Europe may put the brake on Porsche

Porsche’s pursuit of record profits could suffer a setback this year as it contends with sluggish demand in Europe and higher spending on plant expansion and dealerships.

Unbroken demand in China and the United States, where the Volkswagen-owned car maker uses the Detroit auto show next week to flaunt the new Turbo S version of its best-selling Cayenne model, barely compensates for weakening business in Europe, Porsche chief executive Matthias Mueller said.

“The situation in Europe is as critical as ever,” Mr Mueller said.

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It’s unclear whether Porsche’s core market, where it sells more than a third of its vehicles and makes its highest profits on models, will ever return to levels seen before the 2008 credit crunch, he said.

“We have to make up for those missing profit contributions from Europe,” the chief executive added.

Porsche is betting on its next model, the Macan compact sport-utility vehicle (SUV), to boost sales from 2014. It is also adding a dealership a month in China to tap “enormous demand” in its second-biggest market and is building a new US headquarters in Atlanta.

Operating profit in 2012 is expected to have exceeded 2011’s record 2.05 billion euros, and Mr Mueller says the goal is to at least match that this year.

However, results will be burdened by the 500 million euro cost of expanding the Cayenne-making plant in Leipzig, increasing the development facility near Stuttgart and renovating Porsche’s main factory in Zuffenhausen.