A "not so good news" article about Porsche

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Article compliments of "Ben,lj" over at Funcars...actually, I just took it.

Automotive News 8/25/03

60 Hours to build a 911....

FRANKFURT - Hit by high introduction costs for its Cayenne, Porsche AG has begun a drive to reduce costs by 5 percent in the next year.

Porsche is the world's most profitable carmaker, but the expense of introducing the Cayenne SUV has had a big impact on the company's finances.

"The development, production and launch of the Cayenne was an enormous task for such a small company as Porsche," spokesman Christian Dau says.

Porsche CEO Wendelin Wiedeking has ordered efficiency measures across all departments. The internal goal is to achieve the 5 percent cost reduction in less than a year. The cost-cutting drive has four main parts:

1. Significantly reduce the Cayenne's variable costs.

2. Seek production cost savings for the 911 and Boxster sports cars.

3. Find savings in product development.

4. Revise the supply chain to reduce cost and inefficiencies.

Before the Cayenne debut, Porsche placed a lower priority on cost control. It concentrated on assembling the vehicle without compromising quality or production capacity.

Porsche also financially supported some suppliers facing liquidity problems during initial production. To secure production, Porsche had to replace some suppliers quickly and inject cash into others.

Cost assessment

Porsche bosses believe it is time to improve the Cayenne's production cost base and carry out a cost/price and part/value analysis for every component. Porsche also will assess the cost of producing the 911 and Boxster, which share 40 percent of their components. Because both cars are in the second half of their life cycle, the models will not undergo the same tough analysis as the Cayenne.

Instead, Porsche will make more extensive productivity and cost changes in the next generation of design, much like it did when changing from the previous to the current 911 model.

"Today we need 60 hours to build a 911, which is half the time we needed for its predecessor," Dau says. "With the next generation we will be able to cut the current production time again significantly."

The third area is seeking productivity increases across departments and all areas of development. Initial measures in place include increased simultaneous engineering, slashing the time-to-market of innovative technologies and reducing costs by working even closer and earlier with key suppliers.

Revised logistics

Finally, the whole logistics chain will be revised to cut time and inefficiencies in-house and at suppliers. Porsche expects one side effect will be significantly reduced order-to-delivery time. Porsche's benchmark is BMW, which has cut order-to-delivery time to less than two weeks.

The improvements will allow orders of special equipment to be forecast more precisely, making it easier to match supply and demand.

Porsche struggles to build enough Cayennes with air suspension because it underestimated how popular the feature would be.

"Based on the estimate of our sales department, we asked the supplier to prepare for a 40 percent order rate," Dau says. "But virtually all Cayennes are ordered with air suspension, and now we face a supply shortage for those parts."

Also the model mix forecast - 80 percent S and 20 percent turbo versions - was 10 percent off target, causing a delivery backlog for turbo models and resulting in yearlong waiting lists in some markets.

Porsche boosted its sales by 20 percent in the fiscal year ending July 31. The growth is exclusively based on the Cayenne and achieved against a 12.8 percent decline in Boxster demand and 6.8 percent reduction in 911 sales. Sales of the SUV are good, limited only by production capacity in the new factory in Leipzig, Germany.