Q&A: MIKE SULLIVAN, PORSCHE DEALER BOARD OF REGENTS

Macan should put Porsche over 50,000 -- 4 years early

Mike Sullivan
Age: 60
Dealer since: 1985
Dealership: Pacific Porsche, Torrance, Calif.
Average monthly sales: 45 new, 30 used
Quote: "I have to throw in a word of caution that they have to remain humble. Because things are pretty good right now, and that's dangerous."
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After two years of record sales, Porsche is poised to smash its own long-term sales target as early as this year.

The luxury manufacturer has said it wants to sell 50,000 vehicles in the United States no later than 2018. But with a 21 percent jump in sales in 2013 to 42,323 vehicles and the promising new Macan crossover going on sale this spring, the goal looks much closer.

"The Macan alone is going to get us damn close," said Mike Sullivan, a member of the Porsche Dealer Board of Regents.

Sullivan, owner of Pacific Porsche in Torrance, Calif., spoke with Staff Reporter Amy Wilson.

Q. How was 2013 for Porsche dealers?

A. Really good. The luxury market is just on fire.

Regarding Porsche's target of selling 50,000 vehicles in the United States by 2018, won't you hit that way before 2018?

Yeah, but I'm really proud of them for not talking about it. They're still just saying 2018. We're going to hit it way before.

The Macan alone is going to get us damn close [this] year.

Won't it happen in 2014 with the Macan?

It sure looks like it, doesn't it? You're not going to get me to say that. But, gosh, it looks like it. The Macan alone will seem to. What you can't say is, will the Macan cut into the Cayenne a little bit? Sure, a little bit. The Macan is interesting. The six-cylinder Macan runs like the 911 but holds five people, so I don't know what all that thing cuts into.

With a starting price for the Macan of just over $50,000, won't that draw younger people into the showroom?

Yeah, it brings in a dramatically younger person. It could bring in a young family, a mom who never could drive a Porsche and couldn't really afford a Cayenne, a young guy who surfs. And, psychologically, it makes the franchise friendlier. We've really made a point in the last 10 years of becoming a friendly accessible franchise. We're still aspirational. The 918 is stupidly aspirational. But now, all of a sudden, we have this car that people can absolutely relate to.

What kind of volume will the Macan do?

It ramps up. We're only going to get them for nine months next year. Maybe it's 12,000 next year.

So if the Macan alone takes U.S. sales past 50,000 and there are other products on the horizon, what is a good long-term sales goal for Porsche?

They want to hit 50,000 and make it sustainable. Porsche has to be careful with who they are. If they start chasing 55,000, 60,000, 65,000, they could really damage who we are. One of my jobs is to keep them humble. So we need to hit it and have both them and I make money at 50,000 and then not have to incentivize the car, which costs them money and ruins the brand. It's really important for Porsche to be not just that cliche of one car short. Everybody wants to be one car short. But they truly have to be about 7 percent short. It supports everything that we do. It gives just enough snobbery to the franchise without being arrogant.

With the Macan coming and the customer base possibly getting younger, what are the concerns about maintaining Porsche's sports car image?

First of all, you absolutely kick ass with the other product. This GT3 we're launching now, it's a monster. So I don't think we're doing any danger to the brand with a $50,000 or $70,000 Macan. There's a youthful enthusiasm that will come from first-time buyers who are stoked that they bought their first Macan. We're being pretty careful. There's been talk for years about a shared sports car between Volkswagen, Porsche and Audi. Porsche has been the one that's pulled away every time, thank God. It doesn't help us. They're pretty hip to that.

Are your dealers profitable?

Yes. It's gotten more consistent, too. When we were sports car dealers only, it was more seasonal. A boat load of cars would ruin or make your month. With a hiccup in the stock market for 90 days, the 911 buyer disappears. Now we've become more stable and consistent. I can hire more people and train them better. I'm now prepared for the good times, and I used to be too lean to take advantage of the good times.

Are Porsche dealers making money on new cars?

Yes. And used. When you only do 10 or 12 cars in service every day, you've got to make money in sales.

Anything new on the facility front with these volume increases?

Sure. The OEMs just can't stand to not meddle in facilities. Come on. Porsche is on a national program to enlarge and freshen their facilities. It's problematic for some but not a big deal for most. They've got new products coming and people need bigger showrooms than they've had. Quite a few need to expand. For some that will be OK and for a few that will be a problem.

So their program is more about making sure that the facilities are the right size?

Well, it has to have the new look. But most dealerships [already] went to the new look. The biggest problem is we have more models to display. They want to go to an eight-car showroom when they used to be happy at three, four, five. It's hard to argue. I argue it in Southern California, because I'm looking out right now and it's 74 and sunny. So I don't need the showroom that some need. They've been reasonable with that.

Have you done an update?

I built the first of the new design 10 years ago, and I've upgraded it twice since then.

On your own accord?

Not mine. I'm good about keeping it really fresh and clean. I'm not good about taking walls out. A couple of years ago they decided everything had to go from round to square and from black to white. But you walk around the block and look at the statement and go, "Boy, I'd really like five more cars. OK." They get a little goofy, but not bad. This is all a fairly good problem to have.

Do they offer financial assistance?

No assistance. They don't send you a car for it, but it's easier to grow if you do all their stuff.

What does Porsche need to do to help you sell more vehicles?

Be careful on pricing for sports cars. They can't get too full of themselves with the amazing performance. That only translates so far to the American buyers in either the dollars or the lease payments.

What role will the customer experience centers being built near Los Angeles and Atlanta play for dealers?

It's a help in general. This is a brand statement. It gets people talking about it. It gets buff writers talking about it. We're going to take some little writers out from those buff magazines and blow their little minds. They're going to go, "Ooh," and type a little faster.

Will dealers get money to bring customers to the centers?

It's still being defined. They're still looking at: Should I pay to bring a guy down for a proper demo? Should I get so many per car I sell or allocated to me instead of paying? Should a customer be able to go there without me? Should a guy who just drives over on the freeway be able to drive a car or pay $50 to drive a car or not be able to drive a car?

They're certainly blurring the line a bit with dealer experience and manufacturer experience. They're not trying to sell cars out of these things, though you can take delivery at one like you do in Germany. That's cool. It will be different. We'll have to watch them.

Is there a concern Porsche would try to take orders through the centers?

No, but come on. All [the manufacturers] are touching it. So does the hair on the back of my neck go up? Of course. And is it guys like us with experience that are going to help them make the right decisions? Absolutely.

Porsche has just under 200 dealers. Is that right number?

Yeah. All the Porsche dealers would like another store, but they don't want anybody else to get one.

What do you see from new North American COO Joe Lawrence?

Joe is perfect for the role. He's got good experience with BMW. He sold cars years ago. He's an American, but he's been around the Germans. Communication is better.

Is anything missing in the product lineup?

No. They're really doing a good job.

What do you expect for the 918 Spyder?

They're not going to sell that many. The order bank is coming in really nicely. It jumped the last six months. I've got one on order for me. We feel it's going to be the right number of cars.

How are the recently updated products doing?

Boxster/Cayman is doing fine. That is very tough limited segment. It's the one place sales are just good, is all. We're just starting to roll out all the other iterations [of the 911]. Turbos, GT3s, that's just coming now. We're really coming in to the meat of the 911 market. That will be great. Cayenne is great. Macan is going to be great. Panamera is good, and Boxster/Cayman is good.

How much are inventory shortages constraining sales?

We're probably 3,500 or 4,500 cars light this year. In the Porsche world, that's a pretty big number, but it's not like you would want 10,000 more. That would be silly. Aspiration has to be in every sentence with Porsche.

Are you still pushing to get more Cayennes?

We're constantly working on it, and they did free up some for us. It's getting better.

Are you getting the marketing support you need?

It's been OK. If we're kind of sold out of cars, I don't think anyone is clamoring for a bunch more. Maybe they need to keep relaunching Boxster and Cayman and let more people know it's in their budget.

What are biggest challenges for Porsche dealers in 2014?

The product is good. We've all been talking about this Ferrari fighter. They're probably going to do that. Bridges between 911 and 918. That's a cool thing. It makes sense. There's a big gap there, and Ferrari makes a lot of money.

They'll be careful going below the Macan. For years we've talked about a sedan, sub-Panamera. What does that buyer look like? I suspect we're getting pretty close to satiation. You do Macan, you do the Ferrari fighter and maybe one more within that circle. I have to throw in a word of caution that they have to remain humble. Because things are pretty good right now, and that's dangerous.

You can reach Amy Wilson at awilson@crain.com.


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