Porsche's profit drive pays off

STRONGER sales and improved productivity should help Porsche, the German luxury sports-car maker, to break even at the operating level in the second half of this year. Reporting a loss of DM114m ( pounds 46m) in the first six months to January 1994, Walter Gnauert, Porsche's chief financial officer, said the company's German operations were already showing profits.

Sales rose 19.5 per cent to DM980m in the first half. Orders, boosted by the new 911 Carrera model, were 42 per cent higher in the first half to January. The company repeated its forecast of a net loss of DM140m-DM150m for the full year after showing a loss of DM239m last time.

By breaking even next year, the group hopes to be reporting good profits by 1996/7, following what Wendelin Wiedeking, the chief executive, termed a production revolution. Compared with an expected output of 18,000 cars this year, he said Porsche planned to make 30,000 cars in 1996/7 after halving the production time.

By then, Porsche will have simplified its range to just two models, the Boxster, priced at DM70,000- DM80,000, and a completely re-engineered 911 which would be held at today's price of DM125,000. More than a third of the parts will be shared, producing important economies of scale, said Mr Wiedeking. The number of suppliers will be cut from 950 to less than 300.

He said Porsche was pursuing a tough purchasing policy, which had already cut the price of parts by 50 per cent. Mr Wiedeking also noted that productivity gains implied a mixture of job cuts and flexible working arrangements for the labour force of 7,000.

Porsche's hopes for a turnaround in the near future follow a flurry of results highlighting the mixed fortunes of the German car makers during one of their worst-ever years.

Volkswagen, which saw its leadership of the European market shrink from 17.5 per cent to 16.4 per cent, reported a loss of DM1.94bn last year after a disastrous performance by its Spanish subsidiary, SEAT. The luxury German car maker, BMW reported a 30 per cent drop in profits to DM516m. But its main rival, the Daimler-Benz consortium, saw earnings plummet from DM1.5bn to DM600m.