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Audi Sees Big 'Upside' in US: CEO Scott Keogh

By Phil LeBeau, CNBC Correspondent

NEW YORK ( CNBC) -- Is Audi finally going to fulfill its promise in the U.S.? For the first time in years, the German brand looks like it's finally going to make an extended run at joining BMW, Mercedes and Lexus as a leading luxury auto line here in the states. The question is whether Audi has fixed the one issue that has dogged the brand for years, quality and reliability.

"For us at Audi, this is absolutely the beginning of an extended run," said Scott Keogh, President of Audi of America. "The brand is hot. New products are coming. We see a lot of upside."

I caught up with Keogh in San Francisco where Audi is introducing the RS5 to the United States. The RS5 is all about sport performance, with the V8 engine cranking out 450 horsepower. I took it for a drive Sunday and yes, it was impressive. By itself the Audi RS5 will not be a huge volume car (just 1,500 will be sold), but that's not the point.

"We see it as a good way to build a brand. People are big time enthusiasts, they want these types of cars and they definitely want it from Audi," said Keogh.

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The real story with Audi is the growth in sales and brand recognition in the United States. This year, Audi sales are up 18%, out pacing the industry (14%) and growing faster than BMW (9.4%) and Mercedes-Benz (14.9%). Furthermore, Audi has passed Cadillac to become the number five luxury brand in the U.S. -- that could and likely will change once sales of the new Cadillac ATS ramp up.

For all that good news, Audi still has some big challenges. The most troubling is the brand's checkered track record with reliability. Look at the current J.D. Power rankings for initial quality. Audi is the only luxury brand below the industry average.

The survey reflects a long-time problem for Audi. Great styling and less than stellar reliability. Audi says that reputation is changing. Scott Keogh noted many of the problems now reported by Audi owners are smaller, issues (electronics, satellite navigation, etc), not the mechanical headaches that used to plague Audi.
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