Q&A: Porsche finance director Holger Haerter

Frankfurt. Although Porsche has yet again posted record sales for the year to July 31, 2003, Finance Director Holger Haerter isn't complacent. In an interview with Automobilwoche he discusses the current cost-saving program, hedging against currency fluctuations and the company's dispute with the Frankfurt Stock Exchange over the necessity of quarterly earnings statements.

Q: Porsche continues to break records. Is everything going according to plan?

A: It's going even better than planned for Porsche. At the beginning of the past business year we announced that our goal was to sell 65,000 vehicles, we have sold more than 66,800. We aimed at selling 25,000 Cayenne during a full business year and now, within eight months, we have already sold more than 20,000. 100 percent of our financing is done by ourselves, which means that we can finance all necessary design engineering work and investments with the cash-flow available. Despite investing in new products we still have surplus funds available. We are therefore more than satisfied.

Q: Have all sectors managed to reach their targets?

A: There are deviations, such as for example with the sales of our sports cars. However, in total we are above the target figures.

Q: You are not complaining about the strong euro. What do you do better than other manufacturers?

A: We make approximately 50 percent of our total business with the USA. On top of that, there are a few additional countries which also use US Dollars. This situation will not change much in future. That is why we are hedged against currency fluctuation for the next three to four years. In our books the dollar and the yen are above the actual rates. That allows us time to react to any currency movement.

Q: In the past business year you only built 750 units of a total of 18,881 Boxsters in Stuttgart, the majority was built at Valmet. Is it still worth having two manufacturing locations if the number of units produced is so small?

A: We want to remain flexible at the main plant. It therefore makes sense to build both 911 and Boxster on the same manufacturing line. We hope to maintain our employees' Boxster know-how that way.

Q: How much cheaper is Valmet?

A: Employment costs are approximately half of the costs in Germany but on the other hand our transport costs are higher. All in all the costs are more or less the same.

Q: Limited employment contracts also keep the standing costs low. How many of your employees have such contracts?

A: On the production sector it ranges between 10 percent and 20 percent. We want to stick to this model as this gives us the flexibility to adapt to sales fluctuations.

Q: Porsche has a relatively low vertical integration. It is approximately 10% in Leipzig and 20 percent at the main plant. What is the threshold value?

A: We are not planning to make any major changes to the current situation.

Q: Where do you still see saving potential - in case the economy should continue to be slow?

A: Regarding the products we are in a good position. We presented six models at the IAA in Frankfurt and will be able to give a new impetus within the 11 segment. As a corporation we are very much driven by cash-flow. Which is why we will continue to work on optimizing the cash-flow. We are also aiming at a continuous increase of productivity. Due to the changed currency situation we have increased our cost saving measures. We are hedged against the dollar for the next three years. By then we hope to have a stable cost structure so that we can secure high profits on a long-term basis.

Q: On the stock market Porsche is fighting against being part of the general standard because you are not willing to announce quarterly results. Why are you so much against it?

A: Our shareholders invest in Porsche because they have faith in our strong substance and our future potential. We make specific announcements to the economic press, more than 40 a year. We believe that compulsive quarterly reports are obstructive to companies' long-term strategies. Such a short-term way of thinking damages not only the company but also its share holders. And it unnecessarily increases volatility on the already very sensitive stock market.

Q: Porsche's situation is better than ever. However, do you have a strategy to prevent a hostile takeover?

A: No, our defense strategy is the stockholder strategy. The only common stocks with a voting entitlement - which make up 50 percent of the capital stock - are held by the Porsche and Piech families. As long as the two families hold on to their stock portfolios there won't be any external influence on company related decisions. I have no doubt that the families will hang on to their shares on a long-term basis.

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