Porsche And Hedge Funds Essay

1806 words - 8 pages

An Evaluation Created by:

The COGL & M Group

Presented to Don Wagner
BUS 606
International Business for Entrepreneur

January 17st, 2015

Company Profile

In 2008, Porsche generated $13.5 Billion in pre-tax sales selling a record 98,652 automobiles and the world considered it an impossible success for CEO (Chef Executive Officer), Wendelin Wiedeking. Upon further investigation, the financial world discovered that the highest paid CEO in Germany had speculated on financial derivatives and successfully used hedge funds to amass this fortune and save the Porsche brand.
Porsche was founded in 1931 by Ferdinand Porsche and was initially purely designing cars for automakers. ...view middle of the document...

Porsche is a major player in this industry, and continues to prove who they are by showing tremendous success in comparison to other automotive companies over the years.
The success of the Porsche Company can be contributed to several reasons. Porsche continues to introduce new platforms that meet consumer needs, from the 911, Boxster and Cayenne. Also, their accounting standards were beneficial to the way they presented their reports. Finally, and the most significant reason, was their financial performance and health; they were leaders of the competition in the majority of categories.
Porsche can credit the 911 series with their golden ticket to success. With a slowing economy, lack of disposable income for high end sports cars, there was a consumer need for other vehicle platforms. In 1996, Porsche introduced the Boxster Roadster, a lower priced luxury sports car. This was a great success as it was more affordable and less dependent on the cycling economy.
Porsche still believed there was room for a third platform and in 2002-2003 introduced their version of a Sport Utility Vehicle to the market. The result is a very successful launch of their high-end luxury SUV, the Cayenne. In fact, the Cayenne was mentioned as one of the most successful products launches of all time as it floated the sales for Porsche for many years.

Porter’s Five Forces Model for Porsche

Porsche’s Accounting Strategies
Porsche is a company based out of Germany and therefore has adopted the German accounting standards. German accounting standards is known for lack of transparency, which has allowed Porsche to mix operation results with financial results, including foreign exchange operations. The results from these accounting practices have been able to contribute to nine years of consecutive profit. In showing such consecutive success, they were able to pay out a special dividend of €14 per share in 2002 and increase the common regular dividend. At the senior management level there is a great deal of pressure to show a profit as 83% of senior manager’s compensation was based on performance related pay.
Those senior managers are pleased with Porsches great success in the European automotive industry, which is apparent when looking at their 2002 financial health and performance. Porsche leads the competition with Audi, BMW, Fiat, Mercedes Benz, Peugeot, Renault, and Volkswagen. In 2002, Porsche had the highest revenue per vehicle, (€72,589) highest operating margins (16.4%), highest price-earnings ratio (16.5), highest net operating profit after tax (8.9%), and highest return on invested capital (2.3). In addition they had the second lowest debt-asset ratio, and had a cash balance of €1.766 Billion. Porsche concentrated on using this cash balance to generate growth for the company, rather than borrowing from banks.

Porsche in North America
In 2001, Porsche’s sales to the US were nearly 45% of their total revenue and expected to grow with the...

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