Chief executive Wendelin Wiedeking's success has made his Germany's darling, writes Uta Harnischfeger in Austria
As he slides into a red Porsche 911 4S cabriolet, Wendelin Wiedeking's eyes sparkle like those of a first-time showroom visitor. Faced with the prospect of a spin on Austria's curvy Silvretta road in the high Alps, the head of Porsche is eager to get going. "It is an art - selling one of the world's most superfluous things," he smiles.
On the road, the car growls at the pristine landscape and leaves the lazy cowbells ringing in its wake. A fitting image for Wiedeking: one moment he puffs thick Cohiba cigars and discusses golf, riding and sports cars; the next he debates Russet potatoes and the merits of organic farming.
The contrast between his boyish spirit and the snob appeal of his sports cars has made the 51-year-old, after 10 years at the top of Porsche, one of Germany's most acclaimed managers. But it's at times like these that he has to earn those accolades.
Wiedeking will need all his skill and bonhomie to pull Porsche through its latest woes, including sagging sales, plunging shares, the rising euro and worries that its late entry into the sports utility market could go awry.
He can barely keep track of his "manager of the year" awards. An oddity among German managers, most of whom shy away from political issues, he openly bemoans German companies moving abroad or, alternatively, accepting subsidies to stay. Last year he declined the €50 million subsidy offered to build a new Cayenne plant in Leipzig, telling the cash-strapped state to spend it on day-care centres, schools and roads.
Wiedeking's earnestness has won him sympathisers. His favourite stories centre on his home-grown potatoes, which he harvests with a bright red 1960s vintage Porsche tractor, a wedding present from his wife.
Credited with saving Porsche from bankruptcy in the early 1990s, Wendelin Wiedeking turned the legendary sports cars into a coveted brand and made Porsche the world's most profitable carmaker. Last year alone, the company paid the Porsche and Piëch families, who control Porsche's common stock and hold about 10 per cent of the voting shares, a €300 million dividend - equal to the value of Porsche's entire common stock 10 years ago.
But all is not well. Earlier this year, Wiedeking hit an unlucky streak when sharply lower sales of Porsche's two main sports car models, particularly in the US, coincided with the euro's rapid appreciation. The situation was not helped by the general economic malaise and more competing roadsters.
Hitherto spoilt for good news, investors took the reverse to heart. Reports that US sales of its flagship 911 model had plunged 40 per cent in February knocked Porsche's share price to €251, about half its level 12 months earlier.
Worst of all, the news brought back memories of the early 1990s when Porsche stood on the brink of collapse after a sharp rise in the deutsche mark coincided with a failed model policy.
The gloom spread: reports of declining 911 and Boxster sales spurred talk that the Cayenne, Porsche's first non-sports car in its 54-year old history, was selling worse than expected.
Lately, analysts have been fretting at signs that Porsche might launch a cheaper and less powerful six-cylinder Cayenne, a move they believe would be an admission of defeat.
But Wiedeking dismisses talk of a repeat of the early 1990s crisis. "The Porsche system is stronger than ever," he says, adding that he learnt a lot from Porsche's mistakes in the 1990s. For one thing, Porsche is fully hedged in the currency markets until 2006.
He is also adamant that Porsche has healthy cash reserves - it generates about €1 billion a year in free cash flow - and he is open in his contempt for banks. He chuckles with delight when he recalls Porsche's 1994 capital increase, which sold out in a few hours after Deutsche Bank had refused to underwrite the deal.
He says Porsche's "breathable" production system and low fixed costs are saving the day. Already, the company's flexible set-up has allowed it to slam on the brakes: extending summer and winter holidays at its Zuffenhausen 911 production site; lowering daily work hours at its new Cayenne plant in Leipzig; asking Finland's Valmet, where it outsources Boxster production, to cut daily output from 90 to 70, a figure that could soon fall to 50.
The Cayenne highlights his fear of high fixed costs: the car is built in a factory jointly owned and operated by Porsche and VW. VW builds the chassis and other large components, leaving Porsche to make only about 10 per cent of the car, including the engine.
He admits "the Cayenne is what I am most nervous about" although he feels recent events have vindicated his decision to go ahead with it. "In retrospect, the Cayenne was perfectly timed to fill the gap just now arising from slowing sales of our two core models."
Happily for Wiedeking, Porsche last week announced a sales increase in July of 60 per cent compared to a year earlier, which it attributes to the Cayenne.
Wiedeking firmly believes there will always be room for a niche product such as the Cayenne. "Safety is big in the US - even if a housewife just uses it to get groceries at the nearby supermarket, she wants to be safe."
But his optimism can't obscure Porsche's growing problems. SUV have come in for criticism from all quarters. There is also a growing threat of lawsuits against SUV makers in the US.
After selling about 15,000 units since December, Porsche plans to sell 25,000 Cayennes in the 2004 fiscal year and expects production to peak at 40,000 a year. Looking ahead, Wendelin Wiedeking talks excitedly about the forthcoming fourth model, widely expected to be a four-seater coupé.
Undoubtedly, his success has earned him the controlling families' trust and allowed him to become more daring. "In the past the families would have definitely said No to a project like the Cayenne," he says.
But before he approaches the owners with a fourth model, Porsche will relaunch the Boxster and 911 models, starting next year, and add new high-margin 911 versions. For example, the specially produced 911 GT3, of which Porsche will build up to 300 units at a retail price of €125,000, earns Porsche an operating profit of €50,000 per car.
"I have the entire model outline until 2010 in my head," he says.
Whatever he decides for the fourth model, Wiedeking is set on safeguarding Porsche's image. "Strong brands are the future," he says, proceeding to lament the mass-market success of Warsteiner, his favourite beer from his Westphalian home. "Warsteiner failed to maintain its exclusive image," he says - and takes a healthy gulp. ... - Financial Times Service