Porsche Goes Soccer Mom!!!!

[APKhaos]

Following article on Porsche will be in the next issue of Forbes mag.
Its kinda sad, especially the last para. Take your dramamine BEFORE you read it!

Porsche Goes Soccer Mom
Robyn Meredith, Forbes Magazine, 02.04.02


It survived recession and survived Sept. 11. Can it survive a brand extension?
In past global economic shocks--like the Iraqi invasion of Kuwait and the Russian debt crisis--Porsche's stock price got stripped as bare as a set of racecar tires. The Sept. 11 terrorist attack was no exception. Porsche's stock price skidded to the equivalent of $183, half its summertime high. Who in these times would want to buy the $68,000 Porsche 911, especially given its unlucky name?

Yet Porsche sold 2,856 of its 911s to U.S. drivers between Sept. 1 and year-end, up 23% from a year earlier, and its stock price quickly followed, jumping to $393 by mid-January. Merrill Lynch says the stock should be trading for at least $480.

What's so hot about Porsche? Expansion. The brand synonymous with sports cars will appear on a burly sport utility vehicle this fall. Called the Cayenne, the Porsche SUV will be priced between $45,000 and $65,000, will be about the size of a BMW X5 and is expected to boost annual unit sales by nearly 50%, to 80,000 worldwide.

But that's just part of what's going on at this German company. The SUV is the most extreme example of Chief Executive Officer Wendelin Wiedeking's bet to remake Porsche and transform nearly everything behind the rearing-stallion badge. Porsche used to consist of a stable of proud engineers almost hand-building masterpieces and not always being very attentive to profit. Now it is a modern car company--meaning it outsources everything it can get away with. Suppliers now manufacture at least 75% of every Porsche sports car.

Has Porsche sold its soul? Rivals hope the public will think so. But so far the financial results show that Porsche was able to maintain its mystique while it overhauled its manufacturing methods. In the fiscal year that ended last July Porsche earnings rose 29% to $237 million on revenue of $3.88 billion. That 6.2% net margin put Porsche in a league of its own; the industry average (as tracked by Value Line) was 1.9% last year. Even classy BMW netted only 2.9% in its last fiscal year.

Porsche made some mighty profits on each of the 55,000 cars it sold last year. On the 911 Turbo, which starts at $111,000, the company makes a 45% average gross margin. On the low-end Boxster S convertible (starting at $51,600), Porsche pulls in a still-rich 23% gross margin. If Wiedeking is to be believed, a new 205mph sports car, the Carrera GT, will be profitable from its first sale next year. Price tag on that one: $350,000 to $400,000.

The Cayenne SUV is a metaphor for the company's transformation. It will be assembled in a Porsche factory being built in Leipzig, in the former East Germany. But only 12% of its content, chiefly the V8 engine, will come from Porsche. The bodies, prepainted and preassembled, will arrive from a Slovakian Volkswagen factory after a 22-hour train ride. Indeed, Porsche and Volkswagen cooperated on developing SUVs. VW's new Touareg SUV has the same chassis as the Cayenne, though of course they will look quite different.

Ever brash, Wiedeking insists, "Our Cayenne is 100% Porsche." That can't be, of course, if you mean that all its parts are lovingly built in German factories. But Wiedeking means that Porsche maintains control over creating the design, building the engines and sewing some of the interiors, as well as overseeing vehicle assembly and marketing.

Porsche's late entry to the SUV market may be an advantage. If it had been the first luxury brand to get into what started out, after all, as a modified pickup truck, it might have sullied its name. But Cadillac, Mercedes, BMW and Acura now have paved the way.

Still, Porsche hasn't always had luck extending its model line. It failed with the 914, introduced in 1970; the 924 in 1977; and the 928 in 1978. An exception to the pattern is the successful six-year-old Boxster, which is basically a cheaper, convertible knockoff of the 911.

[5axis]

I am feeling a little sick now, thanks.

Time to start saving for a Ferrari.

david 89 turbocab

[pbs911]

Porsche used to consist of a stable of proud engineers almost hand-building masterpieces and not always being very attentive to profit. Now it is a modern car company. . . . basically a cheaper, convertible knockoff of the 911.

[Wayne 962]

Hmmm, you could say that the 911 is an expensive version of the Boxster too...

-Wayne

[Kurt B]

Nice article, but I really have trouble with "It failed with the 914"

914s are a cult flavorite. 928s, 924s are not as much. 914s retain the aircooledness, have improved engine positioning, and were successful at being Porsche's version of an MG; or a German miata.

They handle great, and anytime I see track photos, there's always a beefed up 914 kicking some @ss. That is not true of the other models.

914 a failure? Anything but!

[APKhaos]

Sick stuff, right?
The thing that finally drove me to post it was that thousands of Forbes readers are about to get this dose of self serving market puff served up as fact. Aside from the fact that the journalist has chosen to share her incisive deduction on the Boxster's lineage [ugh!], the piece makes it sound like Porsche has lined up anyone who may be a craftsman, shot 'em, and farmed the work out to Yugoslavia - all in the name of profit margin!
Not a word about the value of the brand, and the years of outstanding engineering that created it.

[cegerer]

If this is what it takes (cancelling the racing program, outsourcing over 75% of the so-called 911, etc.) to make Porsche financially viable, is it worth it? It's not to me. They're marketing their wares to a different type of person - a person who is more concerned about the name on his car than the car. And I think to hang your hat on the promise that this is all necessary so they can afford to go racing again is pure fantasy. -- Curt

[Jack Olsen]

I still can't get past the name:

"Cayenne?"

Like the pepper?

Yeah, like the pepper.

But that's stoopid!

Cayenne.



Could the NYSE move and all the press releases have anything to do with trying to attract a corporate takeover? All this talk about profitability. All the refusals to do any long-term investment in the brand image (racing). Could Wiedeking and his cronies just be looking to make a buttload of cash?

75-85% outsourcing. But tell the press it's "100% Porsche."

45% profit margins. That's just obscene. How is anyone supposed to believe that Porsche hasn't chosen performance on their corporate balance sheets over performance in motorsports? Profitability is vital to the success of any venture, sure -- but at Porsche it's all they talk about any more.

Cheap, disposable powerplants. Their concern is with building a car that will make it through the initial lease period, and nothing more.

...and an SUV with a name like "Cayenne."


Makes me mad.

[emcon5]

Originally posted by APKhaos
Porsche's late entry to the SUV market may be an advantage. If it had been the first luxury brand to get into what started out, after all, as a modified pickup truck, it might have sullied its name. But Cadillac, Mercedes, BMW and Acura now have paved the way.

That is an interesting way to look at it. Most people seem to think that being late to market is a bad thing.

Still, Porsche hasn't always had luck extending its model line. It failed with the 914, introduced in 1970; the 924 in 1977; and the 928 in 1978.

I don't think I would call any of these failures. The 914 would have done much better had they actually developed the 914/6 but this probably would have hurt sales of the more expensive 911. The 924 evolved into the 944, which was a damn nice and sucessful car, and the 928 was around for seventeen years. So it didn't replace the 911 like they planned, but still hardly a failure.

Tom

[Jim T]

The PepperVagen is ridiculous.

Remember Porsche's proud advertising slogan from 20 years ago: "At Porsche, we only build sportscars"? Dr. Porsche loved that saying.

I wonder why?

Actually, I know why, and it is for those exact reasons why the PepperVagen is such a shame.

Is it all about money???

If so, the Honda Accord and Toyota Camry are the biggest selling cars in America. Why doesn't Porsche build a sedan to compete with them? Using all that outsourcing, they could probably sell it for $27,000, and push their apparently precious production numbers up to 500,000 per year, easily. Can you imagine how much profit they could make on something like that?? It would be huge!

Porsche now says "Well, most of our owners own an SUV, too." Well, most of them also own a sedan, too. So why not a Camry fighter?

German car companies seem to have a hard time telling the truth.
Remember Daimler-Benz?: 6 months before the Chrysler acquisition: "This is a true merger of equals." 1 year after the acquistion and the firing of most of the Chrysler executives in Detroit: "This was never a merger of equals." Those are almost exact quotes.

(Another was: "We will never dilute the MB brand by cross-sharing MB and Chrysler parts." Umm, take a look at the Chrysler Cross-Fire for 2003, with its MB E320 engine and trans, etc.).

I still like old Porsches, but I certainly don't have the passion for the cars and the company like I used to. They just don't seem to be cutting-edge like they used to, and the SUV is the final nail in the coffin.

[tight as a bull's ass]

Now a SUV...

next it will make economic sense to build a Mini-van, then a Porsche pick-up truck, then a Porsche electric vehicle, and so on...

[724doorE]

This is to depressing to talk about. I just had the same thing happen to one of my other hobbies. Lionel (toy train manufacturer) just closed up shop and sent the rest of their production to China after 100 years in business. Porsche isn't the only company to "sell out" (by some view points). We should have all seen it coming. The more the family seperated from the company the more change became inevitable. Fortunately we have many fond memories and some of us a fine automobile or two to keep the flame alive. And oh by the way, if I had more money than sense, I'd plunk down that 100,000 for a new turbo faster than you could find second gear!

Ok where are my keys, I need to go relax.

Dennis H.

72 911E

other junk

[Jim Sims]

A Porsche or Porsche firm has engineered or made tractors (recent past, maybe still), tanks (WWII; US Sherman tanks had a 500% loss rate against that 88 mm), and an 305 mm mortar road carriage (WWI, Britain, France and Belgium didn't believe it possible until the the 1 ton shells started coming down on the forts). What's the big deal about a SUV? Profits have to be made, bills have to be paid or the company will cease to exist. It's far better that Porsche make toys for rich guys, spare parts for us and SUVs for soccer moms than engines of war or go out of business or become a division of another car company. Cheers. Jim

[lukeh]

Just to play Devils advocate, I loved the Lambo LM0002 (?). When I first saw it I thought it was cool and I didn't start thinking that Lambo sports cars were now bad or that the company was going down the drain. I just liked and respected the vehicle. I just hope I feel the same way about Porsche's SUV. I don't want one and an SUV has never excited me. However, I hope it is a hit because Porsche might put the extra cash into racing. I don't think we can have one without the other.

[dtw]

I will continue to swim against the current on this one- I fully support Porsche. They're building the C-GT, moving forward on a new front engine wasserpumper GT, and should be back to top-shelf racing in a couple years. (As far as I'm concerned all the series I know need a shakeup period now anyway).

There was a speech by one of the brass that explained why they didn't build a sedan. Good speech. I think I'm the only one that liked it, heheh.

Dunno, I continue to be happy about Porsche's prospects. Maybe it's just the accountant in me (ducking eggs and tomatos hurling by). Hey, by the way, I've found a great Honda motor to put in my '72 project car... (and have a set of slide-valve injection bodies available for sale for 500 bucks...NOT).

Dave

[cegerer]

More so than the PepperVagen (which is a VW with an outsourced Porsche motor), is the outsourcing itself. Sure, they've outsourced various parts of cars over the years (and had VW build cars for them before), but now it has reached a point where over 3/4 of the 996 isn't even made by Porsche! Gee, I wonder if they will contract with Riley & Scott or Panoz to build a race car for them if they decide to favor us with another LeMans program? Ah no worries, I'm sure Porsche would provide authentic stickers to make them look correct ...... -- Curt

[rstoll]

Looks like it is making more sense every day to hold on to the older cars. The real thing.

[scedmonds]

The old ones are the legitimate P-cars, guys.

An East Coast client (and friend) of mine bought one of the first Boxters released in the US. I found my '83 Targa soon after . . .

A year later she was on sabbatical here in San Diego, finishing her master's, and we got together for dinner, driving our Porsches.

As we stood beside our vehicles, smiling and listening to the cracks of the engines cooling down, she said, "You've got a REAL Porsche . . ."

I just smiled.

Cheers!

C.

[Oldporsche]

Wednesday, this week, I read that the Missouri Highway Patrol found Nicholas Cage's porsche, an '89 cabrio in the Lake of The Ozarks. It had been stolen in a small town outside of St. Louis while in shipment. The article mentioned that the car had 100 miles on it and was a collector's item.

After reading the proceeding posts; and to quote Nobel Willingham from the movie, Good Morning Viet Nam, "I think I see a pattern here."

Good luck,
David Duffield

[cstreit]

Well why I personally find the Cayenne ugly, was rather distrubed by the move to water cooled, and personally piss on the "Boxter set" set of Bimbos and meat-heads, there is an upside...

Perhaps if Porsche does make enough money selling the "fluff cars" to the average consumer and soccer mom looking for a status symbol it will allow them to get back into racing, build some truly great sports cars, and keep the marque alive...

Now, I hate how far they have gotten from their roots. I joined the Porsche family only 3 years ago, but have now owned 3 911's, 1970 911S, 1982 930, and 1979 930... AM I a complete purist, no, but it's a sad state where they are heading...


Then again, as long as they do keep making at least one line of pure sports car AND get back into racing, I can liev with some snobby soccer moms.