KTM Is Nearly Bankrupt, Files to Save the Company From Insolvency

Times are tough for KTM's parent company Pierer Mobility AG. 

Though it has some of the best motorcycles around, one of which I still dream about and peruse the classifieds for on a weekly basis, the brand's market share has essentially dropped off a cliff in recent years. There are obvious reasons for this fall, such as interest rates being what they are, wages being what they aren't, a chaotic world, and consumer spending falling like a stone, among other macroeconomic factors such as parts shortages, longer lead times, manufacturing issues, and more. 

KTM has also made some unforced errors that haven't been kind to it either. 

And after reporting on the brand seeking a pretty substantial cash influx on the order of a couple hundred million dollars, KTM AG, which houses the group's motorcycle brands (Husqvarna, KTM, GasGas, and newly acquired MV Agusta) has now filed to restructure its business in a bid to stave off its looming insolvency.

Yeah, that's not great for the Ready to Race brand. 

ccording to KTM, it's entered 2 in the hopes of restructuring the business in the coming months. KTM's press release states, "KTM, which has grown from 160 employees and a production volume of 6,000 units in 1992 to a capacity of up to 1,000 motorcycles per day, is now facing significant hurdles. To address these, KTM will initiate a legal restructuring proceeding with self-administration. The application will be submitted on Friday, 29 November, with the goal of concluding the process within 90 days."

Yet, that makes it sound all sunshine and roses, something it most definitely isn't, as further reporting by the German outlet Speedweek states that KTM's restructuring hopes to reduce the risk of insolvency.

"The point is that companies that are at risk of insolvency but are not yet insolvent have the opportunity to recover economically in judicial restructuring proceedings before they have to file for insolvency," states the media outlet, adding, "The procedure can only be used if the insolvency threatens or is soon likely. In preparation for the procedure, the entrepreneur must develop a restructuring concept. In it, he must credibly describe how he wants to secure the future continuation of the company and what measures he plans for this. The plan requires the approval of the creditors included by the debtor."

That's all to say that this "restructuring hopes to reduce the amount of debt the company carries. But that won't be easy, as what was once a net debt of around 300 million euros two years ago has ballooned to a whopping 1.5 billion euros in the last two years. That's partially thanks to Pierer's acquisition of MV Agusta, which it brought into the KTM family earlier this year. There are other factors, too.

On the news of all this restructuring, as well as massive debt, Pierer's stock price has taken a massive tumble, which only hurts the company and its outlook more. According to Bloomberg, "Shares slumped 45% to 6.9 Swiss francs ($7.8), heading for their biggest daily decline on record and extending a loss this year to 84%." That's not including the massive decline in sales its seen, nor the inventory that's stacking up in dealerships around the world. 

For their part, however, co-CEOs Stefan Pierer and Gottfried Neumeister, attempted to paint the news far rosier than I would've. "Over the past three decades, we have grown to become Europe's largest motorcycle manufacturer. We inspire millions of motorcycle riders around the world with our products," said Pierer, adding, "Now we are taking a pit stop for the future. The KTM brand is my life's work, and I will fight for it.” And that's good to hear he'll fight for the company, the brands it controls, and its workforce.

However, his final words edge on gaslighting, stating, "Together, we have made KTM a success story, and together, we will carry KTM into the future." I'm sorry, but as much as I love the motorcycles KTM and its siblings make, if the company was a success story, I doubt it'd be going through insolvency proceedings and need a multi-hundred-million-dollar lifeline to ensure its continued existence. 

There's a further oddity to this whole situation, though.

When I reached out to KTM for further comment on this restructuring and insolvency plan, a company representative stated that while it won't be offering further comment on the plan, KTM North America and KTM's other subsidiaries aren't affected by it. "North America and all other KTM subsidiaries are not included," they stated. But from my understanding of Pierer Mobility AG's structure, within that hierarchy, KTM AG holds all of the motorcycle brands, i.e. GasGas, KTM, Husqvarna, and MV Agusta. How this restructuring plan wouldn't affect KTM in North America or any other KTM subsidiaries is beyond me. I reached out for clarification.

How this all plays out is anyone's guess, but I'd wager that my earlier prediction of KTM being purchased from Pierer is a likely scenario. Even more so than a week or so ago. But only time will tell. The one thing I hope won't come to pass, and can't really see happening truthfully, is KTM disappearing. Someone will buy it, whether that's Bajaj or someone else with deep coffers.