Audi makes pounds 79m loss as fall in orders dashes earnings pledge

MUNICH - Audi, the upmarket car division of Volkswagen, will record a substantial loss this year and does not expect to be in the black until 1995, writes John Eisenhammer. The loss is despite an earlier pledge to make a contribution to VW group earnings.

Jurgen Gebhardt, Audi's head of production, said the company was operating at 65 per cent of capacity, with break-even a little under 70 per cent. Audi made a pre- tax loss of DM198m ( pounds 79m) in the first six months, and trade in all its main markets has shown no improvement. An unexpected decision by the Chinese government to restrict currency exports has halved Audi's sales there to 12,000, causing a loss of some DM100m.

Audi has ageing models and shares a distributor network with cheaper Volkswagen cars, which does not help its image. It has performed the worst of the upmarket German manufacturers, with production in 1993 down 30 per cent to an expected 340,000 units. Nine-month turnover was down 26 per cent to just over DM9bn.

Despite shedding 4,000 jobs, Audi still has 10 to 15 per cent too many workers for its expected production levels, Franz-Josef Kortum, chief executive, said. More job cuts would be unavoidable next year.

Audi is pinning its hopes on a new small car, the A2, to be produced around the start of 1996. This will make Audi the first of the upmarket German manufacturers to introduce a city car. It will be based on the new Golf platform, enabling the company to make big savings on shared components, Audi claims. A decision on where to produce the A2 has not yet been taken.

Mr Kortum said his predecessors should have moved earlier to separate Audi's sales network from Volkswagen's, and that the process was still going too slowly.