Porsche Zooms Ahead of the Pack

(page 2 of 2)

That savvy approach helped minimize costs and risks for Porsche and allowed Wiedeking to deliver more car for the buck. As demand for older models waned, for example, Porsche cut orders from Valmet but kept Porsche's own Boxster production running at full capacity. "The key is keeping supply and demand tight," says Casesa. "That's especially important when rivals are producing good sports cars for half the price of a Porsche." And by teaming up with others on research and development, Wiedeking engineered innovation at a fraction of the usual investment.

Cayenne Troubles

But growth is already putting a strain on Porsche's fabled quality, especially as emerging markets pump up demand for Porsche's iconic sports cars. And with rival models multiplying, Wiedeking can't afford a slip as Porsche adds a fourth model line, the Panamera four-door coupe, in 2009.

Wiedeking aims to co-engineer the Panamera with Volkswagen, sharing parts, electronics development, and production facilities, as it did with the Cayenne. But the first tandem with VW wasn't a flawless performance: Porsche's venerable quality reputation took a nasty hit when it launched the Cayenne in 2003. The Cayenne and VW's Touareg are built on a common platform, and the bodies of both are assembled at the same Volkswagen plant in Bratislava, Slovakia. According to J.D. Power, both the Cayenne and the Touareg were riddled with defects—though not all of the same kind.

Many of the Touareg's problems were related to Volkswagen's drive train, which differed from the Cayenne's. The Cayenne suffered faulty door locks, malfunctioning keyless entry system, wind noise, poor radio reception, and condensation inside the headlights.

Though a roaring market success, the first Cayennes to hit the market dragged down Porsche's quality reputation and its ranking in quality surveys, which measure the number of problems per 100 cars after three years on the market. Still reeling from the Cayenne quality debacle, Porsche ranked 29th this year in J.D. Power's long-term reliability survey, far below its traditional level.

Competition from Audi and Others

Individually, the Porsche 911 and Boxster models are among the best performers. "The Cayenne single-handedly drags Porsche down below average," says Ivers, who notes the ranking should steadily improve since Porsche has raced to fix those problems on recent models. In the 2007 initial quality survey, the Cayenne had 125 problems per 100 vehicles, down from 233 problems in 2004. "That's drastic improvement," says Ivers. The Porsche 911, by contrast, set a benchmark of only 69 problems per 100 cars.

Quality isn't the only challenge Wiedeking faces. Porsche has to grapple with a slew of new high-performance models from Audi, Maserati (FIA), Aston Martin (F), and Bentley, all eager to claw sales from traditional Porsche owners. "The Audi R8 super sports car is phenomenal,"says Karl Ludvigson, an independent motor-industry consultant based in Suffolk, England. "Audi is making a run at Porsche."

At the same time, government regulations to curb carbon-dioxide emissions could one day crimp the attractiveness of Porsche's cars for some buyers. In July, Greenpeace demonstrated at Porsche's headquarters as the company tried to talk up its green credentials by giving a sneak preview of a hybrid Cayenne that will boost fuel efficiency by one-third, to about 26 miles per gallon, when it hits the market in 2009. Demonstrators nonetheless branded Porsche's cars "environmental pigs." Warns Casesa: "The biggest risk to Porsche is not the competitive threat but the environmental threat."

An energetic Wiedeking shows no fatigue after 14 years at the helm, working the auto-show circuit until the wee hours of the morning. But steering the fast-moving automaker into the future—especially if Porsche takes control of Volkswagen—may well mean less time tooling around the potato patch in his favorite tractor.

Click here to view the slide show.

Edmondson is a senior correspondent in BusinessWeek's Frankfurt bureau.