Porsche's Latest Entry Hits A Crowded Track

Amid fierce rivalry, can a sixth-generation 911 revive sales of the aging sports car?

The sun broke through billowy clouds as a procession of new Porsche (PSEPF ) 911 Carreras rumbled out of the courtyard of a 434-year-old German castle in Hameln, piloted by test drivers eager to tackle curvy country roads and speed down the autobahn. In this Old World setting, Porsche Chief Executive Wendelin Wiedeking on June 18 unveiled the new 911 Carrera, the company's flagship model, four months ahead of expectations. The surprise maneuver, which is trademark Wiedeking, should quickly reverse the ebbing sales of Porsche's aging sports car even as its Cayenne sport-utility vehicle fuels record sales and profits. "It was absolutely the right thing to do," says James N. Hall, vice-president at market researcher AutoPacific Inc. in Detroit.

Much is riding on the renewal of Porsche's 911 Carrera ($77,600) and the more powerful Carrera S ($88,000). The venerable 911 with its 14 variants accounts for 42% of the company's sales and more than 50% of profits. High-end 911 models such as Targas and Turbos, which range from $80,000 all the way to $440,000 for the 911 GT3, yield rich average profit margins of 22%.

But sales of the 7-year-old 911 were down 14% in fiscal 2003 and are expected to decline 18% in the year ending July 31, according to a Morgan Stanley (MWD ) report. Wiedeking needs a new hit generation of 911s to build a war chest for a fourth model, expected to be a sporty four-seater coupe scheduled to roll out in 2009.

Industry experts already are praising the sixth-generation 911 as a worthy successor to a model that has become an industry icon. With its wider rear end, narrower waist, and bigger 19-inch wheels, the new 911 gains in presence without marring its classic silhouette -- something Porsche fans don't want to see changed.


What Porsche customers most yearn for in a new model is more oomph and driving finesse, and they get it in spades. The basic 911 comes with a powerful 325-horsepower engine with higher torque, plus a new, six-speed transmission. The Carrera S boasts an entirely new 355-hp engine that accelerates from zero to 100 kph in 4.8 seconds and tops out at 293 kph. The Carrera S also comes with an electronic suspension system that allows the driver to lower the chassis for a sportier feel. "With the 911, it's the driver that counts. We are not trying to make a design statement," says Peter Schwarzenbauer, president and CEO of Porsche Cars North America. Wiedeking also upgraded the new 911's leather trim, fabrics, and instrument panel. Aficionados complained that the previous model shared too much with Porsche's entry-level roadster, the $42,600 and up Boxster.

The new 911 and its various offspring will vie for customers with the SL series from Mercedes-Benz (DCX ), Aston Martin's (F ) new 450-hp DB9, and BMW's new 333-hp 6-Series Coupé. "The giants have discovered the sports car sector as a lucrative niche," says Wolfgang Dürheimer, Porsche's director of research and development. But the fiercest battle for Porsche is in the entry-level sports car sector, where the Boxster goes head-to-head with BMW's Z4 roadster, Nissan Motor Co.'s (NSANY ) 350Z, and others. The Boxster's sales are forecast to slump 30% this year, as newer models steal the limelight. Insiders say Porsche will unveil the new Boxster six months early at the Paris auto salon in September.

Together the two new sports car models should help boost sales 9% in fiscal 2005, to an estimated 80,000 vehicles, with revenue rising 16%, to $8.5 billion. That kind of growth will help Wiedeking stoke up cash reserves for the fourth Porsche model. Wiedeking is no doubt plotting its launch just as his new 911 Carrera is ready for the next pitstop.

By Gail Edmondson in Hameln

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