Porsche Minivan? The Beginning of the End?

[JR_NYC]

In 10 years, will Pelican have a Porsche Minivan Technical Forum? Maybe they'll drop a turbocharged V-10 in a Vanagon and put a Carrera nose on it.


Porsche's Road To Growth Has Real Hazards

By Stephen Power
1,048 words
8 December 2005
The Wall Street Journal
B1
English
(Copyright (c) 2005, Dow Jones & Company, Inc.)

Stuttgart, Germany -- PORSCHE IS no longer content just being a little car company that makes big profits.

For years, Porsche AG made nothing but powerful, high-priced sports cars, a simple formula that made the company one of the world's premier marketers of luxury goods and its brand name one of the most desired in any industry.

Now, three years after branching out into sport-utility vehicles, the Stuttgart-based company is setting its sights on grander ambitions, with plans to produce a whole range of sporty vehicles, including a forthcoming four-door coupe. Yet this new direction presents a serious challenge: Can Porsche maintain its cachet, and its hefty profits, as it reaches out to a broader class of customers?

European investors expressed doubt yesterday. At a news conference, the company said vehicle sales have risen 6.7% in the first four months of the fiscal year ending July 31, fueled by strong demand for revamped versions of its 911 and Boxster models. But Chief Executive Officer Wendelin Wiedeking also acknowledged Porsche will incur "enormous development costs" for the new four-door coupe and another key piece of future technology -- a hybrid engine for Porsche's Cayenne sport-utility vehicle. That prompted investors to dump Porsche shares, which yesterday closed in Frankfurt down 4.65%.

In an interview with The Wall Street Journal, Mr. Wiedeking said Porsche needs to look beyond sports cars to grow. "It's not enough to cook in your own customer base," he said yesterday.

The company's expansion began last month when it started selling a new two-door sports car called the Cayman S. With a starting price of $59,800, the car is designed to appeal to "relatively young, sports-minded" customers, Mr. Wiedeking says. It also plugs a pricing gap between the $45,000 Boxster and Porsche's franchise product, the 911, which starts at $81,400.

Analysts speculate that Porsche could add a compact SUV. Mr. Wiedeking also declined to rule out entering new segments that might strike Porsche purists as unthinkable. Asked about the possibility of developing a minivan -- something DaimlerChrysler AG's Mercedes now offers -- Mr. Wiedeking said that "today it doesn't make any sense" but added that "you never say never in our business."

The four-door coupe, called the Panamera, is due in 2009 and will compete with rivals who are more established in the segment and already produce some of the most desirable cars on the road. They include BMW AG's BMW 6 Series, the Mercedes-Benz CLS and the Maserati Quattroporte -- cars that range in price from $70,000 to $120,000. Their buyers are typically middle-aged high achievers such as entrepreneurs, doctors and artists whose views have been shaped by the 1960s -- a group sometimes known in the auto industry as "upper liberals."

Despite the stiff competition in this segment, Mr. Wiedeking said Porsche's brand is strong enough to win customers. Potential buyers of a Porsche four-door "believe in the brand," he said, noting that Porsche successfully moved from sports cars to SUVs with the launch of the Cayenne in 2002. Luxury-car buyers "know that we can build sports cars, and now they know we can develop an excellent sport-utility vehicle, and they trust [we can] build an excellent sports coupe," Mr. Wiedeking said.

The launch of the Cayenne, however, revealed some challenges that Porsche will face again in developing the Panamera. "Every screw was new on the Cayenne," Mr. Wiedeking said. "We went into a completely new segment, having no learning curve before this."

In May, the J.D. Power Initial Quality Study, a widely watched industry survey of consumer sentiment, placed Porsche well below average -- a surprising outcome for Porsche that officials at J.D. Power say was heavily influenced by complaints about the Cayenne.

Industry analysts say addressing such complaints quickly is critical for Porsche's expansion into new segments. "Porsche must always be in control of quality much more than everyone else," said Christoph Sturmer, an analyst with the Frankfurt office of Global Insight, an industry-forecasting firm. "They position their products as the most sporty, the fastest, and the most aggressive. If they lose control of quality, everyone's going to yell at them and say, `Why am I paying so much for this car?' "

Mr. Wiedeking, echoing J.D. Power officials, says many customers' complaints about the Cayenne have centered on the vehicle's almost silent electronic door locks.

"The customers' problem was they weren't sure -- is it closed or not?" Mr. Wiedeking said. He said the company has begun to address the problem by instructing Porsche sales representatives to explain to customers how the door locks work, and said the company might tweak the locks in the future to generate a sharp noise.

Although Cayenne sales have been strong so far, they have begun falling as gasoline prices have risen. In the first four months of Porsche's fiscal year, Cayenne sales fell nearly 17%.

In September, Mr. Wiedeking shocked the automotive world by announcing Porsche's intention to boost its stake in Volkswagen AG to approximately 20%, from less than 5%, in a friendly bid that Porsche officials said was intended to prevent a possible hostile takeover of Volkswagen, which provides the body structure for Porsche's Cayenne SUV.

Industry analysts and some Porsche investors have attacked the pending deal as running counter to Porsche's tradition of hoarding cash, but Mr. Wiedeking -- known for unusually colorful rhetoric among corporate CEOs -- struck back yesterday, calling them "self-appointed guardians of corporate governance" and saying the deal will benefit Porsche by allowing it to pool purchasing volumes with Volkswagen, which sells around five million cars annually, compared with fewer than 100,000 at Porsche.

Mr. Wiedeking said Porsche could also cut production costs through jointly developing more new cars with Volkswagen, though he declined to give specific examples of potential new projects.

In the process, Mr. Wiedeking said, the deal will help the company remain independent and avoid the fate of other European luxury brands, like England's Jaguar and Sweden's Saab, now units of Ford Motor Co. and General Motors Corp., respectively.

[Wil Ferch]

IMHO... not much "new" stuff here.....

...ever since the Cayenne came to be...nothing here strikes me as philosophically out-of-step with recent Porsche trends....

...didn't say I agree...just said nothing new here....very "expected" response from Porsche ( example: who would ever say "never" or "always" in this Biz?)

Wil

[oldE]

Wow! What does 15% of Volkswagen AG cost? I know Porsche hauled in some cash from selling their drop-roof business to Magna, but I suspect it took more than that.
I think the 'minivan' thing is insignificant in terms of Porsche. Minivans are in the Walmart segment. Porsche is after customers that drop a lot more cash than that.
I wouldn't be surprised to see a smaller sedan, perhaps sharing some basic chassis architecture with , say the next generation Audi 4, but with a Porsche V8. Any takers? Then how about a wagon/hatch version of that?
Les

[JR_NYC]

Originally posted by oldE
Wow! What does 15% of Volkswagen AG cost? I know Porsche hauled in some cash from selling their drop-roof business to Magna, but I suspect it took more than that.
I think the 'minivan' thing is insignificant in terms of Porsche. Minivans are in the Walmart segment. Porsche is after customers that drop a lot more cash than that.
I wouldn't be surprised to see a smaller sedan, perhaps sharing some basic chassis architecture with , say the next generation Audi 4, but with a Porsche V8. Any takers? Then how about a wagon/hatch version of that?
Les

I agree, I can see an entry into the M3/S4 segment.

[rcm]

We just recieved 6 of 30 R350 Mercedes Benz company cars. Not really much more than a mini van. I'll let you know if mini vans are a bad thing.

What I'm saying is so what if Porsche has a mini van or wants to make one.They open themselves up to a new market. It only boost's sales and gives them more money for R&D on the really cool stuff.

Our MB's are a promo deal with MB GhmB and our parent company. MB wants to open up some new markets, that is if you have 65k laying around.

[Wil Ferch]

Porsche's increased stake in VW will cost them about 3-3.5 Billion ( with a "B") Euros.

About $1.22 for every Euro....

...with "cash" on hand.... I don't think institutional banks are involved.

Wil

( PS- - lament heard over the last 10 years..."We can't afford to go racing because of time/investment with Cayenne development..")

[jmshepard]

Rick,
If this statement were only true:

"What I'm saying is so what if Porsche has a mini van or wants to make one.They open themselves up to a new market. It only boost's sales and gives them more money for R&D on the really cool stuff."

Of course this is only my opinion, but Porsche has produced a pathetically small amount of cool R&D. The Cayman and the truck are the only results that I've seen lately. In my mind, cool R&D would be vehicles that could compete with the Audi R8 at LeMans, the strategy that the company made its' bones on in the 70's and 80's. Only just now, after many years of reaping profits with the new line of products does Porsche find itself in racing, and only at the level below the R8. Perhaps the LMP2 class is the way of the future, but the marque let many years pass by sitting in the GT classes shoveling the racing R&D money into the company coffers.

Jim S.

[pieterk]

Originally posted by jmshepard
In my mind, cool R&D would be vehicles that could compete with the Audi R8 at LeMans

Completely agreed, but I wonder how much easier it is for Audi to justify such costs with the financial backing of VAG.

I'm as horrified as the next guy at the idea of a Porsche minivan--and was nearly as horrified by the idea of the Cayenne back when it was first announced--but I wonder if Porsche management isn't in fact just plain smart for realizing that the only real way to remain independent and competitive is to extend the brand. And if that means temporarily halting racing R&D, then perhaps that's okay.

As an example of purity at the expense of independence, look at Ferrari, wihch is majority owned by much bigger companies. Ferrari can afford to remain "pure" and continue to field its racing program when over 50% of it is subsidized by Fiat, and another substantial chunk by an Italian bank. Porsche doesn't have that, and I can't fault them for not wanting that. Personally, inasmuch as the sentimentality of a company's history might matter to anyone, there's some small, vague extra bit of ownership satisfaction to be had in owning something that's not a subsidiary brand of GM, Ford, or Fiat.

Err...although I'd gladly take an F430 off anyone's hands if they think it's a handful!

[Wil Ferch]

pieterk:

You just painted yourself in a corner... not a slam, mind you....but we tend to repeat what we hear without some more thought..

To wit..the thing about remaining independent. Ferrari ( as you yourself state) is no longer independent... yet they continue to build cars "pure" to their heritage. Certainly more so than ( independent) Porsche is doing today !!

The thinking is....once you lose independence, then you lose the "purity" of the product you've always sold, because "someone else" will be calling the shots. Well...what difference is there when the "independent" Porsche company builds products ( vans / trucks)...that similarly dilute the brand image AS IF IT WAS no longer independent?...and some parent company giant calls the shots?

I say the "independence" angle is over-sold...and Wiedeking and his gang of bandits are simply milking the heritage of the company for as long as it takes before they pull the rope on their retirement Golden Parachute !!

Ahem.... IMHO, of course.....

Wil

[JR_NYC]

In my opinion, they're diluting the brand, which can have a near permanent long-term impact. Does Mercedes still have the same image and perception of brand quality that it once did? Does an S-class today still have offer the same level of status? I don't think so. You see an S-class and it's ho-hum. Porsche is a brand of sports car and they should stay that way. Milking a brand for all the sales it can generate will be ruinous in the long run. The marketing world is full of examples of this yet executives continue to make the same mistakes and not just in the auto industry. One idea would be to create a downscale brand, the opposite of what Toyota did with Lexus. In any case, a minivan or any other non-performance car would be an idiotic move. But hey, that never stopped anyone.

[Wil Ferch]

JR_NYC:

You say.." The marketing world is full of examples of this yet executives continue to make the same mistakes .."

....it's good as long as you're the executive and your pockets are lined....not much of a "mistake"...as long as you don't mix up which "goals" you're talking about....

Wil

[dougn1]

i'll tell you what....porsche needs to build a 4 seat AWD pick-up truck with long travel independent suspension and a sweet interior. it should tow 5000 lbs and have a 1500 lb payload. so the rear end could remain compliant. it should weigh 4000lb max and be powered by that NA V8 and that 6 speed tranny from the cayane. it should get 20mpg and it should cost about 45K. i think they'd sell a lot of them.

[pieterk]

Originally posted by Wil Ferch
pieterk:

You just painted yourself in a corner... not a slam, mind you....but we tend to repeat what we hear without some more thought..

To wit..the thing about remaining independent. Ferrari ( as you yourself state) is no longer independent... yet they continue to build cars "pure" to their heritage. Certainly more so than ( independent) Porsche is doing today !!

I disagree about painting myself into a corner, but you're absolutely right. What I wrote is wholly contingent on the theoretical belief in the corporate Porsche party line that independence has value. I personally didn't advocate the wholesale correctness of that. I also said "inasmuch as the sentimentality of a company's history might matter to anyone"--as that relates to independence--rather than positively assert that it always does or should.

What do I personally think? I love that Ferrari's product line has remained largely undiluted. I also think that corporate dependence is not by any means the automatic mark of death, and that independence can in some or many cases cripple the creative vision of a company as profitability becomes more important than inspiration. I still detest the Cayenne. One just drove into the lot here at work right in front of me. It looks--and I can only imagine drives--like an inverted bathtub. They should have left it to the Tuareg, which I would buy to tow a trailer with a Porsche! I'm not into the idea of a Porsche sedan either. But they'll do what they want to do. I can't stop it, and at the end of the day, it doesn't matter that much to me either way. I've got more fun things to do than worry about who owns what and why.

Originally posted by Wil Ferch
Well...what difference is there when the "independent" Porsche company builds products ( vans / trucks)...that similarly dilute the brand image AS IF IT WAS no longer independent?...and some parent company giant calls the shots?

Dead right.

Re-reading what I wrote, I probably should have clarified that I was trying to think about this from within Porsche's corporate business framework, not from within my own feelings about the car.

All I really know is that SUVs and minivans have nothing at all to do with that first vision of poetry I had as a kid, when brand new 2.7 air-cooled 911s wailed past my dad's dumpy Toyota in LA. I'll never forget the day it first hit me; a kind of light, metallic blue/grey 911 shimmering in the sunlight, accelerating away from the stop sign at Beverly Dr. and Canon. There's nothing like it in the world, and no Cayenne or minivan will ever touch it, whether or not it's branded Porsche, VW, Ferrari, Fiat, GM or Ford.

So yeah, if we can have that, then screw independence I guess!

[pieterk]

Originally posted by SoCal911SC
Smart for coming out with the Cayenne, which not only helps to dilute the brand but is also, after only a couple years, already selling at about half the volume of what was expected (and declining), and is now piling up at dealerships everywhere, with no hope of recovery?

How was that smart?

Apparently it wasn't. They gambled, and maybe now they're losing.

Honestly, I care so little about the Cayenne, or Porsche's overall corporate decision making that I didn't even know that. While I don't wish that Porsche lose money, I'd just as soon see the Cayenne disappear.

Clearly I'm not nearly as informed about what's going on in Porsche's headquarters. I was just trying to think about this from within Porsche's head. That's all.

I like sports cars and I like racing cars. I like Porsche sports and racing cars even more. SUVs are good for towing racing cars. And probably not much else!

Pieter

[mjshira]

I have to confess when I read this article in the WSJ while my Excellence was laying next to me I couldn't help but feel concern.

[K. Roman]

I'm not trying to ruffle any feathers but, when Porsche went into production with 924, 928, and 944's it already started tarnishing the marque in my humble opinion. Was there any performance value in the 924 or 944 that out shined the 911? Then for quite a few years, at least in my neighborhood, you saw 944's more than 911's cruising around. That took the marque down a few more nothces to me. Remember this is just my opinion. You don't see as many old ferrari sitting on blocks.

[ruf-porsche]

Originally posted by K. Roman
I'm not trying to ruffle any feathers but, when Porsche went into production with 924, 928, and 944's it already started tarnishing the marque in my humble opinion. Was there any performance value in the 924 or 944 that out shined the 911? Then for quite a few years, at least in my neighborhood, you saw 944's more than 911's cruising around. That took the marque down a few more nothces to me. Remember this is just my opinion. You don't see as many old ferrari sitting on blocks.

Why start with the 924,928,944. When Porsche came out with the 914, it was only called a PORSCHE in the USA, everywhere else it was called a VW.

[Wil Ferch]

Without belaboring this whole point too much ( too late?)...the 914 was a "VW-Porsche" in ROW...not simply badged a VW.... so let's not over-state the case..

...but I know what you mean !!

Wil

[oldE]

Come on guys! Think outside the box a bit.
The defining characteristic of a 'minivan' is basically a tall wagon, sliding side doors and space for your junk.
Now: think of a Boxter drivetrain, with revised intakes to keep the height down, slide that into the sandwich floor platform of something like a B class Mercedes. There you have a mid-engine, boxer motor rear wheel drive people mover. Using the sandwich floor construction, you could have all kinds of fun, keeping the front seat low, and raising the second row in 'theatre seating'. A small bench in the rear that would also fold into the floor and, Voila! The family Porsche.
I put about a quarter million kilometers on the company's minivans (Chev Ventures) in a 5 year period. We did not drive the van on the weekend, because the Passat handled so much better. I couldn't help but wonder, though, about the driving experience of a minivan with a low center of gravity and enough suspension and tire so it didn't roll over and die in the corners. This could work. Why shouldn't there be a minivan that was fun to drive?
Les

[Jims5543]

Two Words:

Zoom Zoom


Think about Mazda's beginnings and where they are now. They market all their vehicles as sporty. Even their Mini van.