Porsche Profit Holds Firm as 911 Cushions Sales Slump

(Bloomberg) -- Porsche AG’s profitability held up despite another sharp decline in vehicle sales, as demand for 911 sports cars and high-priced derivatives helped cushion the slump in China and weaker factory utilization.

The automotive division posted a 6.9% operating margin for the first nine months, compared with 0.2% a year ago, while group operating profit recovered to €1.74 billion ($1.94 billion) from €0.04 billion a year earlier. Revenue was €25.3 billion, versus a €26.9 billion a year earlier.

Porsche retained its full-year forecasts for revenue of €35 billion to €36 billion and a group operating margin of 5.5% to 7.5%. Maintaining the outlook signals confidence in the fourth quarter, with analysts’ revenue estimates currently sitting just above the bottom of the range.

Chief Executive Officer Michael Leiters is working to repair a profit formula built on strong Chinese demand, high factory utilization and a steady flow of lucrative new models. All three have weakened at once, while US tariffs and Porsche’s costly reversals on electric vehicles have left the company, majority owned by Volkswagen AG, spending heavily just as its former growth engine contracts.

The 911 remains Porsche’s strongest defense. Deliveries of the sports car rose even as the wider business shrank, and buyers continued to favor expensive GTS, Turbo and GT versions. That mix is helping offset China and gaps left by the combustion-engine Macan and 718, but it cannot fully compensate for plants and development operations designed for much higher volumes.

Leiters’s first task is to shrink Porsche for a tougher era. The company plans to eliminate more than 9,000 positions, cut management ranks by 40% and lower the annual volume needed to break even to about 200,000 vehicles. He is also reducing development spending and concentrating resources on fewer, more profitable projects.

Only then does Porsche intend to push decisively further upmarket. The strategy includes increasing prices of its most exclusive sports cars by about 20%, expanding bespoke and track-focused offerings and introducing models above the 911. The quarter offers early evidence of whether Porsche can preserve enough profit and cash during the cost-cutting phase to finance that more ambitious second act.

More stories like this are available on bloomberg.com

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