Porsche at 60: The little sports-car company that could

Porsche's essence may have come about when company patriarch Ferdinand Porsche began tinkering with cars. In 1900, he built what may have been the first hybrid, with a combustion engine under the hood and electric motors on the front wheel hubs.

Or perhaps it started in the 1930s, when Porsche was a contract engineer with some very important clients. Or maybe it was 1948, at the launch of the first series-produced automobile to carry Porsche's name exclusively. Whenever it sprouted, the brand's essence has long since blossomed into what we know as Porsche today.

There are tangible qualities about that essence, certainly: solidity, proper engineering and performance. Porsches boast a civility that simply will not allow them to beat a driver up, plus a wash-and-wear character devoid of prissiness. There are quirks and a sweet mechanical feel that's never rough, but ultimately, it's how Porsche mixes those things into a cocktail that enthusiasts crave. Fahrengeist, if the word existed. We'll call it exhilaration.

Porsche AG as we know it dates to 1930, when Ferdinand established his engineering consultancy in Stuttgart. Dr. Ing. h.c. F. Porsche AG was the classic mittlestand, one of the midsized, engineering-based firms that had been the cornerstone of German capitalism since at least the Franco-Prussian War. Senior managers in the mittlestand were engineers who believed that success is rooted in the best products, designed by the best engineers. The philosophy would carry Porsche a long way and also would push it toward insolvency.

The company's biggest contract in the 1930s was for an automobile that sold more than any carrying the Porsche name. The German government hired Porsche to design a car for the people--a Volkswagen. The rear-engined Beetle eventually would share key components with the first road car called a Porsche. The 64, as it was known, was ready to build in 1939, but war put production on hold.

During World War II, Porsche developed the Kübelwagen, a military version of the Beetle, and the amphibious Schwimmwagen. In 1945, Allied troops took control of Volkswagen's Wolfsburg factory and arrested Ferdinand Porsche--also chairman of the VW board--on suspicion of war crimes. He was never tried, but his confinement proved fateful to the Porsche brand.

During Ferdinand's 20 months in custody, his son Ferry ran the engineering company and created a one-off called the Gmünd Roadster (named for the Austrian town where the firm now operated). As with the 64, the Gmünd shared Beetle design traits. But under Ferry's direction, it evolved into a sporting two-seater aimed at stylish customers. Its low-slung body, created by Beetle designer Erwin Komenda, laid a foundation that influences Porsche design 60 years later.

The Gmünd quickly attracted both orders and investors in war-ravaged Germany. Yet before it was released for series production, the car was altered to provide space for two small rear seats and was designated the 356. Two more Porsche precedents--naming cars after their internal code names and the familiar tiny back seat--were set.

Demand for the 356 quickly overwhelmed the workshop in Gmünd. With Ferdinand released and Germany stabilized, Porsche returned to the Stuttgart area and established its new headquarters adjacent to body supplier Reutter Carosseri, on Porschestrasse in Zuffenhausen (now one of 185 German streets and squares named after Porsche). Shortly thereafter, Ferdinand Porsche died of a stroke, and the company created its familiar crest, melded from its name, the coat of arms of the state of Württemberg (the large shield) and the Stuttgart city shield (the horse).

It also won its first auto races. Almost from the start, in 1951, Porsche made racing a development tool but also a profit center. Its trademark left-side ignition switch was created when someone concluded that it could save as much as 0.1 second in a Le Mans-style start.

A picture of Porsche had to change the 901 name originally chosen for its new sports car to 911 when the car reached dealers after its world debut at the 1963 Frankfurt motor show. Peugeot had already secured the rights to the 901 name, along with every other three-digit number with a zero in the middle, for the potentially lucrative French market.

Porsche had to change the 901 name originally chosen for its new sports car to 911 when the car reached dealers after its world debut at the 1963 Frankfurt motor show. Peugeot had already secured the rights to the 901 name, along with every other three-digit number with a zero in the middle, for the potentially lucrative French market.

In the United States, distributor Max Hoffman worked tirelessly through the 1950s, and the gospel of exhilaration took hold. By the end of the decade, the United States was Porsche's largest market. The 356 evolved through three major updates, and Porsche had sold 77,000 worldwide by the time it was discontinued in 1964.

That was the year Porsche introduced the car that remains its identity and a synonym for sports car. The new 911 had Porsche's first internally developed, horizontally opposed six-cylinder engine, and sales boomed. Before Porsche's first public stock offering in 1984, models such as the 912, the 914, the 924, the 928 (originally conceived as a 911 replacement) and the 944 had followed. Yet 44 years later, the 911 remains the backbone of the brand.

In 1986, Porsche built a record 54,000 cars, but the bubble was about to burst. It wasn't so much mismanagement--sometimes attributed to CEO Arno Bohn--as a confluence of circumstances, similar to what the Detroit Three face today. As world economies globalized in the late 1980s, the traditional high-cost, engineering-oriented German model was at a distinct disadvantage.

The strength of German exports and a devaluation of the dollar drove the deutsche mark sky high, and Porsche prices followed. By 1988, sales fell by more than 50 percent, to 26,000. When a recession hit in 1990, Porsche collapsed under the weight of its own inefficiency. By 1992, sales fell to 14,000, the lowest level since 1966, and the company lost $150 million. It was clear that Porsche needed a savior.

His name was Wendelin Wiedeking. He is Porsche's chairman today and was hired as CEO in 1992. Wiedeking's first order of business was canceling a four-door model in development (the first Panamera) and proclaiming in no uncertain terms: We remain a sports-car company. That in itself was a step toward efficiency, and more followed in short order. Wiedeking fought unions, slashed management and persuaded Japan's Shin-Gijutsu consultancy, the gurus of kaizen, to modernize Porsche development and production. He began a run of 16 consecutive years of increased pretax profit, and today Porsche is widely believed to have the industry's highest profit margins.

When Porsche launched its entry-level Boxster in 1996, it retailed for less than a Nissan 300ZX Twin Turbo. The Boxster sold so quickly that Porsche had to farm out some assembly to an operation in Finland.

But Wiedeking wasn't finished. He realized that sports cars were not enough to insulate Porsche from fluctuating exchange rates, cyclical demand or takeover by one of the big guys. So, in the late 1990s, to the horror of many of the faithful, Wiedeking struck a deal with VW/Audi for joint development of a sport-utility vehicle. The Cayenne was introduced in 2002 and became the fastest-selling Porsche to date. Flush with Cayenne profits, in a position of strength, Wiedeking reintroduced the idea of a four-door Porsche car. The Panamera will launch in spring '09.

Compared with Ford or even Chrysler, Porsche remains a small-volume automaker. It stocks replacement parts for models back through the 356. Its largest dealership, in Dubai, sold 1,419 cars in 2007. Its smallest distributorship, in Trinidad, has delivered 15 cars in 60 years. Racing is a significant contributor to Porsche's bottom line, as is contract engineering. Porsche has designed everything from tractors to survival gear to the V4 engine on Harley-Davidson's V-Rod.

Yet Porsche's management is sound enough and its position strong enough that it has been able to engineer a takeover of VW--ostensibly to keep Germany's largest automaker an automaker, free from control by equity firms or hedge funds.

Exhilaration has its appeal. We as enthusiasts should rejoice.

"For most of the others, the sports car is a marketing strategy," Wiedeking said at the Boxster's press launch. "For us, it is survival. The customer knows the real one."