Audi saves VW's year, sees 2010 improvement

German luxury carmaker Audi contributed the bulk of Volkswagen's cash and earnings in 2009 and forecast better results this year as it launches a dozen new models, including the A1 subcompact.

Although BMW has yet to publish its accounts, it is almost certain that Audi surpassed its Bavarian rival, Daimler's Mercedes-Benz and even future sibling Porsche as the most profitable premium carmaker in the world -- underlining its importance to parent VW.

"Times have changed. We are no longer the hunter, we are the hunted," Chief Executive Rupert Stadler told its annual earnings press conference, referring to his reaffirmation of Audi's goal to be the number one luxury carmaker in the world in the next five years.

With China overtaking the U.S. market as the world's largest last year, Audi was in a good position to profit at the expense of its other rivals that rely far more on demand from overstretched car buyers in California and Florida.

While Audi is tempering estimates for its own U.S. sales in 2015 -- preferring not to push volume at any cost into a fatigued market -- it expects to double sales in China to over 200,000 vehicles this year versus 2007.

"China could become our most important market (in terms of vehicle sales) this year already, even before Germany," said Peter Schwarzenbauer, head of sales at Audi.

Volkswagen wants to topple Toyota from the industry throne before the decade is out and, thanks to Audi, it has most of the funds needed to finance a massive acquisition spree that included buying half of Porsche in December.

VW's entire warchest of 10.6 billion euros ($14.42 billion) at the end of 2009 would have effectively been zero were it not for Audi, whose constant stream of cash bolsters debt ratings at its larger parent and lowers financing costs as companies increasingly compete with governments for investor capital.

Despite a severe slump in car markets that particularly hurt premium carmakers last year, Audi slimmed down its inventories to help boost net cash flow by 21 percent to 2.32 billion euros.

Although operating profit slumped by 42 percent last year, income from interest on its huge cash pile as well as financial currency hedges lifted its earnings to 1.93 billion euros before tax -- exceeding even that of parent VW by nearly 670 million.