Porsche Builds Macan Crossover to Win Over Women

Mitja Borkert was 15 years old before he saw a Porsche. In the 1980s, his East German hometown of Herzberg was full of Trabants and Wartburgs, which were not fast or well-built and did nothing to raise the pulse of a teenage boy. In 1989 the Wall came down and the parents of a friend of Borkert’s bought a 911. “He came and picked me up, and I was hooked immediately,” he remembers. “The acceleration, the sound. It really kicked me.”

It’s not an exaggeration to say that ride—and that swift little waterbug of a car—set the trajectory of Borkert’s life. Just eight years later, in 1997, he had an internship at Porsche and a year after that a job at the company’s design center in Huntington Beach, Calif.

Borkert didn’t know at the time that his biggest contribution as a designer would have nothing to do with the sleek two-seaters he’d drawn in his notebooks as a teenager. Within a few years he was working on an updated version of the Cayenne, an SUV that excelled at two things: annoying Porsche purists, who consider the 911 a sacred vessel, and making money. Carrying fat profit margins and a new class of customers, the Cayenne took Porsche to the top of the car world in 2003. In the five years after the vehicle hit dealerships, Porsche’s total sales rose by 80 percent. Contrary to many predictions, the Cayenne didn’t water down the brand; it strengthened it.

Photograph by Thorsten Futh

By early 2011 roughly one in two Porsches sold was a Cayenne. The experiment was so successful that Porsche decided to do it again, this time with a smaller SUV. It would be a crossover, a segment for which aficionados harbor a special hate. It’s a class too small to have much utility, yet too large to drive particularly well. “It’s kind of the antithesis of what sports cars are supposed to be all about,” says Bill Visnic, a senior analyst at Edmunds.com.

The crossover, known under the code name Cayjun, for Cayenne Junior, was three years in the making and finally rolled into dealerships in April as the Macan. Named after the Indonesian word for tiger, and starting at $49,900, it brings the company into one of the most crowded corners of the auto market and draws it further away from its sports car roots; metaphorically speaking, its development was a journey from the Nürburgring test track to the Whole Foods parking lot. “We make these decisions all the time and they polarize people,” says Bernhard Maier, a master mechanic in charge of sales and marketing. “But once you get the experience, no matter what model you are driving, you feel immediately: ‘Yes, this is a Porsche.’ ”

If the strategy succeeds without alienating the brand’s current customers, the spoils largely go to Volkswagen (VOW:GR); the longtime Porsche production partner acquired slightly more than half the company in 2012. Porsche is now by far the most profitable company in Volkswagen’s family of brands, offering volume that VW can’t realize with its Lamborghinis and Bentleys and profit that it doesn’t find in its Audis (NSU:GR) or its Jettas and Passats.

If the Macan flops, however, the failure could rub off on the rest of Porsche’s product line. “It’s absolutely a risk,” Visnic says. “There’s a spectrum a sports car brand can work with, but that spectrum is narrower for Porsche than it is for BMW (BMW:GR) or Mercedes (DAI:GR).”
In April 2013, Porsche announced a new brand ambassador, tennis star Maria Sharapova. It’s significant that she’s a woman; 85 percent of Porsche buyers are men, and the Macan is intended to win new customers.

Female voices are not in abundance at Porsche. The seven executive board members, a group that includes Maier, are all men. Still, Maier says the company wants to appeal to female customers because it’s good business. The U.S. now has more women with driver’s licenses than men, according to a June study by consultant Frost & Sullivan. There are also a lot of very rich women in the world these days, about 23,500 whose wealth is valued at more than $30 million, according to UBS (UBS). Maier says the opportunity isn’t only in SUVs; women are a fast-growing demographic for small, sporty convertibles, too.

Porsche gets “a bad, bad reaction whenever they release something for soccer moms,” says Michael Prichinello. “But I get why they do it.” The co-founder of the Classic Car Club Manhattan and a longtime Porschephile, Prichinello was not a fan of the Cayenne, and says the design of the Macan reminds him of a Toyota Rav4—and not in a good way. But, he notes, “if the market was just guys like me, they’d sell very few Porsches.”

The success of the Cayenne, say executives, led to the Panamera, Porsche’s first four-door sedan, introduced in 2009. From there, a smaller SUV was an obvious choice. “We just asked ourselves ‘Where is a Porsche missing?’ ” Maier says.

Photograph by Thorsten Futh

The hypothetical customer for the Cayenne was relatively simple to define: a 911 driver who wanted a second, bigger Porsche. The model on the Macan is more complex. Porsche wants to get younger customers who live in urban areas and lead active lives. They aren’t divorced dermatologists in country club mansions; they’re Greenwich moms who take their kids surfing and thirtysomething entrepreneurs in Shanghai. If all goes as planned, these people will buy a Macan and, eventually, add a Cayenne or a 911—or both.

As a category, the crossover is already popular among women and young urban types and is one of the hottest segments in the industry. Twenty years ago, there was no such thing. The Subaru (7270:JP) Outback, which first hit showrooms in 1994, was the closest relative. A strange mutation in the evolution of the automobile, it sold well and hinted at the species to come. In the first half of this year, one in five vehicles sold in the U.S. was a crossover, according to Bloomberg data.

Porsche is late to the game with the Macan. Mercedes, Porsche’s neighbor in Stuttgart, has been making its M-Class since 1997. BMW started selling its X3 in 2003. Audi’s Q5, the Macan’s corporate cousin, was unveiled in 2007.

Borkert, now 40, was the perfect candidate to capture Porsche’s design and put it in a new form. If Porsche is a religion and its R&D center near Stuttgart is an abbey, Borkert is the eccentric monk wearing Beats headphones. Perhaps because of a childhood under communism, he has a special affinity for America. His blond hair is styled into a sort of short pompadour. Touring Porsche’s sunny new design studio on one of the hottest days of the year, Borkert wears dark jeans instead of a skinny suit. When he isn’t driving a Porsche, he’s tooling around the autobahn in a 1960s vintage Ford GT40. “To create an SUV at Porsche is always a bit tough,” Borkert says. “As a designer, you have to play all the cards you have.”

Borkert sketched in the chassis of Audi’s Q5 SUV, which would be the base of the car, and went to work. The result is a vehicle with enough room to carry a decent-size washing machine and still go from zero to 60 mph as fast as a BMW 4-series coupe , though probably not while hauling the washing machine.

Walking around a “rhodium silver” Macan, Borkert points out the nearly 18 cubic-feet of cargo space and the swelling metal over the rear wheels. More than anything else on the vehicle, those “famous hips,” as he calls them, echo the design of the 911. The Q5, which is much taller, has nothing like them. The Macan roofline gradually slants down toward the rear and drops away to a fender with three-dimensional taillights, two crowns of red with a gaping black hole in the middle of each. The same lights can be found on Porsche’s 918, a supercar that starts at $850,000. Borkert is most proud of the hood, a single sheet of aluminum that spills seamlessly over the front wheels—a so-called clamshell. “It’s a race car detail on an SUV,” he says. To please the Porsche board, Borkert knew, the Macan needed to be big enough to handle a sizable Costco haul but still drive like a sports car—and he doesn’t just want me to take his word for it.
Only about half of the 300 miles of road between Porsche’s headquarters in Stuttgart and its factory in the former East German city of Leipzig is subject to speed limits. With just a small suitcase in the trunk, a Macan Turbo covers the distance with an eagerness that speaks more to its 400 horsepower than the almost 4,700 pounds it weighs (about as much as a full-size pickup truck). When the speed limit signs disappear, the vehicle easily tops 100 mph. A bit more prodding and you feel the sports car origins that Porsche executives are always boasting about. The hood rises slightly as the vehicle squats on its rear wheels like, well, fine, a tiger. At 115 mph, the sides of the road become a blur of wheat and wind turbines. At 130, there’s still a wide gap between the accelerator and the floor, and the turbo meter shows it’s only halfway to maximum. With traffic, the trip takes a jet-lagged writer a little bit more than five hours. Christoph Beerhalter, the engineer in charge of Leipzig’s Macan assembly line, does it in three. Beerhalter drives a 911—“the current one”—and he’s made the trip quite a lot since Porsche committed to a $550 million expansion of the plant in early 2011.

Beerhalter had to apply to build the Macan, competing with other Porsche facilities. The stack of paperwork he submitted to the board detailed a number of things: the success of the Cayenne, which his plant had assembled since 2002; abundant room for expansion; relatively cheap labor; a robust network of parts suppliers nearby; and a set of train tracks that run 300 miles to the North Sea port of Emden. Those points were compelling, but equally persuasive was the person they came from. Beerhalter, a short, fit man who seldom wears neckties, played a major role in transforming Porsche from a clunky corporate machine into one of the most efficient and profitable car companies in the world. When he started at Porsche in 1991, the company offered highly customized cars that sold for quite a lot but also cost quite a lot to build. The factory in Stuttgart looked more like a repair shop than an assembly line.

After Porsche tapped Beerhalter to build the Leipzig factory, he studied Toyota (TM), like everyone else in the industry. He also investigated a number of factories outside of the car world; pharmaceutical plants, in particular, were inspiring. Although he had hundreds of empty acres of farmland to work with, Beerhalter agonized over where each line would run, where each trolley full of parts would drive, and where each bin of screws would sit. For the first time a Porsche factory would be as finely tuned as its product.

“It’s like football—rather soccer,” Beerhalter says, describing the assembly line during a tour through the plant. “And it’s all about transparency. You can see right through the line at any point. There’s no clutter.”

The floors shine as brightly as the cars. Bright blue chairs cluster in break areas. From the rafters, vehicle-laden brackets hang like giant metal binder clips, and sunlight streams from a long, thin skylight. Workers in matching red overalls swarm the cars in teams of 10, repeating a choreographed sequence.

Photograph by Thorsten Futh

The bodies of the Cayenne and the Panamera are built in factories in Slovakia and Hanover, Germany, and come in by train to Leipzig, where the workers add engines, electronics, and trim. The Macan, however, is put together almost entirely in Leipzig. The only part of the process Beerhalter didn’t land was the stamping of metal body parts like that futuristic clamshell hood, and he’s still lobbying for that.

The first half of the Macan’s construction is handled by yellow robots, seemingly sentient single arms that grab and spin and measure and weld. In the paint shop, the machines are wrapped in plastic bags and squirt a PVC sealant on the cars’ seams, giant pastry bags icing an intricate metal cake. On the main floor, there’s no clank of metal, no showers of sparks, just a roar and whir of white noise, as if the warehouse were full of 100 dentists bent over teeth with whooshing water picks and tiny drills.

At the end of the painting process, in a tunnel of mirrors glowing with light, humans start touching the car. They hunch close to the metal and scan for imperfections, smudging on a grayish blob of paste once in a while and buffing it out with a spinning pad. For the rest of the process, red overalls far outnumber the yellow robots. Drivetrains are fastened on, as are the engines and the seats. Wires are threaded and plugged. The cockpits are hoisted into place, and, finally, the steering wheels are attached, a piece that Porsche designers are famously fussy about. A screen above the workers reads “TAKTZ 156.4”—the number of seconds between each vehicle rolling off the end of the line.
Buying a Porsche is like ordering an exquisite 10-course meal and paying a la carte for every spice and sauce. It’s a model built on the assumption that once customers are in the door—once they have saved up a pile and set their minds on a Porsche—they’re going to splurge on the extras. Three of Porsche’s five models last year could be had for less than $55,000, including the Cayenne, its best seller. Porsche’s revenue in 2013 was €14.3 billion ($19.2 billion), which works out to just under $119,000 per vehicle.

Buying a Porsche is like ordering a 10-course meal and paying a la carte for every spice and sauce

The base model, the Macan S, starts at $49,900, but the potential to upgrade is vast. Black paint is free; a shinier “jet-black” costs $690. “Espresso”-colored leather seats run $4,910 (black, beige, or gray leather comes free), a trailer hitch is $650, and a fuel cap with an aluminum finish, rather than black plastic, is $160. Porsche will even sell you a spare tire for $290 and little logos to go in the center of the wheel hubs for $185. A buyer can step up to the Turbo model, starting at $72,300, and begin loading it up from there. A Macan with every option could cost as much as $167,700.

Martin Rosenlöcher, whose title is improvement process coordinator, walks the factory floor in a gray lab coat and close-cropped red hair, keeping an eye on all these special orders. At 25, he’s also one of the youngest of the plant’s 2,700 workers. Most of the Porsche parts aren’t in the Leipzig plant a day before they are bolted on to a car, he explains. Fully assembled cockpits, for instance, are delivered every two hours.

Rosenlöcher seldom tells anyone how to do anything. Rather, he hosts workshops with the teams and asks a lot of questions. Something as simple as where a tool is placed or how many screws someone carries can make a huge difference. Rosenlöcher is around 6-foot-3, and he’s been a Porsche employee for only 18 months. When he approaches a line worker to shake hands, he slouches a bit.

Every car factory in the world has robots. Every production manager at those facilities preaches kaizen, the philosophy of efficiency pioneered by Toyota. Porsche has so finely tuned its assembly line, it can handle a menu of 300-plus options. Most cars offer a few packages of options, rather than thousands of different combinations. Even at Toyota, when workers piece together one of the 10 million vehicles they make every year, they don’t have to worry about what color gas cap to screw on or whether the rear windows need $250 blinds.

Some of that profit comes from being a division of one of the world’s largest car companies. The parts from Volkswagen and Audi, which make up one-third of the Macan, have given Porsche purists something new to grumble about, but they’ve also further streamlined the production process and provide better margins. Out of every $100 Porsche collected last year, $18 was profit before taxes. In the same period, the operating margin at BMW was 10.4 percent, and at Mercedes it was 6.7 percent.

Of the 600 or so complete cars that roll off the line every day, 5 percent are given a two-hour “audit.” If the number of imperfections is low enough, every worker gets a monthly bonus, including those in human resources.
As soon as the early prototypes were available, Julian Baumann, director of sales and marketing for Porsche’s SUVs, shopped the Macan around. He thought it would appeal to women, because it was a relatively small SUV yet still elevated the driver, something, he says, that women equate with safety.

Baumann’s team hosted four “product clinics,” in Germany, China, New Jersey, and Los Angeles, inviting 500 people to each. The crowds, which included a lot of women, were given iPads loaded with survey questions and ushered into a room. Parked inside was a Macan and several rival vehicles of roughly the same size and shape, including the Audi Q5 and the BMW X3. They were all painted white to guard against color preferences. Guests weren’t told which company was hosting the event, but the Macan stood out, according to Baumann. “By the end of it, they were all saying, ‘That’s the new Porsche isn’t it?’ ” he says. When asked which of the cars they would buy, 95 percent of them picked the Macan, despite its higher price.

Even the 911 owners approved, albeit grudgingly. “They were fascinated,” he says. “They said ‘I’m not an SUV customer, but I recognize that it’s a true Porsche.’ ”

Last year about 2,500 of the Cayennes and Panameras made in Leipzig were waiting there for customers who came to the plant and made a vacation out of picking up their car. It’s listed on the menu of options presented to buyers, and it’s one of the few extras that’s still free. Imagine 2 percent of Ford customers making a pilgrimage to take delivery of their F-150 pickup trucks in Dearborn, Mich.

When the Leipzig plant is running at full capacity, it will stamp out about 50,000 Macans a year. For 2014, Porsche says it’s sold almost as many as it can make. Some 60 percent of this year’s batch are going to drivers who have never bought a Porsche. Almost one-quarter of the Macans were bought by women.

Most of the Macans will travel to the U.S. or China, Porsche’s biggest markets. They start the trip on the train from the Leipzig plant to the North Sea, stacked two-high. “They actually drive them on,” Rosenlöcher explains. “It’s amazing how fast they go.”

For a video review of the family-friendly Macan, go to: businessweek.com/porsche-macan

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7 August 2014 | 7:00 pm – Source: businessweek.com

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