PORSHCE SALES
Porsche AG troubles in the 2nd half of the 80's and early 90's. - Porsche sales boomed in the early 80's as did success in the racing program. It all peaked in 1985. In 1986 some key markets especially those that bought the higher end models began to hurt. Texas was in an oil slump, California's high tech industry faltered, then the stock market crash of 87 followed by a long recession and currency rate difficulties.
This led to a series of management changes, lack of direction, the end of racing success, very poor sales and losses in the early 1990's. Below are reports from the period that spell out everything in great detail.
From published reports;
Saying Porsche Cars has a problem is akin to describing the Edsel as "different." From a peak in 1986, when the parent Porsche A.G. sold about 30,000 automobiles in America and 55,000 worldwide, sales plunged in 1993 to about 3,800 in America and 19,000 worldwide.
OMPANY EARNINGS; Reuters
Published: Thursday, January 25, 1990
Porsche A.G., the West German maker of sports cars, has turned the corner after a two-year slump, with earnings doubling in the fiscal year ended July 31, the company said today.
The company said it had achieved the stronger performance despite production problems and the introduction of four new models.
The Stuttgart-based Porsche reported earnings of 54.2 million marks, or $32.3 million, for the year, compared with 25.3 million marks, or $15 million, in the previous year. Revenue rose only slightly, to 2.53 billion marks, or $1.5 billion, from 2.48 billion, or $1.48 billion.
The rise in earnings was attributed to a combination of a cost-cutting program, which reduced the 8,000-person work force by about 500 over the last two years, and an emphasis on more expensive and profitable cars. The new strategy was put into place when earnings and sales slumped after the 1987 stock market crash.
In the latest fiscal year, Porsche reduced production of its less expensive 924 and 944 cars and introduced four restyled models. Customers have welcomed the new models, and orders are significantly above last year, the company said.
COMPANY NEWS; Porsche Cuts Staff In U.S. by 23%
By AP
Published: Saturday, August 31, 1991
Porsche Cars North America Inc., a marketing operation of the German maker of luxury sports cars, laid off 23 percent of its staff, citing a depressed auto market. The layoffs affect 77 of the operation's 339 workers.
"This is a clear indication of how hurtful the luxury tax has been, on top of the effects of the recession, in our key markets," the company's president, Brian Bowler, said. Through the first seven months of this year, 2,844 Porsche cars have been sold, 51.6 percent fewer than last year. Sales by other makers of luxury cars, especially European ones, have lagged substantially behind last year, including a 52.3 percent decline for Jaguar, a 44.5 percent drop for Audi and a 22.1 percent decrease for Mercedes-Benz. Earlier this year, Peugeot of France and Sterling Motor Cars of England withdrew from the United States market.
Porsche Cars North America Inc. said yesterday that Brian Bowler, its president and chief executive, had resigned suddenly and that Frederick J. Schwab, a senior executive vice president with years of experience in international management, had been named as Mr. Bowler's successor. The company said Mr. Bowler had resigned over "differences over the direction of the company's future efforts in the important United States market."
Porsche's strategy for the American market has left many analysts uncertain. Several years ago, the company introduced its 924 model, entering the $20,000-to-$30,000 price range. But it started to move gradually into the higher price range and away from new Japanese competition, with its cars costing between $44,500 and almost $99,000 for 1992. (guess what costs 99,000)
IN 1992, in the grip of a recession, Porsche sales plummeted from their peak in the 1980s. Owning a Porsche was suddenly outré. Costs had spun out of control, the family was squabbling, chief executives were coming and going, and Porsche seemed destined to lose its independence.
“We were this close to the precipice,” Mr. Porsche said, putting his fingers inches from the edge of a table. He leaned on family members to promote a young production executive, Mr. Wiedeking, who had returned to Porsche after three years running an auto parts supplier.
The new boss brought in Japanese managers, mostly from Toyota, to lecture the Porsche workers about efficiency. At the behest of one Japanese visitor, Mr. Wiedeking took a saw and cut down shelves stocked with parts — a vivid demonstration that he was serious about reducing inventory and costs.That makes Porsche less dependent on the United States, which in the mid-1980s accounted for 60 percent of its sales. (Remember when Tom Cruise let his father’s Porsche 928 roll into Lake Michigan in the film “Risky Business”?
Published: Wednesday, June 3, 1992
The luxury sports car maker, Porsche A.G. of Germany, will cut its work force by another 850 employees in the year beginning Aug. 1, officials said yesterday. Porsche, which currently employs about 8,500 people, has already eliminated 550 nonproduction jobs this year.
Porsche has been troubled by falling sales and profits. While labor officials said they recognized the need for further cutbacks, they said Porsche should continue to rely on attrition rather than layoffs to trim its work force. Separately, Porsche said group sales for the year ending July 31 would show a 19 percent decline to $1.56 billion from $1.93 billion in the previous year. Arno Bohn, chairman of Porsche's management board, said the company would remain profitable.
BUSH stay the course recession
A Stretch of Bad Road Germany's Porsche A.G. makes sports cars that are pretty, pricey and fast. That's a tough market to be in right now. Thanks to the weak global economy, Porsche's sales fell 15 percent in the year ended July 31, to $1.9 billion. Last week, Porsche said it would eliminate 1,000 jobs and restructure itself. With these and other cuts, Porsche will have eliminated 20 percent of its work force, bringing it to 6,200 by mid-1993. Though Porsche has a deal with Daimler Benz to assemble the ultra-luxurious Mercedes 500E, that car's sales are also falling. Analysts wonder if Porsche can continue to exist on its own. "Maybe Daimler or some other auto maker will take a stake in Porsche," said Peter Fliegel, who follows the company for Berwein Wertpapierhandels-und Boersenmakler, a brokerage in Munich.
Some difficulties were certainly attributable to soaring prices as the German mark grew weaker and the American dollar stronger. The 911 Carrera, reaching dealer showrooms next month, starts at $59,900 -- $5,000 less than its predecessor.
But most Porsche-ophobia was caused by perceptions the car was emblematic of the materialistic, free-spending 1980's -- and therefore out of synch with the value-conscious 1990's. Porsche Cars was among many marketers of 1980's totems that changed agencies in the 1990's, including BMW of North America and Mercedes-Benz of North America.
"The car has carried the imagery of an overblown status symbol," acknowledged Jeff Goodby, who with Rich Silverstein is co-chairman and co-creative director at the agency.
"People who didn't buy them had certain reactions to people who did," he added. "So it's obvious what had to happen: The car had to be taken out of the realm of something that had an off-putting aura and back to being something that worked and performed well, the best thing of its kind, like a Mont Blanc pen."
MODERNIZATION
Putting Porsche in the Pink
By NATHANIEL C. NASH
Published: Saturday, January 20, 1996
Not too long ago, the production floor of Porsche's factory was not a pretty sight. Workers would storm off in a huff. Managers would fume. Voices would rise above the hum and bang of the line.
And Japanese engineers -- mostly Toyota alumni -- would wave their fingers, demand explanations, scold, lecture and browbeat, essentially telling some of Germany's finest automobile craftsmen how poorly they were doing their jobs.
Had the pride of German auto makers bowed under the dominance of the efficient Japanese? Sort of. What was in process was the salvation of Porsche A. G., Germany's ultimate symbol of racing car performance and autobahn freedom.
From the dizzying heights of the mid-1980's when American yuppies, not to mention staid German executives, had to have one, Porsche went to the brink of bankruptcy in 1992. Recession had crippled sales, and costs were out of control. Turning to the Japanese, with their "lean" manufacturing techniques, was considered its only hope of making a profitable car and avoiding the ever-rumored takeover by BMW, Mercedes-Benz or Volkswagen.
"It was the biggest shock for the company to accept that Japanese were walking around, not able to speak either the Schwabian dialect or German, and telling people what to do," said Wendelin Wiedeking, Porsche's 43-year-old chief executive. "They were tough guys. They were absolutely aggressive to the people. And we wanted it that way."
The remaking of Porsche using Japanese manufacturing techniques has a significance beyond the company. For years, German auto makers, feeling the pinch of more efficient Japanese producers, have tried to adopt elements of just-in-time lean manufacturing and to get high-paid German workers to be more flexible. But changes have been modest at best, leading many auto executives to vow they will never open a new car plant in Germany again.
"Germany looked at Japan and said, 'Yes, but we can't do it here; we won't do it here,' " said Daniel T. Jones, a professor at the Cardiff Business School in Wales. "Porsche had no choice. And having done it, the argument that other auto makers ought to be following their lead becomes irresistible."
Feelings may have been hurt, but Porsche survived -- not only as a cachet name in German automobiles, but as the last remaining independent European manufacturer of sports cars. The company recently reported its first profit in four years, after $300 million in losses.
"That profit guaranteed our independence," said Michael Macht, head of Porsche Consulting, which the car maker formed to spread the Japanese manufacturing concepts it learned. "This is not a turnaround. It is a new company."
Today peace prevails on the Porsche line. The production changes imposed by the Shin-Gijutsu group, the cadre of former Toyota engineers to whom Porsche turned for advice three years ago, mean that more cars are produced faster by fewer people without losing technical sophistication and road performance.
And having put the losses behind it, the company can concentrate on developing new models and new markets. Porsche already has orders for 10,000 units of its new roadster, the Boxster, which it plans to introduce later this year as its least-expensive model. In 1997 it will roll out a new version of the famed 911. And the company is in discussions with other auto makers about possibly producing a high-performance off-road vehicle, a minivan and a small low-priced sports car.
The team of Japanese consultants now returns only about four times a year -- "to scold us," Mr. Macht said. But the innovations the Japanese initiated are being continued by the German engineers. Workers on the line submit 2,500 suggestions a month.
The factory is clean and quiet, its huge six-cylinder motors built with remarkable efficiency. Nobody stands around. No half-built engines sit to the side of the assembly line. And there are no bins of spare parts through which workers have to dig. The parts needed for assembly hang on carts that are pulled down the line with the engines, so that workers do not have to leave their work space.
Porsche management says the efficiency improvements are measured in more than just the company's return to profitability. It has reduced the assembly time for one of its speedsters from 120 hours to 72. The number of errors per car has fallen 50 percent, to an average of three. The work force has shrunk 19 percent, to about 6,800 employees from more than 8,400 in 1992. The line itself has been shortened and inventories have been cut back so much that factory space has been reduced by 30 percent. All this means Porsche is making more cars at lower cost.
Much of the credit for the remaking of Porsche is given to Mr. Wiedeking, a self-confident, direct hands-on manager who started as an engineer at Porsche in the 1980's and then left to run an automobile parts maker.
The company's family owners spent much of the 1980's warring with their appointed chief executives, eventually dismissing several. The family was often in the news and in gossip columns over their personal lives.
But no matter. The boom times early in the decade fueled sales, which soared to more than 50,000 a year.
Then the recession of the early 1990's hit. Porsche sales plummeted to 14,000 units in 1993, including a paltry 3,000 in the United States, its largest market. The family paused in its feuding to call in Mr. Wiedeking for help.
From the beginning, he says, his idea was to bring in the Japanese. First, he eliminated one-third of his managers and gave those remaining new assignments, so they would be struggling to learn new jobs -- "rather than waiting for me to make a mistake."
Next he took his management team on extensive tours of Japanese auto plants. They timed precisely how long it took Porsche to assemble body parts and engines and install carpeting and dashboards, then studied the comparable times in Japan. On most tasks, Porsche was taking almost twice as long.
"On those trips a lot of people said, 'I did 20 years of work and it's all garbage now.' " Mr. Wiedeking said. "It gave us an understanding of what had to be done."
The arrival of the Japanese in late 1992 was indeed painful. One of the engineers, Chihiro Nakao, says they were always polite to the workers but often sharp with the managers.
Porsche's assembly line, he says, looked like a dark warehouse when the Japanese arrived. On either side were shelves eight feet high with huge parts bins filled with 28 days of inventory. To get a part, workers often had to climb ladders, wasting enormous amounts of time.
First off, the shelves were cut in half and inventory reduced to seven days. Eventually the parts bins were eliminated entirely; Porsche engineers created a remarkably low-tech, but highly efficient parts supermarket in the basement of the factory. There, workers hook only the parts needed for each stage of assembly onto carts. The carts are then sent up to the line and accompany the car until they are used up, when they return to the basement to be refilled.
"Even the Japanese are interested in this system," Mr. Wiedeking said.
What is ultimately revolutionary for Porsche's auto makers is the redefinition of craftsmanship.
"The traditional craftsmanship for which Germany became famous was filing and fitting parts so that they fit perfectly," Professor Jones said. "But that was wasted time. The parts should have been made right the first time. So the new craftsmanship is the craftsmanship of thinking up clever ways of making things simpler and easier to assemble. It is the craft of creating an uninterrupted flow of manufacturing."
The company now has been able to turn its focus to product development. The 2-seat Boxster -- a roadster with Porsche's traditional flat, six-cylinder with opposing, or boxing, cylinders -- will cost about $50,000, compared with about $64,500 for a 911 coupe. Porsche hopes the Boxster will add younger professionals to its customer base of wealthy professionals and business people over 40.
Porsche still hopes to strip another 10 hours off car-assembly time, according to Mr. Wiedeking, a goal that would make the company comparable to the best Japanese auto makers. And Porsche is working with its suppliers to cut costs and improve quality and deliveries.
But the Boxster will be the true test of Porsche's campaign of self- renewal. BMW, Mercedes-Benz, Audi, Fiat and Rover have all introduced new two-seaters in recent months, or plan to soon.
For ten years Fred Schwab was “Mister Porsche” in the USA and Canada. Under his leadership PCNA continually extended its position as the most important sales company at Porsche AG. As the sales figures for 1992/93 only accounted for 3,700 sports cars, the last fiscal year 2001/02 saw this figure rise to more than 23,100 car sales in the USA and Canada. Thus, under his auspices, the North American continent advanced to become the most important sales market for Porsche cars in the world.
My comments
Sales of Porsche cars in the US excluding the 928 model fell from 27,620 in 1986 to 3,070 in 1993 (1000 968). That is an 87% drop in 911 and entry model sales. It is interesting to note that car sales have NEVER recovered. In 2006 Porsche sold 23,000 997, cayman, and boxsters combined in the US and Canada. More than 4,000 below the sales of cars in the US alone in 1986.
It is a myth to say that the market or the customer gave up on the 928 when the 911 model had just as dramatic a fall and now 20 years later has not returned to previous levels.
In 1985 Porsche had sales of 25,300 cars in the US of which 2580 were 928, 6200 were 944, and 16,500 were 911.Does the drop from 16,500 in 1985 to just 2,000 911's in 1993 say that the buyer no longer liked the 911? Or does it just illustrate how tough the luxury sports car market had become.
US porsche sales numbers for 1985 - 85 total 25300. Individual models 944 - 6200 units, 928 - 2580 units, 911 - 16500 units.
The peak in 1986 was achieved with the introduction of the 944 turbo. 911 sales were lower.
It is confirmed to me what I always thought after doing this research. The 944 was a tremendous entry level vehicle, priced right for the times and different enough in looks, performance, and price to go after a much different segment of the market than the 911.