KTM Owner to Take € 1bn Hit as Bankruptcy Protection Filing Triggers "Redimension of Production"
PIERER Mobility AG is finally giving way to the inevitable outcome of the increasingly bad flow of news that has been coming out of the Austrian business empire of Stefan Pierer since this time last year, with the wholly owned KTM AG subsidiary of PIERER Mobility AG filing for an Austrian equivalent of bankruptcy protection.
In a November 29 2024 application for 'judicial restructuring proceedings' with what is termed 'self-administration' of its on-going trading and restructuring initiatives, it will buy itself the 90-days it says it needs. That time is needed in order to raise the "high three-digit million figure'" it requires to protect itself from its creditors. Failure to do so would ultimately result in a winding-up process that would see it facing a liquidation of its assets and, no doubt, a fire-sale of intellectual properties that would be much coveted in Asia.
In the byzantine corporate structure that is downwind of Stefan Pierer, KTM AG is the business doing the filing, and the business where the financing is required. The management will have three months to find a 'self-administered' way forward - essentially a variation on the theme of a 'pre-pack' solution, albeit one devised under legal cover.
The PIERER Mobility AG executive board stated in advance of the filing that it was the "Executive Board of KTM AG" that had decided to make the filing, but this is all 'in-house' so details of who actually has ownership of the application for the "initiation of judicial restructuring proceedings with self-administration over the assets of KTM AG and its subsidiaries" is being seen as a procedural moat to protect other trading divisions and shareholdings.
"The proceedings give the opportunity to continue to manage the assets under supervision and to reorganize the KTM Group independently. All other subsidiaries of KTM AG, in particular all sales companies, are not affected." Which in and of itself is patently misleading - of course the outcome affects them, even if not in the ways that a filing would interpret that.
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| Recently appointed KTM AG Co-CEO Gottfried Neumeister (left) with Stefan Pierer: "Over the past three decades, we have grown to become Europe's largest motorcycle manufacturer. 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 aim of the proceedings is to agree a reorganization plan with the creditors within 90 days, and in a new generation of 'right sizing' corporate jargon 'redimensioning' of the group is the phrase being used. This is an attempt to try and make everyone think that 'all is okay, it is just a pesky technicality', but it isn't. People are going to lose jobs. Dealers are going to lose their brand investments and all involved will lose money one way or another.
The PIERER Mobility AG release states that the process "should not only secure the continued existence of the KTM Group in the long term, but also create the basis for emerging stronger from the proceeding." Meanwhile, MV Agusta? Will more good money be sent to die on that mountain top?
"A 'redimensioning' of production should lead to a gradual adjustment in excess stock at KTM and its dealers over the next two years. This will result in a reduction in operating performance at the Austrian sites totalling over € 1bn in the years 2025 and 2026."
Having been on the receiving end of 'channel stuffing' and over-trading there are no doubt many hundreds of dealers worldwide who will not be impressed with that time scale. Get it done!
"The restructuring process will result in additional potential losses, for example due to one-off expenses such as necessary write-downs (e.g. for capitalized development costs) and costs for staff reductions as well as the shortfall in fixed costs due to the reduced operating performance and other costs arising from the restructuring process.
"Consequently, for the current 2024 financial year, the company expects a negative annual net result in the very high three-digit million range."
In a subsequent release, PIERER Mobility AG has described it as KTM AG taking a "pit stop" for the future as KTM AG implements "restructuring measures" - the management of KTM AG having assumed that "it will not be possible to secure the necessary interim financing in a timely manner."
Stefan Pierer, who is Co-CEO of KTM AG as well as of his eponymous holding company is quoted as saying: "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."
In September 2024 Pierer fired four of the KTM AG board members from their executive posts - Florian Kecht, COO Rudolf Wiesbeck, Stefan Pierer's son Alex, and Hubert Trunkenpolz, grandson of KTM founder Hans Trunkenpolz (the 'T' in KTM).
Instead, Stefan Pierer had hired Gottfried Neumeister as a newly minted Company Doctor and advisor, Executive Board member and Co-CEO. Stefan Pierer states: "Gottfried Neumeister has brought impressive experience and a breath of fresh air and has made a significant contribution to addressing the current situation. I am convinced that together we will get the company back on track for success."
For his part, Neumeister is quoted as saying: "The enthusiasm of our employees is our most important competitive advantage. 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."
For the success of the restructuring proceedings, a restructuring plan must be agreed upon with the creditors. Stefan Pierer is further quoted as stating: "The core shareholders stand by KTM and PIERER Mobility and its stock market listing. The goal is clear: KTM should emerge stronger from this difficult time."
The Pierer/KTM corporate structure was theoretically realigned (streamlined is not quite the right word for it) to better accommodate the position of Bajaj Auto as co-owner of the KTM AG motorcycle manufacturing and other PIERER Mobility AG owned operations in 2020.
However, the structure has morphed since then. Per a further PIERER Mobility "simplified presentation" corporate structure chart issued in November 2024, Pierer Industrie AG owns 50.1% of Pierer Bajaj AG, in addition to other holdings such as Austrian electronics components manufacturer Abatec (100%) and the Austrian automotive engine and drivetrain parts manufacturer Pankl Racing Systems AG (80% - the owner, among other properties of CP Carillo Pistons and Rods and Arias Pistons in Irvine, California).
In turn, Pierer Bajaj AG owns 74.94% of PIERER Mobility AG. It is PIERER Mobility AG that is listed on the Vienna and Swiss stock markets. The shares have plummeted to around the € 7.7 mark as at the end of November 2024 (approx. USD $8.15), having been as high as € 101.88 (approx. USD $106.37) as recently as February 2022.
It is PIERER Mobility AG that is the 100 percent owner of KTM AG, not Pierer Bajaj or Pierer Industri, and it is KTM AG that is filing, not, as reported mistakenly elsewhere, its PIERER Mobility parent company. It is KTM AG that owns and operates the KTM, Husqvarna, GasGas and MV Agusta motorcycle brands and their operations, and in which the relationships with CFMoto and ZEEHO electric vehicles are owned and operated.
There are four additional business divisions owned by PIERER Mobility AG, but they stand alongside but separate to KTM AG within the structure. These are the Bicycle, Design and R&D (Kiska etc), Digital Transformation and IT division (such as PIERER Innovation which is among the interests in which Stefan Pierer's son Alex is primarily involved) and the Motorsport division.
This structure is important in understanding who exactly those shareholders left taking the loss actually will be, and it would appear that, through PIERER Mobility AG's 100% ownership of KTM AG it will be Pierer Bajaj AG (74.94% of the hurt) and the other shareholders in PIERER Mobility AG - those on the Austrian and Swiss stock exchanges, and any other 'direct' ownership stakes within the approx. 25% remaining minority balance of the non-Pierer Bajaj AG controlling ownership slice.
The day before the filing announcement, PIERER Mobility moved to deny domestic Austrian press reports that talks had taken place with Mark Mateschitz, the son and heir of the Red Bull energy drink founder. An obvious candidate for the nearly € 1bn of liquidity that is said to be required, but a carefully worded denial simply said that no such talks had taken place at that stage. It did not rule out whether such talks might take place at some stage though.
However, Indian conglomerate Bajaj Auto remains the favorite to take over ownership. Additionally, CFMoto already has 'skin in the game' through its corporate and manufacturing ties with the group and their primary Chinese rival Qianjiang Motorcycle (the Benelli-owning Geely subsidiary) and is likely to be wanting to keep a close eye on any moves its internationally best know, respected and connected domestic rival may be planning. Both will likely also be eying how Bajaj Auto responds to the mess.