What's driving Porsche? A firm CEO
By Nick Easen for CNN
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Wendelin Wiedeking bet the success of Porsche on a SUV called Cayenne.
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(CNN) -- It takes a lot to gamble a world-renowned sports-car tradition and an exclusive brand name on a bulky off-roader.
But that is exactly what Wendelin Wiedeking, CEO of the German sports-car icon Porsche did -- and won.
At first family shareholders drew back and enthusiasts balked at the company's in-roads into four-door, sport-utility vehicles.
Yet the CEO's decision to break from the exclusive sports car mould by launching the Cayenne -- an SUV priced at $90,000 -- has fueled the company's seventh year of record profits.
"In the past if you asked somebody "what is Porsche?" The answer was simply a sports-car producer," Wiedeking told CNN.
"In the future the answer will be producing very sporty cars -- that is it -- but based on sports-cars."
Over 20,000 units of the sporty Cayenne have been sold in the first eight months, even though the global auto industry is contracting.
"It took us a long time to check whether the Cayenne would destroy or hurt the brand image," Wiedeking told CNN.
"We found out that if the SUV done by Porsche is a very sporty vehicle, it will work."
The successful strategy created 450 jobs and fueled the opening of the company's factory in Leipzig, Germany.
It also elevated Wiedeking, who has spent most of his working life at Porsche, to one of the most respected bosses in Europe.
Three legs instead of two
Although the SUV premium market accounts for an estimated 800,000 units a year, Porsche's targets were modest -- just three percent.
The strategy was focused on broadening its customer base, as well as appealing to its core markets -- one of which is North America, which accounts for 50 percent of sales.
"The Cayenne is a monster, but that is what people want in the SUV market, especially in the U.S. It is the ultimate automobile," says motoring journalist Nik Berg.
Booming sales of the Cayenne have been in contrast to those of the 911 and Boxster sports-cars, both of which have slumped and the latter by 40 percent.
This sea-change has led to a new way of thinking at a company that only has three car models to sell.
"In the future the fundamental idea is to stand on three legs, which means if one product is up maybe the other is down," explains Wiedeking.
"This will allow us maintain research and development spend, and have the potential to offer the market new products from one year to another."
Although the CEO was prepared to gamble the brand on the Cayenne, he was not prepared to gamble the finances.
The new factory in Leipzig was paid for with cash and almost everything bar the engine is outsourced to carmaker Volkswagen and other suppliers.
"It is the first time Porsche has outsourced to this extent and the first time any car manufacturer has turned over logistics to outside firms to such a degree," says Siegfried Buelow, Managing Director of Porsche.
Analysts believe the company will revitalize its core product, the perennial 911 later this year, followed by a second-generation Boxster in 2005.
In the meanwhile the CEO's iron grip on costs and savvy product know-how are likely to keep the momentum going -- but some say Porsche needs more than just three cars.
With the help of Cayenne's continued success, Wiedeking hopes Porsche will be able to breathe life into new models and give the company more than just a few legs to stand on.
-- CNN's Andrew Carey contributed to this report
