Employees work at an Audi Q5 2.0 production line of the German car manufacturer’s plant during a media tour in San Jose Chilapa, Mexico, in April. Photo credit: REUTERS
FRANKFURT — Making Audis in the U.S. could help Volkswagen Group protect almost $800 million in profit that its luxury-car unit reaps from the world’s second-biggest automotive market.
Audi generated 5.06 billion euros ($5.7 billion) of global operating income last year, excluding items, making it the biggest single contributor to Volkswagen’s overall profit. About 700 million euros of the brand’s earnings before interest and taxes, or 15 percent of its total, comes from the U.S., estimates Michael Dean, an analyst with Bloomberg Intelligence.
The sum would be essentially wiped out if President Donald Trump followed through with a threat to impose a 25 percent duty on automotive imports from the European Union, BI estimates. VW Chief Executive Officer Herbert Diess and other German car executives met with President Donald Trump on Tuesday in a bid to prevent the move.
Diess floated a number of options to increase U.S. output, including building a new plant or locating some production in Ford Motor Co. factories. Volkswagen is in advanced negotiations to expand the work at its plant in Chattanooga, Tenn., which still has extra capacity, but there are other options as well, Diess said.
“We need additional capacity here in the United States,” Diess said Tuesday. “We need an additional car plant for Volkswagen and Audi combined.”
Narrowing the gap
For Audi, a U.S. factory would help narrow the gap with Daimler AG’s Mercedes-Benz unit and BMW AG in terms of global reach. Audi has been the market leader in China for years, but a spat with dealers hurt deliveries last year. In Europe, the manufacturer is struggling to draw a line under the 3-year-old diesel-emissions scandal.
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