VW’s Porsche Shores Up Profitability Through Labor Accord

Volkswagen AG (VOW)’s Porsche sports-car unit moved to shore up its industry-leading profit margins by cutting the number of labor hours required to produce a vehicle.

The 3,300 workers at its car plant in the Zuffenhausen district of Stuttgart, Germany, will work 34-hour weeks by mid-2013, an hour less than at present, while producing the same number of vehicles, Porsche said in a statement. The measures are also intended to attract prospective employees.

“It is a win-win situation,” Chief Executive Officer Matthias Mueller said at a press conference at Porsche’s headquarters in Stuttgart. “The employees benefit from it, and the company does too.”

New models including the Macan compact sports-utility vehicle and an updated version of the Cayman sports car are part of Porsche’s strategy of selling 200,000 vehicles a year by 2018, a 71 percent gain from 2011. The division’s nine-month operating profit totaled 389 million euros ($508 million) on revenue of 2.17 billion euros, giving it a margin of 18 percent. That compares to Bayerische Motoren Werke AG’s automotive margin of 9.4 percent and the VW brand’s 3.6 percent.

Engineers at Porsche’s research and development center in Weissach, Germany, will be able to work as few as 40 hours a week, and timing can be adapted to individuals’ needs, Thomas Edig, the company’s personnel chief, said at the press conference. Productivity is likely to be boosted by the agreement, which is valid through 2016, said Uwe Hueck, head of Porsche’s works council.

“These operational agreements will lead to a great improvement in Porsche’s flexibility,” Edig said. “We are increasing our profitability. The board is convinced that, with this agreement, we will be as prepared as possible for the market environment of the future.”

While luxury carmakers like Porsche, BMW and Daimler AG’s Mercedes-Benz have resisted a plunge in sales that has burdened Fiat SpA (F), PSA Peugeot Citroen (UG) and Renault SA (RNO), the VW unit said Sept. 20 it would build fewer than the 155,000 vehicles initially planned for this year. Daimler said the same day that profit at Mercedes-Benz Cars will fall this year.

Porsche’s acquisition was completed Aug. 1 when VW, Europe’s biggest carmaker, paid 4.5 billion euros for the 50.1 percent stake it didn’t already own. The division, which makes the 911 sports car, still plans to produce more than last year, with 140,000 vehicles set to roll out of its factories in 2012.

To contact the reporter on this story: Alex Webb in Stuttgart via awebb25@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net

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