Leawood911, I've been on the factory tour at Zuffenhausen when I collected my 997S back in November. As part of that tour, they took us to see the engine assembly area. I think the more accurate way to describe what happens is that all the parts for the engine may be made for Porsche by a third party supplier but that they are then assembled by Porsche workers in the engine assembly area.

FWIW, it's quite fascinating to see one man put an engine together. He works in a small concave work station with all sorts of parts on shelves. Once the engine is ready, it is benchtested for around 30 minutes to check it is okay and to measure power output.

I guess therefore engine problems could either be caused by defective manufacture of parts by the third party, defective engine assembly by PAG or defects arising when the engine is married to the chassis.