Porsche Pins Hopes On Its Revamped 911

IN an industry where change is a constant, few cars have lasted as long as the Porsche 911.

One of the world's most admired sports cars, the 911 is entering its 30th year of production. The 1995 model, which debuts in the United States next spring, has been reengineered. The German automaker hopes that by making the 911 faster and easier to drive, it will win back the many fans who have traded their Porsches for Japanese upstarts, such as the Nissan 300ZX and the Mazda RX-7.

``If this car doesn't succeed, we will not survive as an independent company,'' conceded Porsche finance chief Walter Gnauert, as he unveiled the updated 911 for a group of American journalists.

Because it has built only sports cars, Porsche has never been a high-volume manufacturer. In 1986, its best year, worldwide volume barely nudged 50,000 cars, with more than 60 percent of those earmarked for the US. Fueled by the Reagan recovery, affluent Americans snapped up 30,471 Porsches.

The stock market crash then threw sales into reverse. In 1988, US volume slumped to 15,737, and worldwide sales fell to 29,017. But things would only get worse:

* The US recession affected white-collar workers, including those who bought sports cars, more than past economic slumps.

* The Japanese launched a new generation of high-performance sports cars costing far less than comparable Porsche products.

* Germany's strong deutsche mark forced Porsche to double its prices, while rising insurance rates made the cost of ownership even higher. By 1992, worldwide sales fell to just 23,060.

But the downturn was even more precipitous in the US, where volume plummeted to just 4,133. Industry analysts began to question whether Porsche could survive. The company recognized that its future depended on making a breakthrough with the new 911.

While the basic teardrop shape of the body has been maintained, the 1995 model has more horsepower and reengineered suspension. But some of the most critical changes will not be seen or felt by the driver.

``In the past, we would have developed the car, then figured out how much it cost to build,'' says Horst Marchart, Porsche's engineering chief. But in today's market, the company can no longer keep raising prices, so this time, ``We started out with targets the engineers had to meet,'' Mr. Marchart says.

Learning from its Japanese competitors, Porsche invited outside suppliers to participate in the project from the start. It emphasized the assembly line, making sure the new car would be easier to build. The '95 model requires about 25 percent fewer man-hours of direct labor to assemble, and Porsche claims it is well on its way to cutting product-development costs by 30 percent.

``With this car, we want to show the innovative power of our company,'' not only to sell the 911, but also to market the company's services, Mr. Gnauert says. Porsche supplies engineering services to companies like Volkswagen and General Motors.

While the US may never again account for 60 percent of Porsche's worldwide volume, it remains a critical market. Volume is likely to slip further before the end of 1993, but there will be a 15 to 20 percent increase in 911 sales next year, predicts Fred Schwab, president of Porsche Cars North America.

Mr. Schwab says the new car is only one of the ``fixes'' Porsche needs. Its biggest challenge will be to address its ``price/value problem.'' Porsche has cut prices on several models, and Schwab says that the new 911 will cost no more than the model it replaces, and perhaps even less. Porsche is also emphasizing lower-cost leasing, and it created a US finance subsidiary that allows it to offer subsidized financing.

Automotive analyst Susan Jacobs says those are steps in the right direction, but may not be enough. ``Even though they're trying to hold the line on pricing, they're still overpriced for this market. And given that Porsche's volume is small, until we hit another economic boom, I don't see their volumes recovering very much,'' she says.

Porsche officials suggest that even modest increases would be enough to make the company profitable and keep it independent.

Like many analysts, Ms. Jacobs is skeptical. She says she expects that Porsche will eventually form ties with, or be swallowed up by, a larger manufacturer. But she is also optimistic that the 911 will give sports-car buyers a reason to reconsider Porsche.