
– 321,795
–
– 494,150
Result from the sale
of securities
–
–
–
–
–
– 31,283
–
–
– 31,283
Result from settled
cash flow hedges
–
–
–
–
14,508
–
–
–
14,508
Tax items credited
directly to equity
–
–
–
–
68,820
1,834
123,055
–
193,709
Differences from changes
in consolidated companies
–
–
– 2,346
–
–
–
7,208
–
4,862
Dividends paid
–
–
–
–
–
–
–
– 2,304
– 2,304
Withdrawal of holders of
minority interests
–
–
–
–
–
–
–
– 1,753
– 1,753
Capital contributions
–
195,000
–
–
–
–
–
–
195,000
110,080
251,730
6,194,328
– 12,756
– 83,868
– 2,953
– 352,311
–
6,104,250
Position at Dec. 31, 2005
The issued capital of AUDI AG totals EUR 110,080,000.00. Each share represents a mathematical share of EUR 2.56 in the issued capital. It is divided into 43,000,000 bearer individual
share certificates.
162
The capital reserve contains shareholder contributions from the issue of shares in the
company. In the year under review, it rose to EUR 251,730 thousand as a result of a contribution of EUR 195,000 thousand by Volkswagen AG to the capital reserve of AUDI AG.
The opportunities and risks from foreign exchange contracts and currency option transactions serving as hedges for future cash flows are deferred with no effect on the income
statement in the reserve for cash flow hedges. When the cash flow hedges fall due, the
results from the settlement of the exchange-rate hedging contracts are reported in the other
operating result. Gains and losses from the measurement at fair value of financial assets
available for sale are recognised in the reserve for the market-price measurement of securities. Adjustments to actuarial assumptions on retirement benefit obligations are recognised
in the reserve for IAS 19.
The balance of EUR 362,133 (463,857) thousand remaining after the transfer of profit to
Volkswagen AG is allocated to the other retained earnings.
27
Minority interests
The absence of minority interests results from the acquisition of the third party shares in
Audi Brasil Distribuidora de Veículos Ltda., São Paulo (Brazil), by AUDI AG.
LIABILITIES
28
Financial liabilities
Non-current financial liabilities
EUR ‘000
Liabilities to banks
Liabilities from financial lease agreements
Dec. 31, 2005
Dec. 31, 2004
14,355
14,695
1,213
586
15,568
15,281
Non-current financial liabilities with a time to maturity of more than five years amount to
EUR 1,880 (2,287) thousand. The carrying amounts correspond to the fair values.
Current financial liabilities
EUR ‘000
Liabilities to affiliated factoring companies
Liabilities from cash pooling to affiliated companies
Liabilities from cash pooling to enterprises in which the company
has participating interests
Liabilities to affiliated banks
Liabilities to banks
Liabilities from financial lease agreements
Dec. 31, 2005
Dec. 31, 2004
111,675
118,544
14,141
16,153
5,004
5,913
–
5,420
32,849
452
1,226
1,757
164,895
148,239
163
Measurement of the non-current and current financial lease agreements is based on an
interest rate of 6.5 percent p.a. in each case. These agreements will incur a finance charge
totalling EUR 122 thousand over the next few years.
29
Deferred tax liabilities
The temporary differences between tax bases and carrying amounts in the consolidated
balance sheet are explained in the recognition and measurement principles under the item
“Deferred tax”. Pursuant to IAS 1 (revised 2003), deferred tax liabilities are reported as noncurrent liabilities irrespective of their maturities.
30
Other liabilities
The derivative currency hedging instruments reported under other liabilities are measured
at market values. The overall item of currency hedging instruments is shown under other
particulars (item 1.1).
Non-current other liabilities
EUR ‘000
Dec. 31, 2005
Dec. 31, 2004
Carrying amounts
Liabilities to affiliated companies
42,249
of which from derivative currency hedging instruments
(cash flow hedges)
Other liabilities
of which in respect of social insurance
Dec. 31, 2005
Dec. 31, 2004
Fair values
91,181
38,675
80,977
30,167
–
30,167
–
38,552
35,329
38,552
35,329
3,057
5,356
3,057
5,356
80,801
126,510
77,227
116,306
Other liabilities with a time to maturity of more than five years amount to EUR 56,073
(37,244) thousand.
Current other liabilities
EUR ‘000
Dec. 31, 2005
Dec. 31, 2004
853,970
462,243
149,083
26,897
Liabilities to associates
–
6,893
Liabilities to enterprises in which the company has participating
interests
–
7
62,388
8,532
Liabilities to affiliated companies
of which from derivative currency hedging instruments
(cash flow hedges)
Advances received for orders from customers
Derivative currency hedging instruments (cash flow hedges)
–
1,488
698,330
558,862
of which taxes
120,410
102,121
of which in respect of social insurance
117,416
114,429
1,614,688
1,038,025
Other liabilities
164
31
Defined benefit liabilities
Defined benefit liabilities are created on the basis of plans to provide retirement, invalidity
and surviving dependents’ benefits. The benefit amounts generally depend on the length of
service and the remuneration of the employees.
Within the Audi Group, a distinction is made between benefit systems based on provisions and those financed externally via pension funds.
Obligations for retirement benefits both within Germany and in other countries are
measured according to the Projected Unit Credit Method pursuant to IAS 19. Here, the future
obligations are measured on the basis of benefit claims vested pro rata at the balance sheet
date. For purposes of measurement, trend assumptions are used for the relevant quantities
which affect the level of benefit.
The pension fund model introduced in Germany on January 1, 2001 is based on contribution-based retirement benefit commitments, which are classified as defined benefit plans
pursuant to IAS 19 (Employee Benefits). The remuneration-based annual cost of providing
employee benefits is invested in funds on a fiduciary basis by Volkswagen Pension Trust e.V.
This model offers AUDI AG employees the opportunity to increase their pension claims,
while providing full risk cover. As the units administrated on a fiduciary basis satisfy the
requirements of IAS 19 as plan assets, these funds were offset against the retirement benefit obligations.
The calculation is based on the following individual actuarial assumptions:
%
Remuneration trend
Retirement benefit trend
Interest rate
Dec. 31, 2005
Dec. 31, 2004
2.25–3.50
2.25–4.00
1.50
1.50–3.10
2.00–4.25
2.00–5.40
Fluctuation rate
1.40
1.40
Expected return on plan assets
5.00
5.75–6.80
The biometric mortality was determined using the “2005 G Reference Tables” by Dr. K. Heubeck.
Progression from the present value of defined benefit obligations to the defined benefit
liabilities for meeting retirement benefit commitments recognised in the balance sheet:
EUR ‘000
Present value of funded defined benefit obligations
Fair value of plan assets
Deficit
Dec. 31, 2005
Dec. 31, 2004
238,682
206,750
– 238,682
– 196,500
–
10,250
Present value of unfunded defined benefit obligations
2,179,618
1,809,792
Defined benefit liabilities recognised in the balance sheet
2,179,618
1,820,042
165
The actual rise in the present value of defined benefit obligations was + 0.15 (+ 2.43) percent
above the level expected on the basis of the underlying actuarial assumptions.
The amounts recognised in the income statement are as follows:
EUR ‘000
2005
2004
Current service cost for services rendered by employees
in the financial year
66,000
94,756
Interest cost
99,831
96,815
Expected return on plan assets
– 10,867
– 10,914
Total of expense and income recognised in the income statement
154,964
180,657
The interest element in pension costs is shown as interest cost in the other financial result.
There was an actual gain from plan assets of EUR 22,203 (12,969) thousand in the past financial year. The actual rate of return on plan assets was therefore 4.75 percent higher than
the anticipated rate of return. In the previous year, the actual change in plan assets was 1.05
percent below the anticipated level.
The defined benefit liabilities recognised in the balance sheet are determined by offsetting the present value of defined benefit obligations against the fund assets pursuant to
IAS 19. The defined benefit liabilities changed as follows:
EUR ‘000
Defined benefit liabilities at January 1
2005
2004
1,820,042
1,586,502
Changes to the group
– 10,250
–
Employee benefit expenses
154,964
180,657
Actuarial losses
321,795
156,519
Pension payments from company assets
– 57,312
– 54,661
Contributions paid to funds
– 50,027
– 47,981
Transfers received from affiliated companies
Transfers made to affiliated companies
Currency differences
Defined benefit liabilities at December 31
2,426
510
– 2,025
– 1,310
5
– 194
2,179,618
1,820,042
Actuarial gains and losses result from changes in the number of people participating in the
pension scheme and from a deviation in the actual trends (for example, increases in pay or
retirement benefit) from the figures assumed for calculation purposes. In accordance with
IAS 19, such gains and losses are recognised under a separate item within equity, after taking account of deferred tax. The prior-year figures have been adjusted accordingly.
166
The present value of defined benefit obligations changed as follows:
EUR ‘000
Present value at January 1
2005
2004
2,016,542
1,721,762
Service cost
66,000
94,756
Interest cost
99,831
96,814
Actuarial losses
333,587
159,024
Pension payments from company assets
– 57,312
– 54,661
Pension payments from fund assets
Effects of transfers
Changes in consolidated companies
Currency differences
Present value at December 31
– 471
–
401
– 800
– 40,454
–
176
– 353
2,418,300
2,016,542
2005
2004
The fund assets changed as follows:
EUR ‘000
Fund assets at January 1
196,500
135,039
Expected net investment income
10,867
10,914
Actuarial gains
11,792
2,505
Employer contributions
50,027
47,981
– 471
– 98
Benefits paid
Changes in consolidated companies
Currency differences
Fund assets at December 31
– 30,204
–
171
159
238,682
196,500
Employer contributions totalling EUR 44.7 million are expected for the following financial
year.
The fund assets are made up as follows:
% of fund assets
2005
2004
Shares
40.5
48.2
Fixed-interest securities
52.2
44.1
7.3
0.6
Cash in hand
–
6.6
Other
–
0.5
Property
32
Effective income tax obligations
The effective income tax obligations consist of current tax liabilities and provisions for current taxes with more than one year to maturity.
167
33
Other provisions
EUR ‘000
Dec. 31, 2005
Obligations from sales
operations
Dec. 31, 2004
Total
Of which due
within one
year
Total
Of which due
within one
year
1,085,237
2,259,074
1,180,462
1,998,563
Workforce-related provisions
389,724
69,162
324,069
78,727
Other provisions
306,869
258,499
263,771
233,325
2,955,667
1,508,123
2,586,403
1,397,289
The obligations from sales operations comprise risks from the sale of vehicles, components
and original parts, including the disposal of end-of-life vehicles. These are for the most part
warranty claims that are determined on the basis of the previous or the estimated future
loss experience. This item in addition includes discounts, bonuses and similar due to be
granted and arising after the balance sheet date but occasioned by sales before the balance
sheet date.
The workforce-related provisions are created among other reasons for long-service
awards, pre-retirement part time arrangements, suggested improvements and ex gratia
payments.
The other provisions relate to a wide range of one-off risks.
The provisions changed as follows:
EUR ‘000
Obligations from
sales operations
Jan. 1, 2005
Consumed
Reversed
Allocated
Transferred
Compounded
Dec. 31, 2005
1,998,563
820,709
29,793
1,095,481
– 6,438
21,970
2,259,074
389,724
Workforce-related
provisions
324,069
35,131
4,167
102,220
–
2,733
Other provisions
263,771
145,060
15,340
197,612
6,438
– 552
306,869
2,586,403
1,000,900
49,300
1,395,313
–
24,151
2,955,667
Dec. 31, 2005
Dec. 31, 2004
1,635,731
1,638,542
502,407
419,981
11,364
15,211
Overall
34
Trade payables
EUR ‘000
Trade payables in respect of
third parties
affiliated companies
associates
enterprises in which the company has participating interests
168
316
327
2,149,818
2,074,061
The fair value of trade payables in respect of third parties amounts to EUR 1,631,409
(1,638,542) thousand. In the case of liabilities to affiliated companies, the fair value corresponds to the carrying amount.
The customary retention of title moreover applies for liabilities from deliveries of goods.
Notes to the cash flow statement
The cash and cash equivalents indicated in the cash flow statement comprise exclusively the
cash and cash equivalents as reported in the balance sheet.
The cash flow statement explains the streams of payments for both the 2005 financial
year and the previous year, categorised according to cash inflows and outflows from operating, investing and financing activities. Effects of changes to the group and to foreign exchange rates on cash flows are shown separately.
The item Income tax payments comprises payments made to Volkswagen AG on the basis of the single-entity relationship for tax purposes in Germany, and payments to foreign
tax authorities.
The change in cash and cash equivalents as a result of the effect of changes to the group
relates to companies that are consolidated for the first time and were carried at cost in previous years.
The cash flow from investing activities includes additions to property, plant and equipment and long-term investments, as well as development expenditure recognised as an
intangible asset. The change in investment property and the cash inflows arising from asset
disposals are likewise reported here. The change in securities that affects payments is likewise reported under cash flow from investing activities from 2005. The prior-year figure has
been adjusted for ease of comparison.
Financing activities include cash outflows from the transfer and distribution of profit, as
well as changes in other financial liabilities.
In 2005, the cash flow from operating activities includes payments for interest received
amounting to EUR 89 million and for interest paid amounting to EUR 65 million. The Audi
Group accrued dividends and profit transfers totalling EUR 19 million in 2005.
Other particulars
1 Hedging policy and risk
management
1.1 Price and foreign exchange exposure
The Audi Group is exposed to price and exchange rate fluctuations in view of its international business activities. These risks are limited by concluding appropriate hedging transactions for matching amounts and maturities. The measures to hedge against foreign exchange exposure are coordinated regularly between AUDI AG and the group treasury of
Volkswagen AG in accordance with the Volkswagen organisational guideline.
Marketable derivative financial instruments (foreign exchange contracts and currency option transactions) are used for this purpose. The hedging transactions are performed centrally on behalf of Audi by Volkswagen AG on the basis of an agency agreement. Contracts
are concluded exclusively with top-grade national and international banks whose creditworthiness is regularly examined by leading rating agencies. The results from foreign exchange
hedging are credited or charged to the Audi Group each month on the basis of the proportion of the Volkswagen Group’s overall hedging volume.
In accordance with the Volkswagen organisational guideline, AUDI AG moreover concludes hedging transactions of its own to a limited extent, where this helps to simplify current operations.
169
Nominal volume of derivative financial instruments
The nominal volumes of the hedging transactions shown represent the total of all buying
and selling prices on which the transactions are based:
EUR ‘000
Nominal volumes
Market values
Dec. 31, 2005
Time to maturity up to 1 year
Dec. 31, 2004
Time to maturity up to 1 year
Dec. 31, 2005
Dec. 31, 2004
Foreign exchange contracts
5,492,692
3,447,463
1,265,836
1,140,220
– 128,382
51,304
Currency option transactions
2,901,779
2,836,382
514,767
514,767
33,969
54,410
321
321
10,652
7,982
3
1,085
8,394,792
6,284,166
1,791,255
1,662,969
– 94,410
106,799
Currency swaps
Total portfolio
Hedging measures in 2005 related principally to the US dollar, the pound sterling, the Canadian dollar and the Japanese yen.
1.2 Market risk
A market risk exists if price changes on financial markets have a negative influence on the
value of financial instruments. The market values shown in the table have been calculated
on the basis of the market information available at the balance sheet date and represent the
redemption (cash-in) values of the derivative financial instruments. The redemption values
are calculated on the basis of quoted prices or standardised methods.
1.3 Interest rate risk
An interest rate risk, in other words potential fluctuations in the value of financial instruments as a result of changes to market rates, can occur above all in the case of medium and
long-term, fixed-interest receivables or liabilities.
Fixed-interest loans advanced totalled EUR 17 (18) million at December 31. 2005. In view
of the low volume of these financial instruments, no interest-rate hedging contracts were
taken out.
1.4 Liquidity risk
A liquidity forecast based on a definite planning horizon and credit facilities of Volkswagen AG assure the adequate liquidity of the Audi Group at all times.
1.5 Credit risk
The credit risk from financial assets consists in the risk of default by a counterparty and
therefore does not exceed the positive fair values of these assets.
We work on the assumption that the actual risk from primary financial instruments is
covered by reductions for impairment or uncollectability.
The credit risk from derivative financial instruments does not exceed the balance of positive market values in the event of default by a counterparty of Volkswagen AG or the Audi
Group companies. The actual credit risk is negligible, as Volkswagen AG and AUDI AG only
conclude contracts with top-class business partners and trading limits are defined for each
business partner as a risk management measure.
170
2 Contingencies
Contingencies are unrecognised contingent liabilities, the amount of which corresponds to
the maximum possible claim at the balance sheet date.
EUR ‘000
Dec. 31, 2005
Dec. 31, 2004
Obligations from factoring business
Liabilities from guarantees
Liabilities from guarantee bonds
3 Litigation settlements
–
1,344,836
3,940
4,262
–
950
3,940
1,350,048
Neither AUDI AG nor any of its group companies are involved in ongoing or prospective
legal or arbitration proceedings which could have a significant influence on their economic
position. Appropriate provisions have been created within each group company, or adequate insurance benefits are anticipated, for possible financial charges resulting from other
legal or arbitrational proceedings.
4 Other financial
obligations
EUR million
Dec. 31, 2005
Dec. 31, 2004
Due
Due
within 1 year
1–5 years
over 5 years
Overall
after one
year
Overall
property, plant and equipment
549
273
–
822
244
747
intangible assets
175
117
–
292
11
95
long-term rental and lease
agreements
23
23
6
52
29
53
agreed loans
36
–
–
36
–
36
783
413
6
1,202
284
931
Ordering commitments for
Obligations from
5 Discontinued operations
6 Cost of materials
There are no plans to discontinue or cease operations as defined by IFRS 5.
EUR ‘000
Raw materials and consumables used as well as purchased goods
Purchased services
2005
2004
17,758,438
16,540,797
1,380,652
1,135,127
19,139,090
17,675,924
171
7 Personnel costs
EUR ‘000
Wages and salaries
Social insurance as well as expenses for employee benefits and
maintenance payments
of which in respect of retirement benefit plans
of which defined contribution pension plans
8 Total average employees
for the year
Domestic group companies
Foreign group companies
Overall
of which apprentices
9 Related party disclosures
2005
2004
2,578,237
2,481,290
546,918
590,331
61,532
90,287
213,786
198,018
3,125,155
3,071,621
2005
2004
45,504
45,511
6,908
7,633
52,412
53,144
2,019
1,986
Related parties as defined in IAS 24 are:
– the parent company Volkswagen AG and its subsidiaries outside the Audi Group;
– other parties (persons and companies) which could be affected by the reporting
entity or which could exert influence on the reporting entity, such as
Œ
the members of the Board of Management and Supervisory Board of AUDI AG,
Œ
the members of the Board of Management and Supervisory Board of Volkswagen AG,
Œ
associates.
The volume of transactions with the parent company Volkswagen AG and other subsidiaries which do not belong to the Audi Group is indicated by the following summary:
EUR million
2005
2004
Volkswagen AG
3,821
3,485
Volkswagen AG subsidiaries not belonging to the Audi Group
8,221
7,781
Volkswagen AG
4,674
3,829
Volkswagen AG subsidiaries not belonging to the Audi Group
1,345
1,375
3,255
2,173
257
271
1,645
1,297
645
550
Sales and services supplied to
Purchases and services received from
Receivables from
Volkswagen AG
Volkswagen AG subsidiaries not belonging to the Audi Group
Liabilities to
Volkswagen AG
Volkswagen AG subsidiaries not belonging to the Audi Group
At December 31, 2005 loan asset sales to Volkswagen AG subsidiaries not belonging to the
Audi Group amounted to EUR 1,557 million.
172
The extent of business relations between fully consolidated companies of the Audi
Group, joint ventures and associates is indicated by the following tables:
EUR ‘000
Dec. 31, 2005
Share in %
Dec. 31, 2004
Goods and services supplied
Dec. 31, 2005
Dec. 31, 2004
Goods and services received
FAW-Volkswagen Automotive Company, Ltd.,
Changchun (China)
10.0
709,964
930,909
697
715
YANASE Audi Sales Company Ltd., Tokyo (Japan)
33.4
141,118
141,917
27,124
23,127
Audi Zentrum Stuttgart GmbH & Co. KG, Stuttgart
51.0
46,917
41,161
7,956
123
Dec. 31, 2005
Dec. 31, 2004
Dec. 31, 2005
Dec. 31, 2004
EUR ‘000
Share in %
Receivables from
Liabilities to
FAW-Volkswagen Automotive Company, Ltd.,
Changchun (China)
10.0
116,120
107,142
45,335
11,290
YANASE Audi Sales Company Ltd., Tokyo (Japan)
33.4
47,194
61,185
4,727
5,102
Audi Zentrum Stuttgart GmbH & Co. KG, Stuttgart
51.0
27,446
1,514
405
123
All business with related parties has been conducted on the basis of international comparable uncontrolled price methods pursuant to IAS 24, according to the terms that customarily
apply to outside third parties. The goods and services procured from related parties include
primarily supplies for production, as well as development, transport, financial and distribution services and, to a lesser extent, design, training and other services and supplies of
original parts. Business to related parties comprises for the most part sales of new and used
cars, engines and components.
Members of the Boards of Management or Supervisory Boards of Volkswagen AG and
AUDI AG also belong to the supervisory or management boards of other companies with
which the Audi Group maintains business relations. All transactions with such companies
are likewise conducted according to the terms that customarily apply to outside third parties.
Cash management within the Audi Group is centralised at AUDI AG. The group companies invest their liquid funds with AUDI AG or raise liquid funds from it. Residual amounts
are equalised via the cash pool of Volkswagen AG. All transactions are handled on market
terms.
10 Auditor’s fees
EUR ‘000
2005
Auditing of the financial statements
594
Other certification or valuation services
130
Tax consultancy services
8
Other services
–
732
173
Segment reporting
The Audi Group is structured into the segments Germany, Rest of Europe and Rest of world
on the basis of the regional locations of its assets.
The subdivision into segments reflects the arrangements for internal group steering and
reporting.
Transactions between the segments are conducted on generally accepted market terms,
in the way that is customary for transactions with outside third parties.
The prior-year figures have been adjusted by way of retrospective application of the
change to IAS 19.
EUR million
2005
2004
External revenue
Germany
2005
2004
Internal revenue
2005
2004
Total revenue
18,379
17,370
2,723
2,330
21,102
19,700
7,249
6,527
2,177
2,162
9,426
8,689
963
609
1
–
964
609
–
–
– 4,901
– 4,492
– 4,901
– 4,492
Audi Group
26,591
24,506
–
–
26,591
24,506
EUR million
2005
2004
Dec. 31, 2005
Dec. 31, 2004
Dec. 31, 2005
Dec. 31, 2004
Rest of Europe
Rest of world
Consolidation measures
Profit before tax
Segment assets*
Segment liabilities
Germany*
993
790
13,546
12,578
9,948
8,544
Rest of Europe
388
356
4,662
4,285
1,296
1,263
Rest of world
– 65
2
623
383
529
255
–6
–5
– 3,123
– 2,801
– 1,831
– 1,506
1,310
1,143
15,708
14,445
9,942
8,556
Consolidation measures
Audi Group
* The German segment assets include a sum of EUR 25 million for the “assets and liabilities held for sale” of Audi Synko GmbH, bracketed together as a disposal
group.
EUR million
2005
2004
Investments in intangible
asset and property, plant
and equipment
Germany
2005
2004
Long-term investments
1,252
1,511
0
47
452
507
–
–
Rest of world
3
1
–
–
Consolidation measures
–
– 11
–
–
1,707
2,008
0
47
Rest of Europe
Audi Group
174
EUR million
2005
2004
Depreciation and amortisation
Germany
Rest of Europe
Rest of world
2004
Other non-cash expenses
1,607
1,621
1,700
818
273
259
199
115
50
1
249
10
–
– 29
– 397
– 179
1,930
1,852
1,751
764
Consolidation measures
Audi Group
2005
Pursuant to IAS 14 (Segment Reporting), revenue is broken down according to the geographical locations of customers. The resulting breakdown is as follows:
Share 2005
Share 2004
EUR million
%
EUR million
%
8,389
31.5
7,834
32.0
Rest of Europe
13,473
50.7
12,162
49.6
North America
2,370
8.9
2,286
9.3
Asia / Oceania
2,016
7.6
1,921
7.9
210
0.8
200
0.8
Germany
Africa
South America
Overall
133
0.5
103
0.4
26,591
100.0
24,506
100.0
German Corporate Governance Code
The Board of Management and Supervisory Board of AUDI AG submitted the declaration
pursuant to Section 161 of German Stock Corporation Law on the “German Corporate
Governance Code” on December 7, 2005 and made it accessible on the website
www.audi.com/cgk-declaration.
Details of the Supervisory Board and Board of Management
The remuneration of members of the Board of Management complies with the legal requirements of German Stock Corporation Law as well as the recommendations and most of
the suggestions of the “German Corporate Governance Code”. The overall remuneration is
made up of fixed and variable components.
The fixed components assure a basic remuneration that enables the board member to
execute his duties conscientiously and in the best interests of the company, without becoming dependent upon the attainment of short-term targets. Conversely, variable components
that are dependent on the economic reality of the company reconcile the interests of the
Board of Management with those of the other stakeholders.
The remuneration of members of the Board of Management for the 2005 financial year
amounted to EUR 4,496 (4,264) thousand, of which variable components accounted for
EUR 2,345 (2,195) thousand. The fixed remuneration components for the members of the
Board of Management totalled EUR 2,151 (2,069) thousand in the 2005 financial year.
As well as fixed payments in cash, there are varying levels of contributions in kind, including in particular the use of company cars.
Every member of the Board of Management is paid a variable annual gratuity. The variable gratuity comprises components recurring annually that are tied to the economic suc-
175
cess of the company. It is largely based on the earnings achieved by the company and its
economic situation.
Share options serve as variable remuneration components providing a long-term incentive. These options are based on the performance of Volkswagen ordinary shares. In the
context of the seventh tranche of the share options plan, in the 2005 financial year each
member of the Board of Management was able to subscribe to up to 500 non-transferable
convertible bonds at a price of EUR 2.56 each, entitling the holder to up to 5,000 Volkswagen
ordinary shares. A condition of participation in this share options plan was the contribution
of between EUR 5,000 and 25,000 in time bonds, depending on the number of convertible
bonds being acquired.
The structure of the share options plan is essentially as follows: the basis for determining the conversion price (basic conversion price) of a tranche is the average Xetra closing
prices of Volkswagen ordinary shares on the five trading days preceding each decision to
issue convertible bonds. Conversion may take place for the first time after a qualifying period of 24 months and then up until a period of five years from the time of issue of the convertible bonds has elapsed. The conversion price is initially 110 percent of the basic conversion price, rising by five percentage points in each subsequent year. The Board of Management may exercise its conversion rights only three times a year, during four-week exercise
periods, each of which commences on a public reporting date of Volkswagen AG. The share
options plan is thus centred on demanding, relevant comparative parameters in the spirit of
the German Corporate Governance Code. Further details are given in the Agenda to the
Annual General Meeting of Volkswagen AG on April 16, 2002, at which authorisation to introduce the share options plan was granted.
The purpose of the share options plan’s structure is to grant the Board of Management a
remuneration component that is based on appreciation in the company’s share price. It is
thus intended to contribute towards increasing value creation and towards enhancing the
company’s value. The share options plan is in addition a widely used instrument for recruiting and retaining board members.
The retrospective adjustment of the stock option plan’s performance targets or comparative parameters is excluded.
Inappropriate inflows from the share options are not to be expected due to the link with
the share price performance of Volkswagen ordinary shares and the restricted number of
options per tranche. In order to implement the recommendation of the German Corporate
Governance Code, the Supervisory Board is prepared to come to an agreement with the
members of the Board of Management on a cap in the event of exceptional, unforeseen
developments.
In the context of the seventh tranche of the share options plan, the members of the
Board of Management of AUDI AG subscribed to a total of 2,500 of the aforementioned convertible bonds in the 2005 financial year. At December 31, 2005 the members of the Board of
Management were entitled to purchase a total of 100,000 ordinary shares of Volkswagen AG
in the event of the conditions of conversion being met. The value of the share options from
all tranches totalled EUR 406 thousand at December 31, 2005. This calculation is based on a
binominal model and takes all parameters of the share options plan into account.
Former members of the Board of Management had subscribed to 3,000 convertible
bonds in connection with their activities at AUDI AG. The debentures guarantee the right to
purchase a total of 30,000 ordinary shares of Volkswagen AG in the event of the conditions
of conversion being met. The value of these share options totalled EUR 10 thousand at
December 31, 2005.
In certain circumstances, members of the Board of Management are entitled to retirement benefits and a disability pension.
176
The defined benefit liabilities for pensions for current members of the Board of Management totalled EUR 9,033 (4,773) thousand at December 31, 2005.
Former members of the Board of Management and their surviving dependents received
payments totalling EUR 5,344 (2,067) thousand. The defined benefit liabilities for this group
of persons amount to EUR 20,895 (15,180) thousand.
The members of the Board of Management, together with their membership of other supervisory boards and regulatory bodies – pursuant to Sections 285 Sentence 1 No. 10 of the
German Commercial Code and 125 Para. 1 Sentence 3 of German Stock Corporation Law –
are indicated in the Notes to the financial statements of AUDI AG.
The remuneration of the Supervisory Board of AUDI AG totalled EUR 382 (382) thousand,
including EUR 172 (172) thousand in fixed remuneration components and EUR 210 (210) in
variable remuneration components. The level of the variable remuneration components is
based on the compensatory payment made for the 2005 financial year in accordance with
the applicable provision in the articles of incorporation.
Supervisory Board
1)
Position at December 31, 2005
2)
Dr.-Ing. e.h. Bernd Pischetsrieder
Chairman
Shareholders’ representative
Xaver Meier
Deputy Chairman
Employees’ representative
Dr. rer. pol. h.c. Bruno Adelt
Shareholders’ representative
Senator h.c. Helmut Aurenz
Shareholders’ representative
Joachim Dilger
Employees’ representative
Heinz Eyer
Employees’ representative
Dr. rer. pol. Thomas R. Fischer
Shareholders’ representative
Wolfgang Förster
Employees’ representative
Francisco Javier Garcia Sanz
Shareholders’ representative
Dr. jur. Claus Helbig
Shareholders’ representative
Johann Horn
Employees’ representative
Berthold Huber
Employees’ representative
Peter Mosch
Employees’ representative
Dr. rer. pol. Horst Neumann
Shareholders’ representative
Dr.-Ing. Franz-Josef Paefgen
Shareholders’ representative
Hans Dieter Pötsch
Shareholders’ representative
Richard Polzmacher
Employees’ representative
Norbert Rank
Employees’ representative
Dr. rer. pol. Axel Freiherr von Ruedorffer
Shareholders’ representative
Max Wäcker
Employees’ representative
Dr. rer. pol. Carl H. Hahn
Honorary Chairman
2), 4)
2)
5)
2)
3)
5)
1) The profession and company of the members of the Supervisory Board, together with other non-executive directorships, are indicated in the Notes to the financial statements of AUDI AG.
2) Member of the Presiding Committee and the Negotiating Committee.
3) Chairman of the Audit Committee.
4) Deputy Chairman of the Audit Committee.
5) Member of the Audit Committee.
177
Events occurring after the balance sheet date
No events which must be reported according to IAS 10 occurred after December 31, 2005.
Ingolstadt, February 8, 2006
The Board of Management
178
Statement of interests held by the Audi Group
at December 31, 2005
Principal group companies
Name and registered office
Capital share in %
AUDI AG, Ingolstadt
Audi Australia Pty Ltd., Botany (Australia)
100.00
Audi Brasil Distribuidora de Veículos, São Paulo (Brazil)*
100.00
AUDI DO BRASIL E CIA., Curitiba (Brazil)
100.00
AUDI HUNGARIA MOTOR Kft., Győr (Hungary)
100.00
Audi Japan K.K., Tokyo (Japan)
100.00
Audi Synko GmbH, Ingolstadt
100.00
Audi Zentrum Hannover GmbH, Hanover
100.00
Audi Vertriebsbetreuungsgesellschaft mbH, Ingolstadt
100.00
Audi Volkswagen Korea Ltd., Seoul (South Korea)
100.00
Audi Volkswagen Middle East FZE, Dubai (United Arab Emirates)
100.00
Automobili Lamborghini Holding S.p.A, Sant’Agata Bolognese (Italy)
100.00
AUTOGERMA S.p.A., Verona (Italy)
100.00
Automobili Lamborghini S.p.A., Sant’Agata Bolognese (Italy)
100.00
Motori Marini Lamborghini S.p.A., Sant’Agata Bolognese (Italy)
100.00
Lamborghini ArtiMarca S.p.A., Sant’Agata Bolognese (Italy)
100.00
quattro GmbH, Neckarsulm
100.00
Audi Zentrum Stuttgart GmbH & Co. KG, Stuttgart
51.00
YANASE Audi Sales Company Ltd., Tokyo (Japan)
33.40
FAW-Volkswagen Automotive Company, Ltd., Changchun (China)
10.00
* Formerly AUDI SENNA Ltda.
179
Fuel consumption and emission figures
Power
output (kW)
Transmission
Fuel consumption
(l/100 km)
urban
CO2 emissions
(g/km)
extra urban
combined
combined
min.
max.
min.
max.
min.
max.
min.
max.
6.0
6.2
7.7
7.9
185
190
A3 Sportback 2.0 TFSI
147
DSG
10.6
10.8
S4 saloon
253
M6
19.5
19.6
9.8
13.3
13.4
321
322
RS 4 saloon
309
M6
20.6
20.7
9.3
9.4
13.4
13.5
322
324
RS 4 Avant
309
M6
20.7
20.8
9.4
9.5
13.5
13.6
324
326
RS 4 Cabriolet
309
M6
21.1
21.2
9.7
9.8
13.9
14.0
334
336
A6 4.2 quattro
246
A6
16.5
16.7
8.8
9.0
11.6
11.8
278
283
S6
309
A6
19.7
9.7
13.4
319
Audi Q7 4.2 FSI quattro
257
A6
19.5
10.2
13.6
326
Audi Q7 3.0 TDI quattro
171
A6
14.6
8.3
10.5
A8 L W12 quattro
331
A6
S8
331
A6
19.7
9.7
13.4
319
Lamborghini Gallardo
382
M6
24.8
12.4
17.0
400
20.7
20.9
10.0
10.2
13.9
14.1
282
334
Key:
DSG: Direct Shift Gearbox
M: manual gearbox
A: automatic transmission
The transmission/gearbox type is followed by the number of gears/speeds (e.g. M6).
All figures were correct as at February 3, 2006.
The Audi Q7 3.6 FSI model was not available for ordering at the time of printing.
Fuel consumption and emission figures are not yet available.
180
338