KTM is Insolvent and Enters ‘Self-Administration’
KTM’s parent company, Pierer Mobility AG has failed to source for a cash infusion of at least €100 million, and as a result, KTM AG is now insolvent. The company has entered ‘self-administration’ in order to stave off bankruptcy. In other words, they are working on a reorganisation plan with their creditors within a 90-day timeframe.
As part of the restructuring efforts, Pierer Mobility outlined plans for KTM that involve scaling back production and gradually reducing surplus inventory. These measures aim to diminish the output of the company’s Austrian facilities by over €1 billion in the coming two years.
The impact on Pierer Mobility’s stock was severe, with a further 45% decline to 6.9 Swiss Francs. All in all, their stock has plummeted by 88.1% from its previous high of 95.00 Swiss Francs on 14 January 2022. This marked the steepest single-day decrease in the company’s history.
KTM’s problem began when they increased production to cater for the market demand post-Covid-19 pandemic. However, it soon became apparent that their production had grossly outstripped demand, leaving dealers with excess stock. To exacerbate their woes further, there is currently an industrial crisis across Europe, coupled with a decrease in the demand for motorcycles due to rising costs of living.
Some pundits have also pointed out the quality issues faced by the LC8c engine platform, which powers the 790 and 890 ranges.
Pierer Industrie AG, the parent company of Pierer Mobility, which is co-owned by Stefan Pierer and Bajaj Auto Ltd. of India, has been seeking to restructure its debt.
On Monday, the company approached its creditors with a request to prolong the maturity of nearly €250 million ($262 million) of its liabilities.
KTM CEO Stefan Pierer said alongside newly appointed Co-CEO Gottfried Neumeister: “Over the past three decades, we have grown to become Europe’s largest motorcycle manufacturer.
“We inspire millions of motorcycle riders around the world with our products. Now we are taking a pit stop for the future. The KTM brand is my life’s work, and I will fight for it.”
“The enthusiasm of our employees is our most important competitive advantage,” Gottfried Neumeister added. “Their passion is the reason why KTM is globally synonymous with peak performance.
“We build our motorcycles reliably and robustly for every race, for every terrain. Now it’s about making the company robust. Robust for the future. So that we can quickly focus again on what we do best: building the coolest motorcycles in the world.”
Despite Neumeister’s positive tone, a separate statement released by Pierer Mobility on the same day stated that the company expects KTM to end the 2024 financial year with a negative net financial outlook said to be in the ‘very high’ hundreds of millions.
Since 1992, KTM has grown from 160 employees and a production volume of 6000 bikes, to over 5000 employees and the capability of producing 1000 motorcycles per day. As such, further job cuts are expected.
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