The battling of the big carmakers, GM and Ford, is no secret as they set out to reverse their fortunes. German sports car manufacturer Porsche has been highly successful for a number of years, achieving excellent margins. News of its output reduction could therefore be a significant barometer of the market outlook.
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The Iraq war is beginning to have a noticeable effect on the automotive industry. Porsche has announced extended holidays for its workers during the summer in a bid to lower production, as demand for its sports cars falls. Porsche spokesman Chris Jones said there was a “weaker demand for sports cars” and that the sentiment needed for a high level of sales just “isn’t there”.
Porsche has in recent years been the envy of the automotive industry: with the exceptional demand for many of its models causing long waiting lists, high margins on each vehicle are ensured. Whilst the revenues are lower than many of the volume manufacturers, Porsche’s profitability has been very strong. The arrival of its flagship Carrera GT model looks set to continue the per-vehicle margin.
It is therefore of industry wide concern when a company with such a success story needs to reduce output. The problems faced by the volume manufacturers, in particular GM and Ford, have been well documented recently. Both companies are continuing with aggressive cost-cutting strategies in a bid to increase the profits obtained through the high volumes they sell.
GM’s latest incentive effort to boost US sales will offer consumers the chance to take most of its cars and trucks home for overnight test drives. The program will run between April 15 and July 22 and according to Bill Mistele, director of retail strategy, will be the most extensive test-drive offer in company history.
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By GlobalDataFord meanwhile has asked nine cost-cutting teams to save 20% from non-product costs, a total of $6 billion in what Ford spokesman Jim Bright called “the most ambitious cost cutting initiative ever in our 100 years.”
Both firms are looking to trim their marketing and administration costs. Both will also be hoping for a swift end to the war, which if prolonged could hamper their recovery plans.
SOURCE: DATAMONITOR COMMENTWIRE (c) 2003 Datamonitor. All rights reserved. Republication or redistribution, including by framing or similar means, is expressly prohibited without prior written consent. Datamonitor shall not be liable for errors or delays in the content, or for any actions taken in reliance thereon.
