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Porsche reorganizes, lowers prices


DETROIT -- You could dismiss Fred Schwab as hopelessly optimistic when he described 1993 as a "good year." After all, he is president and CEO of a company, Porsche Cars North America, that sold 3,800 cars last year -- vs. 30,000 in 1986.

But at auto shows here and in Los Angeles recently, he proclaimed that "life is being a bit kinder to us."

The bottom line is that Porsche has hit bottom and has started to bounce back -- ever so slowly.

Last year, for the first time since 1987, Porsche made money in the United States. And, although its worldwide sales were down to 19,000, the company has made some long overdue moves to get its financial house in order. It has:

* Created its own lease and finance company to make Porsche cars more affordable to U.S. buyers.

* Reduced the time it takes to make a Porsche and announced plans to further trim production time by 30 percent in the next two years.

* Lowered its worldwide work force to 6,600 and reduced the number in the United States from 740 to 200.

* Improved the mix of cars at its dealerships.

* Worked more closely with its suppliers and encouraged the use of component assemblies instead of separate parts. Porsche wants to reduce its supplier body from 950 to 300 by 1997, according to Wendelin Wiedeking, chairman of its management board.

Perhaps most important, Porsche finally has done something about the cost of its cars.

The new 1995 Carrera 911 that arrives in Porsche showrooms this spring will be priced $5,000 less than comparably equipped 1994 models. A '95 Carrera coupe with a six-speed transmission will be $59,900 vs. $64,990 for the '94 Carrera 2 coupe with a five-speed.

That's welcome news to Porsche lovers who have seen the price of a Porsche more than double since 1987, roughly matching the time when the exchange rate dropped from 340 to 150 marks to the dollar.

"There are limits to what people will pay for anything," Schwab said.

At the same time it is streamlining, Porsche still needs to concentrate on keeping its affluent (and loyal) customers happy. These are married, professional men in their mid-30s to mid-50s. They own three cars, and they replace their sedans and sport-utilities about twice as often as they trade in their Porsches.

Improved customer service is the best way to keep them happy. Mr. Schwab points to several recent surveys of dealers and customers as evidence that Porsche is making progress in this regard.

Porsche was above the industry average in J.D. Power's 1994 Vehicle Performance Study that asked original owners how well they like their 1990 cars, for instance. The company still lagged behind other luxury makers such as Lexus, BMW and Cadillac.

In the United States, Porsche expects to derive immediate benefits from the 1995 Carrera 911. The car, in its 30th year and countless incarnation, gets a more powerful engine, a new rear suspension, a new six-speed manual transmission, bigger brakes and slightly changed exterior styling.

Sales of the 911 should increase by 15 percent to 20 percent, Mr. Wiedeking said.

With the "new" 911 comes a $20 million advertising campaign that tries to put a softer spin on Porsche's hard-and-fast-and-serious reputation.

The ads, which first appeared last month, show Porsche employees, display cars in atypical colors and generally create a lighter, brighter image for Porsche.

On the horizon is perhaps a more important car for Porsche than the 911. Model 986 is based on the Boxster concept car that was first shown at the North American International Auto Show here in 1993.

Porsche has promised the 986-Boxster will debut in the summer of 1996 with a price tag below that of the current entry-level Porsche, the $39,950 968 coupe.

But it seems unlikely that Porsche will ever produce a car intended to reach a much broader audience.

A model that's just less than $40,000 is still more than twice as much as the average American pays for a new car.

"Porsche sports car will never be inexpensive," Mr. Wiedeking said. "The price of exclusivity simply results from comparatively low production quantities."

Worldwide, Porsche wants to return to 30,000 sales annually within two or three years. In the United States, Mr. Schwab said, the goal is 10,000 cars a year.

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