Styling is eye-catching, quality has improved significantly, and Audi is moving into new segments. That should be a formula for success.

And it could be, said Joel Weinberger, head of Audi's dealer council. But he said Audi must improve its image, and Germany has to loosen the advertising purse strings.

Weinberger said image is "not something you build overnight."

He said dealers are frustrated because Audi has the youngest buyers in the luxury segment and improved cars, but the brand is not on enough shopping lists. Audi's new marketing campaigns are a step in the right direction, said Weinberger, who spoke with Staff Reporter Diana T. Kurylko.

What are the dealer council's top concerns? How is the factory responding to those concerns?

One of our concerns is how brand growth will affect facilities. We have a lot of dealers making future facility decisions hoping everything we hear about projected sales increases and new products coming to the market will be true.

I invested in an exclusive facility in 2000, and we have to consider taking action because our facility is seven years old.

Every manufacturer is projecting large increases over the next seven years, and we know some are liars. As a businessman you have to be cautious.

Do Audi dealers have the right product mix and overall marketing strategy to be successful?

We have a great product mix that will only get better. There are a few segments that we are not in, but we will be there — particularly the compact SUV segment that the Q5 will be in. That car rounds us out nicely.

In 2007, Audi embarked on a new marketing strategy with a new advertising firm and a new tag line. It takes time for those things to solidify and become synonymous with the brand. And it takes a lot of dollars to repeat that message.

Audi plans to spend more money, especially on television. We were absent from TV for a long time and Audi plans to be on television during the Super Bowl. They have great aspirations, so there is more money going toward the marketing.

What is better about the marketing message?

It is a little bit more hard-hitting. We have always believed we have the best product that no one knows about. We have a lot of competitive advantages that no one has been able to exploit. We believe there is a lot of stuff that goes into our cars that we do not get credit for because we do not talk about it.

Is quality where it needs to be?

We are leaps and bounds better than we were three to four years ago.

What does Audi need to do to help you sell more vehicles?

They always need to survey the landscape and to make sure that we are competitive. Every car out there is a pretty car. Affordability is always a factor. We need to be in the ballpark with the lease payments — we can't be $50 to $100 more a month. We need them to be competitive with marketing incentives and Audi needs to have more of a presence than they have had in the past. If they could keep the days supply in the sweet range, that's enough cars to sell but a level that helps dealers maintain their front-end gross profit.

Does Audi have the right number of dealers?

Audi has a lot of legacy dealers from the old days. I do not know if they have the right number. Acura sells 200,000 cars and has the same number of dealers but on the throughput, Audi is way off.

In the metro areas we have the right number of dealers. But there are many Audi dealers in very rural areas. The margin structure was aimed at the dealers that can really move the number for Audi.

How will changes to the Audi dealer margin affect dealers? How many dealers won't make more money?

We hope it will be positive for everybody but I do not know if that is being realistic. It is a very complex system and the proof will be looking after the second or third quarter. I believe about 40 percent of the dealers will be better off, 40 percent will stay the same and 20 percent will not do as well. The dealers have the power to alter that for the most part if they engage themselves in the brand. It is a pay for performance margin structure and you don't know what your cost structure will be but if you jump through the hoop, it could go up.

Was the performance margin necessary?

Audi needed to change it but this is way more complex a change than even we had envisioned. It will make the brand more attractive. They have some dealers in metro areas who need to do a better job.

Does Audi have an image problem in the United States?

Yes we do. I believe image is not something you build overnight. We have had our share of setbacks in the past. It is a long-term process. From a styling standpoint, we are moving the needle. We need to have more confidence in our quality and to get into more segments — which we are doing. The Q7 was a significant step and then we'll get the next Q5.

Image is a Catch-22. Lexus is a great brand but its average buyers are well into their 50s and it is concerned it will be the next Buick or Cadillac. Audi has the youngest buyers but people still do not always put us on their shopping list. It will change in time and via word-of-mouth. The best way is to make customers who drive our cars become advocates for the brand.

What does Audi need to do to the A6 to make it more competitive?

The A6 tends to be in that segment that is very high in lease numbers. Right now we have $549 for 36 months with $2,999 down. On a $50,000 car, that is pretty good in its market segment. A competitive lease rate was one of the things I brought up many times last year. The A6 was the "world car" in Germany and sells on parity with Mercedes-Benz and BMW models. So why are we backing away? Because of the euro exchange problem, there is not enough money available to properly market that car. We have been involved in meetings about repackaging the A6. It will be better packaged at the end of 2008 so there will be less complexity. Having a new body will be even better.

Sales of the A6 tapered off a bit, but we will sell more in 2008 and 2009 before the redesign.

Is the new A4 coming next year better positioned to compete against the Mercedes C class and BMW 3 series?

It is absolutely more competitive. They added quite a bit to the wheelbase — about 6 inches — and changed to the platform that the A5 is built on. The A4's size, updated styling and overall dynamic performance will be better. We will have the best car in the market.

And your pricing will be competitive?

It's our entry level luxury sedan and we need something in the low 30s, not less than today's car but with more content and more value.

The Q7 isn't selling at the 3,000-vehicles-a-month level Audi predicted. Is that a pricing or a supply problem?

It is a little bit of both. The turn rate is about 40 percent. It is still a bit of a mix problem. It is a great vehicle but it is still an unknown on the market. It is gaining momentum.

Which ones are people buying?

The six cylinder is the price leader.

Why does Audi need the smaller Q5 SUV in the United States?

The Q7 is a really big vehicle. Just size-wise you have to look at the (Lexus) RX 330 as your target. The Q5 will fit into that niche and it should not cannibalize the Q7. It will be bigger than the (BMW) X3 and (Acura) RDX. Smaller SUVs tend to be more female-oriented.

Is the small A1 a car that can sell in the United States? Isn't pricing a concern and isn't there still the old small car/small price stigma?

Pricing is a concern. We showed that with the A3 — it is a great vehicle that is just a little too pricey. Any car below that has to be price sensitive. There are rumors Audi will make the A1 — it is an attractive car. But then you compete with your sister's brand and there is not a lot of margin there. I would like us to concentrate on volume segments before we are distracted with other segments. I do not know if there is a commitment to make the A1.

Are dealers getting enough R8s, or is a tight supply the key to making this car a success?

We are not getting enough. There is still some production availability and they could bring in a few more without upsetting that great balance. I have a lot of orders — a dozen people — and at this point, I only had one and I delivered one. There is a reason they are going for $170,000 on eBay: The supply is really tight. They are priced well here compared with other markets and they want to make sure R8s from here do not get exported. Audi doesn't make a lot on the R8 in the U.S. Absolutely, we can sell more. The worst mistake Audi could make is to bring in too many. I would rather be on the short rather than the long side.

Why aren't A3 sales higher?

The car needs to be priced 10 percent lower.

Can Audi do that with the euro/dollar level?

No. They are already losing on each car they bring in. We do not want to bring in more. We will lose more money.

What does Audi have to do to sell 200,000 cars a year in the United States by 2010?

We need to stay the course and continue the quest for better quality and to enter some segments like Q5. I am very excited about diesel coming. I think we need Germany to realize that they still need to make an investment in this market. You cannot just build it and it will sell.

Can Audi sell a diesel?

Yes, we can sell it and we can sell it in multiple car lines — Q7 first. The Q5 will go hybrid first and not diesel. You can only have so many drivetrains. It comes down to pricing too. Audi has told me the unit cost of a diesel is $4,000 more but they realize they cannot sell it for $4,000 more — the premium will be half of that. We'll sell them if they can keep pricing in line.

Audi CEO Rupert Stadler says the compact Q3 crossover and A7 four-door coupe are under development, and a small SUV is being discussed. Can you sell those vehicles here?

I think with any decision like that, we have to look at where the car would be priced and what market you would try to sell. We need to look at segments. We only have so much land and we have to be sensitive to inventory requirements. The A4 and A6 and Q5 and Q7 are cores but there is room for a new niche.

What does Audi in Germany have to do to make Audis a better fit for the U.S. market? Why is there a disconnect? Do the German leaders think U.S. consumers will buy what they send over?

That was the case in years past but Q7 and Q5 are proof that they can build a car that suits our market. They have to build some cars here in the U.S. There is always talk of that but even if they were to decide today, it would be a good seven years before the first car rolls off the line.

Do dealers ask about a U.S. factory?

They say from time to time, "We are considering it..