Frankfurt, September 12th, 2014 – Frankfurt School was fortunate to welcome Axel Strotbek, CFO of Audi as guest speaker on September 9th. As Prof. Dr. Udo Steffens, President of the Frankfurt School, pointed out this was a very special occasion because Mr. Strotbek is more often in Karlsruhe or even Linköping in Sweden where he studied, as in Frankfurt. So this evening promised to be a once in a lifetime opportunity that many students wouldn’t want to miss: The Audimax, big enough to hold over 200 People, quickly filled up until extra chairs from next door classrooms had to be brought. In his Presentation, Mr. Strotbek covered two current topics for Audi right now. On the one handside he talked about the internationalization of a global car manufacturer and on the other, he addressed some general challenges that eventually have an impact on the way, we will be driving cars in the future. Both challenges are part of the Audi Strategy 2020. In a nutshell, the aims are:
- Selling 2 Mio. Cars a year
- Becoming leader in innovation
- Investing 22 Bio in Products, technology, and innovation
- Lift the operative yield on turnover to 8 – 10%
- Reduce Audis’ fleet CO2 emissions to 95g/km
Audi abroad: from Ingolstadt (Germany) into the World
In 2004, Germany was the most important market for Audi selling about 235k cars per year which didn’t change to much until 2013. The Emerging markets seemed way more attractice with China being the only player in the BRICS-Countries providing a solid growth: Audi having sold just 53k cars in 2004, the turnover jumped significantly with the extraordinary growth of China to 591k cars sold in 2013. The next very interesting market with attractive growth potential is North America. Expanding to new markets brought several challenges to Audi. Among them are Cultural differences and the supply chain. In order to produce cost efficiently it makes sense to built cars on the spot. But therefore, the suppliers in or close the new markets must deliver the different parts in a steady and very high quality. An alternative would be, to continue producing the expensive parts in Europe and sending them to the factories in China which eventually causes additional shipping costs. So close inspections of potential suppliers versus a 100% waterproof calculation are essential steps when going international. Another challenge is the culture. Especially in China, as Mr. Strotbek pointed out, the language, mentality, and attitude towards cars were not as in Europe since a couple of years ago, only two people out of one thousand had a car. For the next expansion plan, Audi is prepared. As part of the aimed growth in North America a factory in Mexico producing the Q5-offroader for all markets will start operating in 2016. When building the new factory, local experts such as lawyers and bankers must be consulted. Furthermore, Audi seeks to hire locals for management positions since a great deal of the staff consists of locals as well. But what is the benefit of such huge and complex internationalization projects? Mr. Strotbek made his point clear: when markets in Europe are lacking in growth (e.g. because of economic crisis, recession), other markets can still provide a solid turnover helping the company to overcome an economic crisis faster and with a better financial situation.
More fuel efficiency without taking away the fun
A well filled account with a solid financial basis seems to be more and more important looking at the challenges car manufacturers are busy with in the next years. Highest priority of all is the reduction of CO2 emission. As example, the current Hummer H3 Adventure version with V8-engine exhausts nearly half a kilo carbon dioxide – 412g to be exact – per kilometer (1km = 0.62 US-miles). The tiny smart, build by Mercedes Benz and not even called “car” by some people exhausts merely 90g per kilometer, running with only 45 horsepowers. As part of the Strategy 2020, Audi wants to maintain a 3% improvement rate and targets its fleet CO2 emissions to 95g per km by the year 2020. The role of a CFO takes a significant role here since the finance department can have a huge impact on efficiency projects. The Focus is also on alternative engines. But cars that solely run on batteries as the newly released BMW i3 are no option for Audi at the Moment. As Mr. Strotbek says, the technology is not in an attractive state of development. Only if its possible to produce a big amount of batteries and other electric car related parts to benefit from an efficient cost calculation and offer them for competitive prices, Audi might think in producing electric cars. But at the moment Strotbek sees electric cars more as a short-term success. Right now, a mixture of gas and battery is enough. Smaller distances to work/university can be covered by battery while for longer distances the gas engine turns on additionally.
The Smartphone on Wheels
A second interesting development is networks and digital technologies becoming more and more integrated in cars. The digital megatrend changes cars and our mobility behavior: integrated apps and social media communication will facilitate communication and give more information such as temperature in the car/of the battery, free parking lots, information about traffic jams and how to avoid them in the easiest or fastest way. For Audi, cars will become more and more connected to each other and their environment gathering and providing a huge amount of information at the same time and making it safer to drive eventually.
A glimpse even further into the Future
A new, upcoming business model is Audi select: Audi is working on a model, where people drive different cars which are delivered to their house for a certain monthly, bearable rate but not necessarily owned by them. It seems like a flatrate car rental service by Audi with the benefit of getting the cars delivered. As one of the realistic future technologies, Strotbek sees the self driving car. Audi has already done several successful tests in different types of areas. There are of course legal and safety issues that need to be solved. But this evening, it seemed that the phantastic imagination of a self driving car where the driver can relax during his journey, read a book, or play with the children seemed a little more realistic than ever thought. At this moment, even Google as competitor isn’t a real topic for Audi since no one really knows what the Internet-Giant is really doing. But one will never underestimate the capabilities and financial resources of the search-engine provider.
What Mr. Strotbek presented at Frankfurt School this week was definitely very interesting and as first semester student Master of Finance you wouldn’t want to miss seeing the CFO of one of the most prestigious car manufacturers of Germany. Sadly, Mr. Strotbek could’t go too much into detail, which might have been because of his limited time and the very official format of the evening with even the local press being there. For the CFO-Evening – my fellow students and I mentally already signed up for it – it would be great if there was more and detailed insight in the day to day business of a CFO and the small but exhausting challenges, a young professional in finance or management will face entering an international company.