Piech to sack new Audi chief: Recriminations fly as sales plummet and losses mount at upmarket VW subsidiary

FRANZ-JOSEF KORTUM, chief executive of Volkswagen's upmarket subsidiary, Audi, is to be fired today after only 13 months in the job.

At an extraordinary meeting of Audi's supervisory board, Mr Kortum is to take the blame for plunging sales and losses last year, which company sources say will be clearly above the previously indicated DM200m (pounds 78m).

Ferdinand Piech, chief executive of Volkswagen group, had apparently already decided over the Christmas break that Mr Kortum had to go because he had not sold enough cars. Herbert Demel, Audi's head of development, is to move up.

The firing of the second subsidiary chief executive in four months thrusts the spotlight back on to the unhappy situation at Volkswagen, as Mr Piech, despite repeated talk of an imminent turnaround, struggles to staunch the haemorrhaging losses at Europe's biggest car maker.

In September last year, Juan Antonio Diaz Alvarez, the head of VW's Spanish subsidiary, Seat, was fired after unexpected losses of DM1.4bn were discovered.

Talk inside Audi of losses for 1993 being larger than the DM200m recently hinted at cast renewed doubt on the already massive DM2.3bn net loss that Mr Piech said he expected the group to show for last year.

Mr Piech himself was the head of Audi until the end of 1992, when he was promoted to head the VW group. He personally chose Mr Kortum, a marketing specialist, to succeed him.

Mr Piech left Audi calling the upmarket unit a model of successful restructuring, with efficient production and attractive cars. He publicly stated he expected Audi under Mr Kortum to return a profit in 1993.

Instead, as Germany's car market collapsed, Audi's sales crashed by 24 per cent, with turnover falling from DM16.7bn in 1992 to DM12.5bn in 1993.

Most dramatic of all was the plunge of 31 per cent in Audi's production as the company tried to deal with dramatic overstocking. Relations became strained as Mr Kortum openly blamed his predecessor and boss, Mr Piech, for having mismanaged Audi.

While other car makers began cutting production in late 1992, Mr Piech had continued overtime shifts. Mr Kortum said he took over with 100,000 excess cars.

Having made some headway in reducing domestic stocks, Audi had to begin reimporting large numbers of unsold cars later in 1993, notably from dealers in Italy.

These models, mostly without airbag and anti-lock braking, had become almost impossible to shift in the increasingly competitive quality market.

Mr Kortum also blamed previous management for having failed to strengthen Audi's distribution network, mainly by separating it from the more downmarket VW showrooms. 'Clear omissions from the past have to be made good,' he had said in November. Many analysts said Mr Kortum had been made a scapegoat after such a short time.

'The responsibility clearly lies with Mr Piech,' said Hans- Joachim Pilz of MM Warburg.

Volkswagen's share price closed yesterday at DM450, undented by this latest turn in the VW saga.

(Photograph omitted)