DETROIT -- A change in strategy and a shift in the way automakers do business helped an engineering company that shares the name of a German sports car zoom to success in a difficult industry.
Porsche Engineering Services Inc. went from a boutique company specializing in high-tech projects to a company that is working on engineering design, testing, clay modeling, computer modeling, vehicle launches and supplier management.
That enabled it to increase its North American revenue to $15 million by the end of fiscal 2004, compared with $12 million the previous year.
Also by the end of fiscal 2004, its North American revenue from engineering projects had grown by 82 percent over three years.
The Troy, Mich., company would not release the number of engineers on staff for competitive reasons.
The strategy came with Paul Ritchie, who became CEO of Porsche Engineering three years ago. Porsche Engineering's parent company, Porsche Engineering Group GmbH, of Stuttgart, thought there wasn't enough revenue growth in high-tech projects.
"Our growth has been in a difficult environment," Ritchie says.
Now, he says, the company is ready to deal with a new, favorable trend -- U.S. automakers producing a wider variety of cars built at lower volume. At the same time they employ fewer engineers, by either attrition or layoffs.
That trend bodes well for engineering companies, says Ritchie and one of his competitors.
"We're following our customers' changes," Ritchie says. "The automakers have so many niche vehicles, it really compounds their resources.
"The downsizing and reduction of engineering mean there are gaps in some engineering programs. There are opportunities for companies like us to provide that support."
Ricardo Inc.'s John Van Alstyne agrees that the "model proliferation" and new engines and transmissions have put engineering companies in a good position.
"I agree business is fertile on the engineering front," says Van Alstyne, vice president of business development and marketing for the Van Buren Township, Mich., company. "We've had to add staff because business is growing."
Van Alstyne says the number of models introduced rose 50 percent from 1995 to 2005. Annual sales per model variant have dropped, on average, to 75,000, from about 90,000 to 100,000.
"You also have electronics growing from 20 percent of the vehicle to about 40 percent in 2015," Van Alstyne says, "so you have this technology revolution at the same time model proliferation is going up."
That's why Ritchie says he's glad Porsche Engineering made the switch to broader engineering work. He says the company has built a solid stable of Detroit-area engineering talent with low turnover. That will enable the company to expand its expertise to electrical engineering and more chassis work.
"We need to expand into those areas, and we're going to do it with local talent," Ritchie says.