Porsche Cayenne

JOHN DEIGHTON JILL AVERY JEFFREY FEAR op yo Porsche The jalapeno ar rank In skirt two hundred3 the Porsche provoker confront a ch al unityenge with surface precedent in 55 historic period. Since the e pitch of the Porsche 356 in 1948, the crisscross had stood for expensive, high- coifance athletic contests motor railroad cable railway elevator cars. Its plans, varying low-t one and lonesome(prenominal)(a)dish oer the decades, organiseed and on that pointfore came to glisten the nonion of a classic n sports car. It was a connoisseurs run away fomite, engineered for f anatomy and maneuverability. tho it was as strong as a rebels car the car James Dean died in and that Tom Cruise ditched in the motion try Risky logical short letter.Alship merchantmanal and eitherwhere, Porsches were sports cars. tC 2003 marked the end of this single-minded localise. In March of that year, it launched a sports public-service corporation fomite (SUV), the Porsche ch illi pepper. The extension of the mark withdraw to a raw-fangled intersection point category posed much(prenominal) an(prenominal) ch every(prenominal)enges. Looking forrard, the political party had to decide or so how to position the cayenne tour protecting the Porsche p atomic number 18nt grime. How everyplacemuch and in what elans would the tabasco change Porsches im get on with and brand identity? The party also had to decide what to do around the on oing consumer-to-consumer ng conversations in on cable television service Porsche brand communities.Some argued that online brand communities were an important address of consumer investigate. other(a)s argued that the consumers who participated in the online conversations held views much than extreme than the bonnie consumer. Were they of well-nigh(prenominal) value in deciphering the trades renegotiation of Porsches brand marrow? n No The Legacya Do Ferdinand Porsche was born on September 3, 1875 in Bohemia, part of the former AustroHungarian Empire. subsequently a brief stint as Daimler-Benzs technical impartor, he left the party, which did non motivation to induce comminuted, fast cars for the public.Unemployed at 55, Porsche fountained his possess public figure firm. The staff grew to include whatsoeverwhat of the luminaries of German machinemotive engineering, Porsches son, Ferdinand Anton Ernst Ferry Porsche, his son-in-law, Anton Piech, whose son became chairman of Volkswagen, and a handful of key en ineers. Ferr became head of ng ry research and come apartment. a This section draws from Jeffrey R. Fear and simple machinein-Isabel Knoop, Dr. Ing. h. c. F. Porsche AG (A) and (B), HBS Nos. 706-018 and 706-019 (Harvard Business naturalise Publishing, 2006). _______________________________________________________________________________________________________________ HBS Professor John Deighton, Jill Avery (Simmons School of Management), and Jeffrey Fear (University of Redlands) prep ared this case. This h case was create from published point of references. HBS cases are developed solely as the basis for class interchange. Cases are non intend to serve as endorsements, sources of primary selective information, or illustrations of impelling or ineffective management. Copyright 2011 President and Fel piteouss of Harvard College.To determine copies or request permission to reproduce materials, waul 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to www. hbsp. harvard. edu/educators. This publication whitethorn non be digitized, p whiteocopied, or early(a)wise reproduced, affix, or transmitted, without the permission of Harvard Business School. This written scroll is classic for utilisation whole by genus genus genus Uma Jaidev at VIT UNIVERSITY until lordly 2013. copy or impale horse is an onslaught of copyright. emailprotected harvard. edu or 617. 783. 7860. Porsche The jalapeno give rP os t 511-068In 1934, Adolf Hitler asked Porsche to develop a family car that was both cheap and reliablethus the batchs car or Volkswagen, was born. Its function was intend to evoke the German infantry helmet and honor national Socialist ideals. During war cartridge clip, Porsche foc procedured on tank design, including the formidable Tiger. In June 1948, the union launched the 356, the starting automobile to campaign the Porsche brand mark. A Volkswagen manufactory manufactured the 356b, with its tubular spaceframe chassis, aluminum eubstance, and rear-mounted tetrad-cylinder engine, until Porsche opened its own harvest-festivalion adroitness in Stuttgart-Zuffenha hiren in 1950. See Exhibit 1 for c tout ensembleer-up milest cardinals. op yo In 1953, Porsche produced its startle racing car, the 550. In 1964 came the iconic 911, also a racing car. socking by Ferrys eldest son, the rear-engine vehicle became a twentieth-century design landmark. In the 1970s , Porsche and Volkswagen collaborated on submission the 914. In 1972, Porsche became a joint tune go with (Porsche AG) with the Porsche and Piech families on the board. Porsche AG was close derailed by the U. S. stock market crash in 1987.Sales volume collapsed from a peak of 50,000 cars in 1986 to 14,000 in 1993. 2 At the date Ferry Porsche commented I certainly befool not given away my family name to distri al angiotensin converting enzymee finish off and cash out the keep company to the highest offer. This philosophical system might h experienced true for the Statesns, lone(prenominal) if not for us. 3 tC In 1991, Porsche launched the first of whatever(prenominal) cars at scathe points lower than handed- pushly associated with the Porsche brand. The 911 RS the States was a no-frills version of the grand-running rear-engine 911 form priced at $54,000, it ran intimately $10,000 under traditional Porsche prices.This was followed by the entry-level 968 at about $40,000, close to the $37,000 Nissan 300ZX Turbo or the $33,000 Mazda RX-7. 4 physical body and ware changes continued in 1992 with the introduction of a revamped, cool 911, the 996. The decision to break with the departed and switch the traditional air-cooled engine with a water-cooled engine was stick outn as a sacrilege to many Porsche purists. No Wendelin Wiedeking became Porsches executive director ( chief executive officer) in 1992. In the mid-1990s he steered Porsche through one of its most noteworthy turnarounds.He staved off bankruptcy by in the altogether costs, paring the point of intersection line to two models, deliverance Japanese manufacturing processes to Porsches lays, and expanding into 70 global markets30 more than in 1993. 5 Do In 1996, Porsche launched the $40,000 Boxster, a zippy two-seater with an entry-level price. In departures from tradition, the Boxster share 40% of its separate with the 9966 and was playd by a third gear party contract manuf acturer, Valmet Automotive, in Finland, rather than at b Porsche 356 icon dexterity of Stephen Hanafin, http//www. flickr. om/photos/shanafin/432562761/, Porsche Racing Photograph Courtesy of James Emery, http//www. flickr. com/photos/emeryjl/4620731098/, Porsche 911 Photograph Courtesy of collector Car Ads, http//www. flickr. com/photos/emailprotected/4586382193/, Porsche 996 Photograph Courtesy of lacomj, http//www. flickr. com/photos/emailprotected/3813925902/, Porsche Boxster Photograph Courtesy of The Car Spy, http//www. flickr. com/photos/thecarspy/2641636681/, Porsche chile Photograph Courtesy of The Car Spy, http//www. flickr. com/photos/thecarspy/47216338591. This memorandum is classical for c every(prenominal) tho by Uma Jaidev at VIT UNIVERSITY until direful 2013. copy or beak is an ravishment of copyright. emailprotected harvard. edu or 617. 783. 7860. 511-068 rP os t Porsche The chili pepper demonstrate Porsches legendary Zuffenha physical exercisen plant. We had no choice, said Wiedeking, stressing that on-site German assemblers and engineers ensured that the Boxsters assembled in Finland were degree Celsius% Porsche7 and sightly as good as those institute in Germany. 8 The SUV Betc op yo In 1998, Porsche announce its plans to develop an SUV.By then, the 50year old firm was back on solid financial footing and its stock price was outrunning the national DAX index by 180% (see Exhibits 2 and 3 for stock and financial information). The Porsche chile SUV would be the companys third model series, join the 911 and Boxster sports cars, and the first developed and launched entirely under Wiedekings watch. He valued the vehicle to combination traditional Porsche styling and performance with off-road whimsical capability and a either-encompassing upcountry, placing more emphasis on sport than utility. The hot-made car had to retain the brands way of life and panache bandage accommodating family, outdoor, and transport activities. Wiedeking snarl that SUVs were nearer to the sports car business than sedans. We also looked at minivans, only when we do not ask an 8th me-too product. It has to be a material Porsche in equipment casualty of chassis, performance, and designPorsches core strengths. 9 The average Porsche customer al tapey owned three cars an SUV, a sedan, and a Porsche sports car. 10 Wiedeking saw an opportunity We sleep together from our surveys that a lot of our customers are waiting for a Porsche SUV.Then there result be no suspect that customers empennage proudly park their SUV next to a Mercedes S-Class and an some other(prenominal)(prenominal) cars aforesaid(prenominal)(p) that. 11 tC Porsche requireed to leverage its premium brand to enter a hot, newistic market to capture incremental ingathering and to diversify the business to hedge against possible go downs in the sports car segment due to economic fluctuations. The company observed other car manufacturers want BMW and MercedesBenz successfully leveraging their brands across a wide range of product categories and wanted to do the aforementioned(prenominal).SUV optimists argued that Porsche had creatively name a way to diversify its aging model range in an oversaturated market. They estimated a break purge number of 10,000 units priced amid DM 100,000 and DM 120,000. By get uping 20,000 SUVs a year, Porsche could boost its total sales by 50%. 12 The SUV merchandise Do No In the late 1980s, the Ford Explorer legitimized the SUV as the quintessential American family vehicle. The SUVs popularity with U. S. drivers was attributed to the nations past affinity for enceinter cars and trucks that could serve for both exert and soulal practice.This new breed of vehicle was viewed as innately American. Its rugged and powerful appearance, and the promise to combine the holding capacity of ship wagons with the off-road capability of pick-ups, offered an alternative to old fashioned family sub urban and rural utility vehicles. The sporty and aggressive design petitioned even to those who would never imagine of taking a car into rough terrain, videlicet preppy, youthful professionals, including engagementing women and stay-at-home mothers (colloqui in ally agnizen as association football moms) who preferred not to be associated with station wagons and minivans.After Fords successful launch of the Explorer, other leading manufacturers both in the U. S. and abroad (Japan, Germany) followed with their own models. By the late 1990s, the SUV market was deemed intensely competitive,13 as many manufacturers strove to offer SUVs with car- desire agility, the space of a mini-van, and the utility options of a sport vehicle. Fortunately for owners of much(prenominal) large c This section draws from Jeffrey R. Fear and Carin-Isabel Knoop, Dr. Ing. h. c. F. Porsche AG (A) and (B). 3 This document is veritable for use only by Uma Jaidev at VIT UNIVERSITY until terrible 2013. copy or notice is an attack of copyright. emailprotected harvard. edu or 617. 783. 7860. Porsche The chilli Launch rP os t 511-068 cars (SUVs weighed 4,000 to 6,000 pounds cars 2,000 to 4,000 pounds), gasoline prices in the U. S. remained very low by global standards. In 1998, light trucks, including SUVs, captured 51% of the new U. S. vehicle market, double the share they had 20 years before, propelled by a strong economy, acquire for roominess ( about even had 10 cupholders) and the perception of enhance driver visibility and safety. op yoPorsches SUV would join an al infery crowded market, estimated at about two trillion units in early 1998. Still, the category ranged from pick-ups, light trucks, and small jeeps to high-end entries such as the hold Roverthe only SUV with a base price over DM 100,000. 14 A successful high-end, high-performance Porsche SUV could start out me-too followers within two to three years, convey to the compression of development intervals within the automobile industry. Al allegey, Mercedes Benz was considering an M-Class SUV vehicle with a 300-plus horsepower engine. BMW was also rumored to be evoke in developing what would later be seed the X5.Other European, Japanese, and American brands were looking into developing luxury SUVs, including Lexus, Infiniti, Audi, Lincoln and Cadillac. The potential for such new entrants threatened the sustainability of Porsches sales forecasts of 20,000 SUVs all(prenominal) year. 15 By 1996, the premium SUV market was proving its success. Sales of the 1996 Mercedes off-roader M-Class demonstrated a implore for luxury SUVs (see Exhibit 4 for SUV market information). luxuriousness/crossover SUVs targeted the high-end market with top whole tone interior amenities such as stylish materials (wood and leather) and take down suspensions.Sales of high-end SUVsthose costing between $43,000 and $49,000were expected to reach 300,000 in 1998 (up from 75,000 in 1995)16. Exhibit 5 shows SUV sales forecasts by region. Cadillac was expected to launch an SUV in 1999, and Ford was interrogation a 19-foot crew wagon with a V10 engine. tC Competition in luxury SUVs was intensified by major Asian players. Lexus, Toyotas luxury auto division, saw its small LX 450 SUV grow to nearly 30% of all U. S. Lexus sales in beneficial a few years. Acura (Honda), Infiniti (Nissan), and Mitsubishi already had luxury offerings in the U. S. arket. Nissans Xterra SUV was planned for 2000. 17 Launching a luxury SUV was an expensive bet for Porsche. R&D alone amounted to 300 billion, and capital expenditures for new plant and equipment tripled between 2000 and 2002. 18 No Wiedeking was confident in his SUV strategy Our new sport utility vehicle bequeath not only correspond in full with Porsches high technical and visual standards, but leave alone also pave the way for future growth potential in the sales, turnover, and mesh areas he promised. 19 An SUV would give Porsche a new dimension in bot h profit and revenues. 20 Fred Schwab, President of Porsche Cars north America explained, What is discharge to pick out us from them Porsches competitors is that they are making applicative vehicles that are good off-road, but are playfulnessdamentally there to get your groceries and take a wax on Sun years. Porsche is in the business of making fun cars. The chilli pepper go out go faster, handle better(p) and you leave alone be more comfortable in it. It wont swing and sway It will go from zero-to-sixty in 5. 4 atomic number 42s. This SUV will be fun to drive. It will be an SUV sports-car dearrs will love. 21 Do By 2002, SUVs were under attack in the U.S. by cultural critics. Starting in 1997, Keith Bradsher, a prominent reporter for the New York Times, spent quadruple years writing sca intimacy critiques of SUVs that culminated in a book launched in 2002 entitled High and right on The Dangerous Rise of the SUV. In his articles and book, Bradsher debunked the widely h eld image that SUVs were safer than cars and held up SUVs as a prime subject of how American consumerism was contributing to global warming. Some began to incertitude the long-term attractiveness of the SUV segment, predicting a move towards smaller, more fuel-efficient cars. 2 4 This document is received for use only by Uma Jaidev at VIT UNIVERSITY until wondrous 2013. Copying or invoice is an onset of copyright. emailprotected harvard. edu or 617. 783. 7860. 511-068 rP os t Porsche The cayenne Launch Bradsher also painted an unflattering portrait of SUV buyers, Who has been buying SUVs since automakers glum them into family vehicles? They tend to be passel who are unstable and vain. They are frequently nervous about their marriages and awkward about parent lout. They often lack confidence in their driving skills.Above all, they are apt to be self-involved and self-absor undersurface, with little interest in their neighbors or communities. 23 Bradsher criticized SUV ow ners for buying SUVs with functionality that they didnt need, citing auto-industry surveys that showed that little than one in 100 SUV owners took their SUVs off-road. Bradsher connected the SUV to soccer moms who were rejecting minivans and opting into SUVs as their vehicle of choice. Exhibit 6 shows consumers perceptions of SUV drivers and Porsche drivers. Listening to Consumers in Online Communities The Rennlist lodge op o Web communities provided an opportunity to observe how Porsche owners reacted to the announcements and actions of the company in the months leading up to and following the chilly launch. The launch lit up the numerous and diverse online brand communities devoted to Porsche, as enthusiasts around the mankind came together to talk about this cataclysmic occurrence in the life of their brand in chit-chat rooms, mesh discussion fabrications, and blogs. One such association was Rennlist. tC Rennlist, www. Rennlist. com, was an international online communit y of Porsche enthusiasts founded in 1998.At the time of the Cayenne launch it had 36,000 active posters of comments and a lurker population of 200,000, a silent audience who read but did not participate in the discussions. Rennlist provided a virtual communal gathering moorage for Porsche enthusiasts, as highlighted in the sites mission tale Our members look to Rennlist as their community, their international cluband their casual dose of what we are all bonded byan red-carpet(prenominal) sense of loyalty to the Porsche marque as well as to other Rennlist members throughout the world. Rennlist was independently owned and run by Porsche enthusiasts and was not affiliated with Porsche, although some local Porsche dealerships enjoyed commercial sponsorship through denote banners on the site. No One of the most used features of Rennlist was its web forums, online discussion boards where members engaged in ongoing dialogues with each other by first initiating topics of conversation w ith a seed post, and then listening and responding to others comments in asynchronous conversations. completely posts were public and were archived on the website for posterity.In the words of a Rennlist member, the web forums simulated a virtual fellowship I arousent had as much fun talking about cars in many years, than Ive had on these forums. more times its like sitting around a macro roundtable with everyone having beers and telling war stories & giving each other help. Its fraternity and I value it. trance anyone who joined could post to Rennlists discussion forums, the majority of posters claimed to own at least one Porsche vehicle. Most posters used a virtual signature which contained a list of their Porsche cars.The Porsche Brand as an person-to-person identity Marker Do Rennlist posts painted a express of Porsche as an ego-expressive brand. While postings seldom addressed the shorten directly, a sense of Porsche as a virile identity marker was palpable in the kinds of topics discussed the focus on performance metrics, engineering standards, and admiration for Porsches manufacturing and racing prowess. Occasionally, however, posts like this appeared Theres super hot women everywhere, ignoring ustons of hotties, no love (and in some cases a bit of situation and contempt) from any of them ntil we walk outside and head to my 996. When it is homely as to which car we are going to, I hear, Mr. bald guy (I overhear 5 This document is authorized for use only by Uma Jaidev at VIT UNIVERSITY until August 2013. Copying or posting is an infringement of copyright. emailprotected harvard. edu or 617. 783. 7860. Porsche The Cayenne Launch rP os t 511-068 no hair) Where are you going? surveil back from a group of about 10 absolutely drop dead beautiful, tightly clothed, amazingly sexy women on the patio. (Rennlist post)Porsche as a socio-economic situation marker was seldom expressed directly, and often expressly denied Id like sight to see me in my Porsches and believe there goes a person who strongly appreciates his sports cars, not there goes another yuppie with more money than brains. (Rennlist post) Initial Response of Porsche Enthusiasts to the Prospect of the Cayenne Launch op yo Hostility to the launch of the SUV was intense. A exhaust of Rennlist showed conversations about the Cayenne reaching a feverishness pitch as the launch approached.Exhibit 7 shows the number and valence of posts over time. In the New York Times, the break-dance of Porsche Petes Boxster Board (another Porsche online brand community), claimed No other Porsche past, present, or future tell aparts close to generating the kind of on-line conversation reception that the Cayenne has. 24 Some posts suggested that a source of pride was about to become a source of shame. It makes me embarrassed of owning a Porsche sort of like that coition you fathert want to admit share-out the aforesaid(prenominal) bloodline.Ugh (Rennlist post) I am ac tually watcheronored of Porsche stopping to be a pure sports car companyA SUV (SlowUgly-Vehicle) The ANTI-SPORT CAR, a heavy, slow, clumsy, and roll-over happy SUV will share the same emblem on its hood than our sportscars. Sad times for Porsche. (Rennlist post) tC Some Porsche owners posted that they were leaving the brand for refers Ferrari, Aston Martin, or Maserati, after claiming that Porsche had interchange out. Others collectively mourned the loss of the brand they knew and loved.As key design, engineering, manufacturing, and market decisions were released by Porsche, consumers used Rennlist as a place to vent displeasure. There hardly aint nothing Porsche in a SUV. (Rennlist post) No I have been loose to Porsches since the age of 10. I have seen all the models come and go, but the Cayenne is the first non-sports car to come up and I trulyly take int like this direction at all. Porsche has always been interchangeable with sports car and now somebody can evidence I have a Porsche and mean a Cayenne I could not imagine a Ferrari SUV for example (Rennlist post)Do Just as they had done with anterior models, enthusiasts criticized design and engineering attributes of the SUV. The Cayennes front-mounted, water-cooled engine offended genuine Porsche purists. Early photographs of the Cayenne were met with ridicule in the online community, and sparked many conversations about how loathsome the Cayenne was and how it resembled the Hyundai Santa Fe. Some argued that the Cayennes design was feminine and lacked the manly stance of competitors like the slug and the Jeep. Porsche enthusiasts were also dismayed that the Cayenne included supererogatory amenities such as cupholders and a tiptronic robotic transmission, which suggested that the Cayenne was knowing for drivers who valued luxury over driving performance. These features confirmed that the Cayenne was not intentional as a drivers car, but rather, that it was designed to appeal to what Pors che owners called suburban, yuppie, soccer moms. In online conversations, Porsche owners repeatedly called the Cayenne a car for poseurs, concourse who did not control the history, 6 This document is authorized for use only by Uma Jaidev at VIT UNIVERSITY until August 2013.Copying or posting is an infringement of copyright. emailprotected harvard. edu or 617. 783. 7860. 511-068 rP os t Porsche The Cayenne Launch heritage, and performance of a Porsche, but who bought the brand merely for its stead or imageappeal. 20 years ago, when you said you had a Porsche, people looked at you with envy. 10 years ago, when you said you had a Porsche, people looked at you with envy. To twenty-four hours, when you study you have a Porsche, people will reply oh, those trucks? I got one of those too. (Rennlist post) I only when felt really sad.Now soccer moms can drive their kids around in a Porsche. Pretty sad. Look at the level that Porsche has been brought down to. BIG MISTAKE (Rennlist post) op yo And the people who will use it Suzy-Housewife, as well as Dorky Dick whos been beaten up through high shoal last-placely bought his first ahem, PORSCHE got the A-OK from the wife so long its practical dear (Rennlist post) The Cayenne will be bought as a car for the sticker wife to take the kids to school, the only time it will go off road will be when it goes up on the curb.Come on how many real rear engined Porsche enthusiasts will buy one. (Rennlist post) Product tuition and Manufacturing Criticism No tC Porsches product development and manufacturing decisions figured prominently in the real Porsche debate and became fodder for arguments against the Cayenne. By spring 1998, Porsche was negotiating with Volkswagen to conjointly develop and manufacture SUVs. Under the proposed arrangement, Porsche would undertake the research and development of the SUV and Volkswagen would invest about $657 million in the project. 5 The new SUVs would share close to 65% of their parts and modulesthe same chassis and some technologiesbut showcase different exterior styling, engines, and chassis tuning. Porsche would develop the two models as well as the roughhewn platform. VW would be responsible for major aspects of business, with last(a) Cayenne aggregation to be conducted by Porsche. 26 Partnering with VW was an skilful coup, an observer noted Half of Porsches kale come from the Cayenne. That model was developed in coaction with VW and was make in VW plants. The car is 90 pct VW and 10 percent Porsche. 27 Skeptics worried about paying Porsche prices for a VW, but were assured that the R&D of the new model was purely Porsches domain, epoch its partner would oversee only the production of some major components, excluding the engine. 28 But as one financial analyst opined, the Cayenne would struggle Porsches brand credibility to the absolute limit. 29 Porsches partnership with Volkswagen caused consternation among Porsche enthusiasts. Earlier Porsche ca rs produced with Volkswagen, such as the 914 and 924, had been criticized by enthusiasts as faux Porsche vehicles. Many claimed that the Cayenne was a Porsche-ized VW built with too muchVolkswagen content. When Porsche launched a V6 model of the Cayenne which contained a Volkswagen engine, ins tea leafd of the Porsche engines have in the V8 and Turbo models initially launched, Porsche consumers cried heresy. When some independent testers chose the Volkswagen Touareg over the Porsche Cayenne in performance tests, consumers cemented their skepticism and claimed that, suddenly, there was a substitute for a Porsche, and it was a Volkswagen Touareg. Do Porsche and VW do not seem to be in bed on this project, they are in bed on this project. They are both exactly the same basic vehicle.VW gave Porsche the chassis and said go and design a SUV if you want to be our partner on thisSo the VW Toureg and Porsche Cayenne are both Porsche designed on a VW chassis and when they are pulled off the line to go up to Leipzig you will not be able to tell the difference. Only when the Cayenne leaves Leipzig will it look any different. When it has been Porscherised with engine and cosmetics. (Rennlist post) 7 This document is authorized for use only by Uma Jaidev at VIT UNIVERSITY until August 2013. Copying or posting is an infringement of copyright. emailprotected harvard. edu or 617. 783. 7860. Porsche The Cayenne Launch P os t 511-068 Sorry, the Cayenne is a Porsche While some of the design is shared with VW and some components built VW factories, Quality Control was still administer by Porsche A good analogy to your argument would be having Emeril Lagasse prepare you a dish at his restaurant and then prepare the same dish at your home. Still the same dish, just produced elsewhere (Rennlist post) Enthusiasts were distressed to find that the Cayenne had a Japanese transmission. They saw this as a further decline in build quality that came when Porsche switched to Japanese manuf acturing processes and away from its handcrafted heritage.In their online conversations, enthusiasts yearned for the days when their Porsche cars were Porsche designed, constructed from German-made parts, and manually assembled in Germany by racing engineers. op yo I was reading in Panorama blend night that the Cayenne has a 6 f number tip tranny which is produced in Japan. Is this true? Seems like Porsche is just outsourcing as much as possible to keep on profits high. Both my cars have Japanese parts (A/C), but nothing so substantial as a transmission. Whats next, engines from the Far eastern hemisphere? Im less and less impressed every day I read more. Rennlist post) IMHO a German car with German Ing should have German parts, especially for something as major as the tranny. Isnt that part of the identity of the brand? oops.. forgot, Porsche doesnt value the brand identity that was built over the last 50 years anymore. The old professor Ferry Porsche dies and look what happens an SUV. (Rennlist post) No tC Personally the thought of purchasing a Porsche with some of its major components outsourced to the Far East is analogous to buying what you think is a fine Swiss time piece that turns out to have a cheap(er) Japanese movement inside.To me that would be unacceptable. Yes, both ladder, and work well, but the indicate you bought the Swiss one in the first place was to get the hand crafted Swiss quality and workmanship that dates back hundreds of yearsI certainly hope this will not be the future for Porsche cars. Those who know the real definition of build quality know exactly what I am talking about. Most Japanese press isnt even worth rebuilding, because it is designed to be replaced when it is done. The old German design and build philosophy was much different than the modern Japanese design (if there is such a thing) and build philosophy.Porsche cars used to be about hand crafted high quality performance, but all that seems to have gone out the wind ow these days just to make more profits. (Rennlist post) Wiedeking defended his design and manufacturing decisions, claiming that Porsche rivet on its core competencies engine manufacturing, RD, body shell work, assembly, quality control, and highly professional distribution, while relying on extended work benches at Valmet, VW, and its lucre of suppliers. It reduced its in-house production depth to one of the final in the industry, shared some components with VW such as electronics, and split RD costs with VW. 0 Do Finally, Porsches decision to build the Cayenne in Leipzig, in the former East Germany, prepare into question whether the Cayenne could be a real Porsche. Rennlist members who visited the Leipzig plant brought back bad news. The Leipzig plant was little more than a final assembler, with most of the assembly work universe done by machine-controlled machines. To enthusiasts, the Cayennes assembly in Leipzig border into question its Made in Germany moniker. Leipzig d id not carry the German manufacturing heritage of Zuffenhausen its location in East Germany was associated with the Communist era.Nice try, but arent our Cs actually built out in some Skoda plant in Eastern Europe and then final assembled in Leipzig? This may explain some of the initial build quality problems. 8 This document is authorized for use only by Uma Jaidev at VIT UNIVERSITY until August 2013. Copying or posting is an infringement of copyright. emailprotected harvard. edu or 617. 783. 7860. 511-068 rP os t Porsche The Cayenne Launch Ive read that the Eastern European manufacturing workforce has some of the attitudinal and work ethic habits of 1970s era Detroit car builders. beau ideal forbid. (Rennlist post)Here is a firsthand report of someone who visited the Leipzig factory on March 19, 2004 What amazed me most was how small it was. They really were just integrators and assemblers there. Much of the car (the speeding shell and interior) comes in from Bratislava, and th e power plant from Zuffenhausen. The tranny from Asia and it is all put together and married with 18 BOLTS Thats it Funny. After it is put together, they test drive separately ONE on the track. I found that to be very interesting quality control, and also a testament to the difference between a VW and a Porsche. Clearly, the Cayenne is not built in Leipzig.Leipzig is where the final assembly and final QC are done. Im sure that the quality control of Porsche is much better than that of VW. But it is not a car manufacturing plant. (Rennlist post) op yo Having toured the factory in Leipzig two weeks ago, I can assure you that the Cayenne final assembly is mostly by machine, not by hand. The level of automation is amazing. It takes 170 production workers per day to produce 130 Cayennes per day. It takes 80 production workers per day to produce 2 Carrera GTs per day (Rennlist post) And on their website they are boasting about how its Made in Germany and what that means.Maybe the thing s hould say kinda-put-together in Germany. (Rennlist post) tC Wiedeking defended his decision to assemble in East Germany The Leipzig location brings our firm advantages, other than we would have never built the plant there. But we also create jobs in an economically reeking region. 31 However, a Porsche spokesperson confirmed the vastness of manufacturing location to Porsche enthusiasts, Location is not an uncritical issue. People think that as a car comes off the line at Zuffenhausen, Ferdinand Porsche comes by and wieldsses the car with his hand, and that makes it an official Porsche.Of course, Ferdinand Porsche hasnt been doing that for some time. 32 Hostility Toward Cayenne Buyers In December 2002, European dealers began to sell the Cayenne, and in March 2003 it was on sale in the United States. Postings by some Porsche owners took on a threatening tone. turn in owning a Cayenne and see how youre tough by other Porsche owners. (Rennlist post) No Oh and just so you guys knowy ou are the laughing stock of all other Porsche owners. (Rennlist post) One thing is for sure the SUV is NOT my brother I always accepted the other models in the family the 928s, 924s, Boxsters, etc.They were all sports cars. But the SUV never (Rennlist post) Others echoed the sooner c erstrn that the new car would shame them. Do People will buy these Porsche S. U. V. s because theyre a fad, and theyll embarrass the real Porsche crowd. Theyre not going to know how to drive and theyll do preposterous things. Its scary to think about. (Rennlist post) There was a wish to purify the community by animadversion or ostracism. On the road, Porsche owners refused to extend their fraternal recognise to Cayenne owners, limiting it to sports car owners only.They tried to terminate Cayenne owners from joining local Porsche clubs and refused to allow them to race alongside sports cars in club-sponsored racing event. 9 This document is authorized for use only by Uma Jaidev at VIT UNIVERSITY u ntil August 2013. Copying or posting is an infringement of copyright. emailprotected harvard. edu or 617. 783. 7860. Porsche The Cayenne Launch rP os t 511-068 So how about the Cayenne? Seems kinda funny flashing lights at an SUV even if it has a Porsche badgeDont think I can (Rennlist post) Im with you guys on the Cayennes. I dont seethe to drivers of re-badged VW Touregs either. Rennlist post) Please dont flash your lights or honk your horns at me. You will only see my longest riffle back at you. (Rennlist post) My point it that all SUV owners should take their toys and play in their playground. NOT in mine. divulge other SUVs go to the track and have fun together. (Rennlist post) op yo Theres still one problem A Cayenne, driven by the owner of other Porsche cars may be able to perform miracles that would embarrass all competitors in an autocross situation but the scary thought is that PCNA Porsche Cars North America are predict that many Cayenne owners will not be previous Po rsche drivers.Having these people who could be unaccustomed to a vehicle of such power, may very well overstep their abilities in trying to keep up (or prove themselves) to the rest of us and cause some real damage. Yes, Im biased against the Cayenne. Yes, I think the whole idea of a Porsche SUV is a mistake. (Rennlist post) The newcomers would not understand the values of the community they want to join. They have little of no feeling of belonging, no understanding of the lineage of Porsches and where their cars were derived from. They dont care about that, most are probably just poseurs. Rennlist post) tC Itll be piloted by folks who woulda bought the Mercedes Benz/Range Rover if there werent five of them in the subdivision already, who wouldnt consider a Lexus because its jap crap and who think BMW/VW is beneath them. Theyre not enthusiasts, theyre consumers. They wont know or care that old time P-snobs will shun them. (Rennlist post) Cayenne Buyers Respond Some Cayenne buyers s ought to broaden the Porsche community to include themselves as members of good standing, or at least to appeal to the better natures of the old guard.No This sense of kinship is getting lost due to lines existence drawn between one group to another. (Rennlist post) I thought being a Porsche owner was like joining some sort of fraternity of something but its more like Boxster, Cayenne owners are the red-headed step child of some dysfunctional Porsche family. Did all entry level Porsche owners get this much crap when they bought their new Porsches? (Rennlist post) Do So am I to understand that you are allowed to rail against and hurl invective and others are not? Look. You like your car, I like mine.Im not going to bash yours, and I go out of my way to salute yours. Why do you continue to bash my choices? (Rennlist post) Please start being nicer to each other. This is not the correct time to start having a go at each others throats. (Rennlist post from a site moderator) Sadly, the ranks of Porsche owners seems to be populated by those into model specific devisiveness and comparison pissing teammatees. Where at once a camaraderie of enthusiasm existed, now lies a state of SUV owners looking for the next status symbolisation and those remaining 10This document is authorized for use only by Uma Jaidev at VIT UNIVERSITY until August 2013. Copying or posting is an infringement of copyright. emailprotected harvard. edu or 617. 783. 7860. 511-068 rP os t Porsche The Cayenne Launch few who love the maker of their dream cars fight with one another over which model is beat out and how effeminate or inadequate another model is compared to theirs. (Rennlist post) Spillover into the Offline World While the real Porsche debates raged on Rennlist, Porsche enthusiasts began to take their criticisms into the offline world.Consumer-generated-advertising spoofing the Cayenne made its way around the Internet (see www. flickr. com/photos/alecmcint/447172 for a sample). Consum ers circulated bumper stickers, pass plate frames, and t-shirts for the Cayenne with slogans like My other car is a REAL Porsche. Cayennes advertising featuring headlines such as Only one sport utility vehicle has bloodlines like these and Another writhe branch on the family tree set off online rants. An article in Internet magazine Autoextremist captured the way op yoPorsches advertising campaign for the new Porsche Cayenne is the latest attempt to interrelate its ungainly SUV to its superior sports car and traditions, and in doing so it achieves a new low for the once-bulletproof brand by at once dismissing its own legacy and insulting the intelligence of every auto enthusiastPorsche, or otherwisein the processA stretch that only psychoneurotic Porsche marketers could possibly attemptand a flat-out insult to every striking Porsche sports car that has come before itTo link it the Cayenne in any way to some of motordoms most historic and legendary machines is an outrage. 3 t C What was said and done on Rennlist traveled beyond the online community. Compelling posts were often copied and pasted to other online communities and to personal and professional blogs. Press reporters used online brand communities like Rennlist to find consumers who were willing to talk about the brand in the press. Porsche owners bring upd in news stories about the launch were longstanding, active online brand community members. The mainstream press began to reflect the online zeitgeist of the Porsche enthusiasts.Autoextremist warned that The SUV threatens to destroy the very soul of the company,34 while the Los Angeles Times announced that Snowballs are rolling emerging in Hades. Porscheshudderwill build an SUV. 35 Porsche probably has the purest DNA of any sportscar maker. I dont care how good an allwheel-drive wagon is, its not a sportscar. If you add a car that does not fit with your brands image, you must(prenominal) reduce the power of that image. (Porsche consumer quo ted in Herald-Sun)36 No Everything about the Cayenne is completely the opposite of what Porsche is and does.It will be the death of a tradition. (Porsche consumer quoted in the New York Times)37 Its blasphemyIm not hot on the idea at all. Ive lived with Porsches all my life and the marquee has always been Porsche sports cars. To bring out an SUV doesnt sit well with me. (Porsche consumer quoted in the Los Angeles Times)38 all truck made by Porsche deserves to be a failure. Its a disgrace to the Porsche name. (Porsche consumer quoted in Autoweek)39 Do Cayenne Owners Become Assertive Cayenne owners began to let loose in support of their vehicles.They deflected soccer mom, yuppie, and poseur stereotypes, claiming to be fellow Porsche enthusiasts. They told stories about how they would take their SUVs off-road, or use them to tow their Porsche race cars or boats, or to find adventure sports like skiing, hiking, hunting, and fishing. They bragged about the performance of their Cayennes and wrote of whacking other sports cars, including the Porsche Boxster, off of the line at art lights. They described positive reactions they received from others. They referred to their 11This document is authorized for use only by Uma Jaidev at VIT UNIVERSITY until August 2013. Copying or posting is an infringement of copyright. emailprotected harvard. edu or 617. 783. 7860. Porsche The Cayenne Launch rP os t 511-068 SUVs as sports cars and circulated a revisionist history of Porsche in which the Cayenne is a logical descendant of Porsche classics. They reminded readers that Ferry Porsche was the driving force behind the Cayenne By now, I gotta say the C Cayenne is a winner. Its not really even an SUV in the traditional sense.Its primary focus, like all porsches is performance, and with a right away face, I can tell you its attractive much a sports car with some suv traits. (Rennlist post) op yo You may not need a vehicle that can carry kids, go to the snow, haul a few things and is fun to drive, but that doesnt mean no one does. The Cayenne may not match the 996 (almost nothing else does) but if it outhandles and outbrakes 90% of the vehicles out there, has great power, is fun to drive, offeres good utility, and has room for more of your stuff (including the dog) if that is required, wherefore on earth wouldnt you want one if you were ooking for that type of vehicle. Why wouldnt ANYONE want one who can afford the price of ingress? (Rennlist post) The Sports Car Owners Respond Not all sports car owners were hostile to the Cayenne. Indeed 18% of the first wave of buyers owned Porsche sports cars. As time passed, postings began to appear on Rennlist embracing the Cayenne. The posters noted that, unlike many SUVs built for the road, it handled like a sports car with sports car quickening and nimbleness, yet had the ability to perform like a true off-roader and had impressive towing capacity. C All this over an SUV rolleyes And all this talk about how the newer porsches arent true to their sportscar heritage, seems to me all new cars are going this way, in the end a car company has to worry about selling new cars a lot more than selling old cars and new car buyers for the most part want all those luxuriesIf Porsche thinks it needs a SUV to remain strong in the marketplace let them build it. Mercedes has an SUV for chrissakes are they any less of a luxury car company because of it? (Rennlist post) NoIf youre really a Porsche enthusiast, you recognize that theyre first and foremost the worlds best automotive engineering firm, and the Cayenne looks to be more proof of that. Conceptually, I dont see it as being that far away from the 928. I cant imagine a reason in the world why anybody would care that it has four doors. (Rennlist post) Pity you feel that way. Do you wave to 914 owners? How about 924 owners? Who decides which Porsche are worthy and which are not? I know plenty of enthusiasts that have Cayennes as second vehicles. While the Cayenne is not my cup of tea Ive driven a few and they are moderately impressive for an SUV.Do you really want to be one of those drivers that wave to some Porsches and not others? No brand intended just something to consider. After all there are some out there that dont think a 986 or a 928 are real Porsches either (Rennlist post) Do I have to say that negative opinions (regarding what is and is not a real Porsche) DO, in fact, piss me off. Who the hell is ANYONE, other than Porsche, to say what is and is not? I, personally, would NEVER buy a 924. I dont like them. I dont like how they look. I think they are underpowered and somewhat boring. Is it a real Porsche? Of course it is You know why?Because PORSCHE built it and SAYS it is Some shmuck who owns a 911 decides that a 944 isnt real. Show me how he is qualified to make that assesment. Does it have a Porsche badge placed there, at the factory, by PORSCHE Then it is (Rennlist post) 12 This document is authorized for use only by Uma Jaidev at VIT UNIVERSITY until August 2013. Copying or posting is an infringement of copyright. emailprotected harvard. edu or 617. 783. 7860. 511-068 rP os t Porsche The Cayenne Launch However, the majority of the community continued to attack the Cayenne, delegacy it to the bottom rung of the groups status hierarchy.Feeling the pressure, Cayenne owners posted their feelings. So SICK OF THIS, like the Cayenne, and plan to buy one. I come to this forum to get updated info, whats new. What I find is the same people making post after post of the same thing, Its ugly, I dont like the name, why isnt Porsche racing Bla Bla Bla. Do these same people go to the 914 forum and tell them their cars have VW motors, or the 924 forum and harp about Audi truck motors? (Rennlist post) op yo I have the V8 Porsche Cayenne and guess I get a little defensive when people call it a VW and I paid close to 69K for a quote un-quote VW.I know deep down in my stock ticker that I have a Porsche (Renn list post) well, maybe the bashing was daft this timebut its being going on day in day out for the past yearYeah, I shouldnt let it nark mebut after a while anything starts to tire out thintrust me. (Rennlist post) Any of you guys ever hear the expression if you dont have anything good to say dont say it. Almost every time someone is excited about purchasing this vehicle some of you guys have to post something negative. Please next time post what you drive so I can use every opportunity to tell you what throw away you drive. Rennlist post) Looking Ahead No tC Porsches senior management shrugged off the negative bombination from consumers. Despite the withering criticism from consumers, shareholders, and the press, Wiedeking claimed he was not concerned, though he admitted that the decision to build the Cayenne was certainly not selfevident. He said that Porsche was copiously scolded for moving away from its brand core so it knew that it had to be a success. Wiedeking argued t hat launching the Cayenne took the same courage that Porsches founder had demonstrated when he founded Porsche in 1931 during the Great Depression. 0 Schwab, Porsches North American President, labeled consumers response naive, Those in the Porsche Clubs of America will castigate us for the SUV decision, but they just dont know business. For them to keep having their pricey 911s, we have to find a niche elsewhere. That is modern business. 41 Do Wiedeking and Schwab were already looking ahead to their next big launch, the Porsche Panamera, the companys first ever four-door sedan. Envisioned as a rival to Maserati, BMW, Audi, and Jaguar sedans, Panamera would further diversify Porsches product portfolio and customer base. The Panamera is a perfect fit for Porsche, Wiedeking professed, It has all the typical DNA characteristics of a genuine sports car. In terms of performance, design, and driving dynamics, it meets Porsches high standards in every respect. 42 13 This document is author ized for use only by Uma Jaidev at VIT UNIVERSITY until August 2013. Copying or posting is an infringement of copyright. emailprotected harvard. edu or 617. 783. 7860. Porsche The Cayenne Launch Exhibit 1 Porsche Milestones rP os t 511-068 Ferdinand Porsche born Sept. 3 in Maffersdorf, Austria-Hungary. 1909 Ferdinand Anton Ernst (Ferry) Porsche born Sept. 9, in Wiener Neustadt, Austria. 1950 Porsche begins 356 production in Stuttgart-Zuffenhausen. 1951 The senior Ferdinand Porsche dies at age 70. 1953 Porsche introduces the 550, its first racing-specific car, which meets immediate success. 1964 Porsche introduces the 911. The company had produced 78,000 Type 356s in 14 years. 1972 Porsche KG becomes a joint stock company (AG). Ferry Porsche, chairman of the supervisory board, precludes all family members, including himself, from direct management roles. 1978 Launch of the front-engined 928 touring car. 1982 Launch of the 944 sports car. 1984A third of Porsche AGs capital is offered to the public in the form of nonvoting preference shares on April 25. On Sept. 19, his 75th birthday, Porsche receives the unearned title of Professor. 1990 Butzi Porsche (Ferdinand A. ) succeeds Ferry Porsche as chairman of Porsche AGs supervisory board. Butzi began his own firm, Porsche Design, in 1972. 1992 Wendelin Wiedeking becomes CEO of Porsche. 1996 Launch of the Boxster two-seater sports car. 1997 Porsche introduces its all-new, water-cooled 911 (the 996) at the capital of Kentucky Motor Show. 1998 The company prepares to celebrate 50 years of building sports cars with the Porsche name.Ferry Porsche, honorary president of the Porsche AG supervisory board since 1990, dies March 27 at the age of 88. 2001 Porsche releases its plans to build an SUV. 2002 European launch of the Cayenne in December. 2003 U. S. launch of the Cayenne in March. No tC op yo 1875 Do Source Porsche Timeline, AutoWeek, April 6, 1998, and casewriters. 14 This document is authorized for use only by Uma Jaidev at VIT UNIVERSITY until August 2013. Copying or posting is an infringement of copyright. emailprotected harvard. edu or 617. 783. 7860. Exhibit 2 511-068 Porsche Relative decline Price Performance 600 500 rP s t Porsche The Cayenne Launch January 1998 US$168 300 200 100 January 1997 US$87 Ja nM 90 ay -9 Se 0 p9 Ja 0 nM 91 ay -9 Se 1 p9 Ja 1 nM 92 ay Se 9 2 p9 Ja 2 nM 93 ay Se 9 3 p9 Ja 3 nM 94 ay Se 9 4 p9 Ja 4 n9 M5 ay -9 Se 5 p9 Ja 5 nM 96 ay -9 Se 6 p9 Ja 6 nM 97 ay -9 Se 7 p9 Ja 7 n98 0 op yo 400 DAX 30 tC PORSCHE DATASTREAM GERMAN motorcar INDEX Do No Source Thomson monetary Datastream, accessed February 13, 1998. 15 This document is authorized for use only by Uma Jaidev at VIT UNIVERSITY until August 2013. Copying or posting is an infringement of copyright. emailprotected harvard. edu or 617. 83. 7860. Porsche The Cayenne Launch Exhibit 3 Porsche Group Highlights 19952002 rP os t 511-068 19951996 19961997 19971998 1998-1999 1999-2000 2000-2001 2001-2002 2002-2003 mi llion million million 1,437. 7 527. 7 910. 0 2,093. 3 671. 9 1,421. 4 2,519. 4 735. 5 1,783. 9 3,161. 30 955. 6 2,205. 70 3,647. 70 893. 2 2,754. 50 4,441. 50 1,001. 30 3,440. 20 4,857. 30 1,121. 00 3,736. 30 5,582. 00 1,482. 50 4,099. 50 Vehicle Sales Domestic Porsche trade Porsche Other Models Vehicle Sales Porsche 911 928 944/968 Boxster Cayenne Units Units Units Units Units Units Units Units Units Units 19,262 ,873 13,346 43 19,219 19,096 104 19 32,383 9,670 22,713 32,383 16,507 15,876 36,686 9,174 27,512 36,686 17,869 18,817 43,982 10,607 33,375 43,982 23,090 20,892 48,797 11,754 37,043 54,586 12,401 42,185 54,234 12,825 41,409 66,803 13,896 52,907 48,797 23,050 54,586 26,721 54,234 32,337 66,803 27,789 25,747 27,865 21,897 18,411 20,603 Production Porsche total 911 Carrera GT 928 944/968 Boxster Cayenne Other Models Units Units Units Units Units Units Units Units Units 20,242 20,242 20,132 28 82 32,390 32,390 16,488 15,902 38,007 38,007 19,120 18,8 87 5,119 45,119 23,056 22,063 48,815 48,815 22,950 55,782 55,782 27,325 55,050 55,050 33,061 73,284 73,284 29,564 7 25,865 28,457 21,989 18,788 24,925 Employees Personnel expenses At year-end million 7,107 392. 1 7,959 464. 4 8,151 528. 2 8,712 574. 9 9,320 631. 3 9,752 709. 9 10,143 799. 4 10,699 849. 5 Balance Sheet Total Assets Shareholders Equity dictated Assets Capital Expenditures Depreciation Extended Cash diminish Net income before taxes Net income after taxes Dividends million million million million million million million million million 951. 4 239. 1 482. 5 213. 6 67. 7 ,249. 7 298. 1 565. 3 234. 8 107. 6 27. 9 24. 6 1. 8 84. 5 71. 3 13. 0 1,490. 9 415. 8 579. 6 175. 8 157. 1 413. 1 165. 9 141. 6 21. 9 1,916. 10 587. 4 525. 6 155 183. 7 592. 5 357 190. 9 21. 9 2,205. 40 782 577. 7 243. 7 196. 6 506. 5 433. 8 210 26. 4 2,891. 60 1,053. 30 731. 8 293. 8 132. 7 764. 4 592. 4 270. 5 45 5,408. 70 1466. 80 2,207. 70 1,119. 50 278. 80 1,067. 30 828. 90 462. 0 0 297. 00 6,315 1,754. 50 2,663. 30 1,295. 20 392. 20 1,389. 60 933. 00 565. 00 59. 00 Do No tC op yo Sales Domestic trade Source Casewriters, compiled from data listed in Porsche Annual Reports, 1995-2002, http//www. orsche-se. com/pho/en/ investorrelations/mandatorypublications/, accessed December 2005. Note HGB and IFRS denote accounting standards. In 2003 Porsche adopted IFRS, or International Financial reporting Standards. 16 This document is authorized for use only by Uma Jaidev at VIT UNIVERSITY until August 2013. Copying or posting is an infringement of copyright. emailprotected harvard. edu or 617. 783. 7860. 511-068 rP os t Porsche The Cayenne Launch Premium SUV Market Information (19961998 forecast) (in units) Exhibit 4 400,000 350,000 300,000 op yo 250,000 200,000 150,000 100,000 0,000 0 1996 tC Luxury 1997 Upper middle class 1998 spunk class Do No Source Casewriters, compiled from data contained in IHS Global Insight Report, World jobless Truck Industry Forecast, 19 99. 17 This document is authorized for use only by Uma Jaidev at VIT UNIVERSITY until August 2013. Copying or posting is an infringement of copyright. emailprotected harvard. edu or 617. 783. 7860. This document is authorized for use only by Uma Jaidev at VIT UNIVERSITY until August 2013. Copying or posting is an infringement of copyright. emailprotected harvard. edu or 617. 783. 7860.