Van’s Aircraft Facing Challenges

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Jim K said:
I'm pretty sure the second they conjured that play money out of thin air they already had it back, just took a couple years to shake out.
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Exactly why you kinda had to take it.
 
If they declare bankruptcy, buyers (deposit holders), suppliers, and investors would have to get in line as creditors (file a claim with bankruptcy court). There’s a chance that buyers could get some or all of their money back, but prior contracts (price agreements) would be dissolved. Some companies exit bankruptcy stronger, and most creditors get made almost completely whole.
 
The people most in jeopardy here are in-progress builders. Imagine you have been slogging your way through a non-QB kit for the last 7 years. You were just about ready to order the finishing kit. Now it is made of unobtainium, and your project is at risk of being worthless.
 
I wonder if this will have a wider effect on the industry if builders see what's happening to Vans and think twice about sending deposits to other kit manufacturers like Rans, Kitfox, etc. I hope Vans gets this sorted quickly.
 
Punkinhead said:
I wonder if this will have a wider effect on the industry if builders see what's happening to Vans and think twice about sending deposits to other kit manufacturers like Rans, Kitfox, etc. I hope Vans gets this sorted quickly.
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Kit fox already went out of business once in the past. This isn’t new in the home built industry. It’s just a much larger scale than before with Vans. When kit fox went under years ago it solidified my plans to build a sonex because 100% of the details to fabricate every part were included in the plans. If they went under I could still finish. Vans troubles may be a bust for some companies but there will be a void to fill if they go out of business ant least temporarily and if they don’t recover quickly then some other company will step up to fill the void.
 
Bell206 said:
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.
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This is probably exactly what happened and it's why it's important to have a really good operations guy and accounting guy analyzing financials at least monthly. I come from a small business background and it's amazing how many business don't have a clue about this.
FancyG said:
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.
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If you have a business that is losing money, it's a dying business, especially a small business, unless it is funded by a sympathetic billionaire and has a plan for profitability. I've seen many acronym salad solutions to productivity, some work great, some only work out for the consultants. Doesn't matter how you get there, what matters is the bottom line, not watching the bottom line is suicide, nothing else works if you don't make money. I hope Van's figures this out.


Ed Haywood said:
The people most in jeopardy here are in-progress builders. Imagine you have been slogging your way through a non-QB kit for the last 7 years. You were just about ready to order the finishing kit. Now it is made of unobtainium, and your project is at risk of being worthless.
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I've been thinking about building for a while now, not sure if I'd ever do it, but one of things I would do if I did, and I decided this long before Van's issue, is order everything at once, including engine and prop. You just never know.
 
Brad W said:
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
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Vans almost certainly has bank or institutional financing. Once you trip a debt covenant (like total leverage (debt/ebitda), fixed charge coverage (ebitda-capex / princ + int + taxes + distributions)) or any other number of covenants, they (the bank/lender) force a consultant in. Secured lenders control the company after a default (usually this happens after several defaults after extending more credit to a point it's clearly a losing proposition to advance any further).

He was forced to bring in consultants and ultimately an interim CEO.

That's going to drive the highest recovery for the lenders. Sale to the Chinese or others brings in the most cash to repay the loan right now. Much riskier to wait and see if they can work through the problem requiring additional working capital loans etc.

Maybe Mr V has cash to inject as equity or they find someone else to put in equity, but that's tough recently.

Those who have deposits and are waiting on parts are unsecured with little rights in BK. They're behind the banks who expect to take a discount.

Someone buying the business to continue operating will cut a deal with those customers with deposits to keep part of the pipeline. Those customers will have to agree to higher prices (but vs Pennies on the dollar recovery of deposit in the bankruptcy).

My $0.02. Current mgt isn't driving this. The lenders are because they're under water (which means the current equity is worth $0).
 
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On the plus side, Van’s has hard assets and inventory. Shutting down QB lines and RV-12 LSA is an easy labor lever to pull that also impacts shipping liabilities.

That leaves the slow build -7, -8, -9, -12, -10, and -14 lines as viable offerings. The -7/-9 have some shared components, but there doesn’t seem to be much other shared components across the lines.

Depending on tooling and order quantity, the offerings could be narrowed even further either temporarily or permanently.

Alternatively, the go big or go home move is scale back to only QB and LSA offerings, entire kit must be ordered up front, with progressive payments for a spot in line, at start, at mid point, at finish, and shipping due when it’s crated. Existing slow build orders are a bit sticky, but it’s either convert to QB, sell the spot to someone else, or cancel.
 
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Tangent: why does everyone abbreviate "bankruptcy" as "BK"? BanKruptsy. Seems silly.
 
Ed Haywood said:
The people most in jeopardy here are in-progress builders. Imagine you have been slogging your way through a non-QB kit for the last 7 years. You were just about ready to order the finishing kit. Now it is made of unobtainium, and your project is at risk of being worthless.
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And why deciding to buy these kits section at a time and taking 7years to do it is a dumb idea.
 
Clip4 said:
And why deciding to buy these kits section at a time and taking 7years to do it is a dumb idea.
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I wouldn't say it's dumb, in fact it's probably the more logical way to do it. Even the most dedicated builders will take several years to build a kitplane so there is no sense in having money tied up in a wing or fuselage kit that you may not start on for a year or more. Not to mention having to store the kits you aren't ready to start on. There is always the risk though that you get caught in a bad situation like this. I by no means think the product line will disappear as it's the most popular kit plane brand ever, but there will for sure be some people who get burned here.
 
Grum.Man said:
I wouldn't say it's dumb, in fact it's probably the more logical way to do it. Even the most dedicated builders will take several years to build a kitplane so there is no sense in having money tied up in a wing or fuselage kit that you may not start on for a year or more. Not to mention having to store the kits you aren't ready to start on. There is always the risk though that you get caught in a bad situation like this. I by no means think the product line will disappear as it's the most popular kit plane brand ever, but there will for sure be some people who get burned here.
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Sure, when inflation and interest rates are at record lows and business failures reflect that environment.

All the kit providers are small businesses and less than 35% of all small businesses last 10 years. 66% of small businesses face financial challenges everyday placing them at an elevated failure risk when inflation and interests rates turn against them.

Heck, for a lot of consumer goods part availability starts running out at 7 years.

Not withstanding VanGrunsven is 83 years old. A honorable man who is bailing the company out to protect his name and legacy. In todays world it would have been easier and a more common practice for him to protect his estate and walk away.
 
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Saw the story on Vans in my news feed this morning, and went down the rabbit hole on this thread on the Vans Air Force forum.

I've gotten a grand total of 1 hours in a friend's RV-4 ~25 years ago. I totally understand what "The RV Grin" is all about. Hate to see anything bad happen to Vans. They've been an incredible success story up until now.

Here's my takeaway. Appreciate any corrections/clarifications:

- When the pandemic hit, Vans was hit by all of the supply chain snafus that everyone else suffered through. On top of that, they were one of those industries that got flooded with orders.​
​
- In an attempt to keep up with demand, they did some outsourcing. They've had Quick Build kits assembled on a line in the Philippines for ~20 years. In 2021, they added a quick-build kit assembly line in Brazil. A portion of kits from one of these assembly sites suffered from poor primer application, resulting in corrosion, and many QB kits had to be scrapped. Not sure if the issue was from the Philippines or Brazil; I expect Brazil, given the timing.​
​
- They also outsourced some aluminum parts production, and switched the production method from CNC punching to laser cutting. The laser cutting resulted in some level of cracking. There has been a lot of discussion and disagreement regarding what level of cracking is acceptable, what parts are good and what has to be scrapped, and all kinds of other confusion.​
​
- The lead time for Van's kits are 2+ years, and they way it's set up, you put down a deposit on a kit at a specific advertised price, and Vans sends you the kit 1-2 years later. Lead times varied depending on demand, and it sounded like lead times increased significantly as orders exploded during Covid. However, due to the long lead times and the set prices they charged, Vans backed themselves into a financial corner when inflation hit hard within the last year or so. The end result was they were losing money on many kits, as they hadn't accounted for inflation.​

It really sounds like they got in over their head in trying to keep up with demand, as well as the sin of using deposit money to fund the day-to-day ops, with no financial guardrails in place.
 
My hangar partner is working on a 9A. He has most of the parts and should be ok. I have several other friends in a tough spot.
I believe some building are tired of the crap and just want to get out with as much as they can get for their kits. Some are building and want to finish and understand they are going to pay more to make that happen.

Maybe a sort of "Parts Available and Parts Needed" site or thread could be developed. With all the backlogs, lots of parts may not be available - but some will be. I have an extra 9 wing kit sitting in my hangar that I always thought I would build if my fuel tanks crapped out. If it could help someone finish, I may consider letting it go. I bet there are lots of sub kits out there - especially tail kits.

Maybe a few people can unload what they have and a few can get what they need. It wont help Vans when the parts are not bought from them but it isnt really an option now.

Good luck.
 
fasteddie said:
Saw the story on Vans in my news feed this morning, and went down the rabbit hole on this thread on the Vans Air Force forum.

I've gotten a grand total of 1 hours in a friend's RV-4 ~25 years ago. I totally understand what "The RV Grin" is all about. Hate to see anything bad happen to Vans. They've been an incredible success story up until now.

Here's my takeaway. Appreciate any corrections/clarifications:

- When the pandemic hit, Vans was hit by all of the supply chain snafus that everyone else suffered through. On top of that, they were one of those industries that got flooded with orders.​
​
- In an attempt to keep up with demand, they did some outsourcing. They've had Quick Build kits assembled on a line in the Philippines for ~20 years. In 2021, they added a quick-build kit assembly line in Brazil. A portion of kits from one of these assembly sites suffered from poor primer application, resulting in corrosion, and many QB kits had to be scrapped. Not sure if the issue was from the Philippines or Brazil; I expect Brazil, given the timing.​
​
- They also outsourced some aluminum parts production, and switched the production method from CNC punching to laser cutting. The laser cutting resulted in some level of cracking. There has been a lot of discussion and disagreement regarding what level of cracking is acceptable, what parts are good and what has to be scrapped, and all kinds of other confusion.​
​
- The lead time for Van's kits are 2+ years, and they way it's set up, you put down a deposit on a kit at a specific advertised price, and Vans sends you the kit 1-2 years later. Lead times varied depending on demand, and it sounded like lead times increased significantly as orders exploded during Covid. However, due to the long lead times and the set prices they charged, Vans backed themselves into a financial corner when inflation hit hard within the last year or so. The end result was they were losing money on many kits, as they hadn't accounted for inflation.​

It really sounds like they got in over their head in trying to keep up with demand, as well as the sin of using deposit money to fund the day-to-day ops, with no financial guardrails in place.
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Probably more that just deposits, they probably leveraged debt based on orders outstanding, then the increased inflation and interest rates hit home.
 
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ArrowFlyer86 said:
If you wanna puke, start looking up random business PPP loans in Chicago and then googling the businesses that filed for them
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But if you REALLY wanna puke, there are things like this (my former Rep, till our district was re-gerrymandered):

www.dallasnews.com

In Texas, federal PPP loans went to a U.S. House campaign, Senate hopeful’s law firm and lieutenant gov’s radio stations

WASHINGTON — A North Texas car dealership owned by Rep. Roger Williams received a forgivable loan valued between $1 million and $2 million through a small-busin...
www.dallasnews.com
 
ArrowFlyer86 said:
If you wanna puke, start looking up random business PPP loans in Chicago and then googling the businesses that filed for them.
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I found this; it doesn't address all of the Chicago bogus businesses that claimed forgivable paycheck protection loans, only the 1000+ city employees who received the loans, including cops, firefighters, health department workers, school district employees... Suddenly a lot of people became small business owners overnight, despite no records of such businesses existing previously.

https://chicago.suntimes.com/corona...ef-loans-ppp-fraud-chicago-city-hall-watchdog
 
Llewtrah381 said:
But if you REALLY wanna puke, there are things like this (my former Rep, till our district was re-gerrymandered):

www.dallasnews.com

In Texas, federal PPP loans went to a U.S. House campaign, Senate hopeful’s law firm and lieutenant gov’s radio stations

WASHINGTON — A North Texas car dealership owned by Rep. Roger Williams received a forgivable loan valued between $1 million and $2 million through a small-busin...
www.dallasnews.com
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Doesn't even make me queasy. He actually had a legitimate business.
 
I'm not certain on this, but with them saying shipping cost was 5x, that tells me they had these laser cut in China.

I make aluminum parts in Mexico and China, and you can do the nesting and layout cuts for them, but they ALWAYS change it.

I have had to hire a guy to stand in a factory that does nothing but make sure my specs are followed. And I have had to change this guy once, as the factory paid the first guy to look the other way
 
I suppose there is an argument that if you bought all the kits and the company went under at least you'd have a saleable kit if you didn't finish it. IF Van's was to go under or abandon certain models there will be a lot of people with worthless vaguely airplane shaped piles of scrap aluminum. OTOH, there'd probably be half the number of RV's if people had to buy the whole thing at once. The "one piece at a time" strategy was truly a stroke of marketing genius. Serious question: Did Van's invent that?

I don't think anyone outside the high levels of the company had any idea this was coming. I certainly wouldn't have hesitated to buy a tail kit from them 2 weeks ago. I was seriously considering it this summer until I came to my senses and realized I already have too many unfinished projects.
 
My next project after the new commercial building and after the current garage/barndominium renovation. Was going to be building a shop to build an RV. Maybe it'll just be for race cars instead if it can't be both. Too many hobbies.
 
Jim K said:
I suppose there is an argument that if you bought all the kits and the company went under at least you'd have a saleable kit if you didn't finish it. IF Van's was to go under or abandon certain models there will be a lot of people with worthless vaguely airplane shaped piles of scrap aluminum. OTOH, there'd probably be half the number of RV's if people had to buy the whole thing at once. The "one piece at a time" strategy was truly a stroke of marketing genius. Serious question: Did Van's invent that?
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The demand is large enough that I doubt Vans fails. BUT, if they did, one of the assets would be the CAD files and design rights. You or I (and a few friends) could buy those rights and their CNC equipment for pennies on the dollar and start cranking out parts very quickly. That's the aluminum bits. The fiberglass stuff wouldn't be that hard to reproduce either. You'd need different skills and equipment to do the landing gear, engine mounts, etc, but they are certainly doable...
 
I think the company will survive. I think products will be cut, staff may be trimmed. Prices will be increased, we know that. I’m guessing at least doubled.
 
Jim K said:
Tangent: why does everyone abbreviate "bankruptcy" as "BK"? BanKruptsy. Seems silly.
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I don't know if it's the origin, or why they picked it, but federal court file numbers use BK for bankruptcy cases. For example, 1:23-bk-12345. They use CV for civil cases and CR for criminal cases. So people who run in bankrupt(cy) circles use BK as an abbreviation for the word.
 
TCABM said:
On the plus side, Van’s has hard assets and inventory. Shutting down QB lines and RV-12 LSA is an easy labor lever to pull that also impacts shipping liabilities.

That leaves the slow build -7, -8, -9, -12, -10, and -14 lines as viable offerings. The -7/-9 have some shared components, but there doesn’t seem to be much other shared components across the lines.

Depending on tooling and order quantity, the offerings could be narrowed even further either temporarily or permanently.

Alternatively, the go big or go home move is scale back to only QB and LSA offerings, entire kit must be ordered up front, with progressive payments for a spot in line, at start, at mid point, at finish, and shipping due when it’s crated. Existing slow build orders are a bit sticky, but it’s either convert to WB, sell the spot to someone else, or cancel.
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Great ideas.
What's WB? ...but it's either convert to WB...
 
cowtowner said:
I'm not certain on this, but with them saying shipping cost was 5x, that tells me they had these laser cut in China.

I make aluminum parts in Mexico and China, and you can do the nesting and layout cuts for them, but they ALWAYS change it.

I have had to hire a guy to stand in a factory that does nothing but make sure my specs are followed. And I have had to change this guy once, as the factory paid the first guy to look the other way
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Nope. It was a vendor here in the US that did the laser cutting. Van’s gave them the procedure to follow, and the vendor went off script, disregarding Van’s engineers’ specifications. Hopefully the law will allow Van’s to not only not have to pay the vendor, but the shop will have to pay Van’s costs incurred due to them going rogue.

The increased shipping cost was from their contractor in the Phillipines.
 
ateamer said:
Hopefully the law will allow Van’s to not only not have to pay the vendor, but the shop will have to pay Van’s costs incurred due to them going rogue.
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That will be determined by the terms of the agreements Vans and the vendor signed. Unless the vendor wants to avoid the negative reputational impact of failing to satisfy a customer, enforcing those agreements will probably require legal action. The mediation and litigation process can take several years, so it is unlikely to save Vans in the short run, and will cost them $ before it saves them $$. If the vendor does not have fairly deep pockets, prevailing could put them out of business too, and now the whole mess is bogged down in two BK's.
 
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