Bài tập tình huống về toàn cầu hóa case study 10 porsche finds fortune from unlikely outsourcing

April 4, 2009

Porsche Finds Fortune From Unlikely
Outsourcing
By CARTER DOUGHERTY
UUSIKAUPUNKI, FINLAND — Outsourcing to less-expensive places like India, China,
Taiwan and Eastern Europe became routine for many American and Western European
companies over the past decade. But what’s Porsche doing in Finland?
Since 1997, Porsche, the German sports car manufacturer, has headed north to this
tongue-twister of a Finnish town instead of east, a move that helps explain why it is still
making money even as so many automakers are tapping government aid to weather the
worst industry downturn in a generation.

A worker checks the bodywork on a new Porsche at the Finnish Valmet factory. Henna Aaltonen for the
International Herald Tribune

During the fat years, Valmet Automotive cranked out thousands of cars in Uusikaupunki
to supplement Porsche’s production in Germany. Now, the assembly lines here are
slowing, which means that Valmet, rather than Porsche, is bearing much of the burden of
the global auto industry’s distress.


“We are a lean organization, but at the end of the day, there is a threshold here,” said Ilpo
Korhonen, Valmet’s president. “We can’t run like this forever.”
Porsche, the maker of the celebrated 911 two-seater and the Cayenne sport utility vehicle,
developed a production system — call it über-outsourcing — that is inspired by Japanese
models of lean manufacturing and the kind of contract manufacturing common in the
electronics industry. But Porsche has taken the notion even further and, at least so far, its
highly supple system is molding well to the contours of an unforgiving world economy.
“This crisis will be the absolute test for the Porsche
model,” said Jürgen Pieper, co-head of research at

Bankhaus Metzler in Frankfurt. “Right now, Porsche is
anything but a fair-weather company.”
Nothing symbolizes Porsche’s ability to steer through the
storm more than its plans to introduce the Panamera, an
entirely new sports car, during this difficult year for the
industry.
Fulfilling a long-held dream of its founding family, the
company will unveil a four-door sports car, which aims to
blend Porsche’s legendary flair with a little modern
functionality, at an auto show in Shanghai on April 19.
Porsche designed the Panamera, which will be made in
Leipzig, with one eye on Asian markets, where wealthy
customers often have chauffeurs and want more space in
back than a traditional sports car can offer.
Like every automaker these days, Porsche has had to
buckle down and find ways to save money, and it is
nipping and tucking where it can to save €100 million, or
$130 million. In the first half of its current financial year,
which ran from August to January, Porsche’s sales
tumbled 12.8 percent, to €3.04 billion, as deliveries fell
26.7 percent. It also booked €6.84 billion during the
period from the financial derivatives it used to secure
control of Volkswagen.
But Wendelin Wiedeking, Porsche’s chief executive, has
assured the 2,500 workers at its Stuttgart plant that their
jobs are safe, securing a vital flank in a country where
workers are represented on the board.
Automakers universally outsource production of parts or
sections of vehicles, and some even contract for the
assembly of small numbers of automobiles. This strategy shifts part of the financial risk

of a downturn onto suppliers, since a falloff in demand forces manufacturers to curtail
production of cars, but not spark plugs, headlights and the like.
Porsche, though, is notable for using an outside company, Valmet, to assemble one of its
main product lines, the Cayman, and its convertible sibling, the Boxster. In some sense,
the innovation makes Porsche the only major virtual vehicle manufacturer, a company
that designs and markets sports cars without actually cranking them all out on its own
production line.
The bread and butter of Porsche’s work in Stuttgart is the classic 911 sports car, but with
demand for that model now falling, it is pulling Boxster production out of Uusikaupunki
back to Germany. Though the system creates fiendishly complex logistical challenges,
Stuttgart can keep running at capacity, evading the industry’s hoary problem of covering
the fixed costs of factories and labor.
Mr. Wiedeking has said repeatedly that it is “preferable to build one car too few than one
too many.” That allows Porsche to keep pricing its cars like the luxuries they are, rather
than constantly discounting them in order to work off excess inventory — a strategy that
left Porsche near bankruptcy in the early 1990s.
At a time when companies like Daimler and BMW are offering strong incentives for sales
in the United States, Porsche is holding the line.
“You wonder if they would get sales back if they did incentives like the other luxury
brands,” said Jessica Caldwell, manager of pricing and industry analysis at
Edmunds.com, a research company. “But their incentives are very low.”
Mr. Wiedeking became Porsche’s chief executive in 1993 and brought with him the
gospel of efficient production that openly copied methods he learned from Japanese
automakers, above all Toyota. But by outsourcing assembly to Valmet, he did his Asian
mentors one better.
The Valmet-Porsche relationship began in 1997 as demand for the 911 rose, forcing
Porsche to find another way to make the Boxster. Rumors abound in the industry that
Valmet’s quality sometimes outstripped what Porsche has managed back in Stuttgart, a

charge Mr. Korhonen does not deny.
“Officially, we are allowed to be only as good as Porsche,” he said with a smile. “What
matters is the customer.”
In 2006, Valmet’s production for Porsche peaked at about 30,000, or roughly a third of
Porsche’s total output that year. Last year, it was 17,500 vehicles, and it is likely to be far
lower in 2009.
Porsche’s customers and dealers never know the difference. Only a hidden code on the
cars reveals that Finnish elbow grease buttresses German engineering. Valmet’s


production is mixed into shipments from northern German ports that are bound for the
United States and Asia.
Mr. Korhonen, a cerebral engineer with an M.B.A., is constantly calibrating his work
force to match Porsche’s needs with the deft touch of an artist applying the final
brushstrokes to a masterpiece. In each of the last three months, he idled about a third of
Valmet’s 600 employees before ramping up again in January and February, and then
shifting down with 190 layoffs in March.
“We are adjusting capacity almost daily,” Mr. Korhonen said.
Managing the inflow of parts that go into a high-performance Porsche is another tricky
task. Many suppliers are concentrated near Stuttgart, but Valmet has to arrange deliveries
to Finland, and often in smaller quantities.
Hence the “milk run,” as Mr. Korhonen calls it. Trucks are perpetually swinging through
Germany, Poland, Sweden and Finland to collect the components that go into the
Porsches assembled in Uusikaupunki, a town of 16,000, whose many inlets and islands
have made it a popular spot for vacation homes.
No detail is too small. Axles that are delivered to Porsche have the spring-like
suspension, which sticks up from the axle, already attached. But they come to Valmet
disassembled, so as to pack more into a single truck.
But Valmet’s greatest challenge is, in the end, existential. Its contract with Porsche
expires in 2012. The German company will move its outsourced assembly to Magna

Steyr, a company in Austria, which has the resources to assist Porsche in some
development work.
Valmet workers are already clearing space in the factory to manufacture the Karma, a
plug-in electric hybrid designed by Fisker Automotive, a California start-up. It will also
soon produce a luxury golf car for a Danish customer and expects to sell other
engineering services as automakers create derivatives of existing models, Mr. Korhonen
said.
And when the well-to-do rediscover their love of Porsche sports cars, Valmet hopes to
produce those, too.
“Eventually we will ramp back up,” Mr. Korhonen said. “We expect the market to
recover.”
1. How do you understand the title of the article “Porsche Finds Fortune From
Unlikely Outsourcing”? Please explain.
2. Summarize advantages and disadvantages of Porsche (the buyer of outsourcing
service) and Valmet (the supplier of outsourcing service) in this partnership. Is
there anything new of paradoxical to theory?


3. Describe the system of lean manufacturing mentioned in the article. What can be
the dangers to such manufacturing system? What are the threats from the
economic situation that can make the system less efficient or even collapse?
4. Suppose that you are the head of a Vietnamese mechanical factory. What can you
tell Porsche management to convince them to outsource the assembling their 911
or Boxster to your company as a replacement of Valmet?