Porsche changes course: new CEO plans production and staff cuts
Porsche is abandoning ambitious plans for annual production of up to 400,000 vehicles. The new Chief Executive Officer, Michael Leiters, is initiating a large-scale restructuring that involves reducing production volumes, cutting staff, and optimizing the management board structure.
Reasons for the changes: falling sales and profitability
The previous management, led by Oliver Blume, sought to increase sales to 350-400 thousand cars per year. As production increased, so did the number of employees. However, weak sales of electric vehicles and a general business downturn in the USA and China caused Porsche’s profitability to fall to just over 1% last year.
Under Leiters, who previously led McLaren, Porsche recently announced the dissolution of the Car-IT division, reducing the number of departments from eight to seven. There is a possibility that the company’s board may also be reduced from seven to six members, as was the case under Matthias Mueller.
Large-scale production cuts
Last year, Porsche sold approximately 280,000 vehicles, which is over 30,000 less than the year before. The negative trend continues: in the first quarter of this year, sales fell by 15%. According to Handelsblatt, Leiters plans to reorganize the company so that it is profitable with production of approximately 200,000 cars per year. By the end of the decade, the company will aim to achieve an operating margin of 10-15%.
Leiters is negotiating with the German works council regarding cost cuts, which will lead to job losses. The exact number of redundancies is not yet known, but significant cuts could affect the research center in Weissach. Around 5,200 employees currently work there, and according to insiders, a quarter of these positions could be at risk.
Porsche’s head of sales, Matthias Becker, may also lose his position. He is partially blamed for the drop in sales in China. Notably, Becker was absent from the recent Beijing Auto Show.
Furthermore, the automaker is facing the problem of excess production capacity. To overcome this, the company may merge its production and procurement divisions.
These steps indicate a radical change in Porsche’s strategy: from aggressive growth to optimization and efficiency improvement in a challenging market. Cutting production nearly in half from previous targets and focusing on profitability rather than volume is an admission that the previous growth model has exhausted itself. The pressure in the Chinese market, which was previously a key driver for premium brands, is particularly telling. The restructuring will likely allow the company to maintain its status as a high-margin manufacturer, even if it means abandoning ambitious sales volume plans.