Porsche Made in Leipzig Drives Sales at Lowest Labor Cost
Porsche Made in Leipzig Drives Sales at Lowest Labor Cost
Jochen Eckel/Bloomberg
Porsche, Bayerische Motoren Werke AG and Daimler AG are expanding factories in the former-communist region to escape the costs and congestion in the industrial southwest, where they all call home.
Porsche, Bayerische Motoren Werke AG and Daimler AG are expanding factories in the former-communist region to escape the costs and congestion in the industrial southwest, where they all call home. Photographer: Jochen Eckel/Bloomberg
Porsche Made in Leipzig Drives Sales at Lowest Labor Cost
Michele Tantussi/Bloomberg
A Porsche Panamera automobile sits outside the company's car production plant in Leipzig.
A Porsche Panamera automobile sits outside the company's car production plant in Leipzig. Photographer: Michele Tantussi/Bloomberg
Siegfried Buelow, Head Of The Porsche Factory In Leipzig
Michele Tantussi/Bloomberg
“We have excellent conditions in Leipzig,” Siegfried Buelow, head of Porsche’s factory, said in an interview at the plant which features a 32-meter tall diamond-shaped customer center and a 2.3-miles racing circuit.
“We have excellent conditions in Leipzig,” Siegfried Buelow, head of Porsche’s factory, said in an interview at the plant which features a 32-meter tall diamond-shaped customer center and a 2.3-miles racing circuit. Photographer: Michele Tantussi/Bloomberg
Porsche Fuels Eastward Expansion in Competition With BMW
Michele Tantussi/Bloomberg
Panamera 4 S automobiles are carried along the production line at the Porsche AG factory in Leipzig.
Panamera 4 S automobiles are carried along the production line at the Porsche AG factory in Leipzig. Photographer: Michele Tantussi/Bloomberg
Porsche AG Chief Executive Officer Matthias Mueller
Michele Tantussi/Bloomberg
Porsche AG Chief Executive Officer Matthias Mueller reacts during a news conference at the company's car production plant in Leipzig.
Porsche AG Chief Executive Officer Matthias Mueller reacts during a news conference at the company's car production plant in Leipzig. Photographer: Michele Tantussi/Bloomberg
The Porsche AG Factory Is Seen In Leipzig
Michele Tantussi/Bloomberg
Porsche AG is expanding operations in eastern Germany, competing with Bayerische Motoren Werke AG and Daimler AG’s Mercedes-Benz as the carmaker’s record sales drive is thriving on a former Soviet military training base.
Porsche AG is expanding operations in eastern Germany, competing with Bayerische Motoren Werke AG and Daimler AG’s Mercedes-Benz as the carmaker’s record sales drive is thriving on a former Soviet military training base. Photographer: Michele Tantussi/Bloomberg
For Porsche SE, “Made in Germany” increasingly means a onetime Soviet military training base in the country’s former-communist east.
The maker of the 911 sports car broke ground today on a 500-million euro ($689 million) expansion at its factory on the former Soviet site in Leipzig. The addition of paint and body shops will nearly double investment at the plant, home to the manufacturer’s two best-selling models.
The investment, aimed at taking advantage of lower wages in the east, is part of a broader shift by German carmakers 22 years after the fall of the Berlin Wall. Porsche, Bayerische Motoren Werke AG (BMW) and Daimler AG (DAI) are expanding production in the former-communist region to escape the costs and congestion in the industrial southwest, where they all call home.
“There was nothing but green fields when we started out here,” Siegfried Buelow, head of Porsche’s Leipzig factory, said in an interview. “We have excellent conditions in Leipzig. We’re well aware of our advantages here,” said the executive, who joined the company in 2000 when construction of the plant started.
Porsche builds the $75,200 Panamera four-door coupe and the $48,200 Cayenne sport-utility vehicle in Leipzig, the Stuttgart- based company’s only assembly plant outside its home state of Baden-Wuerttemberg. The two models accounted for three quarters of Porsche’s 10,560 global sales last month.
Outpacing the West
The planned spending at the auto plant, the first following reunification in 1990, will add to the 277 million euros invested there over the past decade, according to Porsche. That spending would outpace the 350 million euros that the manufacturer has said is earmarked for facilities in western Germany. More than 420,000 cars have been built at the factory since it opened in 2002.
“Leipzig is building the models that promise higher growth potential for Porsche” than sports cars like the Stuttgart- built 911, said Willi Diez, head of the Institute for Automobile Industry, a state-funded think tank in Nuertingen. “The enlargement will boost the factory’s strategic importance.”
Low Cost
Located in Germany’s eastern state of Saxony where the smoke-spewing Trabant was built, Leipzig was the scene of protests that spread to Berlin and toppled communist East Germany in 1989. Federal aid helped develop the city’s airport into an international cargo hub and construct modern highways and rail links. The new infrastructure and a skilled local labor force have also attracted investments by Amazon.com Inc. (AMZN) and Deutsche Post AG.
Low wages in the region, which still trails western Germany economically, have also been critical. Manufacturers last year paid workers in the eastern states 40 percent less than counterparts in the west, according to the Cologne-based IW economic institute. Labor costs averaged 21.76 euros per hour in the east, compared with 36.28 euros in the west, IW said in a study released this month.
“Leipzig will play an essential role in our plans for future growth,” Matthias Mueller, chief executive officer of Porsche’s car-making unit, said today at the ground-breaking ceremony. “The future for Leipzig looks rosy. Porsche is firmly locked on a growth path.”
More Expansion
Porsche, which plans to merge with Volkswagen AG (VOW), is seeking to boost sales to about 140,000 vehicles next year from an estimated 120,000 in 2011, benefiting from revamped versions of the 911 and Boxster roadster, a person with knowledge of the matter said on Oct. 13. The carmaker is aiming to increase deliveries to over 200,000 by 2018 and expand the number of model lines to seven from four.
BMW, based in Munich, is turning to its Leipzig plant to build its first electric car. The factory, which already makes the 1-Series compact car and X1 SUV at the site, will start manufacturing the emission-free i3 from 2013.
The area’s infrastructure, qualified workers and university ties were key reasons behind a decision to spend 400 million euros on expanding the plant, according to the carmaker, which is hiring an additional 800 people at the site.
“Conditions to distribute vehicles and connect with suppliers couldn’t be better,” said Manfred Erlacher, head of BMW’s Leipzig factory. “We’ve been able to develop the plant very quickly, also because local authorities cooperated very well.”
Room to Grow
Daimler’s Mercedes-Benz will spend about 90 million euros to build a new factory for engine components in Arnstadt, 114 kilometers (71 miles) southwest of Leipzig. The project will initially yield 80 jobs and is to be completed next year.
At the Porsche plant, which features a 32-meter (105-foot) tall diamond-shaped customer center and a 2.3-mile track, Buelow will oversee the addition of at least 1,000 new jobs at the factory. He’s hoping for more models after production of the small SUV starts at the end of 2013.
“We’ll toss our hat into the ring again when it comes to deciding on future models,” he said, while overlooking a map of the 400-hectare (988-acre) area owned by Porsche. “The sheer size of the land will leave us with quite a few opportunities.”
To contact the reporter on this story: Andreas Cremer in Berlin at acremer@bloomberg.net
To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net
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