Volkswagen takes US$6 billion hit due to Porsche restructuring

The logos of Volkswagen cars are pictured in Frankfurt, Germany. (AP Photo/Michael Probst, File)

BERLIN — Volkswagen, Europe’s largest carmaker, said on Friday it will take a 5.1 billion euro (US$6 billion) hit from a far-reaching product overhaul at sportscar division Porsche, with slower roll-outs of electric models.

The move comes after Porsche AG, which is 75.4 per cent owned by Volkswagen, said it would change its product strategy to reflect slower-than-expected growth in the electric vehicle market.

Both Volkswagen and Porsche cut their profit margin targets for the current year. Porsche, Volkswagen’s biggest shareholder, which also owns a 12.1 per cent stake in Porsche AG, also cut its outlook for profit after tax.

Porsche AG said it would significantly adjust its product portfolio.

“Due to the delayed ramp-up of electromobility, the market launch of certain all-electric vehicle models is planned to take place at a later date,” the Stuttgart-based company said.

It added that the new sports utility vehicle above the Cayenne model will initially not be offered as an all-electric vehicle, but with combustion-engine and hybrid models.

“In addition, the production period of currently available vehicle models with combustion and hybrid drivetrain will be extended,” Porsche said.

The change in strategy is expected to reduce Porsche’s operating profit by up to 1.8 billion euros this year.

The company now expects its automotive EBITDA margin to come in between 10.5 per cent and 12.5 per cent, versus 14.5 per cent to 16.5 per cent previously.

(Reporting by Thomas Seythal and Christoph Steitz; Editing by Jan Harvey)