A recent Bloomberg Businessweek story by Andreas Cremer titled Porsche ‘Shock Therapy’ Spurs VW, Lufthansa Efficiency Drive opens with a reminder of something that in-depth followers of the automotive industry like yours truly have long known: “Just as car enthusiasts envy Porsche drivers, so company executives salivate over the carmaker’s profit margins, the highest in the industry.” It then goes on to inform us that “Porsche, the world’s most profitable carmaker, posted an operating margin in the automotive unit in the fiscal first quarter of 19 percent. Bayerische Motoren Werke AG (BMW), the biggest luxury carmaker, posted a third-quarter automotive profit margin of 8.1 percent, while Daimler AG’s Mercedes-Benz was 9.5 percent and VW’s Audi was 11 percent.” Buoyed by its success, Porsche has opened a consulting business that has advised, among others, Lufthansa; cruise vessel manufacturer Meyer Werft; German construction company Kirchhoff and, yes, Porsche’s new owner, Volkswagen.
Yet, almost 20 years ago, Porsche was on the verge of insolvency, plagued by high inventory levels and wasted factory space. In 1993, the German sports car maker reported a net loss of 122 million euros ($162 million) and sales of no more than 14,000 cars. It was at that point that a new Chief Executive Officer, Wendelin Wiedeking entered the picture. Stunned by rampant mass inefficiency, such as “Workers (that) used to spend half their time climbing up and down shelves looking for pieces”, Wiedeking turned to Toyota to learn the intricacies of the Japanese carmaker’s lean-production techniques. Indeed, the second sub-section of Cremer’s article is succinctly titled Taught by Toyota and informs us that, “Under Toyota’s guidance, Porsche took steps to fine-tune cooperation with suppliers to ensure factories received parts just when they were needed on the assembly line, a method that’s been widely copied in the automotive industry and that Porsche is now helping companies in other industries implement.”
One look at J.D. Power and Consumer Reports data serves as reminders of how well Porsche has learned and applied Toyota’s lessons. In an era when the German “luxury three” (Audi, BMW, Mercedes-Benz) are seeing a downturn in quality and reliability, Porsche stands alone among European carmakers in reporting near-Toyota and Honda results in those parameters, at least insofar as its flat six-powered sports cars.
Even Porsche’s move into the consulting business follows in Toyota’s footsteps. As another passage of Cremer’s article reminds us, “Toyota, the world’s largest automaker and Porsche’s teacher, is also in the consulting business, operating the Toyota Production System Support Center at its North American manufacturing and engineering headquarters in Kentucky, where it holds ongoing seminars for outside companies, as well as schools, hospitals and charities, spokesman Mike Goss said.”
Perhaps, though, with Volkswagen’s recent purchase of Porsche, all that Toyota help might come back to bite and haunt the Japanese giant, given VW’s avowed goal to become the world’s largest carmaker by 2018. After all, electrical problems and sub-Toyota levels of long-term reliability are the Germans’ Achiles heel, while their world-leading driving feel and handling have led even Toyota Chairman Akio Toyoda to wax rhapsodic over the latest Volkswagen Scirocco, to name but one example. And it has been said more than once that Toyota’s MR2 Spider is a Porsche Boxster tribute of sorts. Thus, the sure-to-intensify Volkswagen vs Toyota battle may ultimately be decided by which occurs faster: Volkswagen, via Porsche, elevates its long-term quality and durability to Toyota levels; or Akio Toyoda prevails upon Toyota to bring Volkswagen levels of driving involvement, feel and passion to the Japanese carmaker’s offerings while maintaining, and even improving upon, its traditional dependability…