Rennie Scaysbrook | December 3, 2024
November 2024 will go down as one of the darkest periods ever for KTM, the Austrian motorcycle giant entering a self-administration debt restructuring plan with the Austrian Ried Regional Court on November 29 with reported liabilities of a staggering €2.9 billion ($3.03 billion).
Self-administration is a European market measure that allows for a 90-day effort to reorganize and secure financing to continue operations before a company falls into insolvency.
KTM AG reports €2.7 billion in liabilities with approximately 1600 creditors and 2380 employees affected. KTM Forschungs & Entwicklungs GmbH and KTM Components GmbH, on the other hand, assumes liabilities of around €105 million ($110 million) to around 550 creditors and 765 employees at the time of the opening of insolvency proceedings, according to the Alpine Creditors Association (AKV).
“Over the past three decades, we have grown to become Europe’s largest motorcycle manufacturer,” said Stefan Pierer, CEO of KTM AG. “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.”
KTM AG faces obligations to approximately 2500 creditors, including €1.3 billion ($1.36 billion) owed to banks, €365 million ($382 million) to suppliers, and €40 million ($41.8 million) in employee salaries. This financial crisis could affect nearly 3623 employees, who will receive their November wages and Christmas bonuses via the insolvency fund.
Job security is at risk, with 500 layoffs anticipated by year-end. Additionally, production operations are set to pause in January 2025, with working hours reduced to single-shift operations from March in an effort to reduce inventory, which are currently at record levels.
“It was clear that the liabilities of the KTM companies would reach a high level. Nevertheless, we are surprised that the liabilities are so high,” said Cornelia Wesenauer, insolvency expert for the Alpine Creditors Association (AKV). “After all, at first glance, we expect liabilities of €2.5 to €3 billion. That is now clear. This is the largest insolvency procedure in Austria this year.”
The new KTM 990 Duke R was one of a slew of new bikes released by the brand at EICMA 2024, however, the buzz has all but been drowned out by the company’s financial crisis.
Upper Austria Governor Thomas Stelzer, quoted by APA, said, “Of course, as politicians, we want to help and support. We are doing everything we can to save the factory and the jobs. However, EU state aid and insolvency laws de facto exclude liability.”
KTM’s debt crisis comes after years of aggressive expansion, after Pierer Industrie AG purchased Husqvarna, GasGas and a 50.1 percent controlling stake in MV Agusta, and has been exacerbated by the post-Covid 19 pandemic economic downturn, in which dealers have had to slash prices on floor stock just to keep up with sales targets.
According to Italian website GPOne, the 2023 financial year saw KTM produce a €100 million ($104 million) profit, a reduction of €281 million ($294 million) from 2022, with the share price dropping 90 percent to $11.65 at the time of writing.
KTM has taken the steps to reduce its board members from six to two, with Gottfried Neumeister joining as the Executive Board as Co-CEO in September.
KTM will continue to race in MotoGP, however, all development on the RC16 will be halted to save costs.
“The enthusiasm of our employees is our most important competitive advantage,” said Neumeister. “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.”
KTM USA has stated that the legal restructuring procedure pertains only to KTM AG and thus does not currently affect KTM USA’s operations. However, should further financial troubles befall the head office of KTM AG, it’s impossible to see these not trickling down to the various worldwide subsidiaries.
Owing to the current financial situation, KTM has pulled the GasGas and Husqvarna names out of MotoGP, Moto2 and Moto3 competition, with only the head KTM brand remaining in MotoGP, Moto2 and Moto3, although development on all machines will be halted to save costs. Changes have also been made in various off road categories, including the reigning MXGP champions GasGas factory team being pulled from competition.
KTM USA has noted it intends to race as usual within the Monster Energy AMA Supercross series with factory involvement for KTM, GasGas and Husqvarna brands.
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