MATTIGHOFEN. After initiating insolvency proceedings through the subsidiary KTM Components GmbH, KTM AG has now officially registered restructuring proceedings with self-administration at the regional court in Ried im Innkreis.With total liabilities of more than 1.8 billion euros, this is the largest insolvency proceedings in Upper Austria as 2000. 2,380 employees and 1,624 creditors are affected.
The KTM Group, based in Mattighofen, produces and sells race-ready motorcycles used in racing (motocross, enduro, rally, super moto) and in the leisure sector (hard enduro). Light metal sports cars (the so-called “X-BOW”) are also produced.
Reorganization proceedings applied for
A European restructuring procedure was opened for Pierer Industries AG on 25 November 2024. According to the credit protection association KSV 1870, the current insolvency application from KTM AG can be attributed to the following reasons: The motorcycle business was , which is so important for the company, characterized by a steady increase in the number of production and sales until the end of 2023. , with strong wholesale sales (sales from sales to authorized external dealers). Consequently, production capacity was continuously increased. Though, as retail sales (sales from authorized dealers to end customers) could not be increased as much as wholesale sales in 2023, there was a very high level of dealer inventory.
Reasons for bankruptcy
Although, according to the company, 2024 has been a good year in terms of sales figures so far with around 265,000 motorcycles sold, inventories were ultimately too high. The excess motorcycle inventory is currently around 130,000 units. Because of the US market, which is so important for the debtor, especially problems, on the one hand because of the reduced demand for motorcycles and on the other hand because of the high production costs in Austria, according to KTM AG.
For these reasons, in mid-November 2024, as part of the examination duly carried out of the options for restructuring outside the court, the company revealed the need for fresh money worth approximately 650 million euros. As the negotiations with key stakeholders could not be implemented within the short time available, the decision was made to file for insolvency.
“The restructuring administrator, who has not yet been appointed, appointed by Alexander Meinschad from KSV1870, who represents the creditors, must clarify with the debtor the extent to which additional winding up will be done in the company’s loss areas.
Plan for the future
It is planned to reorganize the company to ensure the existence of the KTM Group. A restructuring plan with a 30 percent quota, payable within two years from the adoption of this restructuring plan, is offered to the creditors.”Once the proceedings have started, we will try to get detailed data to prove that this quota was financed and we will work to ensure the best possible economic result for the insolvency creditors,” said Karl-Heinz Götze of KSV1870.
Bankruptcy in numbers
In terms of liabilities, this is the largest insolvency procedure in Upper Austria’s recent history since 2000. In terms of employees affected, it is second only to Tap Dayli Vertriebs GmbH in Pucking, which opened in 2013.
At KTM AG,2,380 employees and more than 1,600 creditors are affected,as reported by the credit protection association. Assets of approximately 316 million euros are offset by liabilities of approximately 1.8 billion euros if the company is restructured. According to the insolvency application, in the event of liquidation there would be 2.1 billion euros in liabilities. With the insolvency of KTM AG,two subsidiaries are also filing for bankruptcy: According to creditreform,KTM Components GmbH has 335 creditors and 374 employees,and Forschungs & Advancement GmbH has 570 creditors and 765 employees.
In total, the insolvencies of the three KTM companies affect more than 3,500 employees and more than 2,500 creditors.According to the OÖN, the required financial injection should be 650 million euros.
How does self-administration in restructuring differ from traditional bankruptcy processes?
interview between the Time.news Editor and Industry Expert on KTM’s Restructuring Proceedings
Editor: Welcome to today’s special segment at Time.news, were we delve into pressing issues in the business world. Today, we are joined by Dr. Anna schmidt, an expert in corporate restructuring. Anna, thank you for being with us.
dr. Schmidt: Thank you for having me! It’s a pleasure to be here.
Editor: Let’s dive right in. KTM AG,based in Mattighofen,has initiated restructuring proceedings due to notable financial strain,with liabilities exceeding 1.8 billion euros. How does this position KTM in the current motorcycle industry landscape?
Dr. Schmidt: It’s a challenging position, for sure. This is actually the largest insolvency proceeding in Upper austria as 2000, and it certainly shakes the foundation of a company that is known for its competitive sport motorcycles and the popular X-BOW light sports car. KTM’s innovative designs and racing pedigree are impressive, but financial viability is crucial for sustainability.
Editor: With 2,380 employees and over 1,600 creditors affected by this, the impact is significant. What factors typically contribute to a severity of this magnitude in insolvency cases?
Dr. Schmidt: There are several factors. for KTM, increased competition in the motorcycle market, rising production costs, and possibly shifts in consumer demand could be at play. Economic downturns impacting discretionary spending can also hurt sales in the leisure sector, which is a key market for KTM. Financial mismanagement or strategic misalignment can exacerbate the situation.
Editor: You mentioned competition and market dynamics. Given that KTM produces race-ready motorcycles for both competitive and leisure purposes, how critical is market diversification in times of financial distress?
Dr. Schmidt: Diversification can be a lifeline in tough times. companies that can adapt their product offerings to meet changing consumer preferences tend to fare better during downturns. KTM’s dual focus on both racing and leisure motorcycles allows it to tap into diffrent customer bases. Tho, if one segment underperforms, the other needs to sustain the business.
Editor: Now, KTM is experiencing a restructuring process with self-administration. What does this entail, and how does it differ from traditional bankruptcy proceedings?
Dr. Schmidt: Self-administration allows the company to retain control from its management while working on a restructuring plan, rather than being overseen by a court-appointed trustee. This can empower the leadership to make strategic decisions more swiftly while addressing creditor claims. The goal is to stabilize the company quickly and preserve jobs, which is crucial in this case given the large workforce involved.
Editor: What are the potential outcomes of such proceedings for KTM? Can you detail some of the options they might pursue?
Dr. Schmidt: Certainly. The primary objective is to create a viable and lasting business model moving forward. KTM may restructure its debt, negotiate with creditors for reduced payments, or even explore asset sales. They may also seek to refocus their business strategy,possibly divesting underperforming units or streams. Ultimately, the aim is to emerge with a more streamlined operation capable of generating profits again.
Editor: Sounds like there is a long road ahead. In terms of the industry’s future, what does this mean for competitors in the motorcycle market?
Dr.Schmidt: KTM’s situation serves as a cautionary tale for competitors. The market dynamics may shift, creating opportunities and risks. Competitors may look to capture KTM’s market share during this tumultuous period if they manage their operations better. It’s a constant reminder of the need for agility and foresight in business strategies.
Editor: Thank you, Dr. Schmidt, for your insights on this significant issue facing KTM and the motorcycle industry. This situation exemplifies the intricate balance of innovation, market demand, and financial health.
Dr. Schmidt: My pleasure. it’s an crucial topic,and I hope for the best outcome for KTM and its stakeholders.
Editor: And to our viewers, thank you for tuning in. We’ll continue to monitor the situation and provide updates on KTM’s restructuring efforts. Stay informed with Time.news!