THE AUDI GROUP
The company I have been given to work with is AUDI. The official name of this company is the AUDI Group, which comprises of the Audi, Lamborghini, and Ducati brands.
Background
Audi are one of Germany’s oldest car manufacturers, having been established in 1932 by the merging of four independent vehicle manufacturers. The company’s emblem is the Audi badge – the four rings – which represents this merger. The company’s name is based on the Latin translation of the surname of its founder, August Horch, which means ‘listen’ in German, which then becomes ‘audi’ in Latin. Audi’s slogan is Vorsprung durch Technik, which means “Advancement through Technology”.
Company Structure
The parent company of the Audi Group is AUDI AG, and the major shareholder of both is Volkswagen AG, who controls approx. 99.55% of Audi AG. The Audi Group consists of 41 fully consolidated subsidiary companies, and 31 non-consolidated subsidiary companies, across 18 countries. Audi holds 100% capital share in 63 of these (38 consolidated and 25 non-consolidated), and as well as shares in 31 associated or joint venture companies. These subsidiary companies operate independently of the Audi Group.
The company is governed by the Board of Management, who provide regular updates and reports to a Supervisory Board. The management board has recently had a reshuffle as a result of the diesel emissions scandal, with four of its seven members being replaced.
Audi shakes up management amid emissions scandal (Aug 2017)
Business Activities
According to the Audi website, the purpose of the company is “the development, production and sales of motor vehicles, other vehicles and engines of all kinds, together with their accessories, as well as machinery, tools and other technical articles”. This seems like a really wide scope for the one company, but if you consider the number of consolidated and non-consolidated subsidiary companies that Audi controls or has shares in, then it definitely has the infrastructure in place to support such a range.
The Audi brand has two production sites located in Germany, as well as production facilities in Hungary, Belgium, China, Brazil, India, Indonesia, Russia, Slovakia and Spain. The Lamborghini brand is produced solely in Italy, and Ducati in Italy and Thailand. The Audi Group also supplies other Volkswagen Group brands to customers via its sales companies.
During the 2016 financial year, the company delivered over 1.8 million vehicles of the Audi brand to customers worldwide. This was an increase of 3.6% on the previous year, and reflected positive growth across all of its sales markets, including the Australian market. The total number of deliveries of all vehicle brands was 2,088,187 cars (including 3,457 Lamborghinis), and 55,451 motorcycles.
Employees
The Audi Group employed 86,695 workers in 2016. Of these, 59,029 were employed in Germany, 25,111 in overseas facilities, and 2,555 were apprentices. Only 14.4% of workers are female, indicating that car manufacturing is still very much a male dominated industry.
Financial Performance
The company generated revenue of €59,317 million in the 2016 FY, up by 1.5% on the previous FY. This was due in part to the growth of the vehicle industry, but also to the company’s development in other automotive businesses, such as the delivery of parts sets for local production in China.
Negative impacts on revenue included devaluation of the pound (₤), and intense competition from Audi’s rival brands. The cost of goods sold also increased, which meant that, although the company made more revenue than the previous year, its operating profit was down by 36.9%. Even so, the net worth of the Audi Group grew by €4,327 million overall.
Key Challenges – The Diesel Emissions Scandal
The last two years have been somewhat tumultuous for Audi, after its parent company Volkswagen was accused of (and later admitted to) installing software in millions of vehicles that allowed them to dodge emissions testing. Some Audi models were also affected, and this resulted in Volkswagen, Audi, and Porsche dealers in the US being banned from selling any new diesels (except for certain 2015 models).
VW, Porsche & Audi put diesel sales on hold in US
Audi’s response to these claims was to set up an internal task force, and to launch a program of cooperation from employees. Regular reporting to the Board of Management was part of the initiatives. The law firm Jones Day conducted independent investigations into the issue, and received operational support from the auditing firm Deloitte. Audi cooperated fully with all the responsible authorities, and in January 2017, Volkswagen AG, Volkswagen Group of America, Inc. and certain affiliates, including Audi AG, reached settlement agreements in the USA. These settlements provide for cash payments to eligible owners and lessees, as well as the option of a buyback or exchange or, for leased vehicles, early lease termination or a free emissions modification of the vehicle, if approved by the regulators. Separate settlement agreements are pending in Canada.
The implementation of a of a technical solution began at the beginning of 2016 and is expected to be complete by the end of 2017.
The company has ensured adequate risk provisioning has been made in the form of provisions for technical measures and legal risks in connection with the settlement agreements for the diesel issue in the United States. These provisions were created for penalty payments, compensation and litigation in relation to the V6 3.0 TDI engine issue. Based on the agreements in place, Volkswagen AG, Wolfsburg, is responsible for defending all cases regarding the affected four-cylinder TDI engines, and any ensuing consequences.
Unfortunately, the effect on Audi’s bottom line will continue into 2018, with the beginning of a new emissions scandal in Germany in June 2017, and the company issuing a recall in July of up to 850,000 cars from Europe and the UK.
Audi emissions scandal erupts after Germany says it detects new cheating
Audi recalls thousands of cars harmful emission levels (Jul 2017)
Also, in March of this year, the Australian Competition and Consumer Commission (ACCC) initiated proceedings in the Federal Court against Volkswagen, Audi and Audi Australia, with the claim that Audi Australia supplied more than 12,000 affected vehicles to Australian consumers.
ACCC sues Volkswagen over diesel emissions scandal
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