KTM Parent Company Pierer Mobility Declares Itself Insolvent Due to Financial Crisis, Announces Restructuring
Since the second quarter of 2024, the industry has been filled with rumors of Pierer Mobility, the parent company of the KTM, Husqvarna and GasGas brands, running into slowing sales, an overstock of product and ultimately major financial troubles. The strong boost in powersports, bicycle and overall outdoor recreation sales seen after the pandemic have slowed, and aggressive sales targets have suddenly become difficult to meet. While none of those dealings behind the scenes had yet impacted what the consumer sees with products—the brands continue to innovate with quite a few new machines for 2025—or on the race track, it’s becoming more and more clear the company will need major changes to continue into the future.
Recently, the company stock, traded in Europe, began to sink, and rumors of a much larger issue, including the possibility of complete bankruptcy, started to gain traction.
The company has been trying to find a new set of investors or creditors to help cover its debt. The company has run out of time to do that. Instead, today, co-CEOs Stefan Pierer and Gottfried Neumeister announced a new plan in a KTM press release and also a statement on the Pierer Mobility website.
The financing requirements of KTM AG currently amount to a high three-digit million figure. The management now does not expect to be able to secure the necessary interim financing in time.
KTM AG, a wholly owned subsidiary of PIERER Mobility AG, will apply for the initiation of judicial restructuring proceedings with self-administration on November 29, 2024. The aim of the proceedings is to agree a reorganization plan with the creditors within 90 days. Redimensioning the group 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.
Said Bloomberg with a financial report today:
(Bloomberg) -- Shares of Pierer Mobility AG tumbled after the company said its KTM AG motorbike unit was filing for a self-administered insolvency in Austria.
KTM will be unable to cover a “very high three-digit million euro” financing requirement, according to a statement. The company will seek to agree with creditors on a reorganization in the next 90 days.
Shares slumped 45% to 6.9 Swiss francs ($7.8), heading for their biggest daily decline on record and extending a loss this year to 84%.
The company owned by entrepreneur Stefan Pierer and India’s Bajaj Auto Ltd. is facing financial strains due to a Europe-wide industrial crisis and lackluster demand for motorbikes. Its parent, Pierer Industrie AG, asked creditors on Monday to extend the maturity of almost €250 million ($262 million) in debt.
Pierer Mobility said the KTM overhaul will include the re-dimensioning of production and a gradual adjustment of excess stock, reducing output of Austrian sites by more than €1 billion in the next two years.
With today's announcement only taking the stock even lower, today is not a day of positive news. However, it does at least appear the company has a plan to continue moving forward instead of going away completely. We hope. In today’s statement and video, the company describes the situation as a “pitstop” for the brand.
What does that mean for not just KTM, but also Husqvarna, GasGas and more? What does it mean for racing budgets in 2025? We wish we knew that answer. What is for certain is there will be a significant reduction in production numbers of the actual motorcycles. Contrary to some rumors, though, we can say that when the production lines turn back on, the major models familiar to American audiences will continue to be built in Austria. KTM had previously announced an expansion with production facilities in China, but those facilities do not build the hardcore motocross and off-road racing machines we associate with the brand here.
The Pierer Mobility Statement is below
PIERER Mobility AG: KTM AG prepares application for judicial restructuring proceedings with self-administration
KTM AG, a wholly owned subsidiary of PIERER Mobility AG, will apply for the initiation of judicial restructuring proceedings with self-administration (Sanierungsverfahren unter Eigenverwaltung) on November 29, 2024. The financing requirements of KTM AG currently amount to a high three-digit million figure. The management now does not expect to be able to secure the necessary interim financing in time.
The Executive Board of KTM AG therefore decided today to file the application for the initiation of judicial restructuring proceedings with self-administration over the assets of KTM AG and its subsidiaries KTM Components GmbH and KTM F&E GmbH. 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.
The aim of the proceedings is to agree a reorganization plan with the creditors within 90 days. Redimensioning the group 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.
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 EUR 1 billion in the years 2025 and 2026.
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 due to the aforementioned reasons.
The KTM brand statement is below
KTM ANNOUNCES STRATEGIC RESTRUCTURING PLAN
Austria – 26 November, 2024 – KTM CEO Stefan Pierer and Co-CEO Gottfried Neumeister today addressed the company's more than 5,000 employees, unveiling a comprehensive plan to navigate the current financial challenges and ensure a robust future for KTM.
Making KTM robust for the future
Stefan Pierer, CEO of KTM AG: “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.”
KTM, which has grown from 160 employees and a production volume of 6,000 units in 1992 to a capacity of up to 1,000 motorcycles per day, is now facing significant hurdles. To address these, KTM will initiate a legal restructuring proceeding with self-administration. The application will be submitted on Friday, 29 November, with the goal of concluding the process within 90 days.
Since September 2024, Gottfried Neumeister has joined the Executive Board as Co-CEO. Stefan Pierer: “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.”
Gottfried Neumeister, Co-CEO of KTM AG: “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.”
Pierer and Neumeister emphasized the importance of the employees' commitment and support during this period. "Together, we have made KTM a success story, and together, we will carry KTM into the future," they stated.
