When Porsche AG chose the location of the factory to build its new Cayenne sport-utility, the decision had a lot to do with image.
Last year, Porsche decided to separate the assembly of the Cayenne from the Volkswagen AG version of the two automakers' joint venture.
Though the two sport-utilities are built off a commonly developed platform, VW will assemble its version in low-cost Bratislava, Slovakia. Porsche will build the Cayenne at a new factory in Leipzig, Germany.
The reason: Porsche customers care about a product's origin.
'The two parties allowed themselves plenty of time to decide where the vehicles should be built,' Porsche CEO Wendelin Wiedeking says. 'We were informed about VW's preferences, but these did not tie up completely with our own.'
The eastern European production site in Bratislava won the VW group's internal competition for cost reasons. Also under consideration were a site in Palmela, Portugal, and a site that Porsche favored in Hanover, Germany.
Wiedeking wasn't happy with the former communist bloc site for his vehicle, which will be a high-end product. Instead of compromising, he abandoned the joint production plan in Bratislava to go it alone in Leipzig.
'The image factor naturally played a decisive part in our choosing this location,' Wiedeking explains. 'For Porsche, 'made in Germany' is a crucial competitive factor. It is important for all Porsche vehicles - the Boxster, the 911 and our new Cayenne - to be clearly associated with Germany as their country of origin.'
Even though Porsche uses Valmet Automotive, an independent automaker in Finland, to produce about half of Porsche's world supply of Boxsters, Wiedeking believes most of the world still perceives that sports car as a 'German product.' By contrast, under the VW plan, all Porsche Cayennes would have borne 'Slovakian Republic' as the country of origin.
But operating independently meant working out additional logistics issues for Porsche.
The Leipzig plant will bring together the highly effective linked production scheme that Volkswagen has devised for the sport-utility with Porsche's main production complex in Zuffenhausen.
Zuffenhausen will supply engines for the Cayenne. Sheet metal pressings will come from VW complexes in Hanover or Wolfsburg, Germany. Axle and suspension components will come from Braunschweig, Germany, while the body shell will be built and painted in Bratislava.
Luckily, Leipzig has two logistical advantages for Porsche. It has access to the German seaports of Emden and Bremerhaven, and it is more convenient to Porsche's key suppliers, most of whom are in Germany.
The separate final assembly will require Porsche to invest about $50 million to build a new assembly building and hire 260 new workers. Despite the cost, Wiedeking says the decision to establish a separate Porsche production makes economic sense.
'Leipzig is not only of interest to Porsche for image reasons but also from an economic standpoint,' Wiedeking explains. 'The additional cost burden compared with Bratislava, where costs are lower, is more than compensated for by the greater added value we achieve in Leipzig - if only because manufacturing in Germany justifies a different pricing policy for our new product.
'In short, on the bottom line, Leipzig is also more attractive for Porsche than Bratislava in economic terms.'