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Van's Air Force
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Van’s Bankruptcy Update, Next Steps
- Thread starter DeltaRomeo
- Start date
Very illuminating and quite positive - both for those who agree to the new contracts and even for those who don't.
JonJay
Well Known Member
These folks are being paid to say “illuminating and positive things”. They have a stake in the company and need to keep consumer confidence.
I would hope that folks take from the read that there is a process that is going on now, and continually. Things will change, ebb, and flow. However, it will be what it is, and it may not be anything known at this time, by them or anybody else.
The most unusual thing I took away is the approval of the loan from Van’ family trust. Most chapter 11 companies don’t have such a benefactor. That is a very positive thing. Cash can be hard to come by in a reorganization.
Earning 10% interest on $6 million in addition to shareholder distributions on profits after payment of all the Chapter 11 plan payments sounds like a pretty sweet deal. I'm not complaining, and everyone is entitled to their perspective, but some may view this process with rose colored glasses. Without pointing fingers at the causes, the reality is that Chapter 11 is a tool to limit liabilities (from potential LCP claims and otherwise) and make money going forward for the company and its existing shareholders. There were likely other alternatives to bankruptcy, but those would not have provided the same financial benefits to the owners. There will be winners and losers. There will be some disappointed people who might have to wait years to receive back their full deposits, and those 10% interest payments will be made while those customers wait to be made whole.
PaulvS
Well Known Member
Apparently they ran a lot with Excel. It definitely won't give the integration and control of an ERP. But ERPs are expensive; we had a whole team dedicated to looking after our company SAP system. Hopefully there is a good system that is suitable for a company the size of Van's.
Kyle Boatright
Well Known Member
An ERP system, or at least the ones I'm familiar with, would be a huge overhead burden for a $50M company to take on.
It may be that Van's hit the awkward phase where running things by spreadsheet is no longer easy to manage, but moving to a big-boy ERP system is a lot to bite off, both from a setup and an overhead cost perspective. There are intermediate steps that can bridge the gap.
Vans Recovery
Kit and component deposit holders are the largest creditors impacted by Vans Aircraft Chapter 11 filing. As the largest creditor, I believe deposit holders should be granted an equity position in Vans Aircraft pro-rata with their financial impact from the price increases and loss of deposits on third party components. Most of these impacts are far in excess of the 32% price increase from the last published price, as contracted prices were entered at the time of order. Equity in exchange for financial impact will not impact the cash flow of the business, and could be structured with a future buy back option. This would also restore significant goodwill and trust in the company.
Kit and component deposit holders are the largest creditors impacted by Vans Aircraft Chapter 11 filing. As the largest creditor, I believe deposit holders should be granted an equity position in Vans Aircraft pro-rata with their financial impact from the price increases and loss of deposits on third party components. Most of these impacts are far in excess of the 32% price increase from the last published price, as contracted prices were entered at the time of order. Equity in exchange for financial impact will not impact the cash flow of the business, and could be structured with a future buy back option. This would also restore significant goodwill and trust in the company.
ArlingtonRV
Well Known Member
There are smaller ERP solutions out there. SAP and Oracle may not be the best choice for a business that size, but there are other options. From what I have heard of big businesses that have incorporated SAP, including a large commercial plane maker just down the street from me, SAP does not provide the kind of flexibility that a smaller company needs.
Jonnyb
Well Known Member
I would order an RV-8 finish kit if:
a) I had a any idea as to when it would be delivered
b) I had any certainty over how much it would cost
Really the two are related, if delivery times are 6 months then I’m fairly certain of the cost. If they are 2 years, then I’m not. However, If Vans want new orders then answers to the above would be nice.
steve murray
Well Known Member
Yes you need an ERP system....
I spent 20 years in large medical device manufacturing. We use to have an ERP joke, "Some companies "run SAP" and many companies are "run by SAP".
ERP systems are great, but it is like owning a dragon, very expensive to buy, very difficult to train and manage, you need to feed them tremendous amounts of data and they can cause nasty bites and burns.... if you are not careful.
I spent 20 years in large medical device manufacturing. We use to have an ERP joke, "Some companies "run SAP" and many companies are "run by SAP".
ERP systems are great, but it is like owning a dragon, very expensive to buy, very difficult to train and manage, you need to feed them tremendous amounts of data and they can cause nasty bites and burns.... if you are not careful.
Years ago a company I work for did a big SAP implementation. The consultants that came said that there are generally 3 divorces caused per customer over the course of a 12 month implementation...... My company beat that by a lot after 18 months.
2theskyy
Well Known Member
Unless you plan to use everything in the finish kit(no more deletions), I cannot think of why you wouldn’t piece meal everything you want. The prices are insane for items you can get elsewhere. Canopy @ $2800, I paid under $1k for low UV from lp aero the end of summer. Plenty of cowls to choose from for half of the new store price. I want to support them but I am not going to be stupid about it.
The engine mount seems to be the big B/O item. I have an order in for awhile and waiting on canopy frame(in stock) & skirts(in stock)to ship when they get to shipping larger items.
I suppose the lcp issue burnt me enough not to put any finish kit deposit down. Burn me once, Shame on them; burn me twice, shame on me.
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Jonnyb
Well Known Member
You make a very valid point. I really like the Sam James engine cowl, and the brakes, wheels ect I can get off the shelf. My big problem is the canopy. Like you say you can buy the frame and skirts from vans, and the actual canopy from elsewhere. While in the U.K. it may not be that easy, I’m definitely going to do some digging and see what I can come up with.
Good idea though!
BigBadBob
Member
YMMV, but I'd rather spend my time building than sourcing materials. I'm paying Van's (dearly, I agree) to do all the thinking/arguing/negotiating for me.
Jonnyb
Well Known Member
So would I, but if Vans can't deliver a finish kit what are the options?
chrispratt
Well Known Member
Excellent interview in my opinion. Mr. Hamstreet gives me confidence that he understands how to navigate this process and be realistic about what is needed, and how long it will take to implement. I've worked for several aircraft OEMs and major aviation service companies in good times and bad and what he is saying rings true.
Chris
Chris
2theskyy
Well Known Member
Not to difficult to look up lp aero; hello ma’am, I’d like an RV8 canopy; yes ma’am, low UV. Ok, in 4 weeks $1k plus shipping. Talk to you when it’s ready to setup shipping.
But to each their own. I’m just offering thoughts on how building an RV used to happen. Vans provided great designs and you filled in how you wanted your plane. I can call the exhaust guy and pay him myself. I don’t need a middleman mark up. But that’s just me. Plus you get to speak to the greats of the experimental world. Guys and gals that built super 6’s and rockets, etc.
JonJay
Well Known Member
Ya, smart guy. That’s what he is paid to say. Could have shared all of this sooner on the web site, but an “independent”‘interview from a reputable magazine plays better. It’s all about maintaining consumer confidence while your finger is plugging the hole in the dam.
apicreator
Member
next steps for whom?
It is not clear if the new proposed price is fixed?
I am not sure if before crating/shipping, they are not entitled to ask for additional money. Can anyone share some information from the new agreement regarding the new price?
My main concern is that we all pay the higher prices, due their faults not ours, and currently there is no timeline anymore on delivery, just a mention on inventory and first come first serve. So, it will be us, the current customers, paying the most while Van and the creditors get a 10% profit on the loans made to the company.
It is not clear if the new proposed price is fixed?
I am not sure if before crating/shipping, they are not entitled to ask for additional money. Can anyone share some information from the new agreement regarding the new price?
My main concern is that we all pay the higher prices, due their faults not ours, and currently there is no timeline anymore on delivery, just a mention on inventory and first come first serve. So, it will be us, the current customers, paying the most while Van and the creditors get a 10% profit on the loans made to the company.
Brantel
Well Known Member
This is on the first page of the new agreements:
"PRICE. The estimated price of the Kit(s) as of the Order Date is $##,### (the “Estimated Price”);
however, due to potential increases in key components, the Estimated Price is subject to change
until commencement of Kit crating and packaging for shipment (the “Crating Date”). All deposits
and payments are to be in US dollars and paid in accordance with this Agreement."
The short story is YES, they can raise the price before the crating starts!
apicreator
Member
That's completely un-reasonable. We pay more now with the possibility to be asked more money again before crating. We will be hostage to price variation. My frustration is maximum as my order is fully paid since it was supposed to be shipped in August. I am asked 35% more now, without a timeline and no parts in stock.
1001001
Well Known Member
IMO, Van's should consider an open-air policy stating how much of each customer's kit is available right now, how much is pending manufacture/delivery from a 3rd party, and offer the customer an option to "ship now" at a price adjusted based on what's in stock.
Maybe make that information subject to an NDA, but allow the customer to decide whether to wait or not. If Van's could discharge sales contracts for kits in this way, giving the customers the option to purchase parts individually from the store later on (at Van's new pricing), wouldn't that result in a higher conversion rate for Van's?
In other words, allowing some customers to receive what parts are already in stock for kits that may not be ready to ship complete for months might decrease the rate of customers giving up and filing claims.
Maybe my thinking on this is flawed.
It's interesting to me some of the expectations people have of Vans right now. Vans is going through bankruptcy. They are working on the very highest priority items in order to successfully emerge from bankruptcy.
Nothing will be "fair" to all parties. Communication will be very infrequent. Emails and phone calls may not be returned timely. Orders will be delayed. Lead times and current inventory levels will not be published frequently. Replacements for LCP's won't be available for weeks or months. Their staff don't have answers to 90% of the questions being asked of them and won't for weeks/months. I think people need to reset their expectations.
And yes, I have skin in the game. I fully paid for my undelivered fuselage kit in August, have deposits on the finishing kit and a Thunderbolt engine. I've also agreed to the new pricing for my two kits and will likely have to cough up thousands more for my engine. I also have laser cut parts. I have a lot of $$$ at risk but I have faith that things will work out just fine - in time.
I'm very impressed with Mr and Mrs VanGrundsven's financial commitment to make sure Vans survives and thrives in the future. I'm impressed with the new portal. I'm impressed with the difficult changes Vans is making to the ordering process and pricing to simplify inventory and make themselves more efficient and profitable. Vans is doing the right things (now) but it won't be business as usual until well into next year at a minimum.
For those who are really, really upset with Vans and keep making posts about wanting to sell and start building another airplane - please sell your kits and move on. You'll be much happier!
Nothing will be "fair" to all parties. Communication will be very infrequent. Emails and phone calls may not be returned timely. Orders will be delayed. Lead times and current inventory levels will not be published frequently. Replacements for LCP's won't be available for weeks or months. Their staff don't have answers to 90% of the questions being asked of them and won't for weeks/months. I think people need to reset their expectations.
And yes, I have skin in the game. I fully paid for my undelivered fuselage kit in August, have deposits on the finishing kit and a Thunderbolt engine. I've also agreed to the new pricing for my two kits and will likely have to cough up thousands more for my engine. I also have laser cut parts. I have a lot of $$$ at risk but I have faith that things will work out just fine - in time.
I'm very impressed with Mr and Mrs VanGrundsven's financial commitment to make sure Vans survives and thrives in the future. I'm impressed with the new portal. I'm impressed with the difficult changes Vans is making to the ordering process and pricing to simplify inventory and make themselves more efficient and profitable. Vans is doing the right things (now) but it won't be business as usual until well into next year at a minimum.
For those who are really, really upset with Vans and keep making posts about wanting to sell and start building another airplane - please sell your kits and move on. You'll be much happier!
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I’m impressed by the loan arrangement too. If the numbers that have been posted here are accurate, Van will be pulling in ~1.5 million per year from his secured loans, while regaining 100% of the old company.
It’s a win-win deal. Van gets well compensated for his investment, and flyers get the benefit from the potential of stabilizing and restructuring for long term survival and assurance of parts availability.
What would put the icing on the cake is a go-fund-me for current builders. The cash would flow through them back to Van’s, helping them to bear the brunt of the cost of recovery, while funding Van’s needs as well.
It’s a win-win deal. Van gets well compensated for his investment, and flyers get the benefit from the potential of stabilizing and restructuring for long term survival and assurance of parts availability.
What would put the icing on the cake is a go-fund-me for current builders. The cash would flow through them back to Van’s, helping them to bear the brunt of the cost of recovery, while funding Van’s needs as well.
Very understandable that they don't have answers to a lot of questions. I have some questions that would be nice to have answered but they won't impact my decision to agree to the new contract. With two QB kits on order the only question I really care about is whether the QBs that will be shipped are free of laser cut parts. I would think anything that hasn't been shipped yet would be LCP free but would be nice to have an answer on that. I might of missed it somewhere - too many threads to keep up with. Overall, I think this is moving in the right direction and Vans has built up a lot of good will over the years.
Seriously? If you need handouts to build your plane, you're probably not going to be able to afford the gas to *fly* it.
Enough with the "let's start a gofundme campaign to save a for-profit company".
NavyS3BNFO
Well Known Member
I think someone else mentioned this but I think existing customers with deposits should get equity in the new company equal to the increase in cost they will have to endure. Only seems fair if they have some upside later on. The article mentions those with claims possibly getting equity vice cash compensation in previous workouts. While I'm thankful Van is willing to put money back in the business, it does seem like he's the main benefactor from this deal should the company survive and thrive. Not to mention the attorneys and workout team. I assume employees who had equity in the company have also been wiped out.
As Van's are putting the deposits in something similar to escrow then the deposit amount could be small (say 5%, non-refundable) with 40% due at 2 months to go and the remainder just before delivery. As long as they trust people with actually go ahead with the order. But if a few people don't then it just shortens delivery times which cannot be bad...
That’s one way to put it but how about “I need a finish kit to… finish. My all in cost on kits will 65k rather than 85k as a new builder faces today.”
Vans can’t act this way forever, but they’re in bankruptcy reorganization and the alternative is liquidation. Both sides are somewhat desperate, perhaps. Hence buyers accepting otherwise onerous terms. I wouldn’t buy a new kit under these terms with long lead times. But this is only a temporary new norm. Things wills stabilize, if we’re all lucky.
By the way, maybe it feels like theft, morally. But if you’ve ever had anything stolen from you maliciously, you’ll know it feels different than what this is.
Vans can’t act this way forever, but they’re in bankruptcy reorganization and the alternative is liquidation. Both sides are somewhat desperate, perhaps. Hence buyers accepting otherwise onerous terms. I wouldn’t buy a new kit under these terms with long lead times. But this is only a temporary new norm. Things wills stabilize, if we’re all lucky.
By the way, maybe it feels like theft, morally. But if you’ve ever had anything stolen from you maliciously, you’ll know it feels different than what this is.
Vans does not have any QB kits that are LCP-free in stock. The earliest some will reach Vans is middle of next year.
I think you misunderstood the comment. Creditors might get equity when this is all done. (I doubt even that as Van's clearly wants to maintain equity control and is willing to risk $$ to maintain that.)
If you agree to the new contract terms you are NOT a creditor. You voluntarily agreed to the new terms and higher price so legally Van's owes you nothing beyond what's in the new contract.
Alternatively you could not sign the contract become a creditor and if Hamstreet's comment that in many cases creditors get 100% is true you will eventually get your money back or equity (he said in most cases within 5 years).
Oliver
roadrunner20
Well Known Member
I was shocked to hear they were managing their operation via spreadsheets.
There are several levels of integrated inventory control management systems & very affordable for a company that size. I've been involved in many over the years as a software engineer.
N804RV
Well Known Member
To fulfill my "life-long learner" goal as a recent retiree, I have enrolled in a financial analysis certification program. This is way over and above the 2 semesters of accounting I took as an undergrad.
One of the early lessons they hammered in was that poorly managed capital structure and an inadequate level of FP&A staffing is a very common problem in private companies experiencing rapid growth.
Just for a point of comparison, I put a $5,000 deposit on a Sling high wing and all it got me was a place in line (about #180 and a minimum 3 year wait). Actual prices will be communicated when the kit is ready to ship. If I decline, they will fully refund my deposit - assuming they can afford it. I'm sure they are looking at Vans and trying to make sure the same thing doesn't happen to them.
Where is this stated?
Thank you for this. 100% agree. The reason Van's got into this mess was trying to accommodate the complainers who didn't want to wait 18-24 months for their kit deliveries. So they tried a new manufacturing process to appease these people and made mistakes in the process. Now the same people are complaining about having to pay more for their kits and that they aren't getting responses from Van's.
While nobody wants to pay more for parts, nobody has more to lose here than the VanGrundsven family. They have contributed substantially to ensure Van's Aircraft stays solvent and viable. While I'm not happy about potentially losing my engine deposit, I'd be a whole lot less happy if Van's Aircraft disappears.
I posted earlier disagreeing with the original poster and urging Vans to use this period to step up and rebuild its tarnished reputation. I really believe Vans is at a critical juncture and wish them to succeed, Very confusing.
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dmattmul
Well Known Member
Incorrect
There were very few customers complaining of long lead times. Even now other kit manufactures are stating 3 years, Lycoming is forecasting 3+ years for certain engines and as builders if we are given a date, we can PLAN around this, even if years out. Nobody is complaining when we are told lengthy lead times up front! The issue is when we are told a date, and it takes twice as long to deliver and even then, arrives with many back-ordered parts. Besides if one is in a big hurry there was always kits to purchase that a decent % had not even been started or the builder was taking longer to complete, happens all the time. My RV-10 wing arrived over twice as long what was told to me (And that was before the LCP fiasco) and even then, like most of us I did not complain as I had other projects to work on. (Plus, I had come to expect this) Say what you can do and do what you say, not difficult.
The spike in the heart came when kits (and later QB’s) were delivered with LCP’s and builders were told to build on. Now you have builds that all of a sudden can’t be worked on any longer.
Vans Aircraft will survive as its airframes plans, and design has value along with needed parts for generations to come. The VanGrundsven investment will do just fine. (By design, great interest rate and they have priority now vs leaving needed cash in the company as retained earnings which has much lower priority)
There were very few customers complaining of long lead times. Even now other kit manufactures are stating 3 years, Lycoming is forecasting 3+ years for certain engines and as builders if we are given a date, we can PLAN around this, even if years out. Nobody is complaining when we are told lengthy lead times up front! The issue is when we are told a date, and it takes twice as long to deliver and even then, arrives with many back-ordered parts. Besides if one is in a big hurry there was always kits to purchase that a decent % had not even been started or the builder was taking longer to complete, happens all the time. My RV-10 wing arrived over twice as long what was told to me (And that was before the LCP fiasco) and even then, like most of us I did not complain as I had other projects to work on. (Plus, I had come to expect this) Say what you can do and do what you say, not difficult.
The spike in the heart came when kits (and later QB’s) were delivered with LCP’s and builders were told to build on. Now you have builds that all of a sudden can’t be worked on any longer.
Vans Aircraft will survive as its airframes plans, and design has value along with needed parts for generations to come. The VanGrundsven investment will do just fine. (By design, great interest rate and they have priority now vs leaving needed cash in the company as retained earnings which has much lower priority)
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skylor
Well Known Member
Lead Time
I would argue that allowing their lead times to get to 18-24 months for kits is part of the reason they got into this mess! It's much harder for a company to plan 18-24 months ahead than it is to plan 6-12 months ahead. These lead times (and Lycoming's too) are getting ridiculous.
Skylor
I would argue that allowing their lead times to get to 18-24 months for kits is part of the reason they got into this mess! It's much harder for a company to plan 18-24 months ahead than it is to plan 6-12 months ahead. These lead times (and Lycoming's too) are getting ridiculous.
Skylor
rocketman1988
Well Known Member
True…but
I agree with you…but…I think they said there was an increase in orders, during Covid, of over 200% above normal. With such an increase in volume, longer lead times were not avoidable unless they either stopped taking new orders or tried to increase the throughput, ie a new vendor to make more parts. We all know how that turned out…
What would have been the sentiment if they had just stopped taking orders or only took a limited amount?
It is all hindsight now, and all we can do is move forward.
I agree with you…but…I think they said there was an increase in orders, during Covid, of over 200% above normal. With such an increase in volume, longer lead times were not avoidable unless they either stopped taking new orders or tried to increase the throughput, ie a new vendor to make more parts. We all know how that turned out…
What would have been the sentiment if they had just stopped taking orders or only took a limited amount?
It is all hindsight now, and all we can do is move forward.
rmarshall234
Well Known Member
Lead times
This is not specific to Vans but to the comment that these lead times are getting ridiculous. I agree, ridiculous and problematic. In this era of constant change it’s not reasonable or realistic to commit to something that far out. The easy thing to do is say “ok” and take the money. Doing the easy thing in business usually ends up being the wrong thing in the end. Just say “no”, it’s not that hard.
This is not specific to Vans but to the comment that these lead times are getting ridiculous. I agree, ridiculous and problematic. In this era of constant change it’s not reasonable or realistic to commit to something that far out. The easy thing to do is say “ok” and take the money. Doing the easy thing in business usually ends up being the wrong thing in the end. Just say “no”, it’s not that hard.
