Porsche to make more cost cuts to meet US tariffs and sales slump

STUTTGART: Porsche AG warned its employees to brace for further cost reductions as the luxury-car maker seeks ways to offset declining sales in China and the escalating cost of US tariffs.

The manufacturer will start negotiations on additional reductions in the second half of this year, chief executive officer Oliver Blume wrote in a memo to employees seen by Bloomberg.

Management is following through on its pledge to find more savings after taking steps to reduce headcount earlier this year.

"Our business model, which has served us well for many decades, no longer works in its current form," Blume said in the memo.

Porsche is grappling with lower-than-expected demand for EVs and weak luxury sales in China, where the market for battery-powered cars is fiercely competitive.

In the US, Porsche's single biggest market where it relies solely on imports, President Donald Trump's trade moves are weighing on margins.

"All of this is hitting us hard - harder than many other car manufacturers," Blume said.

Porsche earlier this month warned of a tough road ahead for sales this year, after a slowdown in the US and its persistent weakness in China.

The additional cuts, to be hammered out with labor leaders, are meant to bolster Porsche's profitability in the coming years.

The company targets an operating margin of 15% to 17% in the medium term, from 8.6% in the first quarter.

The 911 maker is following parent Volkswagen's lead in trying to whittle down its production costs in Germany, where labor and energy are expensive.

Volkswagen clinched its own deal with unions late last year to slash production capacity and reduce headcount by 35,000 employees over the next five years.