Porsche to cut 9,000 jobs, trim 20% of model variants in sweeping restructuring

Derivative models cut 20 percent, D/E-segment lineup to expand

Managerial roles slashed 40 percent, 9,000 jobs eliminated

Top-tier model average prices to rise 20 percent

Long-term operating margin target: 15 percent; net cash flow rate: 12 percent

Porsche AG Chairman of the Executive Board Dr. Michael Steiner [Porsche]

Porsche is embarking on a sweeping overhaul, cutting its workforce, trimming its model lineup and slashing development and production costs simultaneously. The German automaker plans to eliminate 9,000 jobs and reduce the number of derivative model variants by about 20 percent. It also aims to cut development costs and sales and retail expenses by up to 20 percent, with the goal of reaching breakeven even if annual sales fall below 200,000 vehicles.

Porsche AG announced Thursday that it unveiled its medium-to-long-term strategy through 2035, called "Sportwagenschmiede 35," at a Capital Markets Day held at its Weissach development center in Germany.

The company will first target costs and organizational structure. Development costs for future models will be reduced by up to 20 percent, while labor costs in production will be cut by up to 30 percent over the medium term. Sales and retail expenses will fall by 20 percent, and material costs for new vehicle projects will be trimmed by about 10 percent compared with existing plans.

The organizational structure will also shrink. Managerial positions will be reduced by 40 percent over the medium term, and the total workforce — combining direct and indirect employees — will be cut by 25 percent. The long-term target is a 30 percent reduction.

Under a "Future Package" agreed upon by management and labor, 9,000 jobs will be eliminated in a socially responsible manner. In return, employment for core staff will be guaranteed through 2035. Porsche expects these measures to reduce labor costs by about 10 percent.

A worker installs a steering wheel on a vehicle at Porsche's factory in Stuttgart-Zuffenhausen, Germany. [Reuters]

The product lineup will also be simplified. Porsche plans to reduce the number of derivative model variants it currently offers by about 20 percent over the medium term, lowering complexity in development and production. The remaining models will receive concentrated sales efforts, with the aim of boosting sales per model by about 30 percent.

Porsche is also divesting non-core businesses. The company has sold its stakes in Rimac and Bugatti Rimac and signed an agreement to sell its consulting subsidiary MHP. It also plans to wind down the development and production activities of Cellforce Group, Porsche eBike Performance and Seatec. Porsche Engineering and Porsche Digital will be merged into a new entity called Porsche Technologies.

The aggressive restructuring comes against a backdrop of falling sales and mounting pressure on profitability. Global deliveries in the first half of this year totaled 122,306 vehicles, down 16 percent from the same period a year earlier. Sales in China — the company's biggest headache — plunged 32 percent to 14,501 units. Revenue over the same period fell 5.1 percent to 17.23 billion euros ($19.4 billion).

Profitability has also deteriorated sharply. Operating profit for the first half came in at 1.35 billion euros, and Porsche's own guidance for the full-year operating margin stands at 5.5 to 7.5 percent — nearly half the long-term target of 15 percent.

With uncertainty growing in China and other key markets, Porsche has concluded it must transform into a company that can remain profitable even as unit sales decline. Lowering the breakeven point to below 200,000 vehicles annually is central to that goal.

"We will strengthen Porsche's unique sports car brand identity across all model lines and introduce desirable new products, particularly in high-margin segments," said Michael Steiner, chairman of Porsche AG's executive board.

"This strategy will serve as the foundation for dramatically improving Porsche's efficiency, productivity and profitability across three phases," he added. "We are already making meaningful progress on key initiatives, and at this stage we are focused on cost reduction and financial discipline."

While cutting costs, Porsche intends to increase the revenue it earns per vehicle. The guiding principle of the new strategy is "value-driven growth" — prioritizing value over volume. Rather than chasing higher unit sales, the company will expand its offering of high-end, high-margin vehicles, options and bespoke products.

The sales focus will shift toward the higher-margin D and E segments — vehicle classes that encompass mid-size and larger luxury cars. Porsche plans to expand the share of these segments in its portfolio by about 45 percent over the medium term.

Premium specifications and top-tier models will also be expanded, with the aim of raising the average selling price of the highest-end models by about 20 percent over the medium term. Revenue from the "Sonderwunsch" bespoke customization program is targeted to grow to six times its current level.

The performance business will be strengthened as well. Porsche plans to increase its stake in Manthey Racing to 67 percent and broaden the scope of collaboration to cover performance kits, track experiences and the development of limited-production vehicles.

New model development will also be refocused around high-margin vehicles. Porsche is pursuing the development of a mid-engine super sports car platform that can underpin higher-tier 911 variants. The company is also exploring the possibility of developing an SUV positioned above the Cayenne.

At least one new brand-defining product will be launched every year through 2030. Porsche will also maintain its "three powertrain" strategy, offering internal combustion engine, plug-in hybrid and battery electric vehicles in parallel.

The all-electric 718 Boxster and Cayman are expected to make a meaningful contribution to sales from 2028. That same year, Porsche plans to introduce a new B-segment SUV to be sold alongside the Macan Electric. New internal combustion engine and plug-in hybrid models will also enter mass production in 2028, supporting earnings improvement thereafter.

On the strength of this restructuring and value-focused strategy, Porsche targets a medium-term group operating margin of 10 to 15 percent and an automotive net cash flow rate of 9 to 12 percent. Medium-term revenue is targeted at 41 billion to 45 billion euros.

For its long-term targets through 2035, Porsche has set a group operating margin of 15 percent and an automotive net cash flow rate of 12 percent. The company also intends to maintain a dividend payout of at least 50 percent of consolidated after-tax net profit.

kwater@heraldcorp.com