By William Boston
STUTTGART, Germany--The weak euro is giving sports car maker
Porsche AG a boost, allowing the company to meet its ambitious
profit targets this year, Chief Finance Officer Lutz Meschke told
The Wall Street Journal.
Mr. Meschke, who is also in charge of Porsche's digital
strategies, said that new models of the company's iconic sports
cars and popular sport-utility vehicles will come with Apple Inc.'s
CarPlay preinstalled on the in-car communication system. The first
model to allow drivers to use their favorite iPhone apps on the
car's pop-up display will be an upgraded version of the 911 sports
car that will be unveiled at the Frankfurt Motor Show in
September.
The Stuttgart-based sports car maker accounts for nearly a
quarter of pretax profit at its much larger parent, Volkswagen AG,
but has struggled with thinning margins in recent years. Porsche's
profits are under pressure from skittish global markets, high
development costs to meet European emissions targets, and lower
profitability of its expanding fleet of sport-utility vehicles.
Because it only manufactures in Europe, Porsche is getting help
from the weak euro, which Mr. Meschke expects to boost pretax
earnings with a "significant triple-digit million" euro windfall in
2015. Porsche conducts a mix of long-term hedges against about 20
currencies, but revenue not covered by the hedges is translating
into higher profit from overseas markets. These gains ensure that
the company will meet its target of a 15% pretax profit margin, Mr.
Meschke said in an interview.
"We will achieve our strategic target," Mr. Meschke said. "We've
taken the currency gains in the first half of the year and have
continued to record orders at a high level. That's why I expect
that we will have higher profit at the end of the year."
Until now, Mr. Meschke has said the company would have to work
hard to achieve a 15% return. Now, he expects currency gains and
higher sales to allow the company to meet its target.
Though hugely profitable, Porsche's margins have come under
pressure, falling from 19% just a few years ago, as costs to lower
emissions standards and the company's expansion into less
profitable SUVs hit earnings. Last year, SUVs accounted for 58% of
the company total car sales. The share of SUVs in total car sales
is expected to rise in 2015, the first full year that the Macan
will be on sale. The Macan went on sale in select markets in
mid-2014.
Porsche reports earnings for the first half of the year on July
29.
Mr. Meschke also said Porsche is accelerating development of
digital businesses and could make acquisitions of technology
startups to acquire IT expertise or technology.
At the Frankfurt Motor Show in September, Porsche will unveil an
updated version of its 911 sports car with new engines and a new
communication system. It will also pre-install Apple's CarPlay in
the 911 upgrade and will install CarPlay in all future Porsche
models.
"We've realized that 80% of Porsche customers are Apple iPhone
users," said Mr. Meschke.
CarPlay is an in-car information and entertainment system that
allows drivers to use their favorite iPhone apps such as iTunes and
iPhone contacts on their car's dashboard computer. Competing
systems include Google's Android Auto, which offers access to
Google apps and phones based on Google's Android operating system.
Car makers are beginning to roll out models that allow car owners
to integrate their smartphones in the dashboard display.
Porsche has no current plans to install Android Auto in its
cars, Mr. Meschke said.
So far this year, Porsche new car sales are up 30% to 113,984
vehicles world-wide, driven by strong sales of the 911 sports car
and the company's Cayenne and Macan sport-utility vehicles. Last
year, Porsche sold 189,949 new cars world-wide.
"We will sell more than 200,000 new cars in 2015," Mr. Meschke
said.
Porsche posted hefty sales gains in the U.S., Europe and China
in the first half of the year. But Mr. Meschke warned that
conditions in China are changing significantly.
Chinese government pressure on car makers to cut prices and
customer preferences for fewer features and less powerful engines
are hitting profits. Porsche has felt the pressure on sales of its
Panamera sedan. Dealers this year have had to cut Panamera prices
in China 15% to 20%, Mr. Meschke said. Prices for other Porsche
models have remained stable.
"Profits in China are clearly declining and will continue to
decline in the future," he said. "These are trends that no one saw
coming two years ago. You have to react, and so we are developing
other markets faster than we had expected to do two or three years
ago."
Porsche is expanding its dealerships in Taiwan and South Korea,
even though it still expects strong growth in China.
Write to William Boston at william.boston@wsj.com
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