by Peter M. DeLorenzo
Clueless In Stuttgart.
Detroit. It was amusing to hear how "surprised" Porsche AG CEO Dr. Wendelin Wiedeking was when he and his minions in Stuttgart found out that Porsche Cars North America was offering rebates to Porsche Club of America members on the dead-in-the-water Boxster ($500 on 2001 & 2002 models, $1000 on "S" models). This caused Wiedeking to bristle with righteous indignation, insisting that it could negatively affect the brand, even going so far as chastising Fred Schwab, the president of PCNA, in front of reporters at the Cayenne press introduction in Leipzig two weeks ago. Schwab was quoted as saying that the rebates meant "nothing" - that they really didn't count as an incentive because it was limited exclusively to the Porsche Club.
Hello? Is anybody home at Porsche - on either side of the Atlantic?
I mean, really, folks. Isn't this the same company that ran a nationally-supported ad campaign promoting blow-out leases to get rid of Boxsters that were stacked up like cord wood at dealerships across the country? Ahem, hey, Wendelin, in case you're wondering and since you seem to be so far out of the loop, that program ran from June 5 - July 31, and it has been extended. It involved giving people $499 lease payments on the Boxster and $599 on the Boxster S, with fat "suggested" down payments - which many dealers reduced or waived altogether just to get rid of the cars.
You're just now worried about damaging the Porsche brand, Wendelin? You gotta be kidding me...
Maybe Dr. Wiedeking's brain was fried by the glowing and gushing praise he's been receiving in the fawning German press over the debut of "The David Principle" - the lavish testament to his brilliance published to coincide with his 50th birthday celebration and in honor of his tenth year at the helm of Porsche AG. In the book, 16 "prestigious" co-authors, including Germany's Chancellor, offer "diverse thoughts and interpretations on their own approach to success and on that of Porsche AG and its chairman." The term "The David Principle" refers to "never losing one's humanity in victory, nor one's courage in defeat" - with all essays in the book revolving around the biblical story of "David and Goliath." It's a glowing tribute to Wiedeking's belief that, as he says, "The most profitable car manufacturer in the world is coincidentally (or perhaps not) also the smallest vehicle producer. Only with this convergence of extremes does the principle work: the smallest and the most profitable - exactly what the advocates of globalization don't want to admit is possible. And so that they can continue to follow their own dubious logic, they now present Porsche as an exception to the rule. David has won!"
Well alrighty then, Wendelin - you Da Man! But while you were out being "Da Man" and sharing your brilliance with the world, your little fiefdom was coming unraveled right under your nose. While you may be "surprised" (or should we say shocked - ed?) that such common and distasteful terms as "discounting," "rebates" and "incentives" are being bandied about and applied to one of Porsche's perfect automotive creations - the "real world" isn't shocked at all. On the contrary, as a matter of fact - especially the "real world" as defined by the U.S. market, where Porsche, the brand, has been floundering as of late.
Let's go over the daunting set of problems facing Dr. Wiedeking and Crew, shall we? I mean somebody has to deal with reality for Porsche, since they're obviously incapable of doing it on their own.
It's interesting that Dr. Wiedeking touts profitability as one of his company's proudest achievements. And how did Porsche get that reputation, exactly? Well, some would argue that Porsche did it in recent years by bringing in Japanese manufacturing consultants who straightened out their nightmarish assembly methods and introduced the joys of "parts commonality" to the happy campers in Stuttgart, who then dutifully put it to work by bringing out the Boxster - which liberally shared components with the 911.
That's partially true, yes. But the bigger reason that Porsche is such a proud beacon of German profitability comes down to one word: Greed. Porsche has made a killing in the U.S. market by charging outrageous amounts of money for optional equipment and "packages"- and this is on top of the outrageous amounts of money they already charge for their cars up front. And they have developed this usurious pricing strategy down to an exact science, with incredible amounts of available minutiae on their option lists priced for equally incredible amounts of money. Now, granted, the Porsche faithful in the U.S. market have gone along with this strategy like happy little lambs being led to slaughter - but things seem to be changing for Porsche in this regard, and not for the better. People are getting smarter, and even though Porsche trumpets the fact that they have sold more 911s than at any other time in their history (ask Porsche dealers how much discounting they're having to do on the "stock" 911s, and the feat doesn't appear nearly as impressive) - the writing is on the wall. Buyers aren't willing to go along with the Porsche program of "Thank you, sir, may I have another?" with blinders on anymore.
Porsche 's sky-high sticker prices, combined with their stratospheric option prices add up to a double negative, and it leaves a bitter taste in the mouths of a lot of Porsche loyalists. And add to that the fact that Porsche quality has been abysmal as compared to other automakers (luxury or otherwise), and you have a serious problem looming. It's one thing to be duped into paying high prices to become a member of the Porsche "club" - there seem to be enough nouveau surface-oriented gear heads to keep the so-called Porsche "mystique" (or what's left of it) going a little longer, but insult these people with poor quality when they're coming out of vehicles where quality was never an issue - and you end up with a Bobby Flay-sized recipe for disaster.
Porsche didn't exactly help its own cause either, of course, by grossly overestimating the "buzz" of the Boxster. Thinking that the Boxster sales pace would sail along blissfully at the rate that it enjoyed in its first three years of production, Porsche churned out Boxsters like popcorn and crammed them into the U.S. market - just in time for sales to come to nearly a complete halt. Boxsters were so prevalent by the end of 2001 in fact that Porsche dealers had enough of them to last 24 months - given their new snail-like selling rate - which then triggered the incentive lease program and the rebates.
The wizards in Stuttgart didn't get that memo, apparently.
The real world reality for Porsche is shaping up to be nothing like Dr. Wiedeking's "The David Principle" dreams. Outrageous pricing strategies, poor quality and an over supply of vehicles are merely setting the table for the ultimate challenge: the debut of the Cayenne.
The Cayenne - the overblown, overwrought, overweight, overpriced SUV with a Porsche badge on it is simply, as we like to put it, the answer to the question that absolutely no one is asking. We will have a special issue devoted to the Cayenne as it gets closer to getting into the public's hands, but suffice to say we know at least two things about it and what it means for Porsche:
1. Porsche sees the Cayenne as the salvation to its future, a vehicle that will make it virtually immune to the vagaries of roller-coaster sports car sales in bumpy economic times. They are so sure that the Cayenne is the slam-dunk "Final Answer" to their future prosperity as an independent automaker that they are giddy with excitement and see no downside at all. They see no correlation between how rebates and incentives can tarnish a brand and what bringing out a 5,000-lb., $89,000 SUV can do to a brand that forged its reputation by being one of the world's premier sports cars. No correlation at all. Rebates Bad, SUV Good for their image - in Porsche's eyes. We predict they will find out differently, and the long-term damage to the Porsche brand may be incalculable.
2. The Cayenne will be successful - initially. It will be the next urban "must have" to the people who go from nameplate to nameplate in search of the latest, newest, hippest and hottest flavor of the month. The crowd that thinks nothing of spending $10,000 - $20,000 over sticker to be "first-on the-block" and show up with the latest thing. They went from 'Slades to the Mercedes-Benz G500 and the new Hummer H2 without even blinking. These people aren't buying anything more than a fashion statement - what they think they're supposed to be driving in order to be "of the moment." To these people, the Cayenne could be by Prada for all they know. If it's got the bling-bling, it's got the schwing-schwing - end of story. And one very important thing to remember about these people? They have no brand loyalty whatsoever. None. Zero. And these are the same consumers for whom Porsche is mortgaging its future? Good luck. After the Cayenne, it will be something else, so Porsche basically has a six-month window of opportunity after it's introduced. At that point, the Cayenne will have to be sold on its merits. And those would be what, exactly? The Cayenne's ability to fit in at Home Depot? Right.
Porsche is struggling with this "Jekyll & Hyde" product strategy right now. On the one hand, they're bringing out a warmed-over 2003 Boxster whose biggest feature is a glass rear window in its convertible top, this after barely getting rid of their leftover 2002 Boxsters. Does anyone expect the 2003 Boxster to be red-hot out of the gate? Not if you talk to the dealers. They're just hoping they guessed right on their reduced allocations. And then, Porsche is working away on the $400,000 Carrera GT, the car the Porsche faithful is expecting will return the marque to its stature as a premier maker of sports cars. But wait a minute - just as the faithful gets ready to thrust out their chests in pride, Porsche is also working on a new front-engined, luxury 2+2 Coupe that will use the drivetrain from the Cayenne - a spiritual successor to the 928. Talk about the answer to the question that absolutely no one is asking…
And on top of all of that, they're bringing out an SUV - which is akin to Funk & Wagnalls bringing out a new teen magazine.
So, what are we to make of Porsche these days, anyway? A purveyor of uber king-of-the-road supercars like the Carrera GT? Or a maker of parts-sharing sports cars like the 911 and the Boxster, whose sole purpose in life is to milk the Porsche faithful out of as much money as possible? Is Porsche the new poster thang of the "bling-bling" SUV crowd? Or would they rather be known as the new "Gentleman's GT" builder to compete with the latest Aston Martin or Bentley GT Coupe?
I guess it depends on whom you ask and on what day you're asking it.
Porsche is flailing around, throwing anything up on the wall that they think will stick. Sports cars, Supercars, SUVs, GTs - you name it, and Porsche has got it in the works. The only thing we haven't heard of as of yet is a mini car - but we wouldn't discount anything at this point.
The bottom line is that no one at Porsche really knows. And therein lies the real problem.
They're clueless in Stuttgart - and "David" is about to go on a losing streak.
Thanks for listening, see you next Wednesday.
Ich muss sagen ich bin zum teil einig.