Porsche Opens Factory in Leipzig for New SUV

Exlusive sports carmaker Dr. Ing h.c. F. Porsche AG on Tuesday ventured onto the mass market with the launch of a new luxury sports utility vehicle, the Cayenne, which analysts believe will bring a big boost to sales, with demand far outstripping the company’s traditionally cautious production targets.

The new Cayenne production plant, which opened on Tuesday in the east German city of Leipzig, is geared towards the production of 40,000 cars per year. For comparison: a total of 54,000 Porsche model rolled off assembly lines last year. The SUV is set to retail at around 60,000 euros.

Porsche officially foreast that annual production would reach 25,000 units a year. But reports suggest that a letter to suppliers set out significantly higher targets. Moreover, Chief Executive Wendelin Wiedeking said at the opening of the 127 million euros plant that more than 100,000 people had signaled their interest in buying the new Cayenne.

The new SUV will be a direct competitor to BMW’s X5 and DaimlerChrysler’s Mercedes M-Class. But analysts believe the newcomer has big potential. Georg Stürzer, car expert at HypoVereinsbank, said the official production target represented “a nice understatement”.

Stürzer expects the Cayenne to become the main engine for Porsche’s growth, and he forecast that total group sales would rise to more than 6 billion euros in the current business year from an estimated 4.7 billion euros in fiscal 2001/2002, which ended 31 July 2002. Stürzer said that growth in pretax profit could be even stronger, taking the full-year figure clearly above 900 million euros. The analyst believes the Porsche share has potential to rise to 630 euros from its current trading level of around 485 euros.

CEO Wiedeking, meanwhile, was clearly sticking to his policy of delivering conservative forecasts in order to surprise the markets by exceeding targets. He forecast a successful start of the Cayenne and stable sales of Porsche’s 911 and Boxster models for the current business year. “We expect the sports cars to make a healthy contributions to earnings this year,” he told Handelsblatt. For the year just ended, the CEO said the group was set to present a “good result and good sales figures”.

The Porsche chief also said that concerns over new U.S. corporate governance rules had led the company to drop any plans to apply for a U.S. stock-market listing. “We will monitor the SEC’s talks and wait for a result. But to provide a sworn statement on the accuracy of balance sheets is not a real solution,” he said.

After a string of major accounting scandals decimated several companies and undermined stock markets during the past year, the U.S Securities and Exchange Commission (SEC) made it mandatory for chief executive officers to swear that their companies' financial statements fairly and accurately reflect their financial condition.