* Sees "significant" decline in 2009 earnings, no loss in Q1
* Audi's annual volume to decline for first time since 1995
* Sees stabilisation in markets next year
* Shares up 3.16 percent (Adds management comments, updates shares)
By Christiaan Hetzner
INGOLSTADT, Germany, March 10 (Reuters) - German premium carmaker Audi expects to mark its centenary with a sharp profit decline and its first annual sales drop in 14 years as it grapples with a deepening crisis in global car markets.
"2009 will probably be the most difficult year in the history of the automotive industry," the Volkswagen unit said in its annual report published on Tuesday.
Management told a news conference sales would likely fall 10 percent from the 1 million vehicles delivered to customers last year, resulting in a "significant" fall in profits in 2009.
Audi won't reduce staff this year but it does plan to lower its manufacturing costs and slash investments to buffer the projected volume decline, Audi's finance chief said.
"We want to save several hundred million euros," Axel Strotbek told Reuters, adding that capital expenditure would drop by about 10 percent from 2.4 billion euros ($3.05 billion) in 2008.
Audi's growth peaked last year with record results just as BMW and Daimler each cut their profit targets twice.
Audi's operating margin of 8.1 percent last year was nearly twice the 4.4 percent earned by Mercedes-Benz Cars, Daimler's luxury passenger car business, and will certainly exceed BMW's return on sales when it publishes results this month.
"We will see our first considerable earnings decline in the first quarter, but we will still make a substantial profit," Strotbek said.
By comparison, Daimler warned in February that it would post a significant operating loss in the first three months of this year and some analysts have even pencilled in a full-year loss at BMW for 2009.
Audi Chief Executive Rupert Stadler said February sales dropped by around 11 percent to 63,400 vehicles.
"Compared with the competition, however, we fared extremely well," he said, adding that Audi took market share from rivals.
Adverse exchange rate effects will hurt Audi's profits this year due to the stark depreciation in the British pound, but the hit would not be as painful as the 290 million euros from 2008, when income from settling financial hedging contracts failed to offset total currency headwinds of more than 640 million euros.
Audi plans to expand its vehicle range to 40 models by 2015 from 28 now. This includes next year's planned launch of its diminutive A1 model that will be built in Brussels and the roll-out of its compact Q3 sport utility vehicle in 2011.
"There remains no need for external sources of financing," Audi said, which can fund growth from its operations.
That means investors don't have to be afraid that cash burn problem circling rival carmakers would affect Audi, since it forecasts net liquidity would stay at a high level this year after reaching 9.29 billion euros at the end of 2008.
"The Audi Group expects that, following a marked downturn in the global economy in 2009, markets will stabilise in 2010. This development is also anticipated to have a positive effect on the company's key performance indicators," it said.
Revenue at Audi rose nearly 2 percent to 34.20 billion euros last year while net profit jumped to 2.18 billion, more than a billion of which was transferred to parent Volkswagen.
VW illiquid ordinary shares rose 0.8 percent while prefereds gained 3.7 percent by 1521 GMT, lagging a 5.7 percent gain by the European auto sector index.