Online Extra: Porsche's Sizzling U.S. Ride

North American chief Peter Schwarzenbauer aims to get more share while keeping its emphasis on profitability

Porsche Cars North America is having a banner year, on track to selling roughly 28,000 vehicles in the U.S. in 2003 -- about 32% ahead of 2002 sales. Porsche's rebound from last year's 7.5% sales decline owes mainly to the sizzling public reception of its first sport-utility vehicle, the high-performance Cayenne launched this year. Though many critics scoffed at Porsche's move out of its traditional sports-car realm, the SUV is proving to be a hit.

The U.S. market is crucial to Porsche, which sells more than 40% of its cars here and about half of its SUVs. The unit posted a record $2 billion in revenues for the fiscal year ended July 31, 2003, contributing to the parent company's 22% net-profit increase, to $684 million, in the same period. Peter Schwarzenbauer, president and CEO of Porsche Cars North America, talked to BusinessWeek on Dec. 9 about where his group's Atlanta-based operation goes from here. Following are edited excerpts of the conversation:

Q: After 2003's rapid sales gains, can Porsche continue to grow quickly in North America?

A:

We think we could get more share out of this market. Our goal is to double our sales in the next few years. And that's with our current three product lines.

Q: How about all that talk that Porsche is planning a fourth vehicle line, maybe a four-passenger sedan or coupe?

A:

People speculate on all kinds of things. I'm not going to talk about that.

Q: How hard will Porsche push to double its sales here?

A:

We won't expand sales just for the sake of expanding sales. We will stick to our strategy of putting more emphasis on profitability.

Q: So no big rebates? No 0% financing?

A:

No, definitely not (laughing).

Q: What kind of a sales push do you have planned?

A:

We're restructuring our company. From January on, we'll have three North American regions, each with an area manager. Right now, we have one manager in Atlanta who oversees 14 people in the field. That's too much for one person. We need to get closer to our dealers. And our staff in Atlanta will probably grow from 250 people to 300 in the next few years.

We have to invest more than in the past on training. There's a different mindset from selling sports cars to selling SUVs. In January of 2004 we will open the Porsche Academy in Atlanta. It will offer training for dealership employees. And we're encouraging our own staff to sign up for classes as well.

Q: What about your distribution network?

A:

Our dealers have invested $300 million -- that's their own money, not ours -- in the last 13 months. We have 193 dealers in the U.S. and 11 in Canada. They're making some changes to support the Porsche identity, and we're encouraging them to have a showroom dedicated exclusively to Porsche. [In contrast with past years,] we now have just 15 or 16 dealers who still have "dualed" showrooms with Volkswagen-Audi.

Q: What's new on the marketing front?

A:

In July we started a certified, pre-owned program with our dealers. There are 42,000 used Porsches sold every year in the U.S. Until now, Porsche dealers have had only about 6,000 of those used-car sales. We want them to be able to get about a third of those sales. And these kinds of certified programs help our residual [resale] values, too.

We've also opened a performance-driving school at a track in Birmingham, Ala. Our customers have been really enthusiastic about learning to drive their Porsches at higher speeds, safely. And they learn about things like extremely hard braking. We'd also like to do more promotional events at unexpected places. Boat shows are a good one for us.

Q: How are Cayenne sales doing?

A:

The consumer reaction to the Cayenne [launched with a V-8 engine] has been very strong. A V-6 Cayenne [with a modified Volkswagen engine] arrives in January. We'll probably see only limited numbers at first.

Q: There was talk of launch problems with the Cayenne earlier this year. What happened?

A:

We got more demand for the turbo that we expected. That's over now. One specific issue was the air suspension. We were totally surprised by the number of people who wanted [that option]. Everyone wanted to have it. Because we hadn't forecast that, our supplier wasn't ready. We couldn't get enough air suspensions for the first two or three months.

Q: It looks like industrywide U.S. car sales will total a middling 16.5 million units this year. What does the auto market look like for 2004?

A:

All signs in the general economy are looking much more favorable. It will be an election year, and the government will do anything to make everyone feel good. We'll probably see one of the best car-sales years in history -- maybe in the range of 17 million units.

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