Van’s Aircraft Facing Challenges

Status
Not open for further replies.
How iron-clad is the contract when you put a deposit on a Vans kit a year + in advance?

What I'm saying is, what stops them from just re-invoicing their customers on like a force majeure situation?

If some customers walk away that's expected, but at least the ones who remain will be profitable. A fighting chance at survival beats the alternative.
 
hindsight2020 said:
Sincere good luck to Van's. My guess this becomes an even smaller space in short order (like we needed more elitism around here), or they sell out to winnie the pooh.
Click to expand...
I suspect that both will happen based on who they brought in as their interim CEO. That guy wound up doing both to Glasair. He eliminated all of the low wing speedster kits and focus solely on the sportsman, then sold it off to the East.

I would be shocked if the first thing they do is stop production on everything but the RV 10 and RV 14. Those things can be serious money makers because builders have a little less price sensitivity than those folks building RV7s, RV8s, and RV9s.

They're still building parts for rv 3-6 aircraft. That's probably going to stop. What would be cool is if they sold off the IP for those designs and had another company take over making and marketing them.
 
Ed Haywood said:
Lose a little money on every sale, but make it up in volume. Not good when your strategy becomes an MBA school joke.
Click to expand...
The pricing thing went like this, I believe.
2020: Wing kit cost $8K to make, Van's sold 'em for $12K. Deposits came in to secure a delivery.
2021: Supply lines were disrupted. Inflation went through the roof. Kit deliveries were delayed.
2022: Supply lines corrected. Kits started moving again. Unfortunately, in the 18 month interim, the cost to make that kit went from $8K to $12K due to inflation. So there was no profit on that kit. Lather, rinse, repeat times 5,000 subkits a year.

They may have known their cost, but were not protected from inflation. It hadn't been a problem in 40 years (because inflation was relatively low AND because delivery times have been relatively short), so they didn't see the avalanche coming.
 
Last edited:
There isn’t one American aviation company that can financially assist/invest in Vans?
 
Look at the Cessna TTX if you want a modern example of a big company buying a design that came out of home building.
 
Doc Holliday said:
What country was Van's outsourcing to?
Click to expand...
They outsourced QB kit assembly to the Philippines. That started with the inception of the QB program. More recently, they have set up a parallel shop in south or Central America - maybe Brazil.
 
Rein Hart said:
There isn’t one American aviation company that can financially assist/invest in Vans?
Click to expand...

Textron, maybe. But they don’t want to be in the light GA market at all.
 
Aren't we all flush with excess cash according to the Fed? Things are great, right? Van's should have no problem adjusting prices to accommodate 2023 inflation and retain that brand loyal, Orion Capsule gyro-stabilized-vertical price demand inelasticity. Right?

Don't answer that I'm being rhetorical....
 
hindsight2020 said:
Aren't we all flush with excess cash according to the Fed? Things are great, right? Van's should have no problem adjusting prices to accommodate 2023 inflation and retain that brand loyal, Orion Capsule gyro-stabilized-vertical price demand inelasticity. Right?

Don't answer that I'm being rhetorical....
Click to expand...

The challenge if the RV8 fleet gets capped at current size….
 
This is big enough news to be in a general forum...

Ok, my armchair CEO thoughts:
1. While pricing issues might well be a problem, I'm guessing having to remake 50% of the parts for the laser cracks is the bigger issue.
2. Declare bankruptcy. Screw those with current orders and problems.
3. Someone buys assets as they are. Retain most of the talent. Consider an IPO or private stock offering.
4. Stop taking any new orders, satisfy old orders but only to those that pay the new price.
5. Decide on product roadmap, yes likely smaller offerings.
6. All manufacturing in house. Stop QB kits, even those in the works. Make them do some riveting.
7. Rebuild the brand and company around surviving and the RV15.
8. Offer current employees partial ownership with bonus for cash investments. Perhaps in the form of options tied to performance.
 
hindsight2020 said:
Aren't we all flush with excess cash according to the Fed? Things are great, right? Van's should have no problem adjusting prices to accommodate 2023 inflation and retain that brand loyal, Orion Capsule gyro-stabilized-vertical price demand inelasticity. Right?

Don't answer that I'm being rhetorical....
Click to expand...
Apparently most companies are not Vans

1698523091957.png
 
This whole fiasco feels like it falls under the "never time to do it right, always time to do it over" realm. Unfortunately, doing it over is expensive. Businesses selling products at a loss with no clue they are selling at a loss is inexcusable. Companies can't survive that type of mismanagement. Outsourcing and sourcing overseas is very tricky, if you can't sus out the over promise unable to deliver vendors, your business will die a slow miserable death. I hope these guys can recover from this, but it sounds like we may end up with another Chinese owned airplane company. Sad.
 
I wonder how many customers presently have made deposits but haven’t received product. They are essentially creditors (which would be relevant if the company files for bankruptcy or just fails).

I sure wouldn’t want to send them a deposit now.
 
Curious, but who was the CEO prior to this? Was there one? Rian Johnson was president and cto. Greg Hughes was vp and COO. Mitch Lock was CFO. I thought Van had scaled back but was still involved.

File bankruptcy. Ditch the offshore QB program. Perhaps the only hope for keeping ownership stateside would be an owners/pilots association.
 
Poor fella looked like a hostage reading to the camera.

Most businesses like Vans don't actually know their profitability by product/sku. Their data tracks monthly or quarterly gross/net profit, if that.

I'd be shocked if they actually knew what their true costs are per model, and astounded if they updated their COGS inputs in real-time. KPI, what airport is that?

They throw resources at symptoms as their management's skillset is product development and the easiest way to mask symptoms is 'we need more "X" that'll fix it.'

Meanwhile the costs of that "X" never get assigned to the non-existing COGS matrix so the product that may have been profitable certainly isn't anymore.

It is especially critical with long-term items like kits that can stretch out over years to have countermeasures in place to protect profitability.

The only sure way of bridging the successful hobby to real-deal business is incorporating Continuous Improvement with a qualified Black Belt, whether as a consultant or as staff. Detailed accounting is great, but no help in modeling solutions to production problems.

The 'Team' Vans is bringing in will gather all the data that their non-existent Black Belt would be using to manage KPIs. And at great cost and disruption they will make decisions that should have been made years ago, hopefully being able to salvage the company under family ownership.

Sad.
 
Todd82 said:
How iron-clad is the contract when you put a deposit on a Vans kit a year + in advance?

What I'm saying is, what stops them from just re-invoicing their customers on like a force majeure situation?

If some customers walk away that's expected, but at least the ones who remain will be profitable. A fighting chance at survival beats the alternative.
Click to expand...
The problem of forcing a price increase is that the people with deposits down would then be able to immediately ask for a refund while those that agree to keep on aren’t going to pay anymore until parts are ready to ship. That is just going to make a cashflow problem worse.

I don’t see a clean way out of this for current builders. They are going to end up paying higher prices no matter what and may lose all deposits if the company files for bankruptcy. The best they can hope for is a well heeled outside investor that is willing to trade some short term risk of a cash infusion for partial or full ownership of the company. Vans will never be what it once was ever again.
 
Seems like they should have just said sorry we need to adjust prices due to inflation vs selling at a loss. If you had a 1.5 yr old order and buyer wanted to pass at new price then sell to the next guy at a profit. They obviously have a waiting list. Sell every kit for a profit. Raise price until backlog gets to a desired level.
 
Warmi said:
And that is the very catch-22 that makes it real hard for wounded companies like them to come back …. who is going to trust them now ?
Click to expand...
Well...my gut read, only just as a prospective buyer, is that I WOULD HAVE had trust IF they hired consultants, came up with a plan...whatever..... even if it was a failry long road.....
but now that I've read they have given control to what seems to be a hatchet man with a track record of selling out to the chicoms.... yeah, not so much. Not even a little trust..... at least till they announce something actionable
I feel sad
 
FancyG said:
Poor fella looked like a hostage reading to the camera.

Most businesses like Vans don't actually know their profitability by product/sku. Their data tracks monthly or quarterly gross/net profit, if that.

I'd be shocked if they actually knew what their true costs are per model, and astounded if they updated their COGS inputs in real-time. KPI, what airport is that?

They throw resources at symptoms as their management's skillset is product development and the easiest way to mask symptoms is 'we need more "X" that'll fix it.'

Meanwhile the costs of that "X" never get assigned to the non-existing COGS matrix so the product that may have been profitable certainly isn't anymore.

It is especially critical with long-term items like kits that can stretch out over years to have countermeasures in place to protect profitability.

The only sure way of bridging the successful hobby to real-deal business is incorporating Continuous Improvement with a qualified Black Belt, whether as a consultant or as staff. Detailed accounting is great, but no help in modeling solutions to production problems.

The 'Team' Vans is bringing in will gather all the data that their non-existent Black Belt would be using to manage KPIs. And at great cost and disruption they will make decisions that should have been made years ago, hopefully being able to salvage the company under family ownership.

Sad.
Click to expand...

Cost accounting is one of the fundamental basic steps to getting a handle on profitability and absolutely essential for a small business trying to grow into a big business to be successful. In fact it's probably the most important step. It's really not that hard to do if it is part of the design process. It starts with good design practices, and requires important things like detailed bills of materials and inventory control. There are basic store bought programs ( now web based) that allow you to track this stuff. It adds a little bit of overhead, but it allows you to quickly realize if you are going to go bankrupt. Newer engineers detest these steps, but most see the light when the crap inevitably starts hitting the fan, either with manufacturing problems or cost issues. A little discipline up front makes it easy to identify issues caused by changing manufacturing procedures or catching outside vendors causing issues by using inferior, below spec materials.

Companies that don't keep track of the bottom line inevitably fail.
 
Or it can simply be the market has changed and no longer supports the business plan Vans was using. People thought Cessna and Piper were out pricing themselves from a future but in reality they were adjusting to the current market. Maybe Vans was a bit slow to adjust but it fits the profile. A lot of aviation markets have been changing for years and only those who are forward thinkers will survive. And its happening across many different facets of the industry to include E/AB. Wish them luck.
 
PaulS said:
Cost accounting is one of the fundamental basic steps to getting a handle on profitability and absolutely essential for a small business trying to grow into a big business to be successful. In fact it's probably the most important step. It's really not that hard to do if it is part of the design process. It starts with good design practices, and requires important things like detailed bills of materials and inventory control. There are basic store bought programs ( now web based) that allow you to track this stuff. It adds a little bit of overhead, but it allows you to quickly realize if you are going to go bankrupt. Newer engineers detest these steps, but most see the light when the crap inevitably starts hitting the fan, either with manufacturing problems or cost issues. A little discipline up front makes it easy to identify issues caused by changing manufacturing procedures or catching outside vendors causing issues by using inferior, below spec materials.

Companies that don't keep track of the bottom line inevitably fail.
Click to expand...
Cost accounting is critical for managing profitability.

Continuous improvement is critical for sweating assets and modeling the cost/benefit of production improvements and changes.

If your business hasn't had any LSS work done, a 50% increase in throughput is easily achievable. Unfortunately the 500% increase in hurt pride normally sabotages the 'Sustain' part of it.
 
Racerx said:
Just imagine if they hadn't taken that ppp loan...

data.statesmanjournal.com

VAN'S AIRCRAFT INC. - Oregon COVID-19 Paycheck Protection Program (PPP) Loans

The Small Business Administration has released a list of businesses that have received emergency pandemic loans. Use our searchable database to see who in Oregon received funds.
data.statesmanjournal.com data.statesmanjournal.com
Click to expand...
Wow... That's how I know Vans is at least ethical, even if they do need to take a class in managerial accounting. They only ate a million bucks in PPP as an aircraft mfr!

If you wanna puke, start looking up random business PPP loans in Chicago and then googling the businesses that filed for them. I've seen laughable "businesses" filing for 400k+ that operate out of generic strip malls and sell healing crystals. Your tax dollars hard at work!
 
Is there more information than what they posted? Everybody is talking like they're already dead & buried. Maybe they just need to figure out where they are to access a line of credit. I'm hopeful (notice I didn't say "confident") they can figure it out.
 
Jim K said:
Is there more information than what they posted? Everybody is talking like they're already dead & buried. Maybe they just need to figure out where they are to access a line of credit. I'm hopeful (notice I didn't say "confident") they can figure it out.
Click to expand...
If you haven't watched the video of the owner has a little more detail, though not a ton. The salient details are that the company has been surviving for a bit now on loans from the founder; my guess is that the market rates they were offered aren't doable.

I think the fact that they stopped accepting new orders and are not doing refunds kind of tells you a lot about what you need to know. They have to be in real bad shape to disrupt operations this much and accept emergency financing from the owner. If it was a smaller issue it would usually not be this visible to the customer....
 
Jim K said:
Is there more information than what they posted? Everybody is talking like they're already dead & buried. Maybe they just need to figure out where they are to access a line of credit. I'm hopeful (notice I didn't say "confident") they can figure it out.
Click to expand...
Dead and buried? Of course not. Prepping certain people up to get stiffed? Yup.

In fairness, choosing to or not do the latter is a damned if you do/don't type of thing. There is zero way this finalizes with existing customers having their pre-china flu pricing honored, and that's frankly the best case scenario. The more likely scenario (shuttering support for the smaller, more 'democratizing' offerings) is much worse for the rank and file, even non-builders.

--break break--

Remind me again why a "clone parts" business for existing RVs is not possible? Somebody mentioned IP, I wonder how Conti is able to clone Lyco engines and cylinders.
 
ArrowFlyer86 said:
Wow... That's how I know Vans is at least ethical, even if they do need to take a class in managerial accounting. They only ate a million bucks in PPP as an aircraft mfr!

If you wanna puke, start looking up random business PPP loans in Chicago and then googling the businesses that filed for them. I've seen laughable "businesses" filing for 400k+ that operate out of generic strip malls and sell healing crystals. Your tax dollars hard at work!
Click to expand...
It didn't take even a "C" student to foresee that program ending with massive fraud and being largely unnecessary save for the restaurant industry.
ArrowFlyer86 said:
If you haven't watched the video of the owner has a little more detail, though not a ton. The salient details are that the company has been surviving for a bit now on loans from the founder; my guess is that the market rates they were offered aren't doable.

I think the fact that they stopped accepting new orders and are not doing refunds kind of tells you a lot about what you need to know. They have to be in real bad shape to disrupt operations this much and accept emergency financing from the owner. If it was a smaller issue it would usually not be this visible to the customer....
Click to expand...
I can at least be hopeful that things aren't as dire as they appear. And that this pause/video was necessary to do some forensic accounting and figure out where things need to be, who gets fired, and while also staving off the customers wanting their replacement parts, props, kits, etc.

Now, with that said...the way they've been operating with new deposits floating the business...kind of leaves a Ponzi feeling.
 
hindsight2020 said:
Remind me again why a "clone parts" business for existing RVs is not possible? Somebody mentioned IP, I wonder how Conti is able to clone Lyco engines and cylinders.
Click to expand...
Interesting idea. Clone parts are probably doable. But there are a lot of different parts and reverse engineering all of 'em would probably be quite the undertaking, particularly the non-aluminum parts like engine mounts, gear legs, and the like. The flat stuff? CNC punch and, a hydroform machine, and a way to heat treat the parts, or at least some of 'em.

If you were gonna do that, where would you start? Gonna clone a whole airplane, then move to the next one?
 
Status
Not open for further replies.
Back
Top