Porsche Speeds Past Recession Worries
STUTTGART, Germany – Worried about the worst economic outlook in a decade? Not Porsche, which expects to match record profits this year and sees sales climbing despite the shock of Sept. 11 attacks on the United States.
"Our incoming orders figures for November are unbelievable, especially for the 911, and they are also rising in the U.S.," Finance Director Holger Haerter said Wednesday.
Sales rose 13 percent in November, the month when Porsche's key U.S. market was officially declared to be in its first recession for 10 years, and the firm said it expected this year would match the record pre-tax profits chalked up in 2000/01.
Brave talk for a company that has been ill-treated by past slowdowns in the United States, where it makes around half its total sales.
Between 1993 and 1994, Porsche sales collapsed to 4,500 from 11,000, but this time around it says it has got things right.
"We made a lot of mistakes in the past, particularly in the late 1980s when we tried to confront falling demand with higher prices, which is the worst thing you can do in the U.S. where demand is very price-elastic," he said.
Nor was it worried about launching a new product into the highly competitive sports-utility vehicle category just as a growth slowdown hits customer confidence.
Porsche is still coy about when it will unveil the Cayenne — its first attempt to sell such a car — but expects to sell over 25,000 annually and was confident it would be adding to profits in the next financial year.
Two Porsche Family
This was because the same people who bought its sportcars were also driving 4x4s and, judging from current strong sales, the company had high hopes it could persuade them to add a second Porsche to the family stable.
"Over 75 percent of our sports car drivers in the U.S. also own a SUV, so it won't be a question one or the other, but both," he said.
Chief executive Wendelin Wiedeking told a news conference that the success of BMW's X5 SUV had demonstrated that "with quality and verve" a good product will succeed.
"So I am not pessimistic... we will be able to sell our units quite readily," he said.
But it has been thanks to the recession-defying sales of its $62,500 911 that Porsche feels so confident.
Haerter said that better relations with its U.S. dealers and a 100 percent-owned importer were helping. But at the end of the day it was the re-styled 911 that made the big difference.
"It is a fantastic car," he said.
The company said the shift in demand toward its pricier model would help it improve revenues in the current financial year and match last year's record profit performance.
Sales in the first four months of its fiscal year from August 1 jumped 6.3 percent to 1.18 billion euros on the back of strong demand for the 911 classic.
Good news for shareholders in the German carmaker, but even better news for policymakers on both sides of the Atlantic.
Demand for luxury items like a $150,000 Porsche 911 GT2 may not provide a very good yardstick for general household spending or aggregate economic demand.
But the fact that customers are still willing to shell out for a Porsche despite a flood of job cuts and with stock markets at a fraction of last-year's highs will be encouraging news for the resilience of consumer confidence.