Porsche hopes to squeak into black: Chances of independent survival pinned on introduction of Boxster in 1996

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The Independent Online
PORSCHE, the German luxury sports car maker, hopes to be just in the black in 1994/5 thanks to a drastic cost-cutting campaign.

But the company will have to wait until 1996/7 and the introduction of its two-seater Boxster aimed at the lower-price market, before it can 'hope to be making decent profits again', the chief executive, Wendelin Wiedeking, said yesterday.

Porsche is urgently seeking shorter-working arrangements, including a possible four-day week, with the IG Metall union to see it through the intervening weak years in which it will have too many workers for its production needs. The company said it is to increase nominal share capital by DM20m (pounds 8m) to raise finance for new models.

Mr Wiedeking forecast a group net loss of DM150m for the current fiscal year to end July 1994, after a record loss of DM239m in 1992/3. Porsche car sales, helped by the revamped Carrera 911, are expected to rise to 16,000 in this business year from 12,500 in 1992/3. The main improvement will be a 10 per cent increase in the vital American market.

Porsche is pinning most of its hopes for surviving as an independent manufacturer on the introduction of the Boxster in 1996. It will be priced at about DM75,000, (pounds 30,000) and the company expects annual production to rise to 30,000 units. At its peak in 1986 Porsche sold nearly 50,000 cars, more than half of them in the US.

As a consequence of productivity improvements, including a reduced number of suppliers delivering complete modules to the Porsche assembly line, the company said it would take less than 60 hours to manufacture the Boxster, compared with the 85 currently needed for the 911. But even this gain will leave Porsche adrift of its benchmark rival, Honda, which already produces its NSX sportscar in less than 50 hours.

Porsche intends to use the continuing cost improvements to reduce step-by-step the price of its cars. 'We need to reach competitive prices worldwide,' Kurt Wald, Porsche's production director, said. The revamped 911, with numerous additional features, is being sold at an unchanged price.

Alerted by problems in the vital US market, Porsche began earlier than other German car makers to grapple with its competitive disadvantages. Since 1991 Porsche has been introducing lean production, largely based on advice from production managers from Nissan and Toyota. Spending frequent 14-day visits on the production line, the Japanese consultants have been instrumental in achieving a 30 per cent reduction in costs over the past two years.

A large component of the cost reduction has been a 20 per cent cut in the group workforce to 6,800 by July 1994. In production, the workforce has been reduced by 40 per cent, and will be 3,200 by July. A radical agreement on shorter-working hours will enable Porsche to cut wage bill without making further large cuts in its excess labour-force. Uwe Loos, Porsche's board member in charge of production, said the IG Metall union had become very flexible over the last 18 months.