The 2010 Porsche Panamera could begin the next big breakthrough product for the tiny German company, or be a costly anchor around its corporate neck.
Porsche has a way of coming up with the unexpected and confounding conventional wisdom. Despite the naysayers, the German maker’s sports car/SUV, the Cayenne, has become its top-selling product in the critical U.S. market. And despite its miniscule size, this David could yet win a battle to merge withor even gain control of the German Goliath, Volkswagen.
But will Porsche pull it off once again when it finally brings the controversial new Panamera to market, in the coming months. This time, the maker of the legendary 911 is putting its sports car know-how into its first-ever four-seat sedan, and if company forecasts hold true, the Panamera could become Porsche’s most important, if risky, product launch ever.
Success, insiders suggest, could also help shore up company finances battered by the costly and ongoing battle with VW.
“We are confident Panamera will not only stabilize but even boost our sales,” declared Porsche board member and marketing chief Klaus Berning, at an event marking the first time journalists could test drive the new sedan. (A full review of the 2010 Porsche Panamera will be posted on TheDetroitBureau.com over the coming weekend.)
Berning acknowledged that the German maker is feeling “the cold wind” of the global economic meltdown, especially in the United States, a market that traditionally accounts for a third of its worldwide sales – which during the 2008 fiscal year came to 96,852. U.S. sales, for ’08 totaled 31,800, but they’ve been plummeting ever since, with 2009 volume so far off about 30%.
The luxury car segment has, in fact, been the hardest hit in the American market, noted Detlev von Platen, CEO of Porsche Cars North America, in sharp contrast to most prior recessions. Why is a matter of debate. Some industry analysts point to plunging executives salaries and bonuses, others to the reduced availability of leasing, all factors that can put a car like Panamera, which will carry a “base” price of $89,800, out of reach of even the affluent.
“It’s not a price problem. It’s social perception,” countered von Platen, the PCNA boss, adding that “If you’re (an entrepreneur or senior executive) laying off people in your company, it’s hard to justify driving a 911 sports car.”
That would suggest that the timing of the Panamera launch might be ill-fated, at best, stillborn, at worst. But von Palen and other Porsche executives strove to find an optimistic alternative, insisting that recent economic data suggest a recovery is now underway, so, after postponing purchases, American luxury buyers may be ready, willing and waiting by the time dealers can deliver the first Panamera, on October 17th.
At least, Porsche better hope so. Global marketing boss Berning said the automaker is “looking at (global) sales of at least 20,000 a year,” and for the U.S., the numbers could nudge 7,000, which would put Panamera right up there with the Cayenne, now Porsche’s best-seller.
Indeed, over its lifecycle, which should run six to eight years, the new four-door sports car could actually become even more important for the brand. Social perception issues extend beyond the issue of driving a luxury car during an economic downturn. American motorists are becoming more concerned about issues like global warming, and the high-performance Cayenne SUV, in particular, is a symbol, to many, of excess fuel consumption.
Compounding the problem are the recently-revised federal fuel economy regulations. Under the new version of the Corporate Average Fuel Economy, or CAFE, rules, automakers will have to average 35.5 miles per gallon by 2016. That’s hard enough for a company that is selling products in the 400 to 500 horsepower range. But worse, for Porsche, the new rules will set mileage targets based on the size — footprint, in industry parlance — of individual vehicles.
Without a variance, acknowledged PCNA chief von Palen, “it will never be possible for Porsche to meet the target with the 911. You would have to have a (car like the Toyota) Corolla, not a 911,” he said, adding that Porsche and other German makers are looking for a special exemption that would reduce their fuel economy targets.
That’s not to say Porsche isn’t aiming to boost its mileage. A hybrid-electric version of the Cayenne SUV will be offered in the U.S., next year, and will likely be followed by an HEV Panamera. There’s a diesel Cayenne in Europe, as well, though Porsche is so far reluctant to bring so-called “oil burners” to the American market.
Panamera actually boasts a number of technologies that Porsche believes will give it the best mileage in its class, such as Start/Stop, a system that automatically shuts off the engine during idling, at a stoplight, then restarts the vehicle when the driver’s foot lifts off the brake. Standard equipment on the 2010 Porsche Panamera, company officials claim this alone could reduce urban fuel consumption by up to 10%. Mileage claims could not immediately be verified and Porsche won’t have the new sedan’s fuel economy certified by the U.S. government until closer to the October launch.
Porsche isn’t the only sports carmaker entering the four-door segment. Aston Martin, recently sold off by Ford Motor Co., is another small player that sees sedans as a future boost to sales. Its version, the Rapide, will debut in 2011.
Both makers hope their sports sedans will lure in a new buyer, not simply cannibalize demand for their existing products. That largely proved true when Porsche launched the Cayenne; while the SUV was purchased by many existing customers, they were more likely to park the ute next to a Boxster or 911, rather than use a Cayenne as a replacement. Porsche believes conquest customers could account for 70% or more of Panamera sales.
The Panamera launch is helping Porsche shift media focus away from its ongoing battle with Volkswagen — two companies with historic family ties to the smaller maker’s founder, Ferdinand Porsche. Despite amassing a 51% stake in the bigger maker on borrowed money to take over VW, Porsche has so far been unable to complete either a takeover or merger with VW. If the proposed deal ultimately falls through, it could leave the Stuttgart-based sports car manufacturer with $12 billion in debt. The latest word out of Germany, is that VW will bail out Porsche by taking it over.
That has led some observers and analysts to paint gloomy forecasts for a company that, just a couple years ago, was hailed as one of the best-run and most profitable in the car business.
While Porsche board member Berning declined to discuss the ongoing VW matter in detail, he did insist that “The rumors that Porsche will have to be completely restructured (are) utter nonsense.” Still, there’s all that debt facing a liquidity crisis and frozen capital markets.
For now, he asserted, Porsche “is still writing black figures today.” But what happens tomorrow could depend on both the outcome of talks with Volkswagen — and the success of the most important, and unusual, car Porsche has launched in years.