English
Italiano
After more than 30 years of steady growth - with 6,000 motorcycles sold in 1992, the astonishing sale of an 381,555 motorized two-wheelers in 2023, and 13 record years in a row - the first warning signs of the explosive economic conditions at Pierer Mobility AG a year ago were clearly not taken seriously enough.
The groupìs financial burdens worsened on almost a weekly basis. During its successful years, enormous investments and acquisitions had been made, also because investors and shareholders insist on the need to constantly increase sales, profits, and turnover figures for a listed company.
Furthermore, misleading news about the company was spread in the fall of 2024 that drove the share price further down almost daily. One example involves what occurred in October: Stefan Pierer was heavily criticized for decreasing the number of board of directors at Pierer Mobility AG to two. Only he and his co-CEO and fellow board member, Gottfried Neumeister, were mentioned. Neumeister had only been on board since September 21st and was considered Stefan Pierer's successor at the time.
But, actually, Neumeister was hired because he had distinguished himself as a restructuring expert at the Attila Dogudan's Viennese catering company, Do&Co. In the meantime, the corporate structure had been restructured in Wels and Mattighofen. In the past, the motorcycle business was part of Pierer Mobility, while the bicycle business was in Pierer New Mobility. This was the reason why there was a large number of board of directors. Hubert Trunkenpolz, CEO of MV Agusta Motor, made it clear to GPone.com back in November: "Now, the bicycle business will be reduced to the bare minimum. There will be much smaller quantities, and we'ill concentrate on premium quality. That's why Pierer Mobility has been converted into a financial holding company. Stefan Pierer and his designated successor, Gottfried Neumeister, form the board there. At the operating company, KTM AG - which is the umbrella company for all the other affiliated companies - the board of directors remains unchanged."
At the moment, besides Stefan Pierer and Gottfried Neumeister, Florian Kecht and Rudolf Wiesbeck are also board members at KTM AG. A few weeks ago, there were six or seven.
In retrospect, it must be questioned whether the purchase of brands, such as GASGAS, MV Agusta (1,852 units of the luxury brand were sold in 2023) and the ailing Felt Bicycles brand (purchase price 12 million US dollars), made sense, and whether the true costs of building up these brands were perhaps grossly underestimated.
Stefan Pierer became 100% owner of Leoni, the German automotive supplier (95,000 employees and approximately 40 factories worldwide) on August 17th, 2023. But, for years, business at Leoni has not been as smooth as hoped for. The company had overextended itself financially with an expansive growth course. Pierer has now sold a 50.1% stake to the Chinese Luxshare Group for 205 million Euros. A subsidiary of this Chinese electronics group was also supposed to take over the Leoni Kabel GmbH's cable business, for which Leoni had unsuccessfully been looking for a buyer for some time. This company produces cable harnesses for the automotive industry and was supposed to bring in a purchase price of 320 million Euros. The total sum of 525 million will not have a significant impact on Pierer's balance sheets.
Head of Leoni, Klaus Rinnerberger, told Reuters on October 24th, 2024 that very little of the Leoni sales price would end up with Pierer. The 320 million for the sale of the cable division would flow back to Leoni in full and be used to reduce debt. "And, of the 205 million Euros that Luxshare is paying for 50.1 percent of the AG, the majority will go to the banks. Very little of that will end up with Pierer," Pierer's confidant, Rinnerberger, added.
Leoni reported sales of 5 billion Euros in 2023 but got into trouble during Covid and, because of the Ukraine war, since 2022, they had accumulated a loss of 600 million Euros. Leoni's debt burden was estimated at 1.5 billion Euros. Pierer had initially kept Leoni alive with a rescue plan and a capital injection of 150 million Euros, completely taking over the company in August 2023.
On November 29the, KTM AG had to apply for insolvency proceedings under its own responsibility with two subsidiaries at the regional court in Ried im Innkreis. A first creditors meeting will take place on December 20th. KTM has liabilities of 1.8 billion Euros and owes 1.3 billion eEros to various banks.
At the same time, KTM is sitting on 100,000 to 130,000 unsold motorcycles that, if sold, represent a value of 1.4 billion Euros. In order to reduce inventory, KTM is planning a production stop in January and February. In March 2025, the company will then switch from a two-shift to a single-shift operation.
Figures for the required downsizing are now available: KTM expects to sell 250,000 motorcycles per year in the future. In Austria, the workforce will be reduced to approximately 3,700 employees.
The Pierer Group casually equated the restructuring measures with a pit stop. However, experts agree that the upper echelons pulled the brakes too late. Today, the fact that a new US headquarters with 14,000 square meters and construction costs of 53 million US dollars was opened in California at the end of March 2023 is taking its toll. The new GASGAS branch in Terrassa near Barcelona cost €5.7 million, with the regional government of Catalonia contributing €600,000.
People close to Stefan Pierer say that the trained "restructuring expert" sits in his office in Wels or Mattighofen every day from 7 a.m. to 11 p.m., brooding over promising concepts for his life's work, which he definitely does not want to go bankrupt.
But many painful cuts will be made. Motorsport activities will be restricted. So far, they have swallowed up a total of approximately €100 million per year with MotoGP, Dakar Rally, US Supercross and US Outdoor Championship, Motocross World Championship, and Hard Enduro.
In November 2024, despite the dramatic drop in sales, the Pierer Group appeared at the Milan motorcycle fair EICMA (November 6th to 9th) for the first time in five years: 22 new models were presented in a lavish area of almost 1,700 square meters.
KTM board member Florian Kecht admitted to the media in Milan that the first half of 2024 had been very challenging, which is why a drop in sales and a drop in profitability had to be reported. He confirmed the losses in the motorcycle and bicycle divisions. In the motorcycle sector, he blamed the losses on subsidies to dealers with extended payment periods and other rescue measures.
"There are many reasons for our problems in the motorcycle business," Kecht stated. "We had a very special economic environment during the coronavirus phase. Consumer behavior was very strong. People couldn't spend much money during the lockdown, so they bought things they had long dreamt of like bicycles, motorcycles, boats. People just bought like crazy. Like many other companies, we expected this buying behavior to continue. We misjudged the situation and realized that demand fell enormously after the coronavirus. Now we're faced with the problem that we produced too much. That's why we're doing everything we can to support dealers and make good offers to buyers in order to reduce our inventory. Our job is to adjust production to the level of demand in the future. It's about the famous goal of producing one motorcycle less than the market demands."
In the course of 2024, KTM AG's production was already reduced by 30%, but the warehouses remained overfilled. That's why the "efficiency program" had to be continuously adjusted to sales figures that were even lower, in order to adjust the cost structure to the significantly reduced demand.
But restructuring administrator, Peter Vogl, reported on Monday that KTM AG's business would continue: "according to the first surveys carried out." Meanwhile, the Chamber of Labor has been informing the workforce in company meetings since Monday and is obtaining powers of attorney to submit applications to the insolvency fund.
Additional statements from the restructuring administrations - besides KTM AG, the subsidiaries KTM Components GmbH and KTM F&E GmbH are affected - will only be made after the first creditors meeting on December 20th Vogl said.
Whether or not, and in what manner, the expected motorsport activities will continue in 2025 can probably only be concretely assessed the day the restructuring plan is voted on: February 25th. For Stefan Pierer, the Ready-to-Race strategy has always been the key to success. Win on Sunday, sell on Monday.
During the weekend, Motorsport Director Pit Beirer assured that KTM Racing AG, based in Switzerland, is a separate company and not directly affected by the insolvency proceedings.
In the worst case scenario, namely bankruptcy for KTM, any racing operation would no longer make sense.
The smarter politicians of the more economically-oriented parties in Upper Austria fear that a possible KTM bankruptcy could drag numerous other companies into the abyss. KTM is, therefore, considered "too big to fail" for the Innviertel region.
There are already voices calling for the regional state of Upper Austria to invest in KTM AG so that, one day, after a successful restructuring plan, a profit could be made with the taxpayers' money invested.
