Audi 2008 Annual Report Download - page 184

165
Management Report
128 Business and underlying
situation
157 Financial performance
159 Net worth
160 Financial position
160 Report on post-balance sheet
date events
161 Risk report
161 The risk management system
within the Audi Group
161 Economic risks
162 Industry risks
163 Risks from operating
activities
163 Legal risks
164 Personnel risks
164 Information and IT risks
164 Financial risks
165 Overall assessment of the
risk position
165 Report on expected
developments
165 Anticipated development of
the economic environment
166 Anticipated development of
the Audi Group
169 Disclaimer
As a company with global operations, foreign exchange risks, relating in particular to the
U.S. dollar, the pound sterling and the Japanese yen are of particular relevance.
Detailed information on the hedging policy and risk management in the area of financial risks,
in particular relating to the use of derivative financial instruments in hedging transactions, is
presented in the Notes in “Additional disclosures” under Section 34 “Management of financial
risks.”
OVERALL ASSESSMENT OF THE RISK POSITION
The currently unforeseeable consequences of the international financial and economic crisis on
the further development of global auto markets represent a considerable risk to all businesses
in the automotive industry.
However, on the basis of all known circumstances and facts, no risks currently exist that could
significantly and lastingly undermine the net worth, financial performance and financial posi-
tion of the Audi Group, let alone endanger the Company’s survival in the foreseeable future.
REPORT ON EXPECTED DEVELOPMENTS
ANTICIPATED DEVELOPMENT OF THE ECONOMIC ENVIRONMENT
General economic situation
With the financial crisis having spilled over into the real economy in the second half of 2008,
the global economy is experiencing an unexpectedly sharp downturn that had spread to all
regions by the end of last year. In view of the lingering uncertainty, it is very difficult to deliver
a reliable assessment of the prospects for the global economy for 2009 and indeed 2010.
General predictions on the intensity and duration of the global downswing show a considerable
margin of fluctuation.
The Audi Group’s assessment of the general economic situation is that the financial crisis and
global recession will have serious repercussions in 2009, dampening both investment and con-
sumption worldwide. The financial development of businesses around the world will suffer,
which will likely have negative consequences on the job market.
Due to the global economic downturn and falling energy and raw materials prices, inflation will
remain low in 2009. Fiscal and monetary policy worldwide will probably remain strongly expan-
sionary.
The assessment of the Audi Group is that the global economy will contract in 2009 due to fall-
ing economic output in industrialized nations. A marked drop in growth rates is equally expected
in developing and emerging markets. In view of the measures taken by governments and central
banks to stabilize the financial sector and bolster economic activity, the Audi Group assumes
that there is no risk of the global economy descending into a more protracted period of de-
pression. Therefore, the Company expects the global economy to experience a mild recovery
in 2010.
In the United States, 2009 will be dominated by a continuing recession, which the new U.S.
government and the Federal Reserve have probably cushioned at least to some degree thanks
to their swift action.
The economy of Western Europe will experience a phase of recession in 2009, with gross do-
mestic product falling in all major national economies. The Audi Group equally expects the
gross domestic product in Germany to slide. The level of export trade, particularly for capital
goods and automobiles, will retreat noticeably. Consumer spending is not likely to bolster the
economy to any significant degree. Although falling inflation and the German government’s
economic recovery programs will noticeably relieve the burden on households, any benefits are
likely to be offset by the expected rise in unemployment and the resulting losses of income.