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Audi’s CEO Stadler plans efficiency push to enhance margins

Audi's CEO Stadler plans efficiency push to enhance margins

Audi is planning to take steps to boost efficiency and lower costs on all operating levels, according to a senior company source, as the luxury carmaker struggles to raise output and profit margins.

Volkswagen’s flagship brand will launch a “fitness program” to help secure future growth as it grapples with headwinds such as emerging market volatility, fragile European demand and growing technology costs, the source said, citing a letter to be sent to the carmaker’s 50,000 German employees by CEO Rupert Stadler on Thursday.

Stadler, according to the letter, warns employees that high fixed costs paralyze the capability of a company to act.

Audi’s goal is to offset increasing expenditures and growing uncertainties on the earnings side with a so-called fitness program to improve efficiency and lower costs.

Despite record deliveries, Audi’s operating profit margin slipped to 10.1 percent last year from 11 percent in 2012.

Though lacking concrete cost-cutting targets, the new efficiency drive at the world’s second-largest luxury automaker follows cost-savings measures recently announced by Audi’s German rivals, BMW and Mercedes-Benz.

Stadler will say in the letter, reviewed by Reuters, that there will be measures to generate synergies in vehicle development, procurement, production and sales, without being more specific.

The savings drive doesn’t point to cutbacks to Audi’s record investment program currently underway which aims to spend 22 billion euros ($29.43 billion) through 2018 on plants, models and equipment, a spokesman said.

Audi’s parent, VW Group, earlier this month announced plans to steadily increase cost reductions at the VW brand to 5 billion euros per year starting in 2017 to boost profitability.