Porsche Changes Tack
Porsche Changes Tack
“Yes, of course we have heard of shareholder value. But that does not change the fact that we put customers first, then workers, then business partners, suppliers and dealers, and then shareholders.”
Dr. Wendelin Wiedeking, CEO, Porsche
An Overview of Porsche AG, 2005
• • Porsche is a publicly traded family controlled company Porsche is a relatively simple company by product line, having three existing and one newly proposed products:
• • • • 911 – the only model produced and assembled completely by Porsche Boxster – licensed manufacturing with Valmet of Finland Cayenne – co-manufactured with Volkswagen of Germany Panamera – to be completely Porsche (at least that’s the plan)
Will Porsche’s new strategy actually create shareholder value?
• • • •
Porsche’s profitability has been extremely impressive over the past decade – particularly for an automaker Porsche has followed a strategy with both the Boxster and the Cayenne which uses a combination of licensing, out-sourcing, and in-sourcing to leverage other people’s money As a result of its strategy, Porsche has enjoyed an industry leading return on invested capital (ROIC) But two major announcements in the summer and fall of 2005 seemingly indicate that Porsche is changing directions:
• The Panamera will be manufactured in-house, with Porsche’s own money • Porsche has invested 3 billion in taking a 20% interest in Volkswagen (Germany), one of the worst performing automakers in the world
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Porsche Changes Tack: Case Questions
1. What strategic decisions made by Porsche over recent years had given rise to its extremely high return on invested capital? 2. Vesi wondered if her position on Porsche might have to distinguish between the company’s ability to generate results for stockholders versus its willingness to do so. What do you think? 3. Is pursuing the interests of Porsche’s controlling families different from maximizing the returns to its public share owners?
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Exhibit 1 Porsche’s
“Yes, of course we have heard of shareholder value. But that does not change the fact that we put customers first, then workers, then business partners, suppliers and dealers, and then shareholders.”
Dr. Wendelin Wiedeking, CEO, Porsche
An Overview of Porsche AG, 2005
• • Porsche is a publicly traded family controlled company Porsche is a relatively simple company by product line, having three existing and one newly proposed products:
• • • • 911 – the only model produced and assembled completely by Porsche Boxster – licensed manufacturing with Valmet of Finland Cayenne – co-manufactured with Volkswagen of Germany Panamera – to be completely Porsche (at least that’s the plan)
Will Porsche’s new strategy actually create shareholder value?
• • • •
Porsche’s profitability has been extremely impressive over the past decade – particularly for an automaker Porsche has followed a strategy with both the Boxster and the Cayenne which uses a combination of licensing, out-sourcing, and in-sourcing to leverage other people’s money As a result of its strategy, Porsche has enjoyed an industry leading return on invested capital (ROIC) But two major announcements in the summer and fall of 2005 seemingly indicate that Porsche is changing directions:
• The Panamera will be manufactured in-house, with Porsche’s own money • Porsche has invested 3 billion in taking a 20% interest in Volkswagen (Germany), one of the worst performing automakers in the world
1-2
Porsche Changes Tack: Case Questions
1. What strategic decisions made by Porsche over recent years had given rise to its extremely high return on invested capital? 2. Vesi wondered if her position on Porsche might have to distinguish between the company’s ability to generate results for stockholders versus its willingness to do so. What do you think? 3. Is pursuing the interests of Porsche’s controlling families different from maximizing the returns to its public share owners?
1-3
Exhibit 1 Porsche’s