PORSCHE YESTERDAY ann-ounced a cost-cutting programme and further production cuts after the German sports carmaker and owner of a majority stake in Volkswagen reported a fall in half-year operating profits and a sharp drop in sales.

Wendelin Wiedeking, Porsche’s chief executive, said the company had initiated a programme to cut costs by far more than €100 million and would shut its plants for another 19 days before this year’s summer break. Porsche, like many other carmakers, has already halted production longer than usual over the Christmas break.

Mr Wiedeking’s comments came as Porsche’s sales dropped by 27 per cent in the first six months of its fiscal year, which ended yesterday.

“It is fair to say that operating earnings in the first half of the year were down by the same extent as the company’s sales,” Mr Wiedeking said at the company’s annual shareholders’ meeting.

But overall earnings, boosted by VW option trades, would exceed the €1.66 billion of the first six months of the previous fiscal year, he said. Porsche has used a controversial options strategy to gradually take over VW, Europe’s largest carmaker with a revenue 15 times larger than Porsche’s.

In January, Porsche raised its stake in VW to 50.76 per cent. Porsche has said it intended to increase its VW stake to 75 per cent.

However, Mr Wiedeking struck a more cautious note yesterday when he said this plan was tied to the state of the broader economy, which was not favourable at the moment. “We have always said we would not act irrationally.”

Porsche’s revenue was down 14.3 per cent to about €3 billion, highlighting the dire straits of the global car industry.

Martin Winterkorn, VW’s chief executive, said earlier this week that the carmakers’ sales had dropped by 15 per cent in January.

At the shareholder’s meeting, Porsche’s management faced some criticism for its stake-building in VW. Hans Hirt, head of corporate governance at Hermes, the UK pension fund, accused Porsche of misleading the market when the group revealed in October that it held nearly 75 per cent in VW through a direct stake and share options.

“The circumstances we have just described seem to fall within this definition,” he said, referring to the German law of share price and market manipulation.

Mr Wiedeking brusquely dismissed these accusations. “In the past, as well as today, we have strictly obeyed the current law,” he said. – (Financial Times service)