Adds more details on future cuts

By Rachel More and Nick Carey

BERLIN, Oct 17 (Reuters) - Porsche's P911_p.DE decision to bring in ex-McLaren boss Michael Leiters to revive the luxury German carmaker was welcomed by investors, although they have no illusions about the challenge he faces.

Leiters will take over from CEO Oliver Blume from the start of 2026 as the carmaker struggles with U.S. tariffs, sales slumping in China and a costly strategy reversal to ditch electric vehicles in favour of the combustion engines that previously made the company highly profitable.

"It's a bit of a poisoned chalice," former Aston Martin CEO Andy Palmer, who knows Leiters, said of the top job at Porsche.

"He's certainly going to head into a storm," Palmer said. "It wouldn't be easy for anybody... but I think Michael has the experience."

Leiters is a well-known figure in the sports car world after roles at McLaren, Porsche and Ferrari RACE.MI.

During his time as SUV director at Porsche, from 2000 to 2013, he was instrumental in developing the carmaker's Cayenne model.

Since then, the 54-year-old has served as chief technology officer at Ferrari and CEO at McLaren, a role he gave up earlier this year following the company's merger with EV start-up Forseven.

Porsche said on Friday its supervisory board had appointed Leiters to replace Blume, who faced increasing investor pressure to leave the job and focus on parent Volkswagen VOWG_p.DE, where he also serves as CEO.

Porsche shares rose 1.6% on the news.

Blume, at the helm for a decade, has overseen a disastrous era for Porsche since its listing to great fanfare three years ago.

Its profit margin has shrivelled from 18% in 2022 to a best-case target of just 2% this year, while its shares have fallen by more than half and it tumbled out of Germany's blue-chip DAX index last month.

SALES SLUMP IN KEY MARKET CHINA

The crisis is playing out acutely in China, the carmaker's most important market, where sales have slumped since hitting a record of 95,671 just four years ago - nearly a third of its 2021 global total.

Porsche's China sales were down 26% in the first three quarters of this year from the same period in 2024 and accounted for just 15% of the luxury carmaker's total, as consumers rejected the company's electric vehicles in favour of sporty alternatives from Chinese automakers like BYD 002594.SZ and Xiaomi 1810.HK.

Porsche walked back its EV plans in September in favour of hybrids and combustion-engine models, a reversal that forced Volkswagen to take a 5.1 billion euro ($5.96 billion) hit.

Pal Skirta, an analyst at private bank Metzler, said that Blume's early bet on EVs has been a strategic mistake.

But he said this could be fixed if Porsche delivers on promises to deliver a new combustion-engine SUV by the end of the decade.

An SUV expert like Leiters is "a perfect fit" for this task, Skirta said.

NEW BOSS SEEN AS GOOD FIT AS CRISIS MANAGER

With Porsche badly in need of products people want to buy in large numbers, some investors have cautiously welcomed the changeover.

Having led McLaren through difficult times, Leiters is seen as a good fit as Porsche's new crisis manager.

McLaren has been loss-making for years, but according to regulatory filings the company significantly narrowed its full-year loss for 2024 to 135 million pounds ($180.78 million) from 843 million pounds in 2023.

"Someone is returning to Porsche who is not only familiar with the company, but who has already been confronted with difficult situations in other positions," Hendrik Schmidt, head of governance at Porsche investor DWS.

Part of the new Porsche boss's job will be slimming down the company's 40,000 workforce by 1,900 by 2029.

Porsche's restructuring needs are expected to be more far-reaching, with the company currently assessing a second package of cost-saving measures - something which unions will also have a big say on.

As an outsider, Leiters should have the freedom to take difficult decisions, former Aston Martin CEO Palmer told Reuters.

"Whether Porsche allows him, it remains to be seen," he added.

($1 = 0.7468 pounds)

(Additional reporting by Ilona Wissenbach; Editing by Susan Fenton and Jane Merriman)

((rachel.more@thomsonreuters.com;))