2000 Annual Repor t

Key Figures

Audi Group 31 Dec. 2000 1 Production

Cars Engines

Vehicle sales Audi Western Europe of which Germany Rest of world

Cars

Lamborghini Other Volkswagen Group brands

31 Dec. 1999

Change in %

650,850 1,187,666

626,059 1,266,896

4.0 –6.3

919,621 653,404 500,654 239,644 152,750

634,973 634,708 519,141 257,642 115,567

44.8 2.9 –3.6 –7.0 32.2

296

265

11.7

265,921

–

–

Sales revenues

DM million EUR million

39,024 19,953

29,624 15,146

31.7

Earnings before taxes

DM million EUR million

1,605 821

1,640 839

–2.1

Net earnings

DM million EUR million

859 439

634 324

35.5

Sales return before taxes

%

4.1

5.5

Balance sheet total

DM million EUR million

15,078 7,709

13,110 6,703

Equity ratio

%

23.2

21.5

Capital investments

DM million EUR million

3,965 2,027

2,966 1,516

33.7

Depreciation

DM million EUR million

2,251 1,151

1,847 945

21.9

Cash flow

DM million EUR million

2,876 1,471

2,274 1,163

26.5

Employees

Average

49,396

45,800

7.9

1

Figures including AUTOGERMA S.p.A. following its incorporation into Automobili Lamborghini Holding S.p.A.

15.0

Audi Forum Ingolstadt

The company opened a new flagship facility in December 2000: the Audi Forum Ingolstadt. With its modern architecture and wide range of services, this is a microcosm of the Audi brand. Visitors can obtain information on the facilities of the Audi Forum Ingolstadt and, if required, directions from the information pavilion at the entrance. Next to it is the museum mobile, a tall circular building that is visible from afar. This unconventional car museum is the principal attraction at the Audi Forum Ingolstadt. The Customer Center, with the striking Audi hangar architecture, is where customers come to collect their new Audi in person. This is also the starting point of our factory tours. The central reception is located in the link building between the museum mobile and the Customer Center. This is where you can register for a factory tour, for instance. The building also houses various Mövenpick catering establishments which treat customers to exquisite cuisine. Our latest models are on display in the “Market and Customer” building opposite. A variety of services, such as a bank, insurance agency and travel agent, are also housed here for your convenience. The piazza is the central area of the Audi Forum Ingolstadt. It offers plenty of space for automotive and cultural events. Visitors can wind down and enjoy the ambience on the adjoining piazzetta, with its greenery and fountains. We look forward to welcoming you to the Audi Forum Ingolstadt!

Contents

Foreword Report of the Supervisory Board

4 6

Products

10

Technology, People and Nature Technology and Innovations quattro Motor Sport Purchasing Employees Environmental Protection

28 30 31 32 33 36

Presenting the Company in Ingolstadt Audi Forum Ingolstadt museum mobile

40 42

Markets and Customers Marketing and Service Market News Cultural and Sports Sponsorship

46 48 53

Audi Group Finances Management Report Finance Audi Shares Balance Sheet Statement of Earnings Notes Development of Fixed Assets Notes to the Balance Sheet Notes to the Statement of Earnings Segment Reports Other Particulars

56 66 73 74 75 76 76 80 85 88 89

Independent Auditors’ Report

92

Audi Group in Figures

93

Audi is an internationally renowned manufacturer of high-quality cars. Our success has been achieved through creativity, commitment and the ability to generate enthusiasm. The wishes and emotions of our customers are the guiding principle behind our every action. We strive to lead the way in the field of innovation. We aim to establish new standards to substantiate our brand claim of “ Vorsprung durch Technik”.

4 Foreword

Audi further strengthened and consolidated its position on markets worldwide during 2000, even though the context within which we have been enjoying sustained success has become more difficult on certain markets. For the seventh successive occasion we concluded the financial year with new record vehicle sales and revenues. We recorded our highest ever sales total of DM 39 billion in 2000, and sold almost 920,000 vehicles. This figure includes around 266,000 vehicles of other Volkswagen Group brands sold by the Italian importer AUTOGERMA S.p.A., which was consolidated within Audi for the first time. The success of our cars in Germany, Europe, the USA and Asia suitably confirms that we have responded accurately to current market trends by supplying the right blend of continuity and innovation. Various surveys and conversations that I have held with individuals have served to confirm that our brand is a very attractive one. High esteem for the technical and aesthetic qualities of our vehicles is all part of its appeal. Success on the one hand confirms to us that our entrepreneurial strategy is correct. On the other hand, it motivates and obliges us to continue down the same path, for the sake of our customers and employees. This is the reason why we are making such huge capital investments; during the past year, we spent a total of DM 4 billion on our future. We established a very special landmark in the car industry during 2000 with the launch of the Audi A2: this car, which is the first volume-production aluminiumbodied vehicle, makes systematic use of advanced technology in preserving natural resources and protecting the environment. The combined qualities of the A2 enable it to perform a pilot function in shaping the future of mobility. The Audi A8 version with eight-cylinder TDI engine, also launched during 2000, demonstrates at the other end of our product spectrum how we have successfully brought together our expertise in the fields of lightweight design, TDI technology and permanent fourwheel drive to create a luxury-class car that is internationally unique. The appeal of our products and the strength of our market position are founded on the ability to reconcile seeming contradictions: low weight and a high level of safety, suitability for both motorway driving and offroad use, spacious interiors and minimum fuel consumption. Our customers know that they can expect a synthesis of ideas rather than any compromise solution from Audi: on the strength of this product profile, we for example advanced to the status of European market leader in 2000 for cars with four-wheel drive.

The new Audi A4 saloon, which we launched at the end of last year, has garnered lavish praise from both customers and the trade press in its intensely competitive segment. In the light of the widespread positive response to the new A4, we are very confident that this model series will continue to be the mainstay of our success. Our current product range places the emphasis more than ever before on advanced technology and pioneering design. Our products, our ability to innovate, a motivated workforce and satisfied customers provide a sound basis for our success. I take this opportunity to extend my sincere thanks to all those who have made these achievements possible and who are contributing towards our continuing success. Ingolstadt, March 14, 2001

Dr.-Ing. Franz-Josef Paefgen, Chairman of the Board of Management

Members of the Board of Management

Dipl.-Ing. Dipl.-Wirtsch.-Ing. Peter Abele, Finance and Organisation

Dr. jur. Georg Flandorfer, Marketing and Sales

Dipl.-Ing. Erich Schmitt, Purchasing

Dr. rer. pol. Jochem Heizmann, Production

Dr. h. c. Andreas Schleef, Human Resources

Dr.-Ing. Werner Mischke, Technical Development

6 Report of the Supervisory Board

Dr. Robert Büchelhofer, Chairman of the Supervisory Board

Audi brought the year 2000 to a successful conclusion. The objectives were achieved, even if developments were not satisfactory in all markets. In Germany in particular, vehicle sales were adversely affected by the generally slack state of the market. Rising sales in other markets, however, more than compensated for this. The Supervisory Board would like to thank the company’s employees, the elected representatives of the workforce and the Board of Management for their dedication and hard work. They all contributed in different ways towards last year’s good result. In the year under review the Supervisory Board was again able to form a detailed picture of the situation of the Audi Group, its business progress and market developments from the extensive quarterly reports submitted to it and its quarterly meetings. The presiding committee met before each meeting of the Supervisory Board. The Supervisory Board monitored and advised the company’s management over and above the extent required by law. Particular attention was paid to the risk management measures of AUDI AG and of its principal shareholdings. The Board of Management kept the Supervisory Board informed about financial and human resources plans for the coming five years. It also provided an insight into the current and scheduled product range, and into forthcoming technical innovations. The Supervisory Board discussed and ratified the investment plan up to 2005. The Supervisory Board approved the acquisition of AUTOGERMA S.p.A. by Automobili Lamborghini Holding S.p.A. Now that the former has been incorporated into the Audi Group, Audi supplies vehicles of other Volkswagen Group brands in Italy alongside its own brands. At the Annual General Meeting on June 29, 2000 the shareholders elected PwC Deutsche Revision Aktiengesellschaft Wirtschaftsprüfungsgesellschaft, Hanover, as the auditors for the 2000 financial year. The Supervisory Board commissioned the auditors with the task of auditing the Consolidated Financial Statements of the Audi Group and the Annual Financial Statements of AUDI AG. Both sets of accounts, together with the Management Report for the Audi Group and AUDI AG, have received the unqualified certification of the auditors. The findings of the audit and the corresponding

Report of the Supervisory Board 7

documents were distributed to members of the Supervisory Board. The auditors reported on the principal findings of the audit at the Supervisory Board’s meeting on March 14, 2001. For its part, the Supervisory Board examined both sets of accounts, together with the Management Report. It ratified the Consolidated and Annual Financial Statements of AUDI AG, as well as the Management Report, which are thus established in accordance with § 172 of German Stock Corporation Law. Last year saw the following changes on the Board of Management and Supervisory Board: with effect from December 31, 2000 Jürgen Gebhardt, Member of the Board of Management of AUDI AG for Production, left the company at his own request. The Supervisory Board extends its thanks to Mr. Gebhardt for his dedication and personal commitment. Dr. Jochem Heizmann was appointed Member of the Board of Management for Production with effect from February 1, 2001. After 22 years on the Supervisory Board, Theo Schirmer, employees’ representative and Chairman of the Works Council of AUDI AG, Neckarsulm plant, surrendered office with effect from June 30, 2000. The Supervisory Board is deeply grateful and indebted to Mr. Schirmer for his many years of active and loyal service. Heinz Eyer, member of the Works Council of AUDI AG, Neckarsulm plant, was appointed his successor by the Local Court of Ingolstadt, upon the application of the Board of Management, with effect from July 1, 2000. The Audi Forum Ingolstadt, opened at the end of last year, allows Audi to project itself in a new light. In addition to presenting the brand universe of Audi, the history of the brand as well as that of its predecessors is juxtaposed with the future and visions of the presentday company. The Supervisory Board is convinced that Audi will continue to bring attractive products and pioneering innovations onto the market. We are eager to take on the challenges of the future together with the company’s management and employees. Ingolstadt, March 14, 2000

Supervisory Board 1 Dr. Robert Büchelhofer

Chairman 2 Shareholders’ representative

Xaver Meier

Deputy Chairman 2

Bruno Adelt

Shareholders’ representative

Employees’ representative

Senator h.c. Helmut Aurenz

Shareholders’ representative

Helmut Dotzauer

Employees’ representative

Heinz Eyer

Employees’ representative

Dr. rer. pol. Thomas R. Fischer

Shareholders’ representative

Wolfgang Förster

Employees’ representative

Dr. h.c. Peter Hartz

Shareholders’ representative

Dr. jur. Claus Helbig

Shareholders’ representative

Dr.-Ing. E. h. Hans-Olaf Henkel

Shareholders’ representative

Johann Horn

Employees’ representative

Berthold Huber

Employees’ representative 2

Norbert Kniselies

Employees’ representative

Dr. jur. Jens Neumann

Shareholders’ representative2

Dr. tech. h.c. Dipl.-Ing. ETH Ferdinand Piëch 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

1

The profession and company of the members of the Supervisory Board, together with their membership of other supervisory boards and regulatory bodies, are indicated in the Notes to the Financial Statements of AUDI AG.

2

Member of the presiding committee and the negotiating committee

Exceptional places inspire exceptional ideas.

10 Products

The Complete Car – the new Audi A4 A genuine Audi The new Audi A4 celebrated a sensational public début at the Berlin aaa 2000 exhibition. Even at first glance it is obvious that the new generation is a “genuine” Audi. By using clear, precise forms, Audi places the emphasis on pioneering design rather than on fleeting trends. Well-defined lines and striking design elements captivate the onlooker from the moment they set eyes on this car.

Safety comes first Safety is also an overriding priority in this model generation. The Electronic Stability Program in the new A4 comes with a brake assist system that intervenes in an emergency to reduce the stopping distance – fractions of a second and vital metres that could save lives. Even if a collision does occur, the standard-fit Sideguard airbag system reduces the risk of injury to the head and neck.

By sheer definition enjoyable to drive The dynamic allure of the A4’s design is underscored by its range of high-performance engines. These power units incorporate a broad spectrum of high-torque, consumption-optimised petrol and TDI versions. The rangetopping engine is an ultramodern V6 3.0 litre engine with an output of 162 kW. For the first time in its class, the new A4 is available with multitronic, the continuously variable automatic transmission, as an optional extra for all front-wheel-drive versions. The A4 2.5 TDI quattro will please the many drivers of diesel cars who have been longing for a sporty four-wheel-drive version.

Always abreast of new developments The standard specification of the new A4 already leaves the customer wanting for little: diverse combinations of materials and colours pave the way for a high degree of individual character. The automatic air conditioning with sun sensor can be adjusted separately for the driver’s and front passenger’s sides. All A4 cars are equipped with sporty alloy wheels. And the range of optional extras is remarkably extensive for a car of this class: for example, customers can order Audi telematics, to help them get to their destination more swiftly and safely. Various versions of this system are available, with features ranging from emergency and service call functions and the latest traffic reports to “dynamic route guidance”: this latter concept means that the navigation system Plus uses all relevant traffic information to direct the driver automatically along the fastest route.

More is better A more spacious interior was one of the requirements that the new Audi A4 had to meet. A 33 millimetre longer wheelbase and a passenger compartment that is larger in every direction were the solution. The new A4 offers significantly more space to move at head, shoulder and elbow level, and rear passengers will appreciate the extra 43 millimetres of knee room. The luggage compartment, with a capacity of 445 litres, is above-average for its class.

12 Products

Lighter, more economical, more intelligent – the Audi A2 German industry’s award for innovation Anyone looking for an example of supreme technology and having a keen awareness of social responsibility will find its ideal manifestation in the Audi A2. The first volume-built aluminium vehicle has what it takes to achieve low fuel consumption: lightweight construction and outstanding aerodynamics. The all-aluminium body is 43 percent lighter than a corresponding steel structure; the pronounced teardrop shape keeps the Audi A2’s drag coefficient very low. It is no coincidence that it has received the distinction of German industry’s award for innovation. ADAC: “Superb stability in a crash situation” Despite its light weight, you feel amply protected inside the A2. The high-strength Audi Space Frame ASF surrounds the occupants like a protective cage, and is very effective at dissipating impact energy. This was also confirmed in the ADAC crash test, in which the Audi A2 performed excellently.

Two-tier floor: the Space Floor Concept For all its compact exterior dimensions, the A2 has an astonishingly spacious interior. The Space Floor Concept guarantees that rear passengers can adopt an ergonomically correct posture. The secret is the floor, which is lower in the rear footwells, allowing occupants to angle their legs in an entirely natural manner for a relaxed seated position. Each of the rear seats can be folded down into one of two positions in just a few easy operations, or removed altogether. This makes the Audi A2’s interior truly multifunctional. Big interior, small fuel bill The “flyweight” member of its class demonstrates outstanding acceleration and flexibility. There are three engine versions to choose from: a high-torque TDI version and a low-pollution four-cylinder petrol engine, each developing 55 kW from a capacity of 1.4 litres. Finally, Audi unveiled the world’s first five-door, three-litre car in spring 2001; this 1.2 TDI version has an output of 45 kW.

Products 13

A new perspective – the Audi A3 Even better looking and more fun to drive The A3 received a major update last year. The existing engine versions were optimised in terms of fuel consumption and emissions. The careful modifications to the widely acclaimed design of this compact-class car served the purpose of accentuating its sports appeal and sophistication. The contours of the radiator grille are now more pronounced, the headlights and rear lights have a modified design and the interior has been refined. Efficient diesel with sporting ambitions: the Audi A3 1.9 TDI The most important changes are hidden away in the engine compartment. Two high-tech power units now round off the A3 model line: an economical, ultra lowemission 1.6 litre petrol engine developing 75 kW, and a 1.9 litre TDI version generating 96 kW. The high-torque 96 kW TDI transforms diesel driving into a form of sporting activity. Acceleration and top speed speak for themselves: 100 km/h in 9.2 seconds and a top speed of

205 km/h. For all its dynamic constitution, the A3 1.9 TDI is remarkably economical to run. The front-wheel-drive version with the new 1.9 TDI engine can also be supplied with a five-speed tiptronic transmission, resulting in an extraordinary combination of comfort and sports performance. Even more arguments in favour of the Audi A3 Since making its market début, the Audi A3 has won the hearts of over half a million buyers. Careful refinement, improved standards of materials and workmanship, design modifications and exclusive optional extras have served to make it even more attractive and dynamic. Its exemplary safety has been enhanced with the inclusion of the ESP stability program as a standard feature.

14 Products

Personality with style – the Audi A6 Getting the priorities right A spacious interior and elegant outlines are the defining features of the Audi A6. It has all the aura of a large saloon car, without being a slave to convention. Quality, whether on the inside or outside, is the top priority: everything from the fully galvanised body to the exclusive leather options for the seats reflects its calibre. With its distinctive design and ruthless attention to detail, it has established itself as one of the leaders of its market segment. Quality with substance The electronically controlled multitronic transmission has proven exceptionally popular on the Audi A6 2.8. Reason enough for us to make this revolutionary continuously variable transmission also available on the Audi A6 2.4 and Audi A6 1.8 T. The added convenience of this electronically controlled transmission has proven a boon on these engine versions. The power is transmitted smoothly and efficiently, with no trace of gearshift jolt.

And those who believe that such a gain in comfort and convenience will inevitably come at the expense of fuel economy and vigour are in for a surprise: compared with a conventional torque-converter transmission, the multitronic is both more economical and more agile.

Products 15

Living up to high expectations – the Audi A8 Cruising serenely – the Audi A8 3.3 TDI The Audi A8 has pioneered revolutionary innovations in the production of all-aluminium vehicle bodies, a technology that is now finding use in volume production in the shape of the new Audi A2. The reasons for its success are obvious: lightweight material and high strength bring together high performance and economy, comfort and ecological compatibility. To match the high expectations of our customers, the A8 model range was again extended last year. The new A8 with V8 TDI engine, with a displacement of 3.3 litres, combines outstanding performance figures with low fuel consumption. In conjunction with the five-speed tiptronic, the Audi A8 3.3 TDI quattro moves along with supreme smoothness. Exclusive twelve-cylinder car – the Audi A8 L 6.0 quattro The new version of the Audi A8, which will be arriving on the market in summer 2001, represents not only our entry into the twelve-cylinder class, but also secures

us an exceptional position there: thanks to the engine’s space-saving W configuration, this will be the first twelve-cylinder front-engined car to have permanent four-wheel drive. The engine is notable not only for its outstanding performance, but also for its smooth, refined characteristics. This makes the long-wheelbase version, with its extra space in the rear area, an even more luxurious saloon car.

16 Products

Form follows emotion – the Audi TT Success that speaks volumes The high demand for the two TT models during 2000 impressively reflects their popularity. The Audi TT topped the registration statistics in Western Europe for its class of sports car. The offer to retrofit the Electronic Stability Program ESP on Audi plant premises, in response to the questions raised about its handling, has been received very positively by our customers. The campaign in Germany was brought to a successful conclusion at the end of the year. The Audi TT Coupé The Audi TT Coupé is a unique combination of purist design and advanced technology. It is moreover notable for its outstanding drag coefficient and low fuel consumption. The Audi TT Coupé is available in three variants: with front-wheel drive and 132 kW engine, or as a quattro, with a choice of a 132 kW or 165 kW engine. The latter accelerates from 0 to 100 km/h in a mere 6.6 seconds.

Products 17

The Audi TT Roadster The Audi TT Roadster is the key to unlimited freedom. As in the Coupé, attention has been paid to even the most minute detail in its driving area. The steering wheel and fittings are adorned with matt-lustre aluminium, and the pedals and footrest have stainless steel trims. The distinctive leather package Authentic is available as an option: it is remarkable for its very high-quality finish and stylistic details, such as the visible moccasin seam. The high-strength aluminium rollover bars and the option of an electrically retracted glass wind deflector are other eye-catching features. In addition to the engines offered for the Audi TT Coupé, a 110 kW engine version in combination with front-wheel drive was introduced at the start of 2001 for the Roadster. Another new option is the hardtop with heated rear window and exclusive fabric lining. The roof, based on an aluminium space frame structure and with plastic outer panelling, provides very effective acoustic insulation and acts as an efficient form of thermal insulation.

18 Products

Our statement on understatement – the S models The true connoisseur savours and enthuses The arresting “S” symbol identifies our sportiest and most powerful models. Those who know and appreciate them treat them with the discreet respect of the connoisseur, rather than the urge to show off. All S models have permanent four-wheel drive and an additional dose of sporting flair: lower suspension, exceptional performance potential, firm suspension and damping, and optical highlights such as Avus-design cast alloy wheels and forged aluminium door mirrors. Left, right, left! Four-wheel drive proves particularly beneficial in conjunction with high-performance engines, because the more powerful the engine, the more important the way its power is transmitted to the road. Superior traction makes a critical difference all the time, not just on bends. The firm sports suspension settings ensure that S models remain safely on course even when accelerated hard and when driving on poor roads.

Sports appeal that suits every taste Audi supplies a supremely sporty version for every market segment, with a range extending from the S3 to the S8. The dynamic performance of the Audi S3 (154 kW) is in itself awesome: the 1.8 litre four-cylinder turbo engine responds spontaneously to a mere touch of the accelerator, and delivers substantial torque right across the engine speed range. In the Audi S4 Avant (195 kW), the V6 2.7 litre biturbo engine demonstrates that acceleration need not be a tour de force. Its two turbochargers respond spontaneously, supplying high torque at low-end speeds. The Audi S6 (250 kW) occupies a special place in its market segment: it is available as both a saloon and an Avant. The Audi S8 (265 kW) is equally exceptional: the deluxe saloon can be supplied as an automatic, for added convenience, or with a precision-action six-speed manual gearbox.

20 Products

Unconditionally spor ty – the Audi RS 4 High performance from quattro GmbH In summer 2000, Audi launched an astonishingly powerful vehicle that caused huge ripples of excitement. The RS 4, created by the AUDI AG subsidiary quattro GmbH, is a high-performance vehicle that is unequivocally sporty in both its technical constitution and its appearance. This deluxe Avant, brimming with 280 kW of power, offers a quite exceptional combination of features: the V6 biturbo engine, permanent four-wheel drive, sporty six-speed manual gearbox, precision-tuned suspension – and of course ample interior space. The ultimate sports Avant The Audi RS 4 shows its true strengths where others reach their limit: at the limits of cornering stability, whether on dry or wet roads. Take to the wheel, and you soon realise why the trade press dubbed the RS 4 a “rocket-powered estate”: it accelerates from 0 to 100 km/h in a blistering 4.9 seconds. The design of this exceptional vehicle – both inside and out – unmistakably signals its performance.

Products 21

Transcending limits – the Audi allroad quattro All-terrain vehicle or classic estate car? This is a decision that customers need no longer make: the allroad quattro, launched last year, is both. It offers the luxury of a full-size car for long-distance driving, and its tractive power comes into its own on difficult terrain. These qualities are made possible by highperformance technology: permanent four-wheel drive, the intelligent air suspension system with four adjustment levels, and specially designed tyres. The right approach Overcoming problems means responding flexibly to new challenges. The allroad quattro does not have fixedlevel suspension; its ground clearance is adjusted precisely in line with the driving conditions. On difficult terrain, the driver can raise the vehicle’s height successively; after returning to the road, the allroad quattro automatically lowers the suspension by up to 6.6 cm, depending on its driving speed.

The makings of a top multi-discipline athlete The engine of this on-and-off road vehicle is as exclusive as the vehicle concept itself. There are two V6 versions to choose from: a 184 kW 2.7 litre biturbo, and a V6 TDI developing 132 kW. The allroad quattro masters very steep gradients and can tow loads of 2.3 tonnes.

Products 23

An Italian legend – the Lamborghini Diablo With infinite attention to detail Very few sports cars possess such exceptional mystique as the Lamborghini Diablo. The small provincial town of Sant’Agata, between Modena and Bologna, is where Lamborghini’s dedicated technical experts build the car which so many people dream of owning. Anyone who has witnessed the meticulous craftsmanship that goes into the Diablo will understand the passion that this car embodies. The model sporting the badge with the bull was made both more powerful and more luxurious last year. With a new 6.0 litre V12 engine developing 405 kW and the ability to accelerate from 0 to 100 km/h in less than four seconds, the Lamborghini Diablo 6.0 is the last word in auto manufacturing. Other performance data are also more than impressive: the sports car with four-wheel drive achieves its maximum torque of 620 Nm at 5500 rpm, and is capable of a top speed of 330 km/h. The engine’s sound is an initial indication of the forces that are at work: all the legacy of immense technical input. Lamborghini lightweight design Thanks to Lamborghini’s exceptional know-how in the development of composite materials, most body parts of the Diablo 6.0 are made of carbon fibre – a particularly lightweight, strong material. The whole interior of the Lamborghini Diablo 6.0 is lined in leather. This, in combination with components in carbon fibre and aluminium, gives it a luxurious sports style.

24 Products

Cars and more … quattro GmbH – because every person is an individual The expertise of quattro GmbH has been underlined both in the field of vehicle development – with the recent launch of the RS 4 – and with its separate range of products, lifestyle articles and accessories. These go far beyond the regular AUDI AG equipment range and reflect the preferences of customers who attach particular importance to exclusivity, individuality and sports appeal. Virtually every customer request can be satisfied: custom vehicles using exclusive materials, sporty interior and suspension packages, alloy wheels, special paint finishes and built-in state-of-the-art communications technology, as well as a regularly updated range of high-quality clothing and luggage, leather items, watches, sunglasses and other lifestyle articles. And because sports appeal should not be restricted to the world of the car, quattro GmbH has also created premium bikes for active leisure use.

High-tech pump-injector units from Hungary Series production of a new generation of diesel engines with pump-injector fuel injection commenced in July 2000 at AUDI HUNGARIA MOTOR Kft., in the Hungarian city of Györ. The new technology is used for instance in the 96 kW TDI engine for the Audi A3. On this system, the fuel pump and injector form a unit located directly above the cylinder. The line normally connecting the pump and injector is no longer required. This permits extremely high injection pressures in excess of 2,000 bar, which keep the combustion process particularly efficient and clean. High injection pressures can be equated with high torque, low fuel consumption and low emissions. For the customer, this above all means one thing: significantly higher torque that is the key to more driving pleasure – and all this without inflating fuel consumption or increasing environmental pollution.

Products 25

Biturbo power from 2.7 litres Cosworth Technology’s expertise was used in modifying the 2.7 litre biturbo engine from the Audi S4 in preparation for its use in the RS 4. The cylinder heads are cast at Worcester, Great Britain, using a patented aluminium engine casting method, and final assembly of the engines is carried out at Wellingborough, Great Britain. Production there was stepped up at the start of this year, to keep up with the continuing high demand. The engine blocks for the V6 3.0 litre engine, which is available on the new Audi A4, are likewise cast at the Worcester plant.

Prevention to minimise repairs Cosworth Technology, Inc., USA, has developed a revolutionary “black box” for the transport industry. A variety of sensors in the i3000 register a range of data, from the load on the engine to how many times a passenger door is opened. This technology permits the diagnosis of latent faults before they become a major problem. This means vehicles spend less time out of action, and transport companies can reduce their spares inventory. This new product was recently launched on the US market and has generated considerable interest worldwide.

Multi-faceted problems are best solved with multi-faceted ideas.

Technology and Innovations 29

Everyone’s talking about innovation. We’re practising it. Centre of excellence for advanced technology In April last year, the “New Audi Toolshop” was opened at the Ingolstadt plant. Audi invested around 120 million marks in this project. With the aid of ultramodern computer technology, this “company within a company” produces tools and facilities for body manufacturing both for Audi and for external customers. Audi achieves the optimum balance of preferred design and technical feasibility for its customers. Expertise in aluminium A wealth of experience and a command of special technologies are key factors behind the success of the Audi Group. Audi has been a pioneer of the use of aluminium in body manufacturing since the mid-1990s. The use of this lightweight material necessitates the development of new materials and processing concepts, surface technologies and joining techniques. Quality Assurance, with its new “Aluminium/Bodyshell” centre of excellence, is underpinning these developments and has thus made a significant contribution towards the success of the allaluminium construction technique in series production. This achievement has won acclaim both in Germany and elsewhere: the Audi A2 enjoyed the distinction of winning both German industry’s award for innovation and the European Aluminium Award in 2000. Modern communication made easy With their increasing number and complexity of functions, modern vehicles are being pushed to the very limits of user friendliness. The networking of the software for individual components such as the telephone, telematics, Internet access, sound and navigation systems is therefore one of our principal development areas in the field of electronics. We want our customers to find their vehicle easy to operate and to have access to a full range of information sources. Audi’s latest screen-based navigation system is performing a pioneering role in this market. Audi is moreover set to acquire a strong competitive position in future by launching a new multimedia platform. Test drives along virtual roads Testing the ESP sensor technology and tracking down the sources of “creaks and groans” in vehicles used to involve time-consuming, personnel-intensive test drives that could not begin until the regular assembly process had been completed. Since mid-2000, Audi has been conducting these tests on ESP/shaker rigs that are integrated into the production lines. The way they function is an absolute world first. The car is first driven on rollers equipped with steel plates that resemble a cobblestone surface, and any extraneous noises identified. The test rig then simulates body movements during cornering by tilting and turning the vehicle, so as to

test the ESP sensor technology. These test rigs not only operate with greater reliability and precision, they are also swifter than the previous methods. The shape of things to come? A futuristic design study was unveiled to the public at Autostadt in Wolfsburg: a sports car that establishes the connection between the legendary Auto Union racing car and contemporary Audi design. With its flowing lines and a monumental radiator grille, this vehicle plausibly visualises the technological potential of the Audi brand: lightweight design, sheer dynamism and functional precision. A second design study, the Steppenwolf, was one of the highlights of the 2000 Paris Motor Show. This synthesis of a roadster and all-terrain vehicle unites top-class comfort, high utility and innovative technology. Following the successful launch of the Audi allroad quattro, it represents a progression of the on-and-off roader concept for the compact class.

30 quattro

20 years of quattro 1980: the début of the quattro The first Audi with permanent four-wheel drive was unveiled at the 1980 Geneva Motor Show. 20 years on, Audi was able to celebrate the unique success story of the quattro concept: compared with conventional front or rear-wheel drive, permanent four-wheel drive means that each individual wheel is always handling less propulsive power but greater cornering force. This is the key to its impressive cornering stability. The superiority of this technology was fully evident from the start, with countless wins and championship titles on rally circuits and racetracks worldwide. Names such as Michèle Mouton, Hannu Mikkola, Stig Blomqvist and Walter Röhrl are inseparably associated with the quattro’s most magnificent moments. 1982: series production The trade press acclaimed the decision to take the quattro into series production in 1982 as a “stroke of genius”. Since then, Audi has built over one million quattro vehicles; at present, almost one-third of all models built are ordered with permanent four-wheel drive.

A concept that was initially regarded as something of a technical curiosity on ordinary roads is now a standard option in the range of virtually every car manufacturer. Audi, however, supplies easily the most diverse range of variants. This is hardly surprising, considering the superior technological and production know-how gleaned over two decades of building fourwheel-drive systems. A shining example of “Vorsprung durch Technik”. 2000: the allroad quattro The latest high point in the success story is the Audi allroad quattro. It was given its first public showing last March in Geneva, aptly enough the venue where the “original” quattro had made its début twenty years earlier. The public’s response to the new vehicle suitably demonstrates the unbroken appeal of the quattro legend, as does the sustained high level of demand for quattro models.

Motor sport 31

It’s Audi … ahead of Audi … then Audi 1 – 2 – 3 at Le Mans Audi added to its lengthy tradition of motor sport success with a resounding triple victory in the Le Mans 24 Hours. Following its successful début in 1999, Audi achieved in 2000 what no other manufacturer had done before: the three Audi R8 cars which started the race secured the first three positions on the grid, clocked up the fastest lap times and crossed the finishing line in unison ahead of the remaining field after 24 hours on the circuit. This achievement reawakened memories of Auto Union’s legendary Silver Arrows from the 1930s. These new-generation silver-bodied racing cars, built by Audi Sport and identified by the three colours of the German flag, crossed the finishing line shortly after 4 pm on June 18, 2000. The 200,000 spectators lining the racetrack at Le Mans thus witnessed a perfectly stagemanaged victory and an “all-Audi” winners’ rostrum.

An idea circles the world Because scarcely any other sporting occasion holds the power to captivate such a large audience worldwide as the Le Mans 24 Hours, the triumphant models also took part in the American Le Mans Series, with eight races in the USA, one each in Canada, Great Britain and Germany, and the season’s final in Adelaide, Australia. Audi clinched victory in the drivers’ championship in the America Le Mans Series before the end of the series with a double victory in Las Vegas. The Audi Sport North America team already had the constructors’ and team titles sewn up after Laguna Seca. Audi likewise won the final “Race of a Thousand Years” on New Year’s Eve 2000 in Adelaide, with a convincing victory by a crocodile-look Audi R8 making the final race of the American Le Mans Series a real highlight of the season. AUDI AG will be maintaining its successful involvement in motor sport in the 2001 season, starting in the Le Mans 24 Hours and the American Le Mans Series with two refined Audi R8 sports racing cars.

32 Purchasing

Hand in hand with suppliers Partnership with suppliers further intensified The demand for highly innovative and individually specified cars that must be supplied at short notice will continue to rise. The challenge facing both Audi, the manufacturer, and its suppliers is to harmonise the quality of the product and the process, and therefore overall reliability. Last year 25 suppliers from both Germany and elsewhere were presented with the Audi Quality Award for outstanding achievements, in recognition of the exceptional standard to which they fulfilled our requirements. Electronic marketplace Audi is continuing to systematically develop the way it works hand in hand with its suppliers. Our partners will assume product and process responsibility for their respective supply chains to an even greater extent than has previously been the case. This trend towards the supplier taking on greater responsibility will continue. Companies will become increasingly networked in future as the e-business principle becomes better established. A worldwide digital supplier marketplace has

been set up for this purpose. The prospective applications range from the publication of online catalogues to forms of trading such as auctions. 3,900 suppliers are already connected up to our Electronic Supplier Link and therefore connected online with both Audi and each other. By implementing Internet technology, we are introducing increasing clarity and fluidity into internal and external processes. The entire value creation process is thus becoming much swifter and more efficient.

Employees 33

Outstanding products made by well-qualified employees The standards are high … … because Audi customers are used to buying products of excellent quality that are tailored to their own requirements. The high standard that is required of its vehicles is satisfied not simply through ultramodern development and production techniques. It is much more important that there is a clever mind behind every machine and every desk, an individual capable of working with enthusiasm, a sense of responsibility and considerable expertise. The aim is to keep improving every product. This is why Audi attaches particular importance to a high standard of qualifications for its workforce. Merely a sound basic training is by no means adequate. Audi expects its employees to be prepared to keep learning throughout their careers, and promotes this through ongoing specialist and personal advancement measures. … and will keep rising. Audi has expanded rapidly in recent years: between 1995 and 2000, production rose from under 450,000 vehicles to around 650,000. At the same time, the international

workforce has grown from just under 33,000 to almost 51,000 at present. As a result of the rising standards expected of employees, the proportion of skilled workers and graduates is steadily increasing. Yet Audi is approaching certain limits of growth: regional labour markets have become depleted and it is consequently becoming increasingly difficult to satisfy the demand for suitably qualified metalworkers and electricians at the principal plants in Ingolstadt and Neckarsulm. Audi has adopted a wide range of initiatives, for example holding training programmes for external applicants to prepare them for working on the production line and as parts finishers. In conjunction with local employment offices and agencies, skilled workers are in addition being recruited from other parts of the country where there is higher unemployment, to work in the two German plants. Audi is a popular choice among well-qualified skilled workers, though a frequent lack of mobility has previously stood in the way of overcoming the shortage of skilled labour to any significant extent.

Qualification structure of blue-collar workers (AUDI AG)

Qualification structure of white-collar staff (AUDI AG)

Average, ’000

Average, ’000

blue-collar workers 24.4

26.0

27.9

29.3

31.7

white-collar staff

8.0

8.4

9.0

9.6

10.2

of which skilled workers

16.0

17.6

18.9

20.9

of which graduates

2.8

3.1

3.4

3.7

13.9

1996

1997

1998

1999

2000

14.8

30

10 7.5

20 5 10 2.5

1996

1997

blue-collar workers

1998

1999

2000

of which skilled workers

white-collar staff

of which graduates

Employees 35

Creativity also extends to vocational training … In this situation, Audi has made a virtue out of necessity: the company will gradually be stepping up the number of apprenticeships from a current 1,400 to over 2,000 by adopting a new vocational training concept. In addition to boosting the number of apprentices, the new concept systematically optimises the vocational training being provided. This will permit a more rapid response to technical and organisational changes, more flexible occupational structures, more intensive in-house training and a deliberate policy of giving fulltime employment to newly qualified skilled workers. In response to the need for more practically oriented training, which is driven by operating circumstances and requirements, “learning stations” have been established. The apprentices are supervised by specially trained personnel – the station delegates – and integrated into operative procedures at an early stage. After successfully completing their final apprenticeship examination they are transferred into one of the areas whose learning station they have already passed through. This significantly reduces familiarisation times.

A new apprenticeship timetable is to be introduced for the 2001 intake, in order to achieve the aims of this concept rapidly and economically. Staggered training times within the window of 6.00 am to 10.30 pm allow the training facilities to be put to maximum use and mean that apprentices can be integrated better into production procedures.

Mitarbeiter (Audi Group) Konzern) Employees (Audi

Structure of personnel costs 4,972 (Audi Group)

Durchschnitt Average, ’000 in Tsd. 34,5 34.5

37,8 37.8

41,0 41.0

45,8 45.8

49,4 49.4

… and produces results. This new vocational training concept has three crucial advantages, the most important being the superior quality of the training provided. More young people can be trained, and the shortage of qualified skilled workers can be alleviated. Audi will thus be able to adhere to the principle of recruiting people trained to a very high standard, so that it can continue to supply its customers with the excellent quality to which they are accustomed.

4,481

Total, DM million

50 Wages and salaries (compensation for services)

40

56.3 % 55.9 %

30 Mandatory social security contributions Mandatory benefits and payments for hours not worked Pension contributions

20

10

Other welfare and supplementary contributions 1996

1997

1998

1999

2000

14.1 % 10.3 %

14.6 % 10.0 %

4.8 %

5.1 %

14.5 %

14.4 %

2000

1999

36 Environmental Protection

Building cars entails demonstrating responsibility for the environment. Environmental protection knows no boundaries Audi regards the ecological probity of its operations as a declared corporate aim, and high priority is attached to practising environmental protection in all processes at all production plants. To ensure that it does more than merely pay lip service to environmental protection, Audi participates voluntarily in the European Community system based on the EU Eco-Audit and Management Scheme. Above and beyond fulfilling all the relevant environmental requirements, it lays down tougher standards of environmental management. By systematically incorporating improvements into its industrial environmental protection measures, the Ingolstadt plant once again successfully participated in this system in 2000. An environment-friendly infrastructure Audi has an established reputation for the responsible use of natural resources in the area of vehicle development. A less known fact is that it also pays particular attention to environmental protection in the designs of its buildings: for instance by using an ecologically acceptable component cooling system in the recently completed “Market and Customer” building in Ingolstadt, instead of conventional air conditioning. Cooled water flows through pipes in the walls, cooling down the interior in hot weather. This technique not only saves energy; it also assures pleasant air quality. In addition, fully automatic sun sails reduce the extent to which the building’s interior heats up. In the latest building project at Ingolstadt – the museum mobile – the sun’s energy is converted via solar panels into electricity that drives a moving system of sun blinds. Waste avoided: one problem fewer to deal with The paint shop at Neckarsulm demonstrates how it is possible to actively protect the environment by preserving resources and reducing emissions in all areas of the company. When vehicle bodies are being painted, a degree of overspray is inevitable; surplus filler coat can, however, now be recovered by means of ultra-filtration, and recycled. The method reduces the amount of material consumed and the volume of special waste. Audi is thus practising the key principle of environmental protection: avoid causing waste in the first place, and you need not concern yourself with its disposal.

Reducing water consumption Water is precious, and must be used sparingly and with care. To preserve water resources, Audi is making increasing use of rain water at Ingolstadt. Underground cisterns with a total capacity of 5,300 cubic metres have been constructed for this purpose. Audi has now invested around DM 10 million in these rainwater retention basins as a form of environmental protection. The rainwater collected in them is treated at the company’s water treatment plant and fed into the service water system. Over 100,000 cubic metres of rainwater is used in this way each year.

Day after day we concentrate on one and the same thing : innovation.

Presenting the Company in Ingolstadt 41

Audi Forum Ingolstadt The new flagship facility The Audi Forum Ingolstadt, a collection of buildings grouped together around a central outdoor area, opened its doors in December 2000. Its architecture embodies the philosophy of the company: fascinating technology presented in compelling style, with people always the central focus. A form of presenting the company to customers, business associates and guests that is a fitting reflection of the Audi brand claim. A facility at the Ingolstadt plant that fulfils a flagship function for the company. The Customer Center, completed in 1992, is where customers come to collect their new car directly from the factory. The Audi Shop stocks accessories and carrelated lifestyle articles. Customers can find out more about the customisation range available from quattro GmbH in a special showroom. The facilities also include Internet terminals and attractive cinema programmes. The triangular “Market and Customer” building has housed the Audi Bank, the insurance service and a travel agent since autumn 1999. Employees can arrange to purchase or lease their new Audi at the Employees’ Vehicle Centre. The current range of Audi models is also on display in the same building. The museum mobile traces the history and evolution of the Audi brand from its very beginnings to the present day. Visitors can enjoy a wide range of culinary delights at the various catering establishments located between the museum and the Customer Center. There is the Lounge, the Wine Shop, a Mövenpick self-service restaurant and a conventional restaurant. The piazza, which is accessible to all users, serves as a venue for special events and therefore as a platform for communication between the company and the Ingolstadt region. Next to the Customer Center is the piazzetta – a small, relaxing park area with fountains.

Audi and more The redesigned entrance zone enhances the appeal and merit of the Ingolstadt plant. This new experience is also intensified by the restructured factory tours, which follow the production process. The unique combination of vehicle collection facilities, museum visits and catering establishments gives the visitor an all-encompassing experience. Regional tourism is likewise benefiting from the new Audi Forum Ingolstadt. Audi, in conjunction with a travel company and Internet provider, has developed a new tourism programme of premium calibre: selected hotels and activities that are a refreshing change from mass tourism entice visitors to spend longer in Ingolstadt and the surrounding region – in particular in the Altmühl Valley, the largest nature park in Germany.

42 museum mobile

museum mobile – animated history An image from the natural world The museum mobile was formally opened on December 15, 2000. The new museum, with its striking architecture, attracts the onlooker’s gaze from afar. This unusual concept was inspired by the natural world: the cross-section of a tree trunk with its annual rings. From the germinating seed – the fledgling company A. Horch & Cie. established in 1899 by August Horch – to the majestic, spreading tree with its deep roots – the presentday Audi Group – the passing of each year can be traced with the appearance of another ring. Mobility within immobility The architecture is not its only unusual feature. The exhibition concept, too, sets new standards. The entire building appears to be in motion: moving sunscreens on the outside encircle the museum once in 24 hours, and moving panels on the inside present the background social history to the exhibits. A continuously running paternoster elevator contains prototypes spanning the past 100 years, and the visitor can also operate various moving exhibits. The overall impression is of mobility within immobility: the visitor is actively absorbed into the era being presented. The name says it all: museum mobile. A brief tour of the museum After watching the short introductory film in the cinema, visitors set off on a journey back through time to the year 1899. They then begin to explore the origins of Audi and trace the logical progression of the exhibits as time passes, covering a century of the motor car before arriving back at their starting point. The visitor’s attention is captured by numerous active exhibits which present the history of the Audi brand and of all its predecessor brands. Visitors can witness a discussion between several leading personalities from Audi’s past, and watch a vivid evocation of how one car manufacturer after another went bankrupt during the Great Depression. Back then, 44 German car companies went out of business – and the rapid rise of Auto Union, formed by the merger of Audi, DKW, Horch and Wanderer in 1932, began. Vorsprung durch Technik Even though this slogan was not coined until 1971, it is rooted in Audi’s distant past.

There’s nothing new about aluminium August Horch was very interested in the scope for using light metal right from the start. He was the first person to use aluminium for engines and gearbox housings. Lightweight construction methods consequently go back more than a century at Audi. In this respect, the Audi Space Frame, developed by the Neckarsulm Aluminium Centre and used in the A8 and A2, is part of a grand tradition. Front or rear-wheel drive? Although neither Audi nor any of its predecessor brands can claim the credit for the revolutionary idea of frontwheel drive (the US manufacturer Cord was making front-wheel-drive vehicles as early on as 1929), the DKW F1 from 1931 was the car which took the concept into volume production and made it reliable for the market. This was the forefather of all DKW front-wheeldrive models built until the 1960s. … quattro! As long ago as the late 1960s, Audi took its parent company in Wolfsburg by surprise with a “secret” in-house development: the Audi 100. Then in 1978, Audi engineers demonstrated their art with a vehicle that succeeded in climbing the snow-bound Turrach Heights, Europe’s steepest mountain pass, “on all fours” – and with ordinary summer tyres! The quattro idea was born. In launching the concept of permanent four-wheel drive, Audi created yet another innovation that enjoyed unprecedented success. Too loud, too lumpy, too crude? These used to be the classic features of a direct-injection diesel engine. Everyone knew how economical and high on torque this type of engine was because it had long been a popular choice for trucks. For many years, however, it seemed impossible to exploit these advantages in a passenger car. Then, in 1989, Audi developers unveiled the first direct-injection diesel engine for a production car: the 2.5 litre five-cylinder TDI engine. Thanks to its low fuel consumption and enormous propulsive power, it prompted a genuine boom in TDI engines that is still continuing today.

We want to leave you wanting nothing.

46 Marketing and Service

Spor ty – progressive – sophisticated A genuine Audi … Vorsprung durch Technik: as an “ambassador of change”, Audi has produced vital innovations that underline its international pioneering role. We do not try to do everything like so many; instead, we do what we do with inimitable style. This gives every Audi a distinctive character: sporty, progressive, sophisticated. … enjoys the limelight. Car shows provide a fitting context in which to demonstrate innovative vehicles and concepts to the public worldwide. “In Future – Audi” was the motto for the presentation of the new Audi allroad quattro at the Geneva Motor Show in March 2000 and the unveiling of the Steppenwolf design study in Paris in early October. The high point of the year was the launching of the new Audi A4 at the aaa 2000 in Berlin: our most important, top-selling model. It is distinguished from its competitors not primarily by individual details, but rather by its overall concept of “The Complete Car”.

Marketing and Service 47

Thanks to our specialist dealers … Every customer can be sure of one thing: their Audi dealer knows what he is talking about. Even before a new model is launched, all Audi dealers worldwide are familiarised with the facts and figures at extensive dealer launches spanning several weeks. And – as was the case with the new Audi A4 in Portugal – they have literally obtained “hands on” experience of each new model by test-driving it themselves before the first potential customer gets behind the wheel. … our customers know what they are getting. The advertising campaign for the launch of Audi’s newest model vividly evokes what goes into “The Complete Car”. TV commercials and print media advertisements alike convey the absolute harmony that the Audi A4 embodies: the perfect interplay of all component parts creates something very special, something that is more than merely the sum of its parts.

Wann ist die Suche beendet ? Wenn die Freude anfängt.

Der neue Audi A4. Die Entdeckung des Ganzen.

Automobile sind ein bisschen wie wir. Immer unterwegs, ständig angetrieben. Und wenn beim Beschleunigen, in einer Kurve oder auf einer sehr, sehr langen Geraden ein Gefühl der Freude aufkommt, hat sich etwas gefunden. Und die Suche legt endlich eine Pause ein. Weitere Informationen unter 0 800-283 43 42.

Wann ist die Suche beendet ? Wenn die Freude anfängt.

Der neue Audi A4. Die Entdeckung des Ganzen.

Automobile sind ein bisschen wie wir. Immer unterwegs, ständig angetrieben. Und wenn beim Beschleunigen, in einer Kurve oder auf einer sehr, sehr langen Geraden ein Gefühl der Freude aufkommt, hat sich etwas gefunden. Und die Suche legt endlich eine Pause ein. Weitere Informationen unter 0 800-283 43 42.

Vorsprung durch Technik www.audi.de

48 Market News

Renewed increase in vehicle sales by Audi Group Demand higher than in 1999 Vehicle sales by Audi rose for the seventh year in succession: the rate of increase in 2000 compared with the previous year was 2.9 percent. The total for the Audi Group was further boosted by the incorporation of Autogerma. Last year, the Audi Group saw its vehicle sales rise to 919,621 (634,973) vehicles. This total included 653,404 (634,708) vehicles sporting the Audi badge and 296 (265) of the Lamborghini Diablo. Following the incorporation of AUTOGERMA S.p.A. into Automobili Lamborghini Holding S.p.A., the Audi Group’s delivery range now for the first time includes other brands belonging to the Volkswagen Group. During 2000, Autogerma sold 265,921 vehicles of the Seat, Škoda, Volkswagen Passenger Car and Volkswagen Commercial Vehicle brands in Italy, in addition to Audi cars. In Germany, Audi – in common with many other car manufacturers – felt the impact of the decline in newcar registrations: unit sales by the Audi brand fell to 239,644 (257,642). Outside Germany, on the other hand, more Audi vehicles were sold than in 1999: the total

reached 413,760 (377,066). The percentage of total vehicle sales outside Germany thus rose from 59.4 percent in the previous year to 63.3 percent. Germany: four new models launched Audi brought four new models onto the German market in the course of 2000. First came the Audi allroad quattro in May. One month later it was followed by the Audi A2, voted by a clear margin the most important new car of 2000 by the readers of “Auto Zeitung”, and the RS 4. The end of the year saw the launching of the new Audi A4 saloon version. Audi sets new sales record in the USA Audi last year surpassed its previous sales record of 74,100, which had stood since 1985. As in 1999 the USA was our largest export market, with 80,372 passenger cars sold. Almost 90 percent of vehicles were ordered with permanent four-wheel drive. The early part of the year saw two market launches: in good time for the summer, US enthusiasts of opentop driving were able to savour the fresh air in the

Market News 49

Audi TT Roadster. Rear passengers in the long-wheelbase version of the Audi A8 4.2 quattro were able to enjoy more head, shoulder and leg room than previously. The Audi allroad quattro took to the roads – and the terrain – in the autumn. The Audi A6 2.7 T, the A6 4.2 and the Audi TT Coupé had the honour of being listed among the “10 Best Cars for 2000” by the auto magazine “Car and Driver”. And the Audi S4 received the “2000 Grand Prix Award” from the “European Car Magazine”. Great Britain: largest export market in Europe In a year in which car prices in the UK were brought down by an average of ten percent, to the level of other European countries, Audi was able to increase its market share. With the market as a whole virtually stagnant, 8.3 percent more vehicles with the four-ring badge were sold than in the previous year. 2000 was an extremely successful year for the Audi TT in particular, which is available exclusively as a quattro in Great Britain. The sales totals for both the Coupé and the Roadster exceeded our expectations.

Major markets

Audi cars, worldwide Germany USA Great Britain Italy Spain France Belgium China Switzerland Austria Netherlands Sweden Brazil Japan Lamborghini cars, worldwide 1

Foreign brands only

The Audi A2 was launched to considerable press acclaim. The magazine “Autocar” awarded a very rare five stars following its road test, declaring the A2 to be “the most desirable supermini in history”. Italy: Audi TT Roadster – Best New Product The Audi TT Roadster was voted Best New Product of 2000 by the readers of the magazine “Quattroruote”. The criteria according to which the candidates were judged were design, technology and level of innovation. Last year Audi sponsored the charity concert “Pavarotti & Friends” in Modena for the first time. The purpose of this event was to raise money for child victims of war in Cambodia and Tibet. New showroom in the heart of Paris Audi’s triple victory at Le Mans substantiates our claim to sporting prowess and is also boosting the popularity and appeal of our brand. The new Audi showroom in Paris, in the Rue Royale, was officially opened in June. This facility gives Audi a further prestigious address in the French capital.

Unit sales 2000

Year-on-year percentage change

653,404 239,644 80,372 43,612 41,020 38,420 36,874 18,309 17,451 16,327 14,949 13,220 12,440 9,489 6,972

2.9 –7.0 21.9 8.3 –7.1 0.5 0.2 –1.4 152.5 –4.3 –3.8 5.4 1.5 133.7 8.4

296

11.7

Market share in 2000 in percent

6.9 1.9 1 1.9 1.7 2.8 1.6 3.5 2.7 5.2 4.9 2.0 4.2 0.8 2.8 1

Year-on-year percentage change, overall market –11.1 9.4 1 1.1 3.3 –2.0 –0.7 5.2 5.9 –0.1 –1.5 –2.3 –1.6 13.4 0.9 1

50 Market News

The Audi A8 L 6.0 quattro made its world début at the Paris Motor Show. The Steppenwolf study likewise made its first public appearance there. Switzerland: heading for the mountains by quattro A reader poll in “Motorpresse Schweiz” pronounced the Audi TT Coupé the best car of 2000 in its class. The Audi TT Roadster and the Audi A3, A4, A6 and A8 all finished among the top three in their respective categories. Audi also won the category for “Best Advertising”. Over half of all Audi cars exported to Switzerland are equipped with permanent four-wheel drive; this makes Switzerland the European country with the highest proportion of Audi drivers who place their trust in quattro. Czech Republic: spotlight on Audi Audi recorded sales of 1,141 (1,074) cars in the Czech market – 6.2 percent up on the previous year. This rise outstripped the growth in the Czech market as a whole, where first-time registrations rose by 1.6 percent. The annual conference of the IMF and World Bank, from September 26 to 28 in Prague, was a media event

that gave Audi an ideal opportunity to raise its profile. A fleet of 230 Audi cars, made up of A8 and A6 models, was placed at the disposal of leading representatives of the financial world. Performing groundwork for a bright future in Russia Audi more than doubled the previous year’s unit sales here, to 1,171 (502) vehicles, and for the first time occupied the rank of second-largest make in the premium segment of the resurgent Russian market. With the Audi allroad quattro, available since last year, and the market launches of the new Audi A4 and Audi A8 L 6.0 quattro scheduled for this year, Audi is performing the groundwork for a brighter future in Russia. Israel: largest premium German make Last year we sold 1,852 (1,228) cars in Israel, an impressive year-on-year increase of 50.8 percent. Whereas Audi was only the third-ranking premium German make as recently as four years ago, 2000 was already its second year in the top spot.

Market News 51

In the early summer of 2000, Audi sponsored the first International Opera Festival in Caesarea, building on its partnership with the New Israeli Opera of Tel Aviv. The programme included performances of two operas, in the Roman Theatre against the backdrop of the Mediterranean, as well as a concert with Jessye Norman. Leading position in China strengthened Audi boosted its unit sales for 2000 in China by over 150 percent, to 17,451 vehicles. By the end of 2000, Audi had 31 retail partners in the country’s largest cities. Twelve dealerships with Audi hangars have already been completed, and a further eleven are under construction. The recently opened Audi dealer in Zhuhai, South China, is among Audi’s five largest hangar buildings in the world. By the end of 2001, there will be a total of 51 dealerships dedicated exclusively to the Audi brand in China. The development of the exclusive dealer network, in conjunction with the successful market launch of the special Chinese version of the A6, has clearly had a positive influence on Audi’s position as a premium brand.

The focus is being shifted increasingly to private buyers, by means of the latest communication and customer contact measures. Brazil: successful sales joint venture Audi established a new sales record last year in the largest country in South America; the previous year’s figure was more than doubled, with unit sales reaching 9,489 vehicles. The locally built Audi A3 accounted for the bulk of this total. The joint venture AUDI SENNA Ltda., based in São Paulo, was created on January 1, 2000 with the objective of selling our vehicles in Brazil. AUDI AG holds a 51 percent stake in the company, with the former importer Senna Import owning the remaining shares.

52 Market News

Thailand: marketing joint venture In parallel with the start of local production of the Audi A6, a marketing joint venture with the local importer was launched in Thailand. The restructuring of the dealer network, to introduce greater brand exclusivity, culminated in the opening of the new exclusive dealership in Vipavadee, Bangkok. Mid-way through 2000, the locally built Audi A6 went on sale in Thailand. 249 (238) customers took delivery of an A6 by the end of the year. Winds of change for Audi Japan In Japan, 2000 was a year in which Audi placed the emphasis on restructuring its dealer network. The number of retail outlets was slimmed down from 250 to 100, now largely exclusive to the Audi brand. Audi anticipates that this change will create the premium environment that is needed to give its image and sales a significant boost. In an effort to enhance our brand presence in Japan, we have brought new models onto the market and given the established models much more overtly sporty equipment specifications. We have in addition optimised our communication measures. Lamborghini acquires new subsidiary in Italy Lamborghini sold 296 (265) sports cars in 2000. Its largest market was the USA, which accounted for unit sales of 99 (131). Western European customers purchased 159 (95) Diablo models. Since the transfer of AUTOGERMA S.p.A. from Volkswagen Beteiligungs-Gesellschaft mbH to Automobili Lamborghini Holding S.p.A., the Audi Group has been supplying vehicles of other Volkswagen Group brands in Italy, over and above Audi cars and the Diablo. All motor vehicle operations of the Volkswagen Group in Italy are consequently now handled by this national holding company.

Sports and Cultural Sponsorship 53

Audi broadens horizons. Audi sets sail – with the Streamline close to the wind In addition to its established sponsorship activities in the worlds of skiing, show-jumping and golf, Audi has now added high-tech sailing to its portfolio. A new-concept yacht by the name of “Streamline” was developed with Audi’s support. This venture involved cooperation of a technical nature: flow research conducted in Audi’s ultramodern wind tunnel and expertise in materials engineering acquired in the fields of motor sport and CAD technology also have a contribution to make towards this innovative regatta boat. The Streamline set sail for the first time last October in the International German Match Race Championship in Kiel, for which Audi was the principal sponsor. A highquality field of competitors guaranteed an interesting regatta, promising further exciting races involving these new three-man vessels.

Glyndebourne Festival – Mozart opera with picnic An eccentric music-lover opened an opera house on his country estate in the south of England in 1934. This paved the way for one of the most famous festivals of opera in the world: the Glyndebourne Festival. Last year saw Audi become involved for the first time in the capacity of sponsor, focusing on a new production of the opera “Don Giovanni” by Wolfgang Amadeus Mozart. The appeal of this unconventional cultural occasion stems from its happy blend of music, architecture and horticulture. Opera-lovers at Glyndebourne are renowned for their famous champagne picnics in the park during the interval. In addition to its involvement in Glyndebourne and the Salzburg Festival, as well as many other national and international music festivals, Audi once again organised the “Summer Concerts between Danube and Altmühl” last year in conjunction with the Bavarian broadcasting corporation Bayerischer Rundfunk. Customers, importers, Audi dealers and employees are all able to take part in the company’s cultural activities, for example by making use of the special ticket service.

Visions are dreams plus reality.

56 Management Report

General economy and the sector Economic upturn Growth in the global economy continued to gather pace in 2000. This development was bolstered by the pronounced upward trend in the USA and robust expansion in Europe – though the economies in both zones slowed down again towards the end of the year – and by a recovery in Asia. Japan also showed progress. The fundamental data in most threshold countries likewise improved. Latin America and the Middle East made up ground in 2000, after the slowdown of the previous year. There remains considerable imbalance in both the economic and the financial and monetary conditions between the US dollar, yen and euro currency zones. The rise in the price of oil during the course of 2000 could pose a threat to the long-term prospects for sustained global economic expansion. The slowdown in the US economy has moreover been more rapid than had been expected even fairly recently, and this has had a correspondingly negative knock-on effect on other national economies. Automotive sector worldwide in good shape In parallel with the generally healthy global economy, the automotive sector made positive progress in 2000. In Western Europe, where first-time registrations totalled just under 15 million, the figure nevertheless fell short of the prior-year figure by two percent. In Germany, the number of cars being newly registered actually declined more sharply, by around eleven percent. Registrations in Belgium, Greece and Ireland rose. The major car markets of Great Britain and Italy expanded only slightly. Fewer passenger cars were registered as new in France and Spain in 2000. In the USA, both the market as a whole and the market for imported vehicles grew. Around 8.8 million passenger cars were registered as new there. South America recovered after the slack period of the previous two years, with first-time registrations risDevelopment of major car markets New registrations in million units 36.2

37.4

34.6

36.7

37.3

1996

1997

1998

1999

2000

15

10

05

Western Europe

North America

Japan

Other

ing by approximately nine percent. The revival in Brazil, the largest market in the region, was particularly pronounced. First-time registrations of cars in Japan were marginally up on the previous year. Car production totals by and large reflected the trend in first-time registrations, with the exceptions of Western Europe and the USA: in Western Europe production output was marginally up on the previous year’s figure. Slightly fewer vehicles were built in the USA than in 1999. Both production totals and new car registrations in South America were up; the rise in production output was much sharper because of the high proportion of vehicles built there for export. German car market slumps The domestic and export sectors of the German car industry experienced contrasting fortunes. Whereas exports flourished, the domestic market took a nose-dive: new registrations were around eleven percent down on the 1999 figure, at 3.4 million. Foreign makes accounted for a 34 (34) percent share. Car exports rose by 1.1 percent to 3.5 million units. The weak state of the domestic market was due partly to the very high number of used cars in circulation, and partly to the continuing fall in the average age of vehicles on Germany’s roads; this consequently led to lower after-demand. The high price of diesel and petrol also had a constraining effect on sales of new cars. Car production in Germany moreover did not match the level of 1999, with 5.1 million units produced.

Management Report 57

Situation of the company Rise in sales and earnings The higher unit sales and the first-time inclusion of AUTOGERMA S.p.A. in the consolidated financial statements of the Audi Group meant that sales revenues rose by 31.7 percent to DM 39,024 (29,624) million. Sales outside Germany generated 66.1 (54.0) percent of this total. Without the new Italian subsidiary, sales would have totalled DM 32,089 million – an increase of 8.3 percent. The gross operating result, in other words the difference between sales revenues and manufacturing costs, was DM 3,783 (3,304) million. Earnings before taxes, following the deduction of DM 251 million in extraordinary expenses to cover take-back and disposal commitments for scrap vehicles in compliance with the new EU directive of October 21, 2000, were roughly on a par with the previous year’s figure, at DM 1,605 (1,640) million. The sales return before taxes was consequently 4.1 (5.5) percent. The group’s net earnings showed a 35.5 percent increase, to DM 859 (634) million. AUDI AG recorded an increase in sales revenues to DM 31,476 (29,151) million; earnings before taxes amounted to DM 1,001 (1,449) million. On the basis of the existing profit-transfer arrangement, AUDI AG transferred DM 176 (222) million to VOLKSWAGEN AG. Allocations to other revenue reserves totalled DM 176 (222) million for AUDI AG and DM 683 (412) million for the Audi Group. For the 2000 financial year, those with small shareholdings in AUDI AG will receive a compensatory payment for each Audi individual share certificate instead of a dividend payment. It will be equivalent to the dividend paid out on one VOLKSWAGEN AG individual share certificate, to be determined by the Annual General Meeting of VOLKSWAGEN AG on June 7, 2001. Production stepped up In response to higher overall demand, Audi further stepped up vehicle production in the year under review. The group built 650,850 (626,059) vehicles in total, an

increase of 4.0 percent. This included 291 (252) of the Lamborghini Diablo. In 2000, Audi dealers outside Germany were supplied with 22,983 (7,594) cars built from completely knocked down (CKD) or semi knocked down (SKD) parts kits. 136,141 (143,333) of the Audi A3 were built at the Ingolstadt plant. 227,028 (248,425) of the Audi A4 in addition left the production line there. Total production at Ingolstadt thus reached 363,169 (391,758) vehicles. At the Neckarsulm plant, our workers turned out 169,276 (161,037) of the Audi A6, 32,164 of the Audi A2 and 12,894 (14,636) of the Audi A8. The new Audi allroad quattro is also built there. 11,439 of this new model were produced in the financial year. The Audi TT Coupé and Audi TT Roadster are built jointly by the Ingolstadt and Györ (Hungary) plants. Audi ships painted bodyshells manufactured in Ingolstadt to Hungary, where they are assembled into finished cars. A total of 56,776 (52,579) of the Audi TT were produced by this method in the 2000 financial year. In the year of its market launch, quattro GmbH built a total of 2,530 of the Audi RS 4 in Neckarsulm. As in the previous two years, Wilhelm Karmann GmbH built the Audi Cabriolet at its Rheine plant. Because production of the previous model was being wound down, only 2,311 (4,086) of this model left the plant. Demand for diesel versions has surged following the rise in fuel prices. During the period under review, 40.1 (37.5) percent of all Audi vehicles were fitted with a TDI engine. Models with permanent four-wheel drive are likewise much in demand: 20 years after the launching of the quattro concept – at the time of its appearance, an utterly revolutionary development – 30.8 (27.0) percent of all Audi cars produced in 2000 had four-wheel drive. Due to lower demand from within the VW Group, engine production by the Audi Group eased off to 1,187,666 (1,266,896) units. Only 121,971 (263,553) fourcylinder engines were built at the Ingolstadt plant. By Diesel shares Diesel-and und quattro quattro-Anteile of production an total der Produktion in %

40

30

20

10

1996

1997 Diesel-Anteil Diesel share

1998 quattro-Anteil quattro share

1999

2000

58 Management Report

contrast, AUDI HUNGARIA MOTOR Kft. boosted its output to 1,060,828 (1,001,912) four, six and eight-cylinder engines. Lamborghini manufactured 291 (252) highperformance car engines. The British subsidiary COSWORTH TECHNOLOGY LIMITED stepped up its production to 4,576 (1,179) engines, including the 280 kW unit for the Audi RS 4. 49.5 percent (49.7 percent) of all engines manufactured by the Audi Group were supplied to other member companies of the Volkswagen Group. Further increase in demand for Audi vehicles In the 2000 financial year, 653,404 (634,708) vehicles of the Audi brand were sold worldwide. Demand thus outstripped the previous year’s level by 2.9 percent. Sales of the Lamborghini Diablo rose by almost twelve percent compared with 1999, to 296 (265) units. A further 265,921 vehicles of the Seat, Škoda, Volkswagen Commercial Vehicle and Volkswagen Passenger Car brands were additionally sold via the newly consolidated company AUTOGERMA S.p.A. As in previous years, the Audi A4 was the top-selling model. Demand for the predecessor to the new Audi A4 – launched in November – remained high right to the end of its model life. Total sales of the Audi A3 and Audi A6 were likewise up on the previous year. Successful launches of new models Audi’s first new model of 2000 was the Audi allroad quattro, launched in May. It combines the comfort of a saloon car with outstanding off-road properties. The RS 4 made its market entry in June; this car unites all the virtues of a high-performance sports car with the everyday suitability of an Avant. The same month saw the appearance of the Audi A2, the first volume-built aluminium car. Its body is around 40 percent lighter than an equivalent steel structure. The A2 is a successful fusion of operating economy and liveliness.

An important new model making its début during the period under review was the new Audi A4, which has been on the market in Germany since November 2000. This thoroughly new design has been much acclaimed by both press and public. The sales figures for the new-generation A4 confirm that Audi will be able to build on the tradition of success of this model, which is of vital commercial importance to the company. Further new products were unveiled at the international motor shows in Geneva and Paris. These include a new W-configuration twelve-cylinder engine for the long-wheelbase Audi A8, and the Steppenwolf design study. The Audi A3 was rejuvenated in autumn 2000. The changes to its exterior are very subtle. However, it is now available with new engines, and has an even more exclusive interior and many detail improvements. A retrofitting campaign for the Audi TT sports car was launched at the start of the year even though a detailed study by Germany’s Technical Inspection Agency (TÜV) confirmed that the Audi TT was a better than average sports car. The campaign was brought to a conclusion at the end of 2000. Around 42,600 of the Audi TT were retrofitted with the Electronic Stability Program ESP at various company plants. More employees within the group The launching of new models, the resulting broadening of production operations and the acquisition of AUTOGERMA S.p.A. all contributed towards an increase in the Audi Group workforce. On December 31, 2000 there were 50,535 (46,558) employees in total, including 6,673 (5,418) outside Germany. 29,914 (28,426) of our employees were based in Ingolstadt, and 13,948 (12,714) in Neckarsulm. AUDI HUNGARIA MOTOR Kft. employed a total of 4,831 (4,312) people at the end of the year, and the Lamborghini Group 440 (380). AUTOGERMA S.p.A. had

Sales of Audi vehicles

A2 A3 TT Coupé TT Roadster A4 incl. RS 4 Cabriolet A6 allroad quattro A8

2000 20,168 147,581 32,039 24,143 229,529 3,020 175,357 8,213 13,354

1999 – 146,322 41,542 3,261 254,895 4,501 169,250 – 14,937

Management Report 59

624 employees. On December 31, 2000 COSWORTH TECHNOLOGY LIMITED employed a workforce of 764 (711). Investments safeguarding long-term success The Audi Group invested DM 3,965 (2,966) million in the 2000 financial year. DM 3,096 (2,799) million of this sum was spent on fixed assets during the course of regular business operations and DM 812 million on capital investments resulting from the acquisition of AUTOGERMA S.p.A. The cash flow, totalling DM 2,876 (2,274) million, covered 92.9 percent of spending on fixed assets. Our overriding objective remains to consolidate the basis for sustained corporate success by making and implementing investment plans with foresight and a view to the longer term. Around two billion marks in total were invested in new buildings, production plant and special tools for the new Audi A4. The bulk of these investment measures had been completed by the end of 2000. Some DM 120 million were channelled into the “New Toolshop” project at Ingolstadt, which was completed in April 2000. The new hall has space for 17 trial presses with pressing forces of up to 2,100 tonnes, eight largescale processing machines and a “try-out area” for assembling complete body production lines measuring up to 75 metres in length. The design and layout of the new toolmaking shop provides improved working conditions for the employees. This is the first toolmaking shop to have received accreditation from the Technical Inspection Agency (TÜV) according to Directive 6.4 of the German Automotive Industry Federation (VDA). It supplies both Audi and other car manufacturers with press tools, body production plant and assembly facilities for the manufacture of body panel sections and assemblies. The third and final phase of the new paint shop at the Neckarsulm plant was completed in October 2000. This phase cost in the order of DM 130 million. The over-

Capital investments in the Audi Group in DM million 1,445 1,496

1,967 1,994

3,168 2,373

2,966 2,274

3,965 2,876

1996

1997

1998

1999

2000

4,000

3,000

2,000

1,000

Capital investments

Cash flow

all project, at DM 600 million, was the largest investment project to date in the history of that plant. The third phase permits the adoption of segmentation; in other words, different model series are processed in different sub-sections of the paint shop. This enhances the facility’s flexibility and performance. Purchasing volume rises The purchasing volume for 2000 totalled DM 21.1 billion. This compared with a figure of DM 20.8 billion for the prior year. Direct materials accounted for DM 17.7 (17.1) billion of the total, and investment goods, services and expendables for DM 3.4 (3.7) billion. A new corporate profile in Ingolstadt The Audi Forum Ingolstadt, the company’s new architectural flagship facility, was officially opened in December 2000. It centres on the museum mobile, in which the development of Audi and its related brands is presented through more than a century of the motor car. The Customer Center, which has been in use since 1992, is the place where customers can collect their new vehicle in person. The link building between the museum mobile and the Customer Center houses highclass catering establishments. Various services are based in the “Market and Customer” building, completed in 1999, which also contains office facilities for over 600 employees. Together with the expansive 20,000 squaremetre piazza at the centre, these buildings create a harmonious architectural ensemble that can serve as a stage for events, interaction and communication. Renovation of August Horch Museum in Zwickau Audi and the city of Zwickau established the non-profitmaking body “August Horch Museum Zwickau GmbH” in December 2000. The purpose of the company is to keep a record of the history of car manufacturing in Zwickau and other Auto Union locations especially in

60 Management Report

Saxony. Its tasks include completely renovating the museum building and the August Horch Villa, looking after and restoring the vehicle collection, organising new exhibitions and running the museum. Audi intends to subsidise the restoration of the building to the tune of around DM 13 million over the next few years. Company switches to the euro With effect from January 1, 2001 the Audi Group switched from the German mark to the euro as its standard currency. All internal non-cash financial transactions are consequently now denominated in euro. In addition to the arrangements allowing us to conduct our business in euro that have been in place since January 1, 1999, we have thus taken a further step towards introducing the euro. AUDI HUNGARIA MOTOR Kft. Developments in the 2000 financial year at Audi’s Hungarian subsidiary, based in Györ, were dominated by important investments and new products. March saw the production start of eight-cylinder turbodiesel engines for the Audi A8. A new generation of diesel engines with pump-injector technology has been manufactured in a purpose-built hall since July. A flexible production line for four and five-valve cylinder heads and a modern centre for near-series development were also erected. Sales revenues rose by 20.2 percent to DM 6,648 (5,531) million. The 100,000th Audi TT left the Györ production line in mid-August – one of 56,776 (52,579) to be built there during the period under review. 4,831 (4,312) people were employed there on December 31, 2000. Lamborghini incorporates AUTOGERMA S.p.A. Automobili Lamborghini Holding S.p.A. acquired a fourth fully owned subsidiary in the year under review: AUTOGERMA S.p.A., of Verona. Together with the three

other companies Automobili Lamborghini S.p.A., Motori Marini Lamborghini S.p.A. and Lamborghini ArtiMarca S.p.A., AUTOGERMA S.p.A. is now owned by a single national holding company which controls the group’s entire automotive activities in Italy. Autogerma is the Italian general importer for the Audi, Seat, Škoda, Volkswagen Commercial Vehicle and Volkswagen Passenger Car brands. The company enjoys a strong position in the Italian market, with over 2,000 sales and service outlets and a large parts business. AUTOGERMA S.p.A. had 624 employees at the end of 2000. During the financial year, the car manufacturer Automobili Lamborghini S.p.A., based in Sant’Agata Bolognese, placed the emphasis on a comprehensive investment programme spanning five years. In addition to erecting a new vehicle delivery centre, it invested in a new development centre and an additional company building. Capital investments totalling some DM 200 million over five years are intended to restore the company to profitability in the medium term. Automobili Lamborghini S.p.A. supplied 296 (265) sports cars to customers during 2000. Lamborghini opened a showroom at Munich Airport in October 2000, in the immediate vicinity of the Audi Forum. The Lamborghini Group posted sales revenues of DM 119 (92) million in the period under review. The company had 440 (380) employees on December 31 of last year. COSWORTH TECHNOLOGY LIMITED This manufacturer of high-quality, very high-performance engines has three sites in the English Midlands. Engines and drivelines are designed and developed at the company’s headquarters in Northampton. Aluminium cylinder heads and engine blocks are produced by a unique, patented aluminium engine casting method at Worcester. The subsequent production and final assembly of the engines themselves then takes place out at Wellingborough.

Management Report 61

COSWORTH TECHNOLOGY LIMITED in addition owns all the shares of Cosworth Technology, Inc., Novi (USA). The latter develops information and diagnostic systems for vehicles. Sales by COSWORTH TECHNOLOGY LIMITED during the period under review totalled DM 219 (134) million. The company, which is still undergoing restructuring, reported a negative result of DM -26 (-36) million. The company had 764 (711) employees at the end of the year. quattro GmbH – sales success for the RS 4 quattro GmbH, based in Neckarsulm, is a fully owned subsidiary of AUDI AG. In addition to customising Audi vehicles and offering an extensive range of vehicle components with sporting flair, quattro GmbH has had profitable trading/lifestyle articles operations since 1984. In June 2000, the Audi RS 4 enjoyed a highly successful market launch; this is the first high-performance model to have been developed in the context of the new RS strategy. Thanks to the exceptionally high level of demand, over 2,500 of this model were sold by the end of the year. quattro GmbH generated sales revenues of DM 130 (38) million during the reporting period. The Annual General Meeting of AUDI AG on June 29, 2000 approved the profit-transfer agreement which was concluded between quattro GmbH and AUDI AG with effect from January 1, 1999. quattro GmbH transferred a sum of DM 38 (-27) million to AUDI AG in the 2000 financial year.

62 Management Report

Risk repor t Risk management within the Audi Group Since the introduction of corporate governance legislation (German KonTraG) on May 1, 1998, German public limited companies whose shares are quoted on the stock exchange are required by law to establish a risk management system. The purpose of such a system is to identify at an early stage any risks which could have a significant effect on the company’s net worth, financial position and earnings situation and pose a threat to the company’s survival. Such developments include in particular high-risk transactions, the inaccurate preparation and disclosure of accounts, and infringements of legal requirements. Even before this legal obligation came into being, the Audi Group had installed a system whereby such risks could be identified. The arrangements include clearly defined spheres of responsibility and reporting and record-keeping obligations for the company’s individual divisions and subsidiaries, as a means of assuring the viability of this system. Following its incorporation into the Audi Group, AUTOGERMA S.p.A. is likewise covered by the existing regulations and procedures for risk management. Risks from the review of the Block Exemption Regulation The “Motor Vehicles Block Exemption Regulation” grants car manufacturers certain exemptions to the requirements of competition law within the European Union. These exemptions are intended to regulate the manner in which cars are sold and serviced, in order to assure the roadworthiness of these products throughout their entire operating life. Customers must be able to rely on their car being serviced to the highest technological, safety and environmental standards wherever they are. In particular, block exemption permits car manufacturers to maintain a selective network of sales partners and to oblige the latter contractually to maintain high standards.

The European Commission first issued the Block Exemption Regulation in 1985, and extended it in 1995 for a further seven years, until September 30, 2002. The aim was to ensure that the highly complex technology in modern cars was maintained in a proper and safe condition, provided this did not hinder the evolution of the single market. The European Commission is currently investigating whether and in what form the regulation is to be renewed a further time. It published a report on November 15, 2000. In it, the Commission raises the objection that block exemption has obstructed independent competition, and that consumers in particular are disadvantaged because the existing system prevents them from reaping the benefits of the free movement of goods across national borders. The Association of European Car Manufacturers (ACEA), on the other hand, emphasises that block exemption is the only way its members can guarantee consumers a broad-based, high-quality car network. It believes that deregulation would result in the thinningout of dealer networks and cause them to become concentrated in urban centres. It anticipates that many of the surviving workshops, which would then be independent, would only be prepared to perform basic repairs. As a result it could no longer be guaranteed that vehicles could be kept both in safe working order and in an environmentally acceptable condition throughout their useful life. The European Commission’s report of November 2000 does not indicate in what ways the current Block Exemption Regulation for cars may be modified. The Commission intends to present the proposed new arrangements by the end of 2001. These will then be introduced by no later than the first half of 2002. The unforeseeable nature of the new arrangements at European level harbours the imponderable risk for the Audi Group – as indeed for all other manufacturers – that the basis for the existing selective sales system

Management Report 63

would be eradicated by the abolition of block exemption. Independent dealers and retail chains (e. g. supermarkets and the financial services sector) would then be able to sell new vehicles. This could necessitate the creation of fundamentally new channels along which vehicles would pass from the manufacturer to the customer. In order to be adequately equipped for the potential restructuring of the sales network, Audi has investigated several scenarios. Appropriate sales strategies have been drawn up for each scenario. These will permit the group to respond promptly and fittingly as soon as the new legal position takes on definite shape. Risks from the EU Directive on end-of-life vehicles The EU framework directive on end-of-life vehicles took effect in October 2000. Its objective is to avoid vehicle scrap and to re-use components or recycle the material from which they are made. Car manufacturers are accordingly obliged to accept back, at their own expense, any vehicles first registered after July 1, 2002 and to reprocess them. This requirement will apply to all scrap vehicles from 2007. The directive requires that 85 percent of the vehicle’s weight be recycled or overhauled for re-use from no later than 2006. This quota will subsequently rise to 95 percent. Every scrap car within the European Union must moreover be handed in to an authorised salvage depot. Standards on the identification of components and suitable take-back facilities are to be created. Before new models can be homologated, manufacturers must in addition confirm that the specified reprocessing quotas can be met. The use of heavy metals in new cars is to be further reduced in future. The Directive on end-of-life vehicles must be incorporated into national law by EU member states by April 2002 at the latest. The commitments resulting from the acceptance and reprocessing of vehicles will cause the Audi Group to incur considerable costs, for which we have made provision in the annual accounts for 2000.

Risks from exchange rate fluctuations As a car manufacturer with international operations, the Audi Group is exposed to the risk of exchange rate fluctuations. The foreign currency exposure resulting from the manufacture and sale of vehicles is initially reduced via the netting scheme operated within the VW Group. It involves the clearing of scheduled currency receipts and outgoings. The remaining balance of foreign currency is protected against exchange rate fluctuations by the use of suitable financial instruments, in accordance with the current group guidelines and within the limits specified by the Treasury. Payments resulting from the purchase of investment goods and services denominated in foreign currency are protected against exchange rate fluctuations by appropriate hedging transactions. Special group guidelines lay down the boundary conditions and control mechanisms for hedging against foreign currency exposure. Insured risks The assessment of the likelihood of damaging events and of the consequent costs makes it appropriate to have certain risks covered by third parties. In cases where this is also economically expedient or required by law, Audi has taken out appropriate insurance cover as part of its risk management measures. The principal policies which Audi uses include fire insurance, fire business interruption insurance, motor vehicle liability insurance for vehicles used by the company, and insurance cover for operational, environmental and product risks. Security risks in information technology For a company that operates on a global scale, it is both essential and logical that its computers and telecommunications systems worldwide should be networked and closely linked to the Internet. The dramatic growth in the IT infrastructure means that increasing volumes

64 Management Report

of sensitive information are being exchanged electronically worldwide. Examples of this are the Internet, as an information base and exchange medium, the rapidly increasing level of IT integration with suppliers and development partners, and the spread of e-business. Meanwhile, the degree of availability required of IT systems is steadily rising, on the one hand as a result of global networking between our own locations and with external partners, and on the other hand in response to the more demanding expectations of users. To minimise the risks resulting from these more exacting requirements, Audi will continue to invest consistently in making further improvements to the security and availability of its information technology. This includes for example measures to optimise network stability, the implementation of reliable encryption techniques and digital signatures, and the comprehensive use of virus protection software. Audi ensures that these measures are implemented operatively and that appropriate arrangements are applied right through to the individual computer user. One vitally important aspect is the need to harmonise the dictates of IT security with the requirements of working routines within company departments. This is achieved through close cooperation between all those involved. Overall company situation On the basis of all particulars and circumstances known to us, there are currently no risks to the Audi Group which would have such a significant effect on its net worth, financial position and earnings situation that they could endanger the company’s survival.

Management Report 65

Outlook Favourable economic climate The development in economic growth in Audi’s principal markets will largely remain positive in 2001. In Germany, the rise in gross domestic product will be slightly more restrained than in 2000. Despite a moderate decline throughout the euro zone, the economy is expected to progress at a level that is well above the long-term European average. There has been a slowdown in the USA, an important export market, since the end of 2000. This development, which was expected, has cut in more swiftly than was anticipated a few months ago. Car sector to remain stable The progress of the car sector worldwide is largely mirroring that of the economy as a whole. New-car registrations in Germany are forecast to recover slightly in 2001. Slight growth is expected throughout the euro zone, but the car sector in the USA will fall well short of the previous year’s totals. Success in 2000 to be continued in 2001 Audi concluded the 2000 financial year with record sales revenues and unit sales. The successful market launches of the Audi allroad quattro in May, the Audi RS 4 and Audi A2 in June and the new Audi A4 in November 2000 all contributed towards this. For the 2001 financial year, we expect to see vehicle sales rise further, and anticipate that the sales and earnings figures will be roughly on a par with 2000. Audi will in addition be strengthening the international focus of the group. Outside Europe, we regard North America and China in particular as key markets for the future, and will be stepping up our sales activities there.

New models in 2001 The Audi A2 1.2 TDI, the first five-door vehicle to use less than three litres of fuel per 100 km, will be appearing in the first half of the year. The Audi A8 L 6.0 quattro, which extends the model range at the top end, will also be launched in the summer of 2001. It has a newly developed, extraordinarily high-performance, high-displacement 12-cylinder engine with a W-type configuration. Record investments over next few years Ultramodern technology in the car necessitates equally advanced production technology. Audi is therefore constantly investing high amounts in order to keep all systems abreast of the latest technology. Current plans envisage capital investments to the tune of DM 17 billion by 2005, largely in new products and in the structural expansion of our plants. New approach by Audi to retirement benefits In the light of demographic developments, the level of provisions for old age pensions within the group’s employee pension scheme will rise over the next few years. Audi is therefore considering ways of reorganising the existing system of pensions.

66 Finance

Earnings situation Rise in sales revenues to DM 39.0 billion The financial position of the Audi Group continues to provide a sound basis for the company’s future development. Thanks to the healthy development in sales and the first-time inclusion of AUTOGERMA S.p.A. in the consolidated financial statements of the Audi Group, sales revenues rose to DM 39,024 (29,624) million. Excluding the new Italian subsidiary, sales revenues would have totalled DM 32,089 million – an increase of 8.3 percent. The model making the highest contribution towards sales revenues was the Audi A6, which brought in DM 9.7 (8.2) billion. The Audi A4 accounted for DM 9.3 (9.4) billion, sales revenues for the A3 amounted to DM 4.2 (4.3) billion, followed by the Audi TT, which generated sales revenues of DM 3.0 (2.4) billion. A8 sales revenues amounted to DM 1.2 (1.3) billion. The Audi allroad quattro, launched in May 2000, and the new Audi A2 also contributed towards the rise in sales revenues. Manufacturing costs rose by 33.9 percent in the year under review, and therefore by a slightly higher rate than sales revenues, reaching DM 35,241 (26,320) million. This increase is largely attributable to the acquisition

cost on the part of AUTOGERMA S.p.A. for the purchase of other Volkswagen Group brand vehicles. The gross margin, which is the difference between sales revenues and manufacturing costs, fell to 9.7 (11.2) percent. Personnel costs rose by 11.0 percent to DM 4,972 (4,481) million, one factor behind this change being the larger workforce in the year 2000. The cost of materials rose by 43.1 percent to DM 28,418 (19,862) million, in line with higher production output. In particular as a result of the inclusion of AUTOGERMA S.p.A. in the consolidated financial statements of the Audi Group, selling and distribution costs rose significantly by 32.2 percent to DM 2,269 (1,716) million. General administration expenses totalled DM 329 (281) million. The improvement in the result for other operating income and expenditure to DM 517 (251) million was prompted by lower expenditure for exchange rate hedging transactions and the liquidation of provisions no longer required. The financial result rose to DM 154 (82) million as a consequence of higher investment earnings. On the basis of take-back and disposal commitments for scrap vehicles in compliance with the new EU direcEntwicklung des Ergebnisses vortaxes Steuern Development in earnings before und sales der Umsatzrendite Steuern and return before vor taxes 862

1,112 1.112

1.684 1,684

1.640 1,640

1.605 1,605

2.000 2,000

251

1.500 1,500

6.2 5.5 5.0 1.000 1,000

4.6 4.1

0.500

1996

1997

1998

Ergebnis Steuern Mio. DM Earnings vor before taxes,inDM million Außerordentliche Ergebnisbelastung Extraordinary expenses (Altautorücknahmeverpflichtung) (commitment to take back scrap cars) Umsatzrendite vor Steuern Sales return before taxes inin %%

1999

2000

Finance 67

tive of October 21, 2000, extraordinary expenses of DM 251 million were incurred in the year under review. Earnings before taxes were only slightly down on the previous year, at DM 1,605 (1,640) million. The corresponding sales return figure was 4.1 (5.5) percent. By contrast, net earnings rose by DM 225 million to DM 859 (634) million. After the profit transfer to VOLKSWAGEN AG of DM 176 million, there remained a net profit for the period of DM 683 million for the Audi Group – an increase of DM 271 million on the previous year. We have allocated this amount to other revenue reserves.

Result according to DVFA/SG1 The result according to DVFA/SG represents a company’s net profit for the period, adjusted to compensate for special factors. The purpose of this reference figure is to reflect the financial strength of a company in as objective a manner as possible, irrespective of the accounting principles applied in the preparation of its financial statements. This figure is therefore suitable for drawing comparisons between individual periods and between companies. The DVFA result fell by 7.9 percent to DM 867 (941) million, and the result per share was DM 20.16 (21.89). 1

Key earnings data Sales return before taxes Sales return after taxes Equity return after taxes Return on employed capital before taxes Return on employed capital after taxes Capital turnover

Added value Source Sales revenues + Other income – Expenses prepaid Added value Distribution Employees State Creditors Transfer of profits to VOLKSWAGEN AG Net profit remaining

% % % % %

Based on the recommendations of the working group of the Schmalenbach-Gesellschaft on the statement of changes in financial position

1996

1997

1998

1999

2000

4.6 1.6 15.9 9.6 3.4 2.1

5.0 1.6 17.7 10.8 3.6 2.2

6.2 1.7 20.2 14.3 3.9 2.3

5.5 2.1 24.4 13.5 5.8 2.3

4.1 2.2 27.2 12.0 7.1 2.6

2000

1999

DM million 39,024 1,532 33,752

%

DM million 29,624 990 24,360

%

6,804

100.0

6,254

100.0

DM million 4,972 767 206 176 683

% 73.1 11.3 3.0 2.6 10.0

DM million 4,481 1,018 121 222 412

% 71.7 16.3 1.9 3.5 6.6

68 Finance

Balance sheet structure Balance sheet structures remain sound The Audi Group’s course of expansion was also reflected by the 15.0 percent increase in the balance sheet total, to DM 15,078 (13,110) million. The asset side rose significantly to DM 8,865 (7,196) million as a result of continuing high investment activity. Capital investments totalling DM 3,965 (2,966) million compared with depreciation and net disposals amounting to DM 2,296 (2,325) million. The rejuvenation and expansion of the model range once again accounted for the bulk of spending on fixed assets in 2000. Goodwill totalling DM 668 million, reported as an intangible asset, arose in the period under review as a result of the firsttime consolidation of Autogerma. Current assets rose by 5.1 percent to DM 6,213 (5,914) million. In view of the higher sales volume, the wider model range and, above all, the first-time consolidation of AUTOGERMA S.p.A., inventories rose sharply to DM 2,824 (1,760) million. Raw materials and supplies increased to DM 556 (516) million. Inventories as a percentage of the balance sheet total thus rose to 18.7 (13.4) percent.

Largely as a result of the acquisition of the Italian importer Autogerma from own funds, the liquid assets of the Audi Group in the year under review fell to DM 1,692 (2,953) million. On the shareholders’ equity and liabilities side, shareholders’ equity, including special items with an equity portion, rose to DM 3,499 (2,819) million. This reflected in particular the positive development in earnings. Total reserves, following allocation of the net profit for the period, rose to DM 3,252 (2,569) million. The equity ratio rose to 23.2 (21.5) percent. Borrowings were DM 1,288 million higher than in the previous year, at DM 11,579 million. The precautionary measures in connection with the EU Directive on end-oflife vehicles in particular resulted in higher provisions of DM 7,067 (6,699) million. Higher liabilities, above all trade payables, resulted in higher borrowings. The long-term funds available to the company – shareholders’ equity and long-term borrowings – accounted for 39.0 (39.3) percent of the balance sheet total, consequently covering 66.3 (71.6) percent of fixed assets.

Balance sheet structure

Shareholders’ equity and liabilities

Assets

in DM million 15,078

13,110

15,078

3,499

13,110 12,683

12,683

2,819 10,940 8,865 9,568

6,114

2,375 2,169 2,331

1,984

Shareholders’ equity

1,518

Long-term borrowings

2,241

Medium-term borrowings

Short-term borrowings

1,875

3,869

1,268

Receivables and liquid assets

9,568

2,168

1,652

2,281

Inventories

10,940

7,196

4,717

Fixed assets

2,408

2,465

1,545

929

2,491 1,760

2,824

4,770

4,955

5,024

4,154

3,389

7,552

5,679

5,642

4,405

3,825

1996

1997

1998

1999

2000

2000

1999

1998

1997

1996

Finance 69

Cash flow Compared with the previous year, cash flow rose by DM 602 million to DM 2,876 (2,274) million. The positive effects of higher earnings and higher depreciation were offset by the reduction in medium-term and long-term provisions. Capital investments of DM 3,965 million were covered by cash flow to 72.5 percent. Taking into account other internal financing, the inflow of funds from current business operations totalled DM 2,851 (1,701) million. The outflow of funds from investment activity totalling DM 3,937 (2,890) million and the transfer of profit to VOLKSWAGEN AG resulted in a decrease of DM 1,261 million in financial resources. These totalled DM 1,692 (2,953) million at the end of the reporting period. The detailed flow of funds analysis is shown in the Notes to the Consolidated Financial Statements of the Audi Group on page 79.

Key data on internal financing

1996

1997

1998

1999

2000

Cash flow Cash flow + other internal financing Cash flow as percentage of capital investments

DM million

1,496

1,994

2,373

2,274

2,876

DM million

1,843

2,306

3,365

1,701

2,851

%

103.5

101.4

74.9

76.7

72.5

70 Finance

Consolidated companies Steady progress in sales by Audi Hungaria Audi’s Hungarian subsidiary saw an improvement in all its key data in the past financial year: having passed the production landmark of one million engines in the previous year, 1,060,828 engines were built in the year under review. The production range comprised 790,148 four-cylinder engines, 251,644 six-cylinder engines and 19,036 eight-cylinder engines. These were predominantly manufactured for other companies within the Volkswagen Group. The company’s vehicle production statistics were likewise impressive: last year saw the completion of the 100,000th Audi TT in Györ. The production total for the year reached 56,776 (52,579) vehicles, comprising 31,064 of the TT Coupé and 25,712 of the TT Roadster. This positive development in sales prompted a 20.2 percent rise in sales revenues to DM 6,648 (5,531) million. Earnings before taxes mirrored this dynamic expansion of business: the company recorded earnings of DM 623 million in the past financial year, compared with DM 506 million in the prior year. Capital investments remained high at DM 498 (599) million, with investment measures in the year under

review focusing on the long-term positive development of the Hungarian subsidiary. The newly completed centre for near-series engine development typifies the extensive investment measures: since last year, the range of tasks performed by Audi Hungaria has included refining and cultivating the entire engine range, over and above its own engine production and vehicle assembly operations. The company’s positive development and extensive investment measures are ultimately also reflected in the larger workforce: at the end of 2000, 4,831 (4,312) people were employed at Audi’s Hungarian plant. Lamborghini now includes Autogerma Lamborghini acquired a further company last autumn: ownership of AUTOGERMA S.p.A., of Verona – which imports vehicles of the Audi, Seat, Škoda, Volkswagen Passenger Car and Volkswagen Commercial Vehicle brands – was transferred in full from Volkswagen BeteiligungsGesellschaft mbH to Automobili Lamborghini Holding S.p.A. All automotive activities in Italy are consequently now controlled by a single national holding company.

Consolidated companies within the Audi Group

AUDI Aktiengesellschaft

AUDI HUNGARIA MOTOR Kft.

COSWORTH TECHNOLOGY LIMITED

Automobili Lamborghini S.p.A.

Automobili Lamborghini Holding S.p.A.

Motori Marini Lamborghini S.p.A.

AUDI DO BRASIL E CIA.

Lamborghini ArtiMarca S.p.A.

quattro GmbH

AUTOGERMA S.p.A.

Finance 71

Autogerma’s pride and joy is its large central parts store, covering a floor area of 51,000 square metres. From there, the company acts as Volkswagen Group supplier of over 70,000 different parts to around 800 customers in Italy, as well as to the general importers in around 15 countries in Eastern Europe, the Near East and North Africa. In the period under review, Autogerma sold 306,941 (300,105) vehicles via the dealer organisation. The objective for the next few years is to boost this total steadily. Over four million Volkswagen Group vehicles have been sold in Italy to date. The company generated sales revenues of DM 8,752 million in the period under review. The new Audi subsidiary had 624 employees at the end of the year. A new departure in Sant’Agata The new showcase facility at the Lamborghini plant is the vehicle delivery centre, currently under construction, which will house a showroom, museum, boutique and new offices. Lamborghini is investing around DM 13 million in this complex. The new development centre was occupied last year. These measures all form part of an

ambitious programme: capital investments totalling some DM 200 million and spread over the next five years are intended to restore the company to profitability in the medium term. In addition to renewing the production facilities, new models are to be developed. The company is pursuing the goal of further strengthening its pre-eminent position in the sports car segment. Audi is providing both technical and operational support for Lamborghini in this, without encroaching on the brand’s autonomy. The vehicle manufacturer Automobili Lamborghini S.p.A. supplied 296 (265) sports cars to customers in the year under review. The USA is its most important market. The companies within the Lamborghini Group recorded sales revenues totalling DM 119 (92) million. Earnings before taxes amounted to DM 73 million. This figure includes income from participations of DM 128 million. 440 (380) people were employed at Sant’Agata Bolognese at the end of the year.

72 Finance

COSWORTH TECHNOLOGY LIMITED The British engine manufacturer responds to the requirements of car manufacturers for special driveline technology. The company has now been part of the Audi Group for more than two years. During this period, fundamental operational measures to integrate it have been completed: these include establishing a new management structure, creating and standardising reporting systems, and integrating the accounting system. Even though this Audi subsidiary is in the midst of a phase of consolidation, the activities of the past financial year are indicative of its bright future. The Worcester foundry, one of the most modern in Europe, entered “Phase D” of a comprehensive investment programme at the start of 2001. This phase centres on refining Cosworth’s patented foundry process; the “Technology Development Centre” will then be erected in the concluding phase of the extension work. The Worcester plant is also furthering the cause of industrial environmental protection: the foundry was awarded the environmental certificate ISO 14001 at the start of September 2000. The Manufacturing Division at Wellingborough has specialised in manufacturing small-series engines. It produces mechanically processed cylinder heads and engine blocks, as well as high-performance engines. Highly qualified engineers and designers at the company’s Northampton headquarters produce complete driveline concepts, from initial drafts of the engine to its application and testing. At the end of the period under review, COSWORTH TECHNOLOGY LIMITED had 764 (711) employees. Audi’s British subsidiary manufactured 4,576 (1,179) complete engines, as well as engine components, and generated total sales revenues of DM 219 (134) million.

quattro GmbH The customer buying a car in this day and age on the one hand benefits from the rationalisation of volume production, but on the other hand increasingly wants a car that is “one of a kind”. Audi is able to fulfil most requests with its diverse range of equipment specifications. Any wishes that remain unfulfilled are the domain of quattro GmbH, a fully owned subsidiary of AUDI AG which specialises, among other things, in the customisation of Audi models. With its wide range of exclusive options, quattro GmbH satisfies even the most eclectic of preferences. The spotlight last year was on the launch of the Audi RS 4. This manifestly sporty, high-performance vehicle was developed in conjunction with AUDI AG. Thanks to the high level of demand, over 2,500 of this model had been sold by the end of the year. The company’s trading/lifestyle accessories operations were likewise highly successful. quattro GmbH recorded sales revenues totalling DM 130 (38) million last year. On the basis of the existing profit transfer agreement, the company transferred DM 38 million to AUDI AG.

Audi Shares 73

Audi shares Profit transfer and compensatory payment for shareholders Around 99 percent of the share capital of AUDI AG is held by VOLKSWAGEN AG. A control and profit transfer agreement exists between VOLKSWAGEN AG and AUDI AG: this agreement lays down the level of compensatory payment to be made to those with small shareholdings in Audi. These shareholders will receive an amount equivalent to the dividend paid out for the same financial year on one Volkswagen individual share certificate. The Annual General Meeting of VOLKSWAGEN AG to be held on June 7, 2001 will determine the dividend payable for the 2000 financial year.

The CDAX Automobile, a sector index for leading German automotive manufacturers and suppliers whose shares are quoted on the stock market, started the year on 416.38 points and closed at 339.56, a drop of around 18 percent. Audi shares proved largely resistant to this trend, their price falling by only 7 percent.

Audi share price trend 2000 was a turbulent year for the German stock market. The German Share Index (DAX) started the year on 6,750.76 points and closed at 6,433.61. Audi shares likewise experienced a roller-coaster ride during the course of the year. They peaked on November 27 at EUR 75.53. The price at the end of the year was EUR 58.99, compared with EUR 63.50 at the start of 2000.

Ratios per Audi share 1 Compensatory payment 2 Compensatory payment and tax credit 2 Result acc. to DVFA /SG 4 Cash flow Shareholders’ equity

1996

1997

1998

1999

2000

0.46 0.66 9.37 34.80 46.14

0.61 0.87 15.40 46.38 50.44

0.77 1.10 19.18 5 55.19 56.00

0.77 1.10 21.89 5 52.89 65.55

1.00 3 1.43 3 20.16 5 66.89 81.37

1996

1997

1998

1999

2000

EUR EUR

50,36 24,54

102,21 48,11

103,08 60,59

85,00 56,50

75,53 48,50

EUR

48,57

70,05

74,14

61,00

58,99

EUR EUR DM DM DM

Market prices of the Audi share 1/2 Highest Lowest Quoted price at year end (Frankfurt Stock Exchange) Audi share price trend 2 EUR

120

100

180

1

160

2

Values for 1996 to 1998 converted into euro for information only

3

Based on the proposal regarding the appropriation of net earnings put forward by the Board of Management of VOLKSWAGEN AG

4

German Association for Financial Analysis and Investment Consultancy/ Schmalenbach-Gesellschaft

5

DVFA result according to new method of calculation

140 1996 Highest

1997

1998

1999

Quoted price at year end

2000 Lowest

1996–1998 adjusted at a ratio of 1:10, following introduction of individual share certificates

74 Balance Sheet

Balance sheet for the Audi Group as at December 31, 2000 ASSETS

Note

31 Dec. 2000 DM ’000

31 Dec. 1999 DM ’000

1 2 3

740,402 7,683,903 440,627 8,864,932

155,763 6,653,945 386,104 7,195,812

4 5 6

2,824,139 1,680,816 1,633,159 58,991 6,197,105

1,759,900 1,192,786 1,915,414 1,038,060 5,906,160

15,721

7,661

15,077,758

13,109,633

Note

31 Dec. 2000 DM ’000

31 Dec. 1999 DM ’000

7 8 9

215,298 110,954 3,140,958 3,467,210

215,298 110,954 2,457,934 2,784,186

Special items with an equity portion

10

31,876

34,391

Provisions

11

7,066,892

6,699,125

Liabilities

12

4,504,932

3,591,931

6,848

0

15,077,758

13,109,633

Fixed assets Intangible assets Tangible assets Financial assets

Current assets Inventories Receivables and other assets Other securities Cash on hand, cash in banks

Prepaid and deferred charges

SHAREHOLDERS’ EQUITY AND LIABILITIES Shareholders’ equity Subscribed capital of AUDI AG Capital reserve Revenue reserves

Deferred income

Statement of Earnings 75

Statement of earnings for the Audi Group for the 2000 financial year Note Sales revenues

13

2000 DM ’000 39,024,003

Manufacturing costs of products and services generating sales revenues

14

35,241,142

26,319,325

3,782,861

3,304,367

16 17 18 19

2,268,532 329,316 1,170,886 653,499 + 147,548 + 7,839

1,715,665 281,335 780,536 529,559 + 68,543 + 20,566

20

1,561

7,143

1,856,226

1,640,310

Gross profit Selling and distribution expenses General administration expenses Other operating income Other operating expenses Participations result Interest result Write-downs of financial assets and of securities classified as current assets

15

Results from ordinary business activities

1999 DM ’000 29,623,692

Extraordinary result Taxes on earnings and income of which charged by VOLKSWAGEN AG DM 648,779 (1,004,749) thousand Profit transferred as a result of profit transfer agreement

21 22

– 251,100 746,126

– 1,006,310

23

176,000

222,000

Net income for the year

24

683,000

412,000

76 Notes

Notes to the financial statements of the Audi Group for the 2000 financial year Development of fixed assets DM ’000

Gross book values Acquisition or manufacturing cost

Carry-forward for companies consolidated for first time

Additions

Transfers

Disposals

1 Jan. 2000

Intangible assets Concessions, industrial property rights and similar rights and values, as well as licences thereto Goodwill

Tangible assets Land, land rights and buildings, incl. buildings on land owned by others Technical equipment and machinery Other equipment, factory and office equipment Payments on account and construction in progress

Financial assets Holdings in affiliated companies Loans to affiliated companies Holdings in associated companies Participations Loans to companies linked through participation Securities Other loans

Total fixed assets

Acquisition or manufacturing cost 31 Dec. 2000

60,855 153,315

12,764 –

27,190 668,102

2,031 –

4,081 –

98,759 821,417

214,170

12,764

695,292

2,031

4,081

920,176

4,224,923 5,582,583

77,075 –

321,742 498,993

269,733 404,744

8,836 288,317

4,884,637 6,198,003

7,823,060

65,558

1,417,488

256,335

289,072

9,273,369

1,157,929

11,052

857,958

–932,843

4,100

1,089,996

18,788,495

153,685

3,096,181

–2,031

590,325

21,446,005

300,574 12,413 60,186 5,443

– – – –

13,897 14,517 – –

– – – –

– 939 12 –

314,471 25,991 60,174 5,443

56 – 9,003

– 38,681 –

– – 1,318

– – –

17 10,338 2,632

39 28,343 7,689

387,675

38,681

29,732

–

13,938

442,150

19,390,340

205,130

3,821,205

–

608,344

22,808,331

Notes 77

Value adjustments Accumulated depreciation

Book values

Carry-forward for companies consolidated for first time

Depreciation for current year

Transfers

Disposals

Write-ups

1 Jan. 2000

Accumulated depreciation

31 Dec. 2000

31 Dec. 2000

31 Dec. 1999

27,744 30,663

10,296 –

17,513 97,473

– –

3,915 –

– –

51,638 128,136

47,121 693,281

33,111 122,652

58,407

10,296

114,986

–

3,915

–

179,774

740,402

155,763

2,297,381 4,133,452

9,551 –

219,670 761,093

1,005 571

3,506 280,341

– –

2,524,101 4,614,775

2,360,536 1,583,228

1,927,542 1,449,131

5,701,636

41,126

1,155,069

–571

275,432

–

6,621,828

2,651,541

2,121,424

2,081

–

322

–1,005

–

–

1,398

1,088,598

1,155,848

12,134,550

50,677

2,136,154

–

559,279

–

13,762,102

7,683,903

6,653,945

– – – –

– – – –

– – – –

– – – –

– – – –

– – – –

– – – –

314,471 25,991 60,174 5,443

300,574 12,413 60,186 5,443

7 – 1,564

– – –

– – 122

– – –

– – –

3 – 167

4 – 1,519

35 28,343 6,170

49 – 7,439

1,571

–

122

–

–

170

1,523

440,627

386,104

12,194,528

60,973

2,251,262

–

563,194

170

13,943,399

8,864,932

7,195,812

78 Notes

General comments on the consolidated balance sheet and the statement of earnings The consolidated financial statements for the Audi Group have been drawn up in conformity with the requirements of the German Commercial Code and the rules laid down in the German Stock Corporation Act. For the sake of greater clarity and visibility, certain individual items in the balance sheet and statement of earnings have been combined. These items are shown separately in the notes to the financial statements. The statement of earnings has been prepared according to the cost-of-sales method. The accounting, valuation, disclosure and currency translation methods used in 1999 have in essence been retained. Any individual changes compared with the previous year are explained in the notes. Companies included in consolidation Fully consolidated group companies fundamentally include all those companies in which AUDI AG holds a direct or indirect interest of more than 50 percent or which are under central management. In addition to AUDI AG, these are AUDI HUNGARIA MOTOR Kft., COSWORTH TECHNOLOGY LIMITED, four companies of the Lamborghini Group and AUDI DO BRASIL E CIA. In the year under review, Automobili Lamborghini Holding S.p.A. acquired AUTOGERMA S.p.A. The Italian company was fully consolidated into the Audi Group for the first time in the year 2000. As a result of the acquisition and incorporation of AUTOGERMA S.p.A., the scope for comparison between these annual accounts and the accounts for the previous year is limited. Wherever significant changes in the year under review are attributable to the consolidation of AUTOGERMA S.p.A., this is specifically indicated under the items in question. quattro GmbH is included in the consolidated financial statements at equity. On the basis of the control concept pursuant to § 290 Para. 2 of German Commercial Code, Audi Japan K.K. is consolidated by VOLKSWAGEN AG. Five foreign subsidiaries and nine domestic companies have moreover not been included in consolidation. These companies are of only minor significance for the group’s net worth, financial position and earnings situation. Two domestic subsidiaries and one foreign participation upon which AUDI AG exerts a substantial influence are rated as associated companies and are included at acquisition cost in the consolidated financial statements, in view of their marginal value. A list of the Audi Group’s equity holdings is provided in the Notes, on page 90. Principles of consolidation The capital is consolidated according to the purchase method. This means that the acquisition costs are offset against the parent company’s proportionate equity capital at the time of acquisition or first-time consolidation. The assets and liabilities of domestic and foreign companies included in the consolidated financial statements are reported in accordance with the uniform accounting and valuation methods used for the group as a whole. The proportionate equity capital in affiliated companies has been calculated on the basis of the accounting and valuation principles applied at the respective companies. Receivables, liabilities, expenses and earnings between consolidated companies have been eliminated. Intra-group profits have been eliminated from group inventories and fixed assets. Where consolidation has an impact on net income, accruals have been made for accumulated tax payments. Where accruals have been made for tax liabilities in the course of consolidation, these have been offset against the balance of deferred taxes from the individual financial statements; the latter do not appear in the balance sheet, however. Currency translation For the consolidated financial statements, the additions to tangible assets in the individual financial statements of foreign subsidiaries and the amounts carried forward for companies being consolidated for the first time are translated at the average rate for the month of acquisition; depreciation and disposals are shown at the average exchange rates (historical rates) weighted on the basis of the monthly additions. With the exception of loans, financial assets are reported at the exchange rates at the time of acquisition and continued on this historical basis. Loans are translated at the mean of the buying and selling rate on the balance sheet date. Other assets and liabilities are valued at the mean of the buying and selling rate on the balance sheet date. Changes in the currency translation differences resulting from exchange-rate movements during the year in progress are booked to net earnings for the Audi Group.

Notes 79

Average monthly rates are usually applied in the statement of earnings. In a departure from this principle, depreciation of financial assets is performed on a historical basis. The depreciation of tangible assets contained in the manufacturing costs and functional areas is likewise translated at historical rates. The result for the year for foreign subsidiaries is obtained by translation of the amount in local currency at the rate on the balance sheet date, taking account of the effect of currency translation on net income for reporting purposes.

Flow of funds analysis Net earnings before transfer of profits Depreciation less write-ups of fixed assets Change in medium and long-term provisions Other expenses and income not affecting payments Cash flow Loss on disposals Change in inventories and receivables Change in short-term provisions Change in liabilities Change in other items Inflow of funds from current operations Outgoings for capital investments 1 Inpayments from asset disposals Outflow of funds from investment activities Inpayment from capital increase Transfer of profits to VOLKSWAGEN AG Effective change in funds Funds at start of period Funds at end of period 1

31 Dec. 2000 DM ’000 859,000 2,251,092 –231,171 –2,515 2,876,406 +16,476 –1,560,329 +598,938 +913,001 +6,872 2,851,364 –3,965,362 +28,674 –3,936,688 0 –176,000 –1,261,324 2,953,474 1,692,150

31 Dec. 1999 DM ’000 634,000 1,793,944 – 151,281 – 2,276 2,274,387 +15,000 – 755,775 +91,946 +75,354 +414 1,701,326 –2,965,796 +75,391 –2,890,405 298 –222,000 – 1,410,781 4,364,255 2,953,474

Less acquisition costs for financial assets (DM 387 million) in preceding years for subsidiaries fully consolidated for the first time in the 1999 financial year.

The flow of funds analysis reveals the origin and use of the Audi Group’s funds. Cash flow rose to DM 2,876 (2,274) million. The positive effects of the higher result and of higher depreciation were offset by the reduction in medium-term and long-term provisions. The inflow of funds from current business operations rose to DM 2,851 (1,701) million as a result of the level of other internal financing. The outflow of funds from investment activities totalled DM 3,937 (2,890) million. Financial resources fell by a total of DM 1,261 million.

80 Notes

Notes to the balance sheet 1 Intangible assets Concessions, industrial property rights and similar rights and values, as well as licences thereto Goodwill

31 Dec. 2000 DM ’000

31 Dec. 1999 DM ’000

47,121 693,281 740,402

33,111 122,652 155,763

Intangible assets comprise purchased computer software and licences in such rights and values, as well as subsidies to utility companies. One balancing item booked to assets (goodwill) totalling DM 668 million arose from the first-time consolidation of AUTOGERMA S.p.A. during the period under review. Valuation principles Intangible assets are capitalised at acquisition cost, taking into account incidental acquisition costs and acquisition cost reductions, and depreciated pro rata temporis. Goodwill from the first-time inclusion in the consolidated accounts is depreciated over a period of five to ten years, starting in the year of first-time consolidation.

2 Tangible assets Land, land rights and buildings, incl. buildings on land owned by others Technical equipment and machinery Other equipment, factory and office equipment Payments on account and construction in progress

31 Dec. 2000 DM ’000 2,360,536 1,583,228 2,651,541 1,088,598 7,683,903

31 Dec. 1999 DM ’000 1,927,542 1,449,131 2,121,424 1,155,848 6,653,945

Valuation principles Tangible assets are valued at acquisition or manufacturing cost, less depreciation. Acquisition cost comprises purchase price, incidental acquisition costs and acquisition cost reductions. Tangible fixed assets invoiced in foreign currencies are valued through translation at the mean of the buying and selling rate applicable on the date of invoicing. In the case of self-produced assets, in addition to the directly attributable cost of materials and personnel costs, manufacturing cost also comprises the material overheads and production overheads that must be capitalised for tax purposes, including proportionate depreciation. Interest on borrowings is not taken into account. Regular depreciation on tangible assets is charged using either the straight-line method or – to the extent permissible under tax laws – the declining-balance method. A scheduled changeover is made from the declining-balance method to the straight-line method as soon as the latter produces higher levels of depreciation. Depreciation of depreciable assets is dated from their acquisition or completion. The full yearly rate of depreciation was made on movable assets in Germany acquired in the first half of the year, and the half-yearly rate on those acquired in the second half of the year. Our depreciation plan is based for the most part on the following estimates of useful lives: Buildings (excluding plant fixtures) Plant fixtures Production machinery Other equipment, factory and office equipment, including special tools, jigs and fixtures

25 – 30 years 8 – 30 years 5 – 10 years 3 – 10 years

Low-value assets are fully expensed in the year of acquisition. Opportunities for special depreciation for tax purposes are utilised to the full. Differences in comparison with depreciation according to commercial law resulting from increased deductions under § 7 d of the Income Tax Act (environmental protection) as well as from special depreciation under § 82 d of the Income Tax Directive (research and development) and pursuant to § 6 b of the Income Tax Act (transfer of capital gains) are shown under special items with an equity portion.

Notes 81

3 Financial assets

31 Dec. 2000 DM ’000 314,471 25,991 60,174 5,443 35 28,343 6,170 440,627

Holdings in affiliated companies Loans to affiliated companies Holdings in associated companies Participations Loans to companies linked through participation Securities Other loans

31 Dec. 1999 DM ’000 300,574 12,413 60,186 5,443 49 – 7,439 386,104

The increase in the case of affiliated companies relates almost exclusively to AUDI SENNA Ltda. The loans to affiliated companies totalling DM 25,991 thousand represent funds contributed substantially by members of the company’s workforce to the time “bond” scheme. These funds are invested by AUDI AG in VOLKSWAGEN AG special funds. The securities originate from AUTOGERMA S.p.A. Valuation principles Holdings in affiliated and associated companies, where they are not valued using the equity method, and also participations, are shown at acquisition cost or the lower applicable value. Additions to financial assets in foreign currency are translated at the mean of the buying and selling rate on the day of the transaction. Interest-free and low-interest loans are stated in cash value on the basis of an annual interest rate of 7 percent.

4 Inventories

31 Dec. 2000 DM ’000 556,023 563,964 1,704,152 2,824,139

Raw materials and supplies Work in progress Finished goods and merchandise

31 Dec. 2000

31 Dec. 1999

%

%

19.7

Raw materials and supplies

29.3 Finished goods and merchandise

Finished goods and merchandise

60.3

20.0

31 Dec. 1999 DM ’000 515,557 522,085 722,258 1,759,900

Raw materials and supplies

41.0

Work in progress

29.7

Work in progress

AUTOGERMA S.p.A. contributed DM 841 million to the increase in finished goods and merchandise. Valuation principles Raw materials and supplies are stated at updated average acquisition cost or at the lower replacement value. Materials invoiced in foreign currencies are valued on the day of the transaction using regularly adjusted fixed exchange rates. Incidental acquisition costs and acquisition cost reductions are taken into account as appropriate.

82 Notes

In the case of work in progress and finished goods, which are valued at manufacturing cost, direct materials are likewise included on the basis of average acquisition cost. The values given also comprise direct personnel costs, together with other costs which must be capitalised under tax law. Interest payments on borrowings are not included. Company cars are depreciated at a rate permissible under tax regulations on the basis of their anticipated useful life. Merchandise is valued at acquisition cost. Provision has been made for all discernible storage and inventory risks by way of value adjustments. In this, work in progress and finished goods, as well as merchandise, are valued loss-free as soon as the values derived from the sales market are lower than the acquisition or manufacturing costs.

5 Receivables and other assets Trade receivables of which amounts due in more than one year DM 1,031 (289) thousand Receivables from affiliated companies of which trade receivables DM 270,534 (341,950) thousand Receivables from companies linked through participation of which trade receivables DM 91,481 (33,210) thousand Other current assets of which amounts due in more than one year DM 61,555 (600) thousand

31 Dec. 2000 DM ’000 692,746

31 Dec. 1999 DM ’000 388,756

477,936

397,882

101,890

33,210

408,244

372,938

1,680,816

1,192,786

Valuation principles Receivables and other assets are stated at their nominal value or at acquisition cost. Provision is made for discernible one-off risks and general credit risks in the form of appropriate value adjustments. Receivables in foreign currencies are valued at the mean of the buying and selling rate on the balance sheet date.

6 Other securities This item comprises capital-market instruments and shares in special securities funds. Valuation principles Securities are valued at acquisition cost or the lower applicable value on the balance sheet date.

7 Subscribed capital The capital stock totals DM 215,297,766.40 or EUR 110,080,000. It is divided into 43,000,000 bearer shares.

8 Capital reserve The capital reserve consists of premiums on the issue of company shares. As at December 31, 2000, it was unchanged at DM 111 million.

Notes 83

9 Revenue reserves Legal reserve Other revenue reserves

31 Dec. 2000 DM ’000 256 3,140,702 3,140,958

31 Dec. 1999 DM ’000 256 2,457,678 2,457,934

The net income for the year of DM 683 (412) million has been allocated to other revenue reserves.

10 Special items with an equity portion Adjustment to value of fixed assets in accordance with: § 7 d of Income Tax Act (environmental protection) § 82 d of Income Tax Directive (research and development) § 6 b of Income Tax Act (transfer of capital gains)

11 Provisions Provisions for pensions and similar obligations Provisions in respect of taxes Other provisions

31 Dec. 2000 DM ’000

31 Dec. 1999 DM ’000

4,505 6,712 20,659 31,876

5,765 7,217 21,409 34,391

31 Dec. 2000 DM ’000 2,185,977 53,038 4,827,877 7,066,892

31 Dec. 1999 DM ’000 2,031,070 1,872 4,666,183 6,699,125

Other provisions relate for the most part to warranty claims cover, costs arising in connection with the obligation to dispose of scrap cars in conformity with the EU Directive on end-of-life vehicles, selling/distribution expenses and workforce-related costs, as well as legal expenses and product liability risks. Provisions also exist for risks arising on pending transactions and from purchasing and development commitments, as well as for repair backlogs to be cleared in the first three months of the following financial year. In 2000, in a change from the previous year, no use was made of the option to report certain items in the balance sheet pursuant to § 249 Para. 2 of the German Commercial Code. Valuation principles Provisions have been set up according to sound commercial judgement and cover all risks from anticipated claims within this context. Provisions for pensions have been created on the basis of § 6 a of the Income Tax Act using the going-concern value method, applying actuarial principles. The Audi Group applies an interest rate of 5 percent for the purpose of calculating provisions for pensions. Provisions for long-service awards have been discounted at a rate of 5.5 percent, taking into account the rules on valuation for tax purposes and applying actuarial principles. Provisions for product liability claims in North America have been calculated in US dollars and translated using updated average exchange rates, or the higher buying rate on the balance sheet date. Provisions for warranty claims cover have been created on the basis of previous or estimated claims incurred by vehicles sold. Provisions for costs resulting from the obligation to dispose of scrap cars in conformity with the EU Directive on end-of-life vehicles cover the residual risk to the Audi Group, taking account of national variations in salvaging costs, including the anticipated proceeds from the sale of scrap materials.

84 Notes

12 Liabilities

Advance payments received Trade payables Amounts payable to affiliated companies of which trade payables Amounts payable to companies linked through participation of which trade payables Other liabilities of which taxes of which in respect of social insurance

Due in up to 1 year DM ’000 10,219 2,445,015 1,459,430 (770,273)

Due in over 5 years DM ’000 – – 79,900 (–)

257 (257) 425,259 (172,583) (125,853) 4,340,180

– (–) 19,203 (–) (387) 99,103

31 Dec. 2000

31 Dec. 1999

DM ’000 10,219 2,463,633 1,539,330 (770,273)

DM ’000 47,771 2,077,059 1,076,266 (156,553)

257 (257) 491,493 (172,583) (125,853) 4,504,932

364 (364) 390,471 (157,034) (118,535) 3,591,931

Medium-term liabilities amount to DM 65,649 thousand and relate to other liabilities. Valuation principles Liabilities are shown at the amount at which they must be repaid. Liabilities in foreign currencies are valued at the mean of the buying and selling rate on the balance sheet date.

Notes 85

Notes to the statement of earnings 13 Sales revenues

2000 DM ’000 13,235,678 18,381,902 5,488,616 1,917,807 1,500,309 215,159 202,339 25,788,325 39,024,003

Domestic sales Europe (excluding Germany) North America Rest of world of which: Asia/Oceania Africa Latin America Sales outside Germany Total

Share in % 33.9 47.1 14.1 4.9 3.8 0.6 0.5 66.1 100.0

1999 DM ’000 13,621,514 11,128,159 3,757,868 1,116,151 808,599 174,296 133,256 16,002,178 29,623,692

Sales revenues by region, 2000

Sales revenues by segment, 2000

%

%

Rest of world

Other revenues 4.9

North America

Audi A3

11.3 18.3

14.1 33.9

Domestic

47.1

6.2

Other models

VW, Seat, Škoda models Europe (excluding Germany)

Share in % 46.0 37.5 12.7 3.8 2.7 0.6 0.5 54.0 100.0

Audi A6

15.4 23.8

Audi A4

25.0

The increase in sales revenues resulted principally from the first-time inclusion of AUTOGERMA S.p.A., which accounted for DM 6,935 million of total sales; the increase in vehicle sales, coupled with higher average sales revenue per vehicle, likewise boosted sales revenues. Vehicle sales accounted for 89 (88) percent of total sales revenues. The Audi A4 and Audi A6 are the models making the highest contributions to sales revenues. The remaining sales revenues, which accounted for 11 (12) percent of the total, were above all for trade receivables from affiliated companies and miscellaneous sales to third parties.

14 Manufacturing costs of products and services generating sales revenues The manufacturing costs of the products sold include expenses relating to the manufacturing sector and to merchandise. This item also comprises research and development costs, warranty costs and changes in adjustments to the value of inventories. The sharp increase in the manufacturing costs is attributable to the inclusion of DM 6,356 million for AUTOGERMA S.p.A.

15 Selling and distribution expenses Selling and distribution expenses essentially comprise expenses relating to marketing, sales promotion, advertising, public relations and outgoing freight.

86 Notes

16 Other operating income Liquidation of special items with an equity portion Liquidation of provisions Other income

2000 DM ’000 2,515 406,430 761,941 1,170,886

1999 DM ’000 2,274 208,246 570,016 780,536

Other income primarily comprises income from passed-on costs, profits from current accounts held in foreign currencies and income from recourse claims.

17 Other operating expenses The largest item included in other operating expenses is expenses for transactions in foreign currency.

18 Participations result Income from profit transfer agreements Income from participations of which from affiliated companies DM 87,026 (34,983) thousand Expenses for participations in affiliated companies Other income from participations Expenses from the transfer of losses Net income

2000 DM ’000 37,713 109,835

1999 DM ’000 – 45,548

– – – 147,548

3,039 53,070 27,036 68,543

Income from profit transfer agreements relates to quattro GmbH. Income from participations relates above all to profit shares from Volkswagen Transport GmbH & Co. OHG and FAW-Volkswagen Automotive Company Ltd.

19 Interest result Income from long-term loans Other interest and similar income of which from affiliated companies DM 38,060 (17,279) thousand Interest and similar expenses of which to affiliated companies DM 159,030 (108,556) thousand Net income

2000 DM ’000 3,922 209,839

1999 DM ’000 868 141,137

205,922

121,439

7,839

20,566

The interest result contains expenses from the sale of non-interest-bearing receivables (factoring) to the VW Group company Coordination Center Bruxelles. Profits and losses from the sale of securities are likewise shown here. The interest result was influenced by the lower volume of assets invested as a result of the higher level of investment activity.

20 Write-downs of financial assets and of securities classified as current assets Write-downs of financial assets and of securities classified as current assets results from the lower applicable values on the balance sheet date.

21 Extraordinary result In the year under review, the net earnings of the Audi Group were diminished by expenses totalling DM 251 million to cover the financial risk from the obligation to take back scrap vehicles in accordance with the EU Directive on end-of-life vehicles.

Notes 87

22 Taxes on earnings and income Taxes on earnings and income include taxes passed on by VOLKSWAGEN AG on the basis of the single-entity relationship between the two companies for tax purposes, along with taxes owed by AUDI AG and its consolidated subsidiaries. Operating taxes totalling DM 21 (12) million are allocated to manufacturing costs, selling and distribution expenses and general administration expenses; they are not shown under other taxes.

Net earnings for the year Prior to the transfer of profits to VOLKSWAGEN AG and appropriations to other revenue reserves, net earnings for the year came to DM 859 (634) million.

23 Profit transferred as a result of profit transfer agreement Pursuant to the profit transfer agreement with AUDI AG, an amount of DM 176 (222) million was transferred to VOLKSWAGEN AG.

24 Determination of distributable profit Net income for the year Transfer to other revenue reserves Distributable profit

2000 DM ’000 683,000 683,000 –

1999 DM ’000 412,000 412,000 –

The distributable profit was the same for the group and for AUDI AG. Differences arising on consolidation have been offset within the group’s revenue reserves.

Factors influencing net earnings for the year and future tax charges The expenses to be allocated to other financial years total DM 379 (122) million, of which DM 53 (75) million represent aperiodic allocations to provisions. This compares with aperiodic income totalling DM 478 (320) million. The latter amount includes income from the liquidation of provisions totalling DM 406 (208) million. The application of tax regulations has had only a minor impact on the group results for 2000. Future charges relating to taxes on earnings (in certain circumstances passed on by VOLKSWAGEN AG) are expected to correspond to slightly more than one-third of the total amount of the tax concessions claimed, principally the special items with an equity portion.

88 Notes

Segment repor ts The activities of the Audi Group have been divided into the segments AUDI AG, AUDI HUNGARIA MOTOR Kft., COSWORTH TECHNOLOGY LIMITED, the Lamborghini Group, and AUTOGERMA S.p.A. The AUDI AG segment accounts for the bulk of the activities of the Audi Group. The segments AUDI AG and the Lamborghini Group develop, produce, assemble and sell cars and engines. The segment AUDI HUNGARIA MOTOR Kft. relates to the production and assembly of engines and cars. The segment COSWORTH TECHNOLOGY LIMITED develops, builds and assembles engines and vehicle components. The segment AUTOGERMA S.p.A. – a new inclusion in the Audi Group – imports and sells vehicles of the Audi, Seat, Škoda, Volkswagen Commercial Vehicle and Volkswagen Passenger Car brands to dealers in Italy. The individual figures in the segment reports are based on the group-wide accounting and valuation principles, and not on the individual financial statements which were prepared in accordance with the legal requirements in each specific country.

External sales revenues 2000 1999 DM million DM million AUDI AG 28,369 27,942 AUDI HUNGARIA MOTOR Kft. 1,644 1,510 COSWORTH TECHNOLOGY LIMITED 140 81 Lamborghini Group 119 91 AUTOGERMA S.p.A. 8,752 – Miscellaneous, consolidations 0 0 Audi Group 39,024 29,624

Sales to other segments 2000 1999 DM million DM million 3,108 1,209 5,011 4,029 69 27 0 1 0 – –8,188 –5,266 0 0

Earnings before taxes 2000 1999 DM million DM million AUDI AG 974 1,411 AUDI HUNGARIA MOTOR Kft. 505 411 COSWORTH TECHNOLOGY LIMITED –20 –50 –37 Lamborghini Group 73 1 AUTOGERMA S.p.A. 98 – Miscellaneous, consolidations –25 –95 Audi Group 1,605 1,640

Cash flow 1999 DM million 1,735 642 –33 –20 – –50 2,274

2000 DM million 1,777 909 5 84 96 5 2,876

1 Including income from participations for AUTOGERMA S.p.A. amounting to DM 128 million

2000 DM million 31,477 6,655 209 119 8,752 –8,188 39,024

Sales overall 1999 DM million 29,151 5,539 108 92 – –5,266 29,624

Capital investments 2000 1999 DM million DM million 3,667 2,397 498 599 25 51 987 18 8 – –1,220 –99 3,965 2,966

Notes 89

Other par ticulars Cost of materials Raw materials and supplies, purchased goods Purchased services

Personnel costs Wages and salaries Welfare contributions and pension costs of which in respect of pensions DM 238,660 (224,858) thousand

Average workforce Group companies in Germany Group companies outside Germany Total of which apprentices

2000 DM ’000 26,583,247 1,835,217 28,418,464

1999 DM ’000 18,253,953 1,607,990 19,861,943

2000 DM ’000 4,028,308 943,340

1999 DM ’000 3,599,902 880,953

4,971,648

4,480,855

2000

1999

43,118 6,278 49,396 1,441

40,736 5,064 45,800 1,474

Contingent liabilities A contingent liability amounting to DM 7 (8) million existed on December 31, 2000 in respect of the creation of collective charges on real estate to secure non-company liabilities from the long-term rental of a warehouse. Other financial obligations Obligations not shown in the balance sheet and arising from rental and leasing contracts with terms of several years amount to DM 99 (118) million. Of this amount, DM 5 (7) million relate to affiliated companies. Total obligations resulting from rental and leasing agreements with a term of several years are made up as follows: short-term obligations DM 49 (55) million; medium-term obligations DM 44 (54) million, and long-term obligations DM 6 (9) million. Commitments arising from capital investment projects are well within the bounds of standard business practice.

90 Notes

Statement of interests held by the Audi Group at December 31, 2000 Name and registered office of company Capital share, % I. Parent company AUDI AG, Ingolstadt II. Subsidiaries A. Fully consolidated companies: AUDI DO BRASIL E CIA., Curitiba (Brazil) AUDI HUNGARIA MOTOR Kft., Györ (Hungary) Automobili Lamborghini Holding S.p.A., Sant’Agata Bolognese (Italy) Automobili Lamborghini S.p.A., Sant’Agata Bolognese (Italy) Motori Marini Lamborghini S.p.A., Sant’Agata Bolognese (Italy) Lamborghini ArtiMarca S.p.A., Sant’Agata Bolognese (Italy) AUTOGERMA S.p.A., Verona (Italy) COSWORTH TECHNOLOGY LIMITED, Northampton (Great Britain) B. Companies consolidated at equity: quattro GmbH, Neckarsulm C. Companies not included in consolidation: Audi Japan K.K., Tokyo (Japan) Audi Synko GmbH, Ingolstadt Audi Vertriebsbetreuungsgesellschaft mbH, Ingolstadt AUTO UNION GmbH, Ingolstadt Cosworth Technology, Inc., Novi (USA) NSU GmbH, Neckarsulm RACING TECHNOLOGY NORFOLK LIMITED, Norfolk (Great Britain) ZERAL Verwaltung GmbH & Co. Bissendorf KG, Munich Audi Zentrum Hannover GmbH, Hanover 2 AUDI SENNA Ltda., São Paulo (Brazil) Volkswagen Group Singapore Pte. Ltd., (Singapore) 3 Audi Akademie, Gesellschaft für Personal- und Organisationsentwicklung mbH, Ingolstadt Design Center Europe S.L., Sitges (Spain) Fahr- und Sicherheitstraining FuS GmbH, Ingolstadt Volkswagen Transport GmbH & Co. OHG, Wolfsburg III. Associated companies (not consolidated) LGI Logistikzentrum im Güterverkehrszentrum Ingolstadt Betreibergesellschaft mbH, Ingolstadt GIF Gewerbe- und Industriepark Bad Friedrichshall GmbH, Bad Friedrichshall 3 FAW-Volkswagen Automotive Company, Ltd., Changchun (China) 1 2 3

Shareholders’ equity DM ’000

Earnings DM ’000

2,501,310

352,0001

100.00 100.00

174,467 2,466,422

–25,309 622,907

100.00

1,108,792

–8,301

100.00

50,913

–53,966

100.00

684

–3,968

100.00 100.00

4,982 322,164

–382 63,105

100.00

154,455

–26,364

100.00

196

0

100.00 100.00 100.00 100.00 100.00 100.00

80,639 15,020 2,379 991 6,489 435

7,546 156 2,184 271 –3,931 170

100.00 95.00 77.00 51.00 49.00

10,882 48 – 27,407 40,809

1,970 0 – 14,406 138

44.50 33.33 27.45 19.00

911 10,428 115 1,000

148 1,614 1,534 171,792

50.00

650

33

30.00

2,093

–5

10.00

1,587,402

592,538

Before the transfer of profits (DM 176 million) to VOLKSWAGEN AG Information unavailable 1999 financial year

The figures for foreign participations have been translated into DM at the mean of the buying and selling rate on the day of the transaction.

Notes 91

Details of the Board of Management and Supervisory Board The members of the Board of Management and Supervisory Board, together with details of their membership of other supervisory boards and regulatory bodies – pursuant to §§ 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 members of the Board of Management for the 2000 financial year came to DM 12,404 (11,490) thousand. Payments to former members of the Board of Management or their surviving dependants amounted to DM 1,777 (1,860) thousand. Pension commitments to former members of the Board of Management and their surviving dependants are covered by provisions totalling DM 20,321 (22,160) thousand. The remuneration of the Supervisory Board amounted to DM 304 (170) thousand. Ingolstadt, February 8, 2001 The Board of Management

92 Independent Auditors’ Report

Independent auditors’ repor t We have examined the consolidated financial statements and the group management report compiled by AUDI AG for the financial year from January 1 to December 31, 2000. The preparation of the consolidated financial statements and group management report in accordance with the requirements of German commercial law and the supplementary regulations contained in the articles of incorporation is the responsibility of the company’s Board of Management. Our task is to pass judgement on the consolidated financial statements and group management report on the basis of our audit. We have carried out our audit of the annual financial statements in accordance with § 317 of German Commercial Code, observing the principles of proper auditing as laid down by the German Institute of Auditors (IDW). These principles state that an audit shall be planned and conducted such that it is possible to identify with sufficient accuracy any misrepresentations and violations which have a significant impact on the representation of the company’s net worth, financial position and earnings situation in the consolidated financial statements, based on the principles of proper accounting, and in the group management report. The scope of the audit was determined on the basis of knowledge of the business activities and the economic and legal context of the group, as well as the likelihood with which particular errors were to be expected. In the context of the audit, the effectiveness of the internal controlling system and evidence of the details provided in the consolidated financial statements and group management report are examined predominantly through random checks. The audit encompasses an assessment of the annual financial statements of the companies included in the consolidated financial statements, and also of the scope of the reporting entity, the accounting and consolidation principles and key judgements made by the Board of Management; it in addition includes an appraisal of the overall presentation of the consolidated financial statements and group management report. We are of the opinion that our audit constitutes a sufficiently reliable basis. No objections are made on the basis of our audit. We are convinced that the consolidated financial statements present, in compliance with adequate and orderly accounting principles, a true and fair view of the net worth, financial position and earnings situation of the group. The group management report as a whole provides an accurate picture of the group’s position and of its future risks. Hanover, February 8, 2001 PwC Deutsche Revision Aktiengesellschaft Wirtschaftsprüfungsgesellschaft Gadesmann Independent auditor

Treffler Independent auditor

Audi Group in Figures

Audi Group in Figures1 1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

Cars

451,265

492,085

340,956

352,589

446,808

491,501

557,777

619,030

626,059

650,850

Engines

645,485

689,175

494,436

544,538

607,175

620,603

763,928 1,241,351 1,266,896 1,187,666

Cars

448,309

472,685

357,521

376,180

447,855

492,046

546,436

Production 2

Vehicle sales

599,509

634,973

919,621

Germany

Cars

227,525

228,246

163,752

160,803

204,138

217,858

238,735

244,127

257,686

239,708

Outside Germany

Cars

220,784

244,439

193,769

215,377

243,717

274,188

307,701

355,382

377,287

679,913

Sales outside Germany

%

49.2

51.7

54.2

57.3

54.4

55.7

56.3

59.3

59.4

73.9

Market share, Germany

%

5.4

5.7

5.3

5.2

6.2

6.1

6.8

6.5

6.8

6.9

DM million

14,814

16,736

12,554

13,456

16,678

18,807

22,410

Sales revenues

EUR million Cost of materials

DM million

9,639

11,391

8,263

8,718

10,993

12,448

14,802

EUR million Personnel costs

DM million

2,936

3,094

2,875

2,625

3,037

3,253

3,859

EUR million Earnings before taxes

DM million

756

508

–148

187

589

862

1,112

EUR million Net earnings

DM million

370

172

–89

22

111

302

367

EUR million

27,222

29,624

39,024

13,918

15,146

19,953

18,732

19,862

28,418

9,578

10,155

14,530

4,130

4,481

4,972

2,111

2,291

2,542

1,684

1,640

1,605

861

839

821

463

634

859

237

324

439

58.99

Share price (year-end quoted price) 3/4

EUR

22.75

20.45

21.47

23.01

24.54

48.57

70.05

74.14

61.00

Compensatory payment 3/4

EUR

0.56

0.10

0.10

0.15

0.31

0.46

0.61

0.77

0.77

Average

38,205

37,738

34,363

32,215

32,823

34,529

37,761

41,011

45,800

49,396

DM

76,841

81,996

83,676

81,480

92,533

94,219

102,194

100,695

97,835

100,649

51,485

50,022

51,461

3,733

3,677

2,771

2,863

3,680

4,219

5,097

5,943

6,254

6,804

3,039

3,198

3,479

Employees Personnel costs per employee

EUR Added value

DM million EUR million

Capital investments

DM million

1,097

947

784

1,505

865

1,445

1,967

EUR million Depreciation

DM million

DM million

DM million

DM million

DM million

DM million

DM million

1,151

889

1,087

1,731 885

945

1,233

1,245

948

1,220

1,774

1,496

1,994

2,373

2,274

2,876

1,213

1,163

1,471

2,899

2,872

2,814

3,589

3,351

3,869

4,717

6,114

7,196

8,865

3,126

3,679

4,532

5,914

6,213

2,491

2,922

3,260

3,496

5,011

5,699

6,223

6,569 3,359

3,024

3,177

5,390

5,794

6,074

7,085

8,362

9,568

10,940

12,683

13,110

15,078

6,485

6,703

7,709

1,554

1,623

1,521

1,780

1,812

1,984

2,169

2,408

2,819

3,499

1,231

1,441

1,789

10,275

10,291

11,579

5,254

5,262

5,920

EUR million Liabilities

2,251

1,035

EUR million Shareholders’ equity

2,027

1,847

914

EUR million Balance sheet total

3,965

823

EUR million Current assets

2,966 1,516

960

EUR million

Fixed assets

3,168 1,620

765

EUR million Cash flow 6

1.00 5

3,836

4,171

4,553

5,305

6,550

EUR million

1

AUDI AG until 1993

2

Incl. Porsche 924/944 (1991), 1993 excl. 4, 1994 excl. 2,021 and 1995 excl. 875 Avant RS2

3

Figures for 1991–1998 converted into euro for information only

4

Figures for 1991–1998 adjusted at ratio of 1:10 following introduction of individual share certificates

5

According to VOLKSWAGEN AG proposal regarding the appropriation of net earnings

6

Modified cash-flow statement as from 1993

7,584

8,771

Index

Index A A2 4, 12, 29, 48, 49, 57, 58, 65, 66 A3 13, 50, 51, 57, 58, 66 A4 4, 10, 46, 47, 48, 50, 57, 58, 59, 65, 66 A6 14, 49, 50, 51, 52, 57, 66 A8 4, 15, 57, 66 A8 long-wheelbase version 15, 49, 50, 58, 65 aaa 2000, Berlin 10, 46 ADAC crash test 12 Added value 67 All-aluminium body 12, 15 All-aluminium construction technique 29 allroad quattro 21, 29, 30, 46, 48, 49, 50, 57, 58, 66 “Aluminium/Bodyshell” centre of excellence 29 Aluminium engine casting method 25, 60 American Le Mans Series 31 Apprentices 35 Audi Forum Ingolstadt inside front cover, 7, 41 f., 59 Audi Group structure 70 AUDI HUNGARIA MOTOR Kft. 58, 60, 70 Audi Quality Award 32 Audi R8 sports racing cars 31 AUDI SENNA Ltda., São Paulo 51 Audi shares 73 Audi Space Frame ASF 12 Audi telematics 10 August Horch Museum, Zwickau 59 AUTOGERMA S.p.A. 4, 48, 52, 57 ff., 60, 66, 68, 70 f.

L Lamborghini Lamborghini Diablo 6.0 Le Mans Learning stations Lightweight design Liquidity

52, 60, 70 f. 23, 52, 57, 60 31, 49 35 4, 12 68

M Manufacturing costs Marketing Markets Motor sport Motor Vehicles Block Exemption Regulation multitronic transmission museum mobile

66 46 f. 48 ff. 31 62 10, 14 36, 41, 42, 59

B Balance sheet Balance sheet structure Board of Management

Q Qualification structure quattro quattro GmbH

34 f. 10, 15, 16, 18, 20, 21, 30, 42, 49, 57 20, 24, 41, 57, 61, 72

R Recycling Result acc. to DVFA/SG Risk management RS 4

36, 63 67 62 20, 24, 25, 48, 57, 58, 61, 65, 72

74 68 f. 4 f.

C Cabriolet Capital investments Cash flow Compensatory payment Consolidated companies Continuously variable automatic transmission Cost of materials COSWORTH TECHNOLOGY LIMITED Cultural sponsorship D Design study Dividend E Earnings e-business Eco-Audit and Management Scheme Economic developments Eight-cylinder turbodiesel engines Electronic Stability Program ESP Employees Engine production Environmental protection ESP/shaker rig EU Directive on end-of-life vehicles Euro, company switch to European Aluminium Award F Flow of funds analysis Fully galvanised body G Geneva Motor Show German industry’s award for innovation Glyndebourne Festival I Internal financing

57 4, 59, 65 59, 69, 73 57, 73 60 f., 70 ff. see multitronic 66 25, 58, 59, 61, 72 49, 51, 53

29, 46, 50, 58 see compensatory payment

57, 66 f. 32 36 56, 65 4, 60 10, 13, 16, 58 33 ff., 58 f. 57 f., 60, 70, 72 36 29 57, 63, 66 60 29

79 14

46, 58 12, 29 53

69

N Navigation system Plus New models in 2001 New toolshop P Paris Motor Show Personnel costs Production output Pump-injector system Purchasing volume

S S models Sailing Sales revenues Salzburg Festival Selling and distribution costs Service Space Floor Concept Sports sponsorship Statement of earnings Statement of interests Steppenwolf Summer Concerts Supervisory Board Suppliers’ award T TDI TT Coupé/TT Roadster Twelve-cylinder front engine V V6 2.7 litre biturbo engine V6 3.0 litre engine V8 TDI engine V12 6.0 litre engine Vehicle safety Vehicle sales Vocational training concept Volume-production aluminium car W W configuration

10 65 29, 59

29, 50, 58 35, 66 57 f., 60, 70, 72 24, 60 59

18 53 4, 57, 66 53 66 47 12 53 75 90 29, 46, 50, 58 53 6 f. 32

10, 12, 13, 15, 21, 24, 42, 57, 65 16, 17, 49, 57, 58, 60, 66 15, 58, 65

18, 20, 21, 25 10, 25 15, 60 23 10, 12, 13 4, 48 ff., 58, 60, 61, 65, 71, 72 35 4, 12, 58

15, 58, 65

Important Dates in 2001

Impor tant dates in 2001 Annual Press Conference

March 20, 2001

Kempinski Hotel, Munich Airport

Annual General Meeting

June 28, 2001

Stadttheater Ingolstadt

Interim Report

August 2001

AUDI AG Finance Analysis and Publications I/FF-12 85045 Ingolstadt Germany Telephone +49 (0)8 41 89-4 03 00 Telefax +49 (0)8 41 89-3 09 00 www.audi.com