[thiggins]

Life is short

I'm a newby. Just began Empennage assembly for my RV-14. Had to abandon the RV-6 project because Vans was not delivering parts.
So... I have a $6000 empenage kit plus about $10,000 in deposits for wing and fuselage.
My original budget (pre-covid) was about $100K. Post covid, the pricing changed it to $140K. More increases are coming that are destroying my budget.
Do I quit and take the $16K loss now or go all in with another $140K+ to finish the project and hope I can at least sell later and recoup some.
Vans was supposed to be low-budget. This is no longer the case.
There are other kit makers out there to consider. Not as established as Vans.
Sigh... This is going to be a tough month to contemplate Blue or Red pill.

If you’re committed to making it happen, you can. If your heart isn’t in it, you can always sell your kits and get out. There are many ways to get a project completed, if you really want to. (There are many other partial kits out there you can pick up if need be, and other builders selling stuff.)

Screw the budget, a dream is a dream. Airplanes are just expensive.

I’m at about double what I expected to spend on my 12iS, but it is what it is. No regrets.

 

[rocketman1988]

Well Said

Well said, Paul.

There are many of us who have gone through the bankruptcy process at the companies we are employed at. It is difficult not knowing how the future will play out, when your livelihood depends on it.

I also stand with Vans, 100%. Nothing has changed with the aircraft design, it is second to none, and the demand is still there. Vans WILL get through this...and likely be a stronger, leaner company on the other side.

I am still looking forward to my next build, a -15. It may be a bit longer wait but I am willing. In fact, I would be happy to invest, right now.

Vans WILL survive. Right now though, they have to put one foot in front of the other, and soon they will be walking cross the floor...

 

[Bavafa]

VansAirForce.net and its forums remain committed to helping the tens of thousands of RV builders and owners safely enjoy their RV airplanes for the next several decades. Here we will continue building friendships, supporting each other and solving technical issues and questions while we live our RV journey.

Chapter 11 sucks, and I'm still absorbing the enormity of it, but these are the steps that were obviously needed to keep the company in existence. It could be a different hobby on the other side, but we will adapt. While it in fact may end up being a different, stripped down hobby, this website and amazing community will be here for RV builders and owners. With your help, I'll do everything in my power to keep this resource here for you for the long haul. Technical issues, motivational support and a sense of RV community. We're in this together.

My heart goes out to the employees affected by this. It just sucks. It just sucks.

Here we'll focus on adapting and overcoming the hill in front of us the best we can. I heard this before about the RV world, "It started out being about the airplane, but ended up being about the people and the journey." I think it will continue to be.

A reminder during this transition, there are posting rules regarding civility, etc. While this is not the news we wanted, I will remind the community that posts violating the rules will be deleted. Bashing, legal threats, civility, you know the bullet points. Folks that don't play nice are going to get their accounts locked down. If you need doom-scrolling and collective social screaming, take it to those places that do that. You gotta be you. Here we're going to focus on the future, support our RV community, and how to best help those still building. Working the problem with the resources we have.

There are tens of thousands of us. We're not going anywhere.

My goal is to keep VansAirForce.net and its forums in business so they can help as many builders and owners as they can. Just like the factory is hoping to do.

Wednesday's edition will be just like Tuesday's, a mix of RV technical and RV motivation. We are RV builders and RV pilots, and we will continue to be! RVators helping RVators.


PS: Mods, leave this thread open, but delete the replies that obviously violate the posting rules. I'll make the call on the grey area ones.​

I wish our country/leaders of our country would operate like this Forum.
My best wishes to VANS and I am very optimistic they will get out of this with their heads high.

Moderators: Please delete if you think this violates the rules or inappropriate.

 

[rocketman1988]

Facts

If you’re committed to making it happen, you can. If your heart isn’t in it, you can always sell your kits and get out. There are many ways to get a project completed, if you really want to. (There are many other partial kits out there you can pick up if need be, and other builders selling stuff.)

Screw the budget, a dream is a dream. Airplanes are just expensive.

I’m at about double what I expected to spend on my 12iS, but it is what it is. No regrets.

Three facts concerning building an aircraft:

It will take longer than you think.

It will cost more than you think.

If you finish, it will be worth it!

 

[MIKE JG]

1800 customers to attend to individually. Even at 6 customers a day (just a swag) that's 300 business days (M-F) to get to everyone. That's 60 weeks if my math is correct. This isn't going to be sorted out for a while IMO. Pack your patience. Personally I think it will all work out eventually, just not on the timeline most of us are hoping for. Maybe they can process more than that a day, we'll see. Good news is that there is money set aside for the LCP issue.

 

[bmellis11]

If anyone at Van's is following this thread, let me make a suggestion that I think will help ensure the long term viability of the company while best serving your loyal customers. Your bankruptcy filings and past statements have made it clear that you were unable to properly determine costs and set prices. There were a lot of factors at play, some unexpected and others predictable. Looking at it from the outside, it seems the biggest problems came from the long QB kit and pre-built RV-12 production times--your sell price was fixed at the point the order was placed, but costs continued to rise during the time you produced the goods and then you had to pay more to suppliers than you collected from customers. This will continue to be a problem for you--there will be future labor issues, port strikes, freight and trucking rate increases, container availability issues, increasing duties, etc. These product lines involve so many variables you can't control. Part of the fix will have to be higher prices for those products. If your future practices don't account for this then you will be back in bankruptcy again.

But those issues don't seem to exist for your historical core business--kit production. To me, the costs associated with SB kits is pretty straightforward. It doesn't take long to manufacture sheet metal with holes in it. In house labor costs, the price of aluminum, and machinery and plant carrying costs don't change much in the short production cycle. And your customer pays for trucking from your warehouse. From what I understand, you're not having foreign labor manufacture these parts and only a few parts are made by third party vendors. You can easily account for these costs and set pricing accordingly.

So through my eyes it appears that the people that just want to buy simple sheet metal parts in SB kits are subsidizing the unpredictable costs related to people that want prebuilt airplanes and QB kits, which are essentially luxury items in the kit business.

My recommendation is that you don't try to make Van's a company that does everything. Split the company into different entities that deal with each other at an arm's length and each specialize in one area. This is something you can accomplish through your reorganization plane. Let the main company do what it always has done--manufacture SB kits. The costs will be predictable and since it won't be subsidizing the other activities, the kit prices will not increase drastically. This will be very good for aviation and will allow normal people to be able to continue to buy your product. Then you can create one or more sister companies that will manufacture the RV-12 and the QB kits. Those companies can buy the parts from the SB kit company and bear their own expenses and set pricing accordingly. The people that really want those luxury products can afford to pay the ever increasing cost of them.

We all really hope for your long term survival and at the same time, our ability to buy kits at an affordable price.

 

[Brantel]

I’m at about double what I expected to spend on my 12iS, but it is what it is. No regrets.

The cost to build a 12 has already increased much more than the other models over the last several years. I for one am hoping that the price increases will be less for the 12 than some of the other models. My finish kit order fell right into this mess and I expect the price to go up but only some reasonable amount. The powerplant kits have also seen significant price increases the past few years. Since powerplant and avionics kits are mostly just third party pass through type transactions, I am hoping that the overall impact to the 12 will be reasonable. If the price to build a 12 doubles, the demand will drop drastically.

 

[Mark Dickens]

FWIW, I think this is the best possible outcome and I'm so impressed with Van's personal support. You don't just see this in the business world and as impressed as I already was with him and his accomplishments, I am totally blown away now. I have a deposit down on a -14 fuse QB kit and I'm IN for whatever the new price is!

 

[LettersFromFlyoverCountry]

Not at all surprising. You just had to read between the lines of the original announcement to see that everything that followed was a typical process for Chapter 11.

For sure, it'll be a different company that emerges but I doubt we'll notice. I suspect there will be some delays and negotiations to work out with third parties that might be part of the process but I think we just have to think long term and focus on that.

I don't think anybody's money (customer wise) is in danger but it will require patience and, fortunately, that's the very first thing we learn when getting into homebuilding.

 

[RV6_flyer]

Being an engineer that has had a successful career ending in a secure retirement, I recognize that engineer's want to engineer but it takes an accountant / business manager to make a company successful financially.

Having watched Chrysler and General Motors go through Chapter 11, I see no issue for Van's Aircraft also getting things straightened out. The biggest issue they will face is human nature impatience.

The new guys (new customers) will need to remember that there are some of us customers that have done business with Van's Aircraft for more than 30-years of their 50-year existence. It took me 8.5-years to build my RV-6. It has now been flying over 26-years.

In the supermarket the other day, I stopped to let a gentleman get out of the store on my way in. We both stopped waiting for the other. He said if he was in a hurry, he would have been here sooner. I told him that I understand as that sounds like something I would have said. Those that are waiting on parts, should have also got started sooner so you would not be waiting now.

The past several years has all been hard on everyone. We had a COVID slowdown and restrictions. We have had inflation not seen in decades. There have been all kinds of supply chain interruptions and price changes. It is easy to see how Van's got caught in the middle of this trying to keep all their customers happy. This reset will get the company back on the correct path.

As a customer of Van's Aircraft for several decades, I feel that Van's Aircraft have always been fair to me, have kept their costs down, and passed the saving on to me their customer. All businesses deserve to make a profit. That profit gets invested in the people doing the work, the equipment / facilities, and new products like the RV-15.

Over the past 35-years of my 42-years of flying, I have watched just about everything quadruple in price. Yes almost everything about flying is four times higher in price than it was back then but so is everything else.

 

[wirejock]

Patience

I agree. Vans will come out better. Stay the course and wait. If you're heart's not in it, sell after the kit(s) arrive. I think value will increase on kits and completed airplanes.

In the meantime, lets keep this forum alive. See my signature below.

 

[GrahamF]

If anyone at Van's is following this thread, let me make a suggestion that I think will help ensure the long term viability of the company while best serving your loyal customers. Your bankruptcy filings and past statements have made it clear that you were unable to properly determine costs and set prices. There were a lot of factors at play, some unexpected and others predictable. Looking at it from the outside, it seems the biggest problems came from the long QB kit and pre-built RV-12 production times--your sell price was fixed at the point the order was placed, but costs continued to rise during the time you produced the goods and then you had to pay more to suppliers than you collected from customers. This will continue to be a problem for you--there will be future labor issues, port strikes, freight and trucking rate increases, container availability issues, increasing duties, etc. These product lines involve so many variables you can't control. Part of the fix will have to be higher prices for those products. If your future practices don't account for this then you will be back in bankruptcy again.

But those issues don't seem to exist for your historical core business--kit production. To me, the costs associated with SB kits is pretty straightforward. It doesn't take long to manufacture sheet metal with holes in it. In house labor costs, the price of aluminum, and machinery and plant carrying costs don't change much in the short production cycle. And your customer pays for trucking from your warehouse. From what I understand, you're not having foreign labor manufacture these parts and only a few parts are made by third party vendors. You can easily account for these costs and set pricing accordingly.

So through my eyes it appears that the people that just want to buy simple sheet metal parts in SB kits are subsidizing the unpredictable costs related to people that want prebuilt airplanes and QB kits, which are essentially luxury items in the kit business.

My recommendation is that you don't try to make Van's a company that does everything. Split the company into different entities that deal with each other at an arm's length and each specialize in one area. This is something you can accomplish through your reorganization plane. Let the main company do what it always has done--manufacture SB kits. The costs will be predictable and since it won't be subsidizing the other activities, the kit prices will not increase drastically. This will be very good for aviation and will allow normal people to be able to continue to buy your product. Then you can create one or more sister companies that will manufacture the RV-12 and the QB kits. Those companies can buy the parts from the SB kit company and bear their own expenses and set pricing accordingly. The people that really want those luxury products can afford to pay the ever increasing cost of them.

We all really hope for your long term survival and at the same time, our ability to buy kits at an affordable price.

That's a very good post Ben - QB kits add a lot of complexity and risk to the business model. The premium charged for them is perhaps not enough to justify it. The LCP parts in QB kits is a horrible problem to solve, and it may be that the best way to do it is to just refund affected customers and say sorry. That's got to be cheaper than trying to work individual solutions on goodness-knows-how-many kits, all of which will need exhaustive examination and then perhaps extensive rework, much of which may be totally impractical. In the circumstances, no customer who just gets their money back is likely to be that pi$$ed.

 

[spatsch]

Agree. No surprise. This was the only logical outcome after Van's stated on the first video that they were selling under cost for a while.

As I know this will be catastrophic for some this is the best possible outcome for ensuring Van's will be around 50 years from now.

Oliver

 

[PilotjohnS]

quick Build

Just my opinion, but I see quick build kits being optioned as slow builds. This will allow Vans to get these kits closed and out the door quicker; and that portion of the old business behind it.

If quick builds stay around, I see the price drastically increasing due to the inflation costs of the supply chain that is independent to Vans in-house stuff.

 

[Desert Rat]

Just my opinion, but I see quick build kits being optioned as slow builds. This will allow Vans to get these kits closed and out the door quicker; and that portion of the old business behind it.

If quick builds stay around, I see the price drastically increasing due to the inflation costs of the supply chain that is independent to Vans in-house stuff.

If quick builds are to be viable going forward, three things need to happen

1- better quality control
2- a realistic pricing adjustment to reflect the world we live in today
3- an escalation clause in the contract to account for the world we may live in tomorrow

for number 3; This is nothing new. For certified airplanes where delivery lead times can be several years, theres a clause in the contract that says final price is to be X (todays pricing) plus Y with Y being some multiplier tied to consumer pricing index.

 

[docjjrmd]

RV-12 and Rotax

The cost to build a 12 has already increased much more than the other models over the last several years.

The powerplant kits have also seen significant price increases the past few years. Since powerplant and avionics kits are mostly just third party pass through type transactions, I am hoping that the overall impact to the 12 will be reasonable.

I hear you. I made an engine deposit Oct 25, 2023. Presumably its held in the separate deposit account. I note that I am not listed on the appendix of order holders. Further, I notice that Rotax is not on the list of creditors which leads me to believe they have operated pay, then ship. I do have main wheels (Grove) on backorder out of my finish kit.

It will take patience on our, the customer's, part but we should not forget that many of those on the top 20 creditor list are themselves small business and this announcement affects them as well. The Lycoming's will do fine, the big aluminum sheet supplier will be ok. Its the little guys like Stein and the welding shop folks we need to remember. Their world went on tilt more than mine. I just have a pause in my hobby, they are worried about house and utility payments.

JJR

 

[GrahamF]

Yes, there are those who are disappointed and angry, but this is the real world - thing like this happen. People in many parts of the world don’t know if they will wake up the next morning to find a war going on in their street.

I don't see much anger but certainly some disappointment. The "you could be in Syria" counterbalance applies to pretty much everything, but someone's biggest worry is their biggest worry - whether it's staying alive until tomorrow, keeping their job, or losing 10 AMUs.

Once the LCP issue properly broke and the lack of traceability became clear, the more perceptive among us did some mental math and concluded that the issue would force the company into insolvency at some point - so none of this is surprising. The only uncertainties were how long it would take, and whether it would be Ch11, liquidation, or a buy out. With every deadline for a promised update that went by with total silence, the endgame became closer and more certain.

Sadly what sped the process up and have undoubtedly contributed to a worse overall situation are some pretty poor management decisions after the LCP issue broke, really representing a failure to 'read the room' with their customers.

The first was spending time, money and goodwill on an engineering assessment to try to convince customers that black was white.

The second was rolling back on the original commitment to replace all LCPs free of charge. That second one was a real hammer blow to customer confidence - after that people felt they couldn't trust the statements Van's made and the old statement that "they'll always do the right thing" became somewhat hollow. People were prepared to wait while the replacement parts were made alongside normal production, they were prepared to do the rework and absorb the cost of paint, consumables, damaged parts etc. What they weren't prepared to do was to pay again for the defective parts they received, especially having earlier been assured they wouldn't have to.

The final one was 'accidentally' requesting final payments way ahead of time, at which point customers immediately smelt a rat and stopped sending money.

Remember that for every cheerleader on here who says he trusts the company completely and is prepared to send money at risk, there are probably several dozen who stay silent and treat their personal funds with the care and prudence you'd expect of the average middle-income American. Not everyone is a repeat offender who considers the Van's brand almost part of their identity. Most customers are just ordinary folks who want to built an aircraft and expect to get what they pay for.

Perhaps the level of cheerleading they saw caused Van's to read the room incorrectly?

 

[lr172]

Under Chapter 11:
Consumers who are owed refunds of their deposits have to get in line and compete with the other creditors for any cash that is available. In many cases, however, there is nothing the consumer can do but accept the fact that they have lost all or most of their deposit paid to the bankrupt business.

.

while generally true in chapter 7, 13 and other dissolution approaches; In chap 11, the court becomes the designated receiver and makes all decisions based upon a variety of factors, including proposed plans from company execs. Chapter 11 is all about reorganizing, so that the business can become solvent and SURVIVE; It is NOT about closing up shop and splitting up the assets. It is essentially a sophisticated, govt sanctioned "Do over," with the courts deciding who losses what and how the company will behave in the short term. Companies cannot realistically survive without customers and evaporating all customer deposits would be a SERIOUS blow to a companies reputation and seriously harm the "going concern" philosophy at the heart of chap 11. The courts will make decisions that best support ongoing operations and therefore would not assume that customer deposits will be held at the same priority as other creditors. You cannot wipe out all customer deposits and expect to sell more stuff, so unlikely the courts would go that way. In fact, I would argue that customers and company reputation in the market hold top priority in chap 11. You can't realistically reorganize with a customer facing, scorched earth policy.

No real expertise here, just stating the general playground rules. These things rarely hurt the customer too much. The suppliers and sometimes employees take the bulk of the damage and execs receive a major ego blow, as the court starts telling them how to run their business.

Larry

 

[Roadjunkie1]

This forum...

I agree. Vans will come out better. Stay the course and wait. If you're heart's not in it, sell after the kit(s) arrive. I think value will increase on kits and completed airplanes. In the meantime, lets keep this forum alive. See my signature below.

And mine.............

I find posting on this forum somewhat of a duty that I owe Vans, but also our RV community to help pay forward the knowledge I have gained over the years of having slow-built SuzieQ (no choice at that time!) and having several decades and over 1200 hours of RV flight time. Kind of like an older brother coming over to visit my younger brothers and sisters with some gentle brotherly advise. My contributions may not be earth-shaking but might produce an "Oh.....hmmmmm....that's an idea...." thought process. If I can change one persons problem into a solution.....

Vans has been around for a long time and this reorganization makes sense. It is likely the only way to have kept this company around. They have spread the RV Word World-wide over many years and have given us builders the satisfaction of having built one of the best aircraft in the World and, once flying or just flying an RV someone else crafted, flying these amazing aircraft, regardless of the model! WE as a group need to support each other and Vans to keep this heritage alive for decades into the future. I have learned much from this forum as we all have.

"Don't fight the Darkness; bring in the Light and the Darkness will disappear."

 

[Jack_G_S]

while generally true in chapter 7, 13 and other dissolution approaches; In chap 11, the court becomes the designated receiver and makes all decisions based upon a variety of factors, including proposed plans from company execs. Chapter 11 is all about reorganizing, so that the business can become solvent and SURVIVE; It is NOT about closing up shop and splitting up the assets. It is essentially a sophisticated, govt sanctioned "Do over," with the courts deciding who losses what and how the company will behave in the short term. Companies cannot realistically survive without customers and evaporating all customer deposits would be a SERIOUS blow to a companies reputation and seriously harm the "going concern" philosophy. The courts will make decisions that best support ongoing operations and therefore would not assume that customer deposits will be held at the same priority as other creditors. You cannot wipe out all customer deposits and expect to sell more stuff, so unlikely the courts would go that way. In fact, I would argue that customers and company reputation in the market hold top priority in chap 11. You can't realistically reorganization with a customer facing scorched earth policy.

No real expertise here, just stating the general playground rules. These things rarely hurt the customer too much. The suppliers and sometimes employees take the bulk of the damage and execs receive a major ego blow, as the court starts telling them how to run their business.

Larry

I’m sure there are ways to at least partially dissolve deposits without it looking that way if you increase the kit costs. Let’s say a kit was contracted at $10,000 and you paid a $2,000 deposit. It later is determined that the current cost for a kit should be $12,000. Just make the new kit price $13,000. You now owe $11,000.
Essentially $1,000 of your deposit was evaporated. New customers will evaporate the other $1,000 of your deposit.

 

[AeroEngineer]

Vans was supposed to be low-budget.

I don't know if I agree. Van's has historically been (relatively) low-budget, sure. However: Given the quality and completeness of the kit and of the instructions, the performance and safety record of the airplanes, the support from the company, etc... I'm not sure it's fair to say that such a great product is "supposed" to be low-budget. Building a modern RV requires less fabrication than building a Lancair or low-wing Glasair (the closest "competitors", to the extent they're still available) and you end up with an airplane that's better in many ways. A Sonex (the true "budget" option for this kind of kitplane) would be smaller and slower, a Panther is a single-seater, a Thorp would be much more work to build, canard pushers require long paved runways and also lots more work during building... and tech support from Van's is probably better than for any of those competitors. So: No, looking at the other options, I don't think it would make sense for RVs to be the budget option. We are all very fortunate that they have been, to some extent.

QB kits add a lot of complexity and risk to the business model. The premium charged for them is perhaps not enough to justify it.

Apparently not!

My recommendation is ... Split the company into different entities that deal with each other at an arm's length and each specialize in one area.

I don't see how that would help. (I'm not doubting you: I am not an expert in these things and I would be curious to learn more. I'm probably missing something, so, I would appreciate any insights from folks who understand this sort of thing). If the QB company is ever hit by a financial event like a sudden increase in the cost of shipping, or in the cost of labor at the assembly facilities, or a container falling off the ship, etc... then, in practice, the other (slow-build kit) company would come bail them out, right? If they don't, then what would be the alternative? Would it be to screw over all the other QB customers but protect the slow-build customers? In short, it seems to me that the only thing that a separate QB company would achieve is a disproportionately high increase in QB prices so as to keep standard kit prices from going up as much. And Van's could simply do that as a single company. Right?

3- an escalation clause in the contract to account for the world we may live in tomorrow.
This is nothing new. For certified airplanes where delivery lead times can be several years, theres a clause in the contract that says final price is to be X (todays pricing) plus Y with Y being some multiplier tied to consumer pricing index.

That sounds like a more reasonable approach to me. But again, I'm not an expert.

 

[MechaSteve]

From reading the documents it sounds like the reorganization is rather tightly focused on three items:

1) Van's is far more valuable alive than dead. Piles of kit parts are largely worthless, so it is far better to finish kits and sell them.
2) Van's can't honor the kit prices originally given in contracts and remain in business.
3) LCP are going to be an expensive fix.


I think we will see #2 and #3 will end up with a little tougher outcome than any affected customer would prefer. However, that is what is required for the company to work.

Going forward, if Van's is keeping deposits essentially in escrow, they would have much more freedom to increase prices at shipping time.

It would suck that you would not have budgetary certainty.
Your deposit would guarantee your place in line, but little else.
However, you would also be guaranteed your deposit back, likely less the $500 administrative fee.

Given the long backlog of orders, Van's should be able to just go to the next name on the list.


One thing I don't see in the documents is any plans for more technical process improvement.
It's old management technique that leads to the kind of large but incomplete inventory described.
I imagine their processes are ripe for improvement with frugal use of technology and lean processes.

 

[bmellis11]

I don't see how that would help. (I'm not doubting you: I am not an expert in these things and I would be curious to learn more. I'm probably missing something, so, I would appreciate any insights from folks who understand this sort of thing). If the QB company is ever hit by a financial event like a sudden increase in the cost of shipping, or in the cost of labor at the assembly facilities, or a container falling off the ship, etc... then, in practice, the other (slow-build kit) company would come bail them out, right? If they don't, then what would be the alternative? Would it be to screw over all the other QB customers but protect the slow-build customers? In short, it seems to me that the only thing that a separate QB company would achieve is a disproportionately high increase in QB prices so as to keep standard kit prices from going up as much. And Van's could simply do that as a single company. Right?

Good questions. Under the scenario you have posed, the increase in QB kit prices to account for unforeseen QB production cost increases would not be disproportionate--it would be directly proportional to the expenses related to production of the product. What would be disproportionate is if you raised SB kit prices (throwing out numbers here) 20% to cover increased costs of the QB kit business if the actual costs of the SB kit production only rose 3%. That's what I was referring to when I said that the SB kits customers subsidize the QB kit customers. What that means is that the SB kit customer has to pay more for their kit than it is worth so that the QB kit customer does not have to pay the full value of the kit they are getting.

To answer your earlier question--no, under my recommendation, the SB kit company would not bail out the QB kit company if they didn't properly account for their costs. The QB company would have to raise prices, find an investor to bail them out, or file for bankruptcy. This wouldn't be screwing the QB customer, this would be making sure that the QB customer is responsible for paying the actual value of their kit instead of pushing that burden off onto someone else. Accordingly, the SB customer's costs would increase based only on factors directly related to the SB kit business.

That is a fairer approach and would go a long way to keep kit building accessible to middle class folks. It would also keep all product lines that were not experiencing issues isolated from the problems of other business lines. If one business line fails, the others don't have to fail with it as is the case currently. That prevents disruptions to customers and the revenues generated from them, and increases profitability to shareholders.

The only reason I could see Van's not doing this is if they see QB kits and aircraft production as being the future drivers of profits, in which case they would want to have the SB kit customers subsidize the growth of those lines. But I don't think that's the case and in time, a lot of business will fall off if prices keep going through the roof.

 

[Paragon]

Regarding haircuts

While I sing the praises of Van for his design work, and hard work and integrity in founding the company, I'm not singing his praises regarding this Chapter 11 filing.

Normally, DIP(Debtor in Possession) financing is provided by a third party, in exchange for a disproportionately large ownership share, which can then typically be either retained or sold for a profit once the company returns to profitability.

Under normal Chap 11, company owners take a substantial haircut, and often lose control of the company.

Van is loaning the company his own funds for DIP under very specific terms preserving his right to be paid back before other creditors. This is not being done out of charity, IMHO, it is being done to retain full or nearly full ownership of the company.

So the net result of the Chapter 11 filing is to cancel existing sales contracts, pile price increases onto existing customers, probably haircut suppliers by 10-20%, and avoid having Van take the losses himself. It was realistically the only legal way to quash those contracts.

Given that many suppliers in aviation are sole source, e.g. Lycoming, you can't haircut them 100% and expect them to keep doing business with you.

If the court is interested in a fair settlement, it will recognize that the owner and the DIP lender are the same, and will force a very substantial haircut on the owner prior to forcing haircuts on suppliers and customers.

 

[Mike S]

Van is loaning the company his own funds for DIP under very specific terms preserving his right to be paid back before other creditors. This is not being done out of charity, IMHO, it is being done to retain full or nearly full ownership of the company.



If the court is interested in a fair settlement, it will recognize that the owner and the DIP lender are the same, and will force a very substantial haircut on the owner prior to forcing haircuts on suppliers and customers.

Methinks you might be mistaken here------as I recall, Vans Aircraft is an employee owned company.

 

[N220LS]

RECENT KIT DELIVERY EXPERIENCE

A point of interest for all current and future RV Airplane Kit customers is our recent experience of tool kit orders for RV airplanes. Within the last three weeks we received calls from RV builders stating that Van’s had shipped their airplane kits and they needed a tool kit quickly. We shipped out two RV-14 tool kits, one RV-8 tool kit, and one RV-10 tool kit. It is apparent to us that Van’s is still shipping airplane kits! They realize protecting their existing and new customers is their number one priority to emerge from this Chapter 11 successfully.

 

[MechaSteve]

I don't see how that would help. (I'm not doubting you: I am not an expert in these things and I would be curious to learn more. I'm probably missing something, so, I would appreciate any insights from folks who understand this sort of thing). If the QB company is ever hit by a financial event like a sudden increase in the cost of shipping, or in the cost of labor at the assembly facilities, or a container falling off the ship, etc... then, in practice, the other (slow-build kit) company would come bail them out, right?

It's similar to companies keeping cost centers at arms length and using things like "internal charge backs" where one department essentially bills another for parts or service.

The principal is that the QB company would have to be managed in a way to handle the unexpected. Theoretically, a monolithic company could do the same, but it is much more difficult.
This allows the QB company to focus on the problems unique to QB.

There is a similar potential model to have individual departments keeping track of costs and properly charging the downstream processes.

e.g.
The parts fabrication department pays purchasing for material and consumables, and charges parts and kitting for parts.

The idea is to create incentives for departments to carry the right amount of material, WIP, and finished inventory, and balance work load to fulfill downstream needs as quickly as possible.

Maybe you don't start a run of 1000 aileron ribs if you have a pending order of only 50, and need to make wing ribs to complete a large number of orders.

 

[Brantel]

If the court is interested in a fair settlement, it will recognize that the owner and the DIP lender are the same, and will force a very substantial haircut on the owner prior to forcing haircuts on suppliers and customers.

How does the ESOP play in to your evaluation?

 

[GrahamF]

Methinks you might be mistaken here------as I recall, Vans Aircraft is an employee owned company.

Negative.

The forms filed with the court simply state that the following two entities own more than 10% of the company:

1. Richard & Diane Van Grunsven Trust (i.e. Van and his wife)
2. Van's Aircraft Inc employee stock ownership trust

I would be extremely surprised if Dick and his wife owned less than 50%.

As the previous poster pointed out, his loan is not an act of charity. It's not an investment and it's not a bailout. If you read the forms filed you will discover they come with strict conditions that he is paid before anyone else, and unless the company fails completely and is liquidated in the next few months his money is at no discernable risk. Even if that happened, he'd get much of it back as the number 1 creditor in line.

Like that poster I am surprised that the owner of the DIP should provide the financing. It's a pretty clear conflict of interest, and as that poster says the usual Ch11 arrangement is that the owners take a haircut and lose some of their stake to those providing the finance. It is quite usual to lose overall control of the company in the process.

 

[Saber25]

bmellis11, I don't have a horse in this race since my plane was completed and flying the past thirty four years, but I think your solution is a credible one and would make sense to explore this option more closely. I haven't seen any criticism of your solution better than your offered thoughts.

 

[bmellis11]

While I sing the praises of Van for his design work, and hard work and integrity in founding the company, I'm not singing his praises regarding this Chapter 11 filing.

Normally, DIP(Debtor in Possession) financing is provided by a third party, in exchange for a disproportionately large ownership share, which can then typically be either retained or sold for a profit once the company returns to profitability.

Under normal Chap 11, company owners take a substantial haircut, and often lose control of the company.

Van is loaning the company his own funds for DIP under very specific terms preserving his right to be paid back before other creditors. This is not being done out of charity, IMHO, it is being done to retain full or nearly full ownership of the company.

So the net result of the Chapter 11 filing is to cancel existing sales contracts, pile price increases onto existing customers, probably haircut suppliers by 10-20%, and avoid having Van take the losses himself. It was realistically the only legal way to quash those contracts.

Given that many suppliers in aviation are sole source, e.g. Lycoming, you can't haircut them 100% and expect them to keep doing business with you.

If the court is interested in a fair settlement, it will recognize that the owner and the DIP lender are the same, and will force a very substantial haircut on the owner prior to forcing haircuts on suppliers and customers.

You are right that Van is getting a benefit by being the DIP lender, including getting superpriority. However, as a counterpoint, he is also their only secured lender (just checked the UCC records) to the tune of $6-8M or so and as an insider, will likely be subordinated to all creditors in his recovery of that loan through equitable subordination/debt recharacterization. Also, Van is offering low rates and has an interest in seeing the company continue in existence (as opposed to some that use the DIP loan as a way to earn a bunch of fees and interest while being indifferent to tanking the company). So he will likely propose a plan that makes sure unsecured creditors (i.e., customers) are taken care of, and I'm sure the court will insist on that since he is an insider and equity would not allow an insider to use bankruptcy to their advantage over creditors.

Van could walk away from the business and his customers, but he is not, and that is admirable. He's providing DIP financing for well below market rates, and I am going to assume he's doing that to keep control, as you mentioned, for the benefit of his customers and his legacy.

 

[DanNiendorff]

Engine/Prop Deposits, LCP timeline

I believe that the pro forma is probably most informational about the concerns of current builders, in particular....

1) Laser Cut Parts - The pro forma shows the cost for "LCP remediation" ramping up and then down over the next 13 weeks.

2) Prop and Engine Deposits - The pro forma shows 200K of expenditure over the next 13 weeks to "honor deposits" for Lycoming and Hartzell.

I read this an intent to provide LCP parts (to what extent we don't know) fairly soon, as well as intent to honor the deposit that customers have placed for Hartzell props and Lycoming engines (likely offset by price adjustments).

No battle plan survives contact with the enemy, and things will change. But i am glad to see that this is part of the plan presented to the court for approval.

 

[Paragon]

How does the ESOP play in to your evaluation?

Not sure how this would be handled for a non-public company. Presumably, employees own minority shares of stock, but it is not publicly traded.

If it were publicly traded, the market would make sure it's value collapsed. But in a privately held company, one would imagine the value could be made lower by forcing the company to retain and pay off long-term debt, vs. extreme haircutting of suppliers and customers.

Perhaps our legal experts could weigh in...

 

[GrahamF]

A point of interest for all current and future RV Airplane Kit customers is our recent experience of tool kit orders for RV airplanes. Within the last three weeks we received calls from RV builders stating that Van’s had shipped their airplane kits and they needed a tool kit quickly. We shipped out two RV-14 tool kits, one RV-8 tool kit, and one RV-10 tool kit. It is apparent to us that Van’s is still shipping airplane kits! They realize protecting their existing and new customers is their number one priority to emerge from this Chapter 11 successfully.

It is quite logical that they should do. They have high levels of inventory and to turn that inventory into cash is to their advantage.

The real puzzle is why they allowed shipping rates to slow down so much and inventory to build up like this. The only explanation I can think of is that production of so many different parts in sufficient numbers was getting difficult to coordinate once the laser cutting went offline. If this is the case, one might find that all these kits flying out the door right now might have significant numbers of back ordered parts.

There is undoubtedly some quantitative management science to be done regarding how much of a kit needs to be available from inventory before it's financially worth shipping it out with the remainder on back order.

 

[Brantel]

Negative.

The forms filed with the court simply state that the following two entities own more than 10% of the company:

1. Richard & Diane Van Grunsven Trust (i.e. Van and his wife)
2. Van's Aircraft Inc employee stock ownership trust

I would be extremely surprised if Dick and his wife owned less than 50%.

As the previous poster pointed out, his loan is not an act of charity. It's not an investment and it's not a bailout. If you read the forms filed you will discover they come with strict conditions that he is paid before anyone else, and unless the company fails completely and is liquidated in the next few months his money is at no discernable risk. Even if that happened, he'd get much of it back as the number 1 creditor in line.

Like that poster I am surprised that the owner of the DIP should provide the financing. It's a pretty clear conflict of interest, and as that poster says the usual Ch11 arrangement is that the owners take a haircut and lose some of their stake to those providing the finance. It is quite usual to lose overall control of the company in the process.

The thing is, we are not privy to the ownership percentages. All we can do is speculate.

I imagine the court will want to know those details though.

 

[Fltonc]

Like many I have known for a long while that Vans would file bankruptcy, but it still stung when I heard the news. I’m a relatively new builder. I received my RV-14A tail kit early 2023 and my wing kit in May 2023. Both kits are predominately laser cut parts. Section 5 of the plans says “no deburring is necessary” for an RV-14. It further says

“These final sized holes are manufactured using specific tooling and tight tolerances to work with all commonly available dimple dies. By “work with” we mean that the holes may be dimpled without fear that the hole would crack prematurely before the expected fatigue life of a conventionally drilled, deburred and dimpled hole. The cost of tooling to produce these holes and quality checks to ensure that they are being produced correctly results in more expensive parts, that are quicker to assemble.”

When Vans made its laser cut parts announcement in July my vertical stabilizer and rudder were fully assembled. I had made significant progress on the horizontal stabilizer and elevator. All parts were primed with a 2-part epoxy primer. In my opinion, taking the vertical stabilizer and rudder apart would result in more effort and a lower quality product than starting from scratch. I feel the same for the portions of my horizontal stabilizer that were previously assembled.

As I became skilled at examining laser cut parts I discovered that most of my parts are laser cut, and most of my laser cut parts are horrible. A photo depicting a typical laser cut hole on my parts is attached. This part is not tooled to tight tolerances, and I doubt that any Van’s employee would want this part in his or her personal plane. Yet, Van’s list says this part is “acceptable for use.”

Vans has not said how they are charging for non “replacement recommended” parts. They initially said all laser cut parts would be replaced free of charge, but that statement was retracted. In addition to paying to replace my laser cut parts, I will need to repurchase parts used in the construction of my vertical stabilizer, rudder and horizontal stabilizer.

I have paid Vans nearly $22,000 for my two kits. I’m still owed nearly $5,000 worth of parts from Vans for items on backorder. I have spent about another $3,000 for freight shipping and about $10,000 for tools and materials to equip my shop. Altogether I’m into this project for $35,000 and nearly everything I have received from Vans is junk.

Charging me again at new pricing to replace the junk I have already paid for may be how the world works but it is not reflective of how the RV community previously viewed Vans Aircraft and its people.

 

[AeroEngineer]

Under the scenario you have posed, the increase in QB kit prices to account for unforeseen QB production cost increases would not be disproportionate (...) What would be disproportionate is if you raised SB kit prices (throwing out numbers here) 20% to cover increased costs of the QB kit business (...) This wouldn't be screwing the QB customer, this would be making sure that the QB customer is responsible for paying the actual value of their kit instead of pushing that burden off onto someone else. (...) That is a fairer approach and would go a long way to keep kit building accessible to middle class folks.

Those are good points. Thank you for taking the time to write them out. I agree that SB customers should not have to pay for the costs (or for unexpected changes in costs) of QB production. And I can see how it must require discipline (or, at least, unpleasant choices) for a single company to pass all QB-related costs/surprises only to QB customers, to keep SB customers insulated from those costs/surprises.

On the other hand: A single bigger company is more likely to survive a crisis that only impacts one of its product lines. If you had multiple small companies, such a crisis could knock one of the small companies out of existence. But yes, I see that it would be unfair for the customers of the successful products to have to pay extra to keep the crisis product line going. (But raising prices on the successful products might not be the only option. The company itself/shareholders could pay, or they could borrow money, who knows. Boeing recently had to go a long time without selling 737s, and they occasionally have to pause deliveries of 767s/777s/787s for months while certification is completed or while some problem is solved with the 787's structure or the 767's refueling camera or whatever. I don't know how they deal with those situations financially. I vaguely remember hearing that they borrowed a lot of money at one point - probably during 787 development - and I'm not sure they would be able to raise prices substantially on other products. But, again, I don't really know. I'm very glad I don't have to deal with things like this for a living).

 

[theduff]

Vans Share of Company

Methinks you might be mistaken here------as I recall, Vans Aircraft is an employee owned company.

Ive been told by an insider Van retains 60% of the company. In the court filings I see Vans Loans are secured by the Real Estate of the company.
I love Van and have known him since 1993 when he gave my then new wife a ride in his RV-4. The fact that Van has so much skin in the game is a good thing in my view. His word has always been sterling and I believe that's why he put the financing on his back to make sure there is a soft landing for both creditors and customers.
Sorry for those with so much of their personal funds at risk as I went through a similar bankruptcy that involved my retirement investments. I had an eye opening experience with dishonest people using the BK rules to screw the investors and lost half of my retirement money, 150 G's ! My only solace is that President of the company is now in jail along with his CFO and corporate attorney.
This feels completely different with well intentioned people all around.

 

[MarkW]

Cost increases in material and labor since 2020 have been incredible.
It surprised me when Van's was taking deposits on orders with a fixed price and then taking so long to ship. Most business's would not have survived that business model.
My industry is air conditioning and the manufacturers increased lead times on commercial equipment up to 24 weeks. On an order we placed in September 2022, we had three price increases before being delivered April 2023.

I think Van's was thinking he was doing the right thing by holding the price but that proved to be a bad business decision.

In the end those that have paid a deposit will end up with the price increase anyway.

 

[Jonnyb]

There’s one “easy” way to deal with a rise in costs while waiting for kits. Make the wait shorter.
Who remembers when you could buy an empennage off the shelf? Wings were 4 weeks?
Builders don’t want to be sat around for 2 years waiting for kits to be delivered. And certainly don’t want to be totally exposed during that time.
There has to be some give and take here. Previously Vans has been far too exposed, but that’s not an excuse to shift all the risk on to the builder.

 

[sahrens]

Support

I believe that those of us with flying RVs or completely delivered non-LCP kits need to step back and not use words like Patience or This happens. Right now 3,500 people are facing increased pricing, at least, and unknown delays. Going into Christmas they are having hard conversations with their families about what is the best path forward. Budget additional thousands of dollars or lose their money. One sub assembly might be easy to give up, but an entire aircraft?

"Customers will have through January 15, 2024, to choose to modify their order(s). Should a customer choose to modify its order, the total deposits and payments previously remitted by the customer for the original order will be applied to the customer’s renewed order. In these cases, no additional deposit will be required. If a customer does not choose to modify its order, and that order has not been acted upon by January 15 2024, the contract will be rejected resulting in permanent cancellation of the order. A claim for the amount of the deposit may then be made in the bankruptcy case provided it is filed by the later of any applicable claims bar date established by the Court or 30 days after the Kit and Aircraft Contract is rejected."

Lets give them the same space and respect given to Vans

 

[gap]

Ive been told by an insider Van retains 60% of the company. In the court filings I see Vans Loans are secured by the Real Estate of the company.

Equity is the first thing to be impaired in a bankruptcy. Owners / stockholders are often wiped out. After owners are wiped out, then unsecured creditors take a hit. Then secured creditors.

So Van will almost certainly lose his current stake. But the filing indicates his financing will likely be converted into equity down the road, so he'll probably have a stake in the reorganized company.

Sadly, any employee with a stake will likely see their holdings become worthless.

 

[ian greenland]

Chapter 11

As an RV 9 flying and an RV8 all most completed. I,d be happy to donate $ 100 for each RV to assist Vans recovery, if someone in the US wants to set this up?
Dues paid except Doug spelt my name wrong
Ian Greenland
RV9 0 320 Fixed
RV8 0 360 Angle Valve Hartzell CS

 

[GrahamF]

Equity is the first thing to be impaired in a bankruptcy. Owners / stockholders are often wiped out. After owners are wiped out, then unsecured creditors take a hit. Then secured creditors.

So Van will almost certainly lose his current stake. But the filing indicates his financing will likely be converted into equity down the road, so he'll probably have a stake in the reorganized company.

Sadly, any employee with a stake will likely see their holdings become worthless.

I don't see how Van loses any of his stake with the proposed arrangements.

I agree that usually in Ch11 the owner loses a lot of their stake, but that's because the lender providing the DIP funding takes the stake in exchange for providing the funding, i.e. it's not really a loan it's an investment - they are buying part of the company.

In this case Van is providing the DIP funding as a loan but is also the (presumably controlling) owner. There seems to be no mention of any change to ownership.

Hopefully the specifics of ownership (and any changes) will come out as the court processes the case. But I don't know enough about the process to know if that'll happen.

 

[gap]

Van is loaning the company his own funds for DIP under very specific terms preserving his right to be paid back before other creditors. This is not being done out of charity, IMHO, it is being done to retain full or nearly full ownership of the company.

Post-petition debt always has priority over all pre-petition debt. Geez, who would loan a BK company new money if they knew they'd be standing in line with existing debtors?

And yes, he'll likely end up with a big stake in the reorganized company. So what? Would it be better if e.g. JP Morgan provided the financing and ended up owning most of the company?

 

[upperdeck]

What does a customer’s age have to do with Van’s bankruptcy? Or the cherished friends they’ve made in the aviation community? Sounds like sour grapes and doesn’t contribute much of anything to the discussion.

 

[gap]

I don't see how Van loses any of his stake with the proposed arrangements.

Equity is subordinated to debt in bankruptcy. Keeping his existing stake would require making every creditor whole, which is unlikely.

 

[Jonnyb]

We don’t know how much of the Company he owns.
But he has secured loans over all the property, machinery, and intellectual property rights anyway.
So does it matter? If the court don’t approve the filing then Vans gets everything out of the bankruptcy as a secured creditor (the only one). If they stay afloat, he will take the company back in his Trust.

 

[GrahamF]

Equity is subordinated to debt in bankruptcy. Keeping his existing stake would require making every creditor whole, which is unlikely.

But the only secured debt is to him!

 

[gap]

But the question is, if he's taking more of a stake then who's he taking it from? Who's taking the haircut?

The company existing bankruptcy will be a different legal entity owned by the creditors (not the owners) of the old company. The old stock will be canceled and new issued.

Van will own a chunk because he's a big creditor. And his post-petition loan(s) will suffer no impairment when converted to equity.