Online Extra: Q&A with Porsche's Wendelin Wiedeking

How does a world-class sports-car maker come up with an SUV? Says the CEO: Lots of R&D -- and management skills
The BusinessWeek 50

Porsche Chief Executive Wendelin Wiedeking argued passionately in 1998 to doubtful board members that the vaunted maker of luxury sports cars could produce a sport-utility vehicle without tarnishing its brand image. The result was spot-on: Porsche's $85,000 Cayenne SUV launched in December, 2002, drives like a sports car at top speeds but can tackle the tough terrain too. Some 18 months since its launch, the Cayenne is fueling record sales and profits at the German auto maker.

Despite the success, Wiedeking barely pauses for a pit stop these days: His main obsession is pondering on what Porsche needs to do to remain one of the industry's most profitable players five years from now.

No question, the 51-year-old engineer who turned around an ailing Porsche in 1993, has a knack for staying on top. Porsche's 10% net margin in fiscal 2003 is one of the industry's highest -- and triple DaimlerChrysler's (DCX ) 3.28%. Wiedeking insists net profit is the only true measure of an carmaker's performance, and he has been delivering solid returns for nearly a decade.

An engineer by training, Wiedeking more than tripled car sales at Porsche from under 20,000 cars in 1993 to 68,000 in 2003. Next month he launches the sixth generation of the flagship 911 sports car. The move comes just in time, since sales of the aging 911 declined 14% in fiscal 2003 and 25.2% in the first half of fiscal 2004.

Like an acrobat with perfect timing, though, Wiedeking keeps churning out models that give Porsche financial vrrooom. BusinessWeek European Correspondent Gail Edmondson recently spoke with Wiedeking for the magazine's report on Europe's top 50 companies. Here are edited excerpts from their conversation:

Q: What's the key to creating shareholder value so consistenly over the years, as Porsche has?  


The key is to avoid a quarterly [earnings] orientation. Years ago we defined a clear strategic plan.  You have to know where you want to be in five to eight years time, and you have to rethink the strategy every year.  It's hard work every day.  That's the key issue.  You have to work hard and redefine the plan -- and you have to execute.

If the papers are saying we're doing well because the Cayenne was selling while the sportscars were declining, it's only a part of the story. Now we're launching a new 911, and believe me, it's going to sell. You have to manage your product cycles.  You have to have tough goals.

The only thing that counts is success and that you deliver what you promise. That's what we have done. We delivered what we announced -- that builds enormous trust in the market.

Q: Porsche's image as a maker of premium sports cars and the concept of a sport-utility vehicle are contradictory. Despite the risks to your brand identity, you decided to build a car that was far from Porsche's core lineup. Why do you think Cayenne was such a success?


First of all, we had done research and development for a lot of third parties on SUVs.  Porsche was known as a sports-car manufacturer, but we knew how to develop an SUV before we even started to conceive the car.  To stay on a growth curve, we had to look to new concepts.  The SUV was actually close to our activities.  Since Porsche was founded, we have develped and built very sporty vehicles.  The Cayenne is much faster or sportier than any black, blue, or red limousine, and it's a lot of fun to drive -- for business, travel, off-road -- and it delivers prestige too.

Q: Did you do market research to make sure consumers wanted such an SUV?


Yes -- around the globe.  We made many surveys.  We were absolutely sure we would succeed.  The handling and drive experience is unbelievable. Once you have driven the car, it's clear it's the benchmark for SUVs.  Cayenne defines the benchmark in top speed and having fun with an SUV.

Q: A lot of auto makers are seeking to stretch their brands, such as Volkswagen with the upmarket Phaeton, or BMW going downstream with the 1 Series. How does one successfully manage the risk of stretching the brand or moving into new product sectors that don't fit the company's brand image?


You have to make sure every decision to go into a new segment isn't destroying the brand image -- that's the core of the company's future potential.  A lot of big players are going into new segments -- it's not easy to get right.  It's especially difficult.  You can try to find out what the market wants through a lot of surveys around the globe. But on the other hand, you have to have the management skills in the organization. People who know the brand and make decisions.  At the end of the process, only a few people make the final decision.

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