Porsche Plans for the Long Term

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It may look like an SUV, but to the folks running Porsche, the all-new Cayenne is something different entirely: the promise of survival.

That might seem hard to imagine when you consider this German company is, on a per-vehicle basis, the most profitable automaker in the world. Yet there’s an undercurrent of concern one hears running through the comments of Porsche executives. It recalls how, barely a decade ago, the carmaker was on the edge of an abyss. In the U.S., its largest market, sales plunged from 2500 a month to little more than 250. And there were plenty of pundits predicting Porsche’s demise.

2003 Porsche CayenneSince bottoming out in 1993, the Stuttgart-based automaker has posted an unexpected revival, with annual sales soaring above the 50,000 mark. And now, with the addition of the Cayenne, Porsche confidently expects is volume to double again.

The Cayenne, declares Rich Ford, chief operating office for Porsche Cars North America (PCNA), “goes a long way towards insuring our independence.” Among other things, he and other company officials stress, it will bring in the cash Porsche needs to keep its lineup up to date. And that is likely to include the addition of a long-awaited four model.

Success guaranteed?

This does, of course, depend on the Cayenne’s success, something far from guaranteed, despite Porsche’s strong global following. Though it may have “Porsche DNA in every cell of its body,” according to Wolfgang Durheimer, Porsche's Executive Vice President for Research and Development, there’s no question the Cayenne takes the automaker into new and uncharted territory.

That was intentional, reflecting the vast transformation the automotive market has undergone over the last decade, especially in the U.S. Today, light trucks account for half the American market and sport-utility vehicles, in particular, make up the fastest-growing segment. Research reveals the typical American Porsche driver has three vehicles in his garage (and, yes, the overwhelming majority are men). In every other one of those garages, there is likely to be an SUV.

Porsche has produced all-wheel-drive vehicles before, including versions of the sacred 911. But with the Cayenne, the automaker is attempting to blend the best attributes of its well-known sports cars with the utility, high seating position and roominess of a ute.

“I can understand the initial skepticism,” says Durheimer, acknowledging some harsh criticism the automaker has received since the first photographs of the Cayenne were released last winter at the Geneva Motor Show. The controversy continued when the vehicle made its formal debut at the Paris Motor Show in September.

Now Porsche is giving the automotive media, including TheCarConnection.com, a chance to drive the Cayenne. Its versatility is winning praise, overall, though reviews haven’t been nearly as kind for its on-the-edge styling.

Selling out vs. selling out

With as much as 450 horsepower in the top-line Turbo version, the Cayenne is expected to do reasonably well, at least initially. Whether Porsche can maintain demand long-term is another matter, especially as it eschews the sort of incentives other automakers depend on.

Clearly, marketing to an SUV buyer will be different than the traditional Porsche customer. The Cayenne is far more likely to be a “daily driver,” an owner’s primary vehicle. As such, there’ll be less tolerance for long delays in service and repair, one of the marque’s traditional weak points.

PCNA has launched an extensive training program in which it expects all 206 U.S. and Canadian dealers to participate. And those franchisees have so far committed more than $300 million to expand and upgrade their facilities.

Since SUVs are a largely American phenomenon, the Cayenne is likely to further deepen Porsche’s dependence on the U.S. market, which generates over half its volume. But the Cayenne could also “open markets where the (condition of) roads don’t allow a Porsche” sports car, such as China, India or Latin America, insisted Klaus-Gerhard Wolpert, director of Cayenne Operations.

Ironically, another big challenge comes from an erstwhile Porsche ally. To hold down development costs, the carmaker turned to long-time ally, Volkswagen AG. Together, they developed both Cayenne and the new VW Touareg, which also debuted in Paris. VW’s SUV doesn’t boast quite the level of performance and handling of its Porsche cousin. But the Touareg has won kinder reviews for its styling, as well as its unexpectedly upscale interior.

Initially meant to target entirely different market segments, PCNA President Fred Schwab now admits, “I’ve definitely got some competition.” That situation will be enhanced by the fact that the Touareg runs about $15,000 less than a comparably-equipped Cayenne.

Looming recovery?

Despite the high stakes riding on Porsche’s third model line, Chairman and Chief Executive Officer Wendelin Wiedeking has repeatedly asserted that his company isn’t betting its future on Cayenne.

Porsche sales have slipped in the face of economic problems in key markets—but nowhere near as badly as its competitors. And while volume was down over the last 12 months, the German marque still posted some enviable numbers, earning a record 828.9 million Euros on sales of 4.86 billion Euros, also a record.

But without a strong reception for the new car, Porsche will clearly have a tougher time financing its next move. Moving forward, there are likely to be some variants off the Cayenne platform, insiders hint, though they decline to offer more details. Certainly, said Wolpert, Porsche is considering other engine options beyond the normally aspirated and turbocharged V-8s the Cayenne offers at its debut.

“Once we’ve digested this, we will turn to the question of what our fourth model line could look like,” said Durheimer, during a preview of the Cayenne in Spain. For now, “even we ourselves don’t know what this fourth model will look like.”

Company officials do know it won’t look like a conventional sedan. Porsche already rejected plans for a four-door.

There’s no question Porsche needs to grow if it’s to remain a strong and independent brand. But unlike a more mainstream marque, whatever does come next will have to maintain the “Porsche DNA.” That’s not quite as limiting as it once might have seemed, for as the Cayenne demonstrates, the fourth model just might take the carmaker in an entirely unexpected direction.

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