Porsche Diversifies Into Hedge Fund Business

With all the difficulty of running a successful car business in today's global auto industry, Porsche AG has apparently diversified it's business to include a hedge fund offering to its owners. An article in today's Wall Street Journal (Porsche Powers Profit With Currency Plays), points out that Goldman Sachs estimates Porsche makes 75% of its pretax profit ($1.07 billion) from crafty currency plays. It makes one wonder how much of Porsche AG's management time and attention is focused on it's auto business versus currency hedge bets.

The same article points out that Porsche's U.S. sales results slid from 30,000 cars per year in 1986 to 4,500 in 1992, a fall that a company spokesman attributed to price increases used to cover currency problems from a weak dollar. But a little more digging might suggest the precipitous unit sales decline at Porsche in the referenced time frame followed not long after a disastrous effort to restructure the company's U.S. distribution system. Read the start of this Fortune Magazine article to get a feel for the turmoil that rocked the company across its entire U.S. dealer network (Porsche's Civil War With Its Dealers, David B. Tinnin, Fortune, April 16, 1984 v109 p63):

Shortly after Porsche swept the top places at Le Mans last year, President Peter Schutz proudly hung the results on his office wall: his cars won all the first ten places except ninth, which was taken by BMW. Printed beneath the rankings is the wry observation: NOBODY'S PERFECT. Schutz looks much less perfect now. Volkswagen of America has been distributing Porsches in the U.S., and Schutz ` decided that when Porsche's contract with VW expires in August, Porsche should go it alone. The plan backfired as Schutz underestimated the power of the dealers on whom an automaker's success depends. Volkswagen, which probably took in more than $40 million importing Porsches to the U.S. last year, has sought to protect itself from Schutz's move with legal action in four states...

Ahh, how a little time provides the opportunity to re-write history and blame it all on currency problems!