By Dominic Chopping

Porsche AG plans to cut thousands of jobs over the coming years as part of a plan to become more efficient as it warned that investments and costs of reshaping the company will hit earnings this year.

In a statement Wednesday, the company said around 1,900 jobs will go by 2029, mainly through natural turnover, such as retirement, restrictive hiring and voluntary agreements. Another 2,000 jobs will go through the expiration of fixed-term contracts.

On top of these plans, the company is in talks with labor leaders over an additional structural package in the second half of the year to increase efficiency in the medium and long term, it said.

The move comes as the German premium sports-car maker expects markets to remain challenging this year with intensifying competition in China. It warned last month that it would take an 800 million-euro ($873.6 million) hit on earnings this year as it invests in new combustion engines and hybrid models, which will send costs higher and weigh on its margin.

Like many Western carmakers, Porsche struggled last year with challenging conditions in China where intense competition has pushed prices lower, while economic pressures have seen buyers in the country pare back on luxury spending.

The challenging economic environment and a comprehensive renewal of its model line-up also weighed on the company last year while costs related to the expansion of customization capabilities, battery development and its corporate organization are also expected to rise this year.

As part of its shake-up, the company said it replaced its finance chief and sales director at the end of February, with Jochen Breckner taking over responsibility for finance and IT and Matthias Becker for sales and marketing.

"We are consciously setting out on a comprehensive recalibration and sustainably strengthening Porsche for the future," CFO Breckner said.

Porsche last year scaled back its electric-vehicle ambitions and vowed to refocus efforts on gas-powered cars as the market transition to EVs was taking longer than expected.

It said Wednesday that it will make additional investments in combustion engines, plug-in hybrids and battery activities allowing customers to choose between all drivetrains in every vehicle segment well into the 2030s.

"In view of the significantly longer global transition phase towards electric mobility, Porsche is expanding its product portfolio in the coming years to include additional models with combustion engines and plug-in hybrid powertrains," the company said.

It is currently mulling whether to produce a new SUV model with combustion and hybrid powertrains with launch toward the end of the decade and plans to offer new 911 models.

To take advantage of growing demand for vehicle personalization, Porsche is also boosting its customization capacity, it said.

Porsche's full-year operating profit slumped 23% on year to 5.64 billion euros, as sales revenue fell 1.1% to 40.08 billion euros.

Analysts in a FactSet poll had seen operating profit at 5.58 billion euros on revenue of 39.44 billion euros.

Earnings were hit by the challenging economic environment and a comprehensive model refresh, in addition to the tough Chinese market, delayed global ramp-up of EVs and disruptions in the supplier network.

It reported a return on sales of 14.1%, in line with its guidance of a figure toward the bottom-end of a 14%-15% range.

Vehicle deliveries fell 3% to 310,718 vehicles.

The company, which is majority-owned by Volkswagen, still expects to report sales this year of between 39 billion and 40 billion euros with return on sales of between 10% and 12%.

The lower expected margin is due to the additional planned investments coupled with lower vehicle sales and high costs.

In the medium term, it expects a margin of 15%-17%, down from 17%-19%, due to the persistently challenging environment, but the margin should rise to over 20% in the long term, it said.

Porsche's net cash flow from its automotive operations finished 2024 at 3.7 billion euros with a margin of 10.2%.

The company proposed an ordinary dividend of 2.30 euros, unchanged from 2023.

Write to Dominic Chopping at dominic.chopping@wsj.com

(END) Dow Jones Newswires

March 12, 2025 03:57 ET (07:57 GMT)

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