WHEN AUDI management board members gathered at the company's design studio in Sitges, Spain, last week, they basked in sunshine and the glow of a great year.
Spirits ran so high at the board meeting that they agreed to spend DM30 million ($16.9 million) on a new Audi history museum at the company's Ingolstadt headquarters.
Recent history has been good. Audi is finishing up four straight years of growth.
The company is finding new customers everywhere. Audi will sell 30,000 more units this year than its worldwide sales goal of 500,000.
Sales in western Europe grew more than 13 percent to 397,559 through October in an overall market that rose 3.7 percent.
In the USA, sales were up 23 percent to 26,876 through October.
'We're right on schedule,' said chief executive Franz-Josef Paefgen.
Audi has been steadily expanding the range since the early 1980s, when it had only two models.
Late next year, it will launch the TT Coupe and Roadster. Last month it announced plans to build a small, aluminum-bodied car based closely on the AL2 concept car shown at the Frankfurt auto show in September.
'We will broaden our model range to cover segments we have not covered before,' said Paefgen, who became chief executive in May after heading product development.
The turning point was 1993, when Volkswagen returned control of Audi marketing to the subsidiary.
'Before then, Audi simply developed and built cars, but VW distributed them,' said spokesman Juergen De Graeve. 'There was a great distance between us and our customers. We didn't know what they wanted and expected from us.'
Paefgen said the foundations for growth were laid in the late 1980s.
'We prepared the new models that would appear on the streets in the 1990s,' he said.
The first was the sleek A4 that replaced the Audi 80 in 1994. 'The A4 has been the key to growth,' said Peter Schmitt of Automotive Industry Data in the UK.
Sales of Audi's biggest volume car hit 261,098 in 1995 and rose to 275,000 last year. They've fallen off in 1997 because of competition from the new Volkswagen Passat and the A3 introduced in 1996.
Audi has been overwhelmed by the success of the A3, which shares a platform with the VW Golf. The A3 moved the company into a new, smaller market class.
Over 100,000 were sold through October, about 25 percent more than Audi expected. Last summer, Audi added longer second shifts, night shifts and Saturday shifts in Ingolstadt. The customer wait period was cut from seven months to three.
The A3 has attracted younger customers to the brand. The traditional Audi owner is 50 years old, but the average A3 buyer is 40.
The TT models and the AL2 will extend Audi's reach even more.
Audi will build 50,000 AL2s a year at its Neckarsulm plant, starting in 1999. It will use aluminum spaceframe technology pioneered on the A8.
About 30,000 TTs will be built annually, with a base price of around DM50,000.
'The TT is not meant to be a volume model,' said de Graeve, 'but it will help lift Audi's image to where we want it to be. The aim is to show that Audi is not just sensible, it is also emotional and fun. This positive image will affect all our models.'
To help with the image turnaround, Audi hired Hamburg-based advertising agency Jung von Matt in 1994. The agency specializes in repositioning brands and is known for its unconventional solutions.
The agency's best known campaign is a TV spot in which an Audi-driven German ambassador beats his counterparts to an event in a remote location.
'The goal has been to get away from the old Audi image of being reasonable and practical,' said de Graeve. 'We will keep this as a core message, but will add others that appeal to other people.'
Schmitt said Audi must be cautious. 'They cannot close the price gap with Daimler and BMW too quickly,' he said. 'But so far everything Audi has done is right.'