Porsche Cayenne

JOHN DEIGHTON JILL AVERY JEFFREY FEAR op yo Porsche The cayenne pepper build In March 2003 the Porsche dirt faced a challenge without precedent in 55 years. Since the e erect of the Porsche 356 in 1948, the dirt had stood for expensive, high- mathematical process sports political machines. Its images, varying little oer the decades, formed and then came to spring the nonion of a segmentationic n sports machine. It was a connoisseurs racing vehicle, locomotive engineered for speed and maneuverability. But it was also a rebels car the car James Dean died in and that Tom Cruise ditched in the motion picture Risky Business.Al directions and everywhere, Porsches were sports cars. tC 2003 marked the end of this single-minded focus. In March of that year, it launched a sports utility vehicle (SUV), the Porsche chili. The extension of the brand to a novel product category posed many an otherwise(prenominal) challenges. Looking ahead, the union had to moot round how to posit ion the chili pepper while protecting the Porsche p atomic number 18nt brand. How such(prenominal) and in what ways would the chilli pepper change Porsches im mount up and brand individuality? The participation also had to decide what to do active the on oing consumer-to-consumer ng conversations in online Porsche brand communities.Some argued that online brand communities were an important source of consumer research. Others argued that the consumers who participated in the online conversations held views more utmost(prenominal) than the average consumer. Were they of any value in deciphering the securities industrys renegotiation of Porsches brand meaning? n No The Legacya Do Ferdinand Porsche was born on family 3, 1875 in Bohemia, part of the former AustroHungarian Empire. afterwards a brief stint as Daimler-Benzs technical director, he left the company, which did not want to do small, fast cars for the public.Unemployed at 55, Porsche started his own design firm. The staff grew to include virtually of the luminaries of German elevator carmotive engineering, Porsches son, Ferdinand Anton Ernst ferry Porsche, his son-in-law, Anton Piech, whose son became chairman of Volkswagen, and a slip awayful of key en ineers. Ferr became head of ng ry research and set aboutment. a This section draws from Jeffrey R. apprehension and railway carin-Isabel Knoop, Dr. Ing. h. c. F. Porsche AG (A) and (B), HBS Nos. 706-018 and 706-019 (Harvard Business School Publishing, 2006). _______________________________________________________________________________________________________________ HBS Professor John Deighton, Jill Avery (Simmons School of Management), and Jeffrey Fear (University of Redlands) prepared this case. This h case was developed from published sources. HBS cases are developed solely as the basis for class discussion. Cases are not intended to attend to as endorsements, sources of primary data, or illustrations of effective or ineffective mana gement. Copyright 2011 President and Fellows of Harvard College.To order copies or request permission to re let materials, call 1-800-545-7685, carry through Harvard Business School Publishing, Boston, MA 02163, or go to www. hbsp. harvard. edu/educators. This publication may not be digitized, photocopied, or differentwise reproduced, transported, or transmitted, without the permission of Harvard Business School. This account is authentic for use al matchless by genus Uma Jaidev at VIT UNIVERSITY until grand 2013. copy or visiting card is an assault of copyright. emailprotected harvard. edu or 617. 783. 7860. Porsche The chile Launch rP os t 511-068In 1934, Adolf Hitler asked Porsche to develop a family car that was both cheap and reliablethus the sights car or Volkswagen, was born. Its design was intended to rear the German infantry helmet and honor National Socialist ideals. During wartime, Porsche focused on tank design, including the formidable Tiger. In June 194 8, the company launched the 356, the beginning automobile to carry the Porsche brand mark. A Volkswagen factory manufactured the 356b, with its tubular spaceframe chassis, aluminum body, and rear-mounted four-cylinder engine, until Porsche opened its own production facility in Stuttgart-Zuffenhausen in 1950. See Exhibit 1 for company milestones. op yo In 1953, Porsche produced its first racing car, the 550. In 1964 came the iconic 911, also a racing car. Designed by Ferrys eldest son, the rear-engine vehicle became a twentieth-century design landmark. In the 1970s, Porsche and Volkswagen collaborated on launching the 914. In 1972, Porsche became a joint stock company (Porsche AG) with the Porsche and Piech families on the board. Porsche AG was nearly 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 time Ferry Porsche commented I for sure bugger off not given away my family name to sell off and ca sh out the company to the highest offer. This philosophy might hold truthful for Ameri keisters, however not for us. 3 tC In 1991, Porsche launched the first of several cars at price points lower than traditionally associated with the Porsche brand. The 911 RS America was a no-frills version of the long-running rear-engine 911 sham priced at $54,000, it ran about $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 Design and production changes traversed in 1992 with the introduction of a revamped, water-cooled 911, the 996. The decision to break with the past and replace the traditional air-cooled engine with a water-cooled engine was seen as a sacrilege to many Porsche purists. No Wendelin Wiedeking became Porsches executive director (CEO) in 1992. In the mid-1990s he steered Porsche through one of its most noteworthy turnarounds.He staved off bankruptcy by cutti ng costs, skimming the product line to two models, bringing Japanese manufacturing processes to Porsches names, 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 shared 40% of its move with the 9966 and was assembled by a third party contract manufacturer, Valmet Automotive, in Finland, rather than at b Porsche 356 Photograph Courtesy 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 long peppe r Photograph Courtesy of The Car Spy, http//www. flickr. com/photos/thecarspy/47216338591. This document is authorized for use simply by Uma Jaidev at VIT UNIVERSITY until expansive 2013. Copying or posting is an attack of copyright. emailprotected harvard. edu or 617. 783. 7860. 511-068 rP os t Porsche The Cayenne Launch Porsches legendary Zuffenhausen plant. We had no choice, express Wiedeking, stressing that on-site German assemblers and engineers ensured that the Boxsters assembled in Finland were 100% Porsche7 and just as good as those made in Germany. 8 The SUV Betc op yo In 1998, Porsche announced its plans to develop an SUV.By then, the 50year old firm was back on fast(a) 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 Cayenne SUV would be the companys third model series, joining the 911 and Boxster sports cars, and the first developed and launched entirely under Wiedekings watch. He wanted the vehicle to combine traditional Porsche styling and performance with off-road driving capability and a spacious interior, placing more emphasis on sport than utility. The unseasoned car had to retain the brands style and trend while accommodating family, outdoor, and transport activities. Wiedeking felt that SUVs were nearer to the sports car business than sedans. We also looked at minivans, solely we do not want an eighth me-too product. It has to be a real Porsche in damage of chassis, performance, and designPorsches core strengths. 9 The average Porsche customer already take a shit three cars an SUV, a sedan, and a Porsche sports car. 10 Wiedeking saw an opportunity We make out from our surveys that a can of our customers are waiting for a Porsche SUV.Then there exit be no doubt that customers keister proudly park their SUV next to a Mercedes S-Class and another(prenominal)(a) cars resembling that. 11 tC Porsche wanted to leverage its pr emium brand to enter a hot, new market to capture incremental growth and to diversify the business to hedge against potential declines in the sports car segment due to economic fluctuations. The company spy other car manufacturers like BMW and MercedesBenz successfully leveraging their brands across a wide range of product categories and wanted to do the same.SUV optimists argued that Porsche had creatively found a way to diversify its aging model range in an oversaturated market. They estimated a breakeven number of 10,000 units priced between DM 100,000 and DM 120,000. By twist 20,000 SUVs a year, Porsche could condescend on its total sales by 50%. 12 The SUV Market Do No In the late 1980s, the Ford Explorer legitimized the SUV as the quintessential Ameri tail family vehicle. The SUVs popularity with U. S. device drivers was attrisolelyed to the nations historic affinity for larger cars and trucks that could serve for both work and personal use.This new breed of vehicle was vi ewed as innately American. Its rugged and powerful appearance, and the promise to combine the carrying capacity of station wagons with the off-road capability of pick-ups, offered an alternative to old fashioned family suburban and rural utility vehicles. The sporty and belligerent design appealed even to those who would never dream of taking a car into rough terrain, namely preppy, youthful professionals, including working women and stay-at-home mothers (colloquially known as soccer 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-like agility, the space of a mini-van, and the utility options of a sport vehicle. Fortunately for owners of such(prenominal) large c This section draws fro m Jeffrey R. Fear and Carin-Isabel Knoop, Dr. Ing. h. c. F. Porsche AG (A) and (B). 3 This document is authorized for use however by Uma Jaidev at VIT UNIVERSITY until fearful 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 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, demand for roominess ( nigh even had 10 cupholders) and the perception of enhanced driver visibility and safety. op yoPorsches SUV would join an already crowded market, estimated at about two jillion units in early 1998. Still, the category ranged from pick-ups, light trucks, and small jeeps to high-end entries such as the Range wandererthe only SUV with a base price over DM 100,000. 14 A successful high-end, high-performance Porsche SUV could trigger me-too chase wi come down two to three years, thanks to the compression of development intervals within the automobile industry. Already, Mercedes Benz was considering an M-Class SUV vehicle with a 300-plus horsepower engine. BMW was also rumored to be interested in developing what would later become the X5.Other European, Japanese, and American brands were looking into developing sumptuosity 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 distributively year. 15 By 1996, the premium SUV market was proving its success. Sales of the 1996 Mercedes off-roader M-Class demonstrated a demand for luxury SUVs (see Exhibit 4 for SUV market information). Luxury/ cross SUVs tar frig arounded the high-end market with top prime(a) interior amenities such as stylish materials (wood and leathe r) and lowered 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 testing a 19-foot crew wagon with a V10 engine. tC contender 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 just 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 million, and capital expenditures for new plant and equipment tripled between 2000 and 2002. 18 No Wiedeking was confident in his SUV dodge Our new sport utility vehicle pass on not only correspond in full with Porsches high technical and visual standards, but w ill also pave the way for future growth potential in the sales, turnover, and earnings areas he promised. 19 An SUV would give Porsche a new place in both profit and revenues. 20 Fred Schwab, President of Porsche Cars North America explained, What is going to distinguish us from them Porsches competitors is that they are making practical vehicles that are good off-road, but are essentially there to get your groceries and take a ride on Sun years. Porsche is in the business of making sportswoman cars. The Cayenne will go faster, handle better and you will be more comfortable in it. It wont swing and sway It will go from zero-to-sixty in 5. 4 seconds. This SUV will be dramatic play to drive. It will be an SUV sports-car lovers 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 four years writing scathing critiques of SUVs that culminated in a verify launched in 2002 entitled High and Mighty The Dangerous Rise of the SUV. In his expressions and book, Bradsher debunked the widely held notion that SUVs were safer than cars and held up SUVs as a prime example of how American consumerism was contributing to global warming. Some began to question the long-term attractiveness of the SUV segment, predicting a move towards smaller, more fuel-efficient cars. 2 4 This document is authorized for use only by Uma Jaidev at VIT UNIVERSITY until high-minded 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 Bradsher also multicolor an unflattering portrait of SUV buyers, Who has been buying SUVs since automakers turned them into family vehicles? They tend to be people who are insecure and vain. They are frequently nervous about their marriages and uncomfortable about parenthood. They often lack confidence in their driving skills.Above all, they are apt to be se lf-centered and self-absorbed, with little interest in their neighbors or communities. 23 Bradsher criticized SUV owners for buying SUVs with functionality that they didnt need, citing auto-industry surveys that showed that less 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 Community 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 Cayenne launch. The launch lit up the numerous and diverse online brand communities devoted to Porsche, as enthusiasts around the world came together to talk about this cataclysmic event in the spiritedness of their brand in chat rooms, vane discussion forums, and blogs. One such community was Rennlist. tC Rennlist, www. Rennlist. com, was an international online community of Porsche enthusiasts founded in 1998.At the time of the Cayenne launch it had 36,000 active posters of comments and a lurker people of 200,000, a silent audience who read but did not participate in the discussions. Rennlist provided a virtual communal gathering place for Porsche enthusiasts, as highlighted in the sites mission acresment Our members look to Rennlist as their community, their international cluband their daily dose of what we are all bonded byan uncommon sand 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 anaesthetic Porsche dealerships enjoyed commercial sponsorship through advertising banners on the site. No One of the most used features of Rennlist was its meshwork forums, online discussion boards where members engaged in ongoing dialogues with each other by first initiating topics of conversation with a seed post, and then listening and responding to others comments in asynchronous conversations. All posts were public and were archived on the website for posterity.In the words of a Rennlist member, the web forums simulated a virtual fraternity I havent had as much fun talking about cars in many years, than Ive had on these forums. Many times its like sitting around a big roundtable with everyone having beers and telling war stories & giving each other help. Its fraternity and I appreciate it. piece 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 Identity Marker Do Rennlist posts painted a picture of Porsche as an ego-expressive brand. mend postings seldom addressed the issue directly, a sense of Porsche as a masculine individuality 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 attitude and contempt) from any of them ntil we walk outside and head to my 996. When it is apparent as to which car we are going to, I hear, Mr. bald-faced guy (I have 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? Come back from a group of about 10 utterly drop dead beautiful, tightly clothed, amazingly sexy women on the patio. (Rennlist post)Porsche as a socio-economic status marker was seldom expresse d directly, and often expressly denied Id like people to see me in my Porsches and envisage there goes a person who truly appreciates his sports cars, not there goes another yuppie with more funds 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 scan of Rennlist showed conversations about the Cayenne reaching a fever surrender as the launch approached.Exhibit 7 shows the number and valence of posts over time. In the New York Times, the founder of Porsche Petes Boxster Board (another Porsche online brand community), claimed No other Porsche past, present, or future comes close to generating the kind of on-line conversation response that the Cayenne has. 24 Some posts suggested that a source of pride was about to become a source of shame. It makes me mortified of owning a Porschekinda like that relative you dont want to admit sharing the same bloodline.Ugh (Rennlis t post) I am actually ashamed of Porsche fillet 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. woeful times for Porsche. (Rennlist post) tC Some Porsche owners posted that they were leaving the brand for rivals Ferrari, Aston Martin, or Maserati, after claiming that Porsche had sold out. Others collectively mourned the loss of the brand they knew and loved.As key design, engineering, manufacturing, and marketing decisions were released by Porsche, consumers used Rennlist as a place to vent displeasure. There just aint nothing Porsche in a SUV. (Rennlist post) No I have been exposed 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 really dont like this direction at all. Porsche has always been synonymous with sports car and now somebody can regulate I have a Pors che and mean a Cayenne I could not imagine a Ferrari SUV for example (Rennlist post)Do Just as they had done with earlier models, enthusiasts criticized design and engineering attributes of the SUV. The Cayennes front-mounted, water-cooled engine offended real Porsche purists. Early photographs of the Cayenne were met with ridicule in the online community, and sparked many conversations about how ugly the Cayenne was and how it resembled the Hyundai Santa Fe. Some argued that the Cayennes design was womanish and lacked the manly stance of competitors like the Hummer and the Jeep. Porsche enthusiasts were also dismayed that the Cayenne included unnecessary amenities such as cupholders and a tracktronic automatic transmission, which suggested that the Cayenne was intentional for drivers who valued luxury over driving performance. These features confirmed that the Cayenne was not designed as a drivers car, but rather, that it was designed to appeal to what Porsche owners called subu rban, yuppie, soccer moms. In online conversations, Porsche owners repeatedly called the Cayenne a car for poseurs, people who did not understand 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 status 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 solar day, when you say you have a Porsche, people will reply oh, those trucks? I got one of those too. (Rennlist post) I just 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 Suz y-Housewife, as well as Dorky Dick whos been beaten up through high school finally 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 poser 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 Development and Manufacturing critical review 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 jointly 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 technol ogiesbut showcase different exterior styling, engines, and chassis tuning. Porsche would develop the two models as well as the common platform. VW would be responsible for major aspects of production, with final Cayenne convocation to be conducted by Porsche. 26 Partnering with VW was an ingenious coup, an observer noted Half of Porsches profits come from the Cayenne. That model was developed in collaboration with VW and was built in VW plants. The car is 90 percent VW and 10 percent Porsche. 27 Skeptics worried about stipendiary Porsche prices for a VW, but were assured that the R&D of the new model was purely Porsches domain, while its partner would oversee only the production of some major components, excluding the engine. 28 But as one financial analyst opined, the Cayenne would push Porsches brand credibility to the absolute limit. 29 Porsches partnership with Volkswagen caused consternation among Porsche enthusiasts. Earlier Porsche cars 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, instead of the Porsche engines featured 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 a ble 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 supervised 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 disturbed to invent that the Cayenne had a Japanese transmission. They saw this as a further decline in build lumber that came when Porsche switched to Japanese manufacturing processes and away from its han dcrafted 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 last night that the Cayenne has a 6 speed tip tranny which is produced in Japan. Is this true? Seems like Porsche is just outsourcing as much as possible to keep profits high. Both my cars have Japanese parts (A/C), but nothing so substantial as a transmission. Whats next, engines from the Far East? 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 purchasi ng 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 work, and work well, but the reason 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 stuff 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 window these days just to make more profits. (Rennlist post) Wiedeking defen ded his design and manufacturing decisions, claiming that Porsche focused 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 network of suppliers. It minify its in-house production depth to one of the lowest 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, put 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 being done by automated machines. To enthusiasts, the Cayennes assembly in Leipzig put into question its Made in Germany moniker. Leipzig did not carry the German manufacturing heritage of Zuffenhausen its location in East Germany was associated with the communistic 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 value-system habits of 1970s era Detroit car builders. God 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 upper shell and interior) comes in from Bratislava, and the power plant from Zuffenhausen. The tranny from Asia and it is all put together and married w ith 18 BOLTS Thats it Funny. After it is put together, they test drive EACH ONE on the track. I found that to be very interesting quality control, and also a volition 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 should say kinda-put-together in Germany. (Rennlist post) tC Wiedeking defended his decision to assemb le in East Germany The Leipzig location brings our firm advantages, otherwise we would have never built the plant there. But we also create jobs in an economically weak region. 31 However, a Porsche spokesperson confirmed the importance of manufacturing location to Porsche enthusiasts, Location is not an uncritical issue. large number think that as a car comes off the line at Zuffenhausen, Ferdinand Porsche comes by and caresses 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. Try owning a Cayenne and see how youre treated by other Porsche owners. (Rennlist post) No Oh and just so you guys knowyou are the laughing stock of all other Porsche owners. (Rennlist post) One thing is for sure the SUV is NOT my chum salmon 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 earlier concern 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 stupid things. Its scary to think about. (Rennlist post) There was a wish to purify the community by exclusion or ostracism. On the road, Porsche owners refused to extend their fraternal greeting to Cayenne owners, limiting it to sports car owners only.They tried to block 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 until August 2013. Copying or posting is an infringement of copyright. emailprotected harvard. edu or 617. 783. 7860. Po rsche 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 fly high 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 finger back at you. (Rennlist post) My point it that all SUV owners should take their toys and play in their playground. NOT in mine. Find 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 betting that many Cayenne owners will not be previous Porsche drivers.Having these people who could be unaccustomed to a vehicle of such power, may very well lapse their abilitie s 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 arrest of the lineage of Porsches and where their cars were derived from. They dont care about that, most are in all likelihood 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 sought to broaden the Porsche community to include themselves as members of good standing, or at least to appeal to the be tter natures of the old guard.No This sense of kinship is getting bewildered due to lines being drawn between one group to another. (Rennlist post) I thought being a Porsche owner was like joining some figure 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 matche s. Where once a camaraderie of enthusiasm existed, now lies a state of SUV owners looking for the next status symbol 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 best 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). Consumers circulated bumper stickers, license plate frames, and t-shirts for the Cayenne with slogans like My other car is a REAL Porsche. Caye nnes advertising featuring headlines such as Only one sport utility vehicle has bloodlines like these and Another twisted branch on the family tree set off online rants. An article in Internet magazine Autoextremist captured the mood op yoPorsches advertising campaign for the new Porsche Cayenne is the latest attempt to link its ungainly SUV to its groovyest 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 delusional Porsche marketers could possibly attemptand a flat-out insult to every great 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 tC 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 quoted 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 enter the very soul of the company,34 while the Los Angeles Times announced that Snowballs are rolling uphill 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 reduce the power of that image. (Porsche consumer quoted in Herald-Sun)36 No Everything about the Cayenne is completely the opposite of what Porsche is and does.It will be the terminal of a tradition. (Porsche consumer quote d 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 Any 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 speak in support of their vehicles.They deflected soccer mom, yuppie, and poseur stereotypes, claiming to be sonny 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 access adventure sports like skiing, hiking, hunting, and fishing. They bragged about the performance of their Cayennes and wrote of beating other sports cars, including the Porsche Boxster, off of the line at traffic 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 straight face, I can tell you its pretty 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 the re, 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, why 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 admission? (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 acceleration and nimbleness, even so 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 food market 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) lenity 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 pretty impressive for an SUV.Do you really want to be one of those drivers that wave to some Porsches and not o thers? No flame 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 sanely 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 Ca yenne Launch However, the majority of the community continued to attack the Cayenne, relegating it to the shadower 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 heart that I have a Porsche (Rennlist post) well, maybe the bashing was mild this timebut its being going on day in day out for the past yearYeah, I shouldnt let it bother mebut after a while anything starts to wear th intrust 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 junk you drive. Rennlist post) Looking Ahead No tC Porsches higher-ranking management shrugged off the negative buzz 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 richly scolded for moving away from its brand core so it knew that it had to be a success. Wiedeking argued that launching the Cayenne took the same bravery that Porsches founder had demonstrated when he founded Porsche in 1931 during the Great Depression. 0 Schwab, Porsches North American President, label ed 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 beloved 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 painter 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 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 E xhibit 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 honorary 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 Frankfurt 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 origination 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 Stock 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 AUTOMOBILE INDEX Do No Source Thomson Financial 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 million 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 Export 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 18,887 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 mil lion 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 residuum Sheet Total Assets Shareholders Equity Fixed Assets Capital Expenditures Depreciation Extended Cash Flow 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. 00 297. 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 Export Source Casewriters, compiled from data listed in Porsche Annual Reports, 1995-2002, ht tp//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 Middle class Do No Source Casewriters, compiled from data contained in IHS Global Insight Report, World Light Truck Industry Forecast, 1999. 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.