The Pierer Mobility Group has announced voluntary KTM restructuring to avert bankruptcy, a decision driven by significant financial challenges that have escalated over the past few months.
The restructuring process is set to commence on November 29, 2024, and aims to stabilize the Austrian manufacturer while navigating through its current fiscal crisis.
The decision behind KTM restructuring comes after the company’s mounting financial troubles with share prices plummeting approximately 90% since their peak in February 2022. The company has reported severe liquidity issues, necessitating additional funding in the high three-digit million euro range.
As part of its restructuring efforts, KTM will apply for judicial restructuring proceedings with self-administration, allowing it to manage its assets under supervision while formulating a reorganization plan in collaboration with creditors.
The company’s board of directors has undergone drastic changes, shrinking from six members to just two as part of an effort to streamline operations amidst ongoing losses.
Furthermore, the KTM restructuring has initiated multiple rounds of layoffs with reports indicating that up to 300 employees may lose their jobs as production is halted during January and February 2025.
This decision reflects the urgent need for cost-cutting measures as KTM grapples with excess inventory and declining sales. However, the company has underlined its commitment to maintaining its core operations while addressing financial challenges.
According to a report published by CRASH, a statement regarding the KTM restructuring process has been released : “KTM AG, a wholly owned subsidiary of Pierer Mobility AG, will apply for the initiation of judicial restructuring proceedings with self-administration (Sanierungsverfahren unter Eigenverwaltung) on November 29, 2024.
“The financing requirements of KTM AG currently amount to a high three-digit million figure. The management now does not expect to be able to secure the necessary interim financing in time.
“The Executive Board of KTM AG therefore decided today to file the application for the initiation of judicial restructuring proceedings with self-administration over the assets of KTM AG and its subsidiaries KTM Components GmbH and KTM F&E GmbH.
“The proceedings give the opportunity to continue to manage the assets under supervision and to reorganize the KTM Group independently. All other subsidiaries of KTM AG, in particular all sales companies, are not affected.
“The aim of the proceedings is to agree a reorganisation plan with the creditors within 90 days. Redimensioning the group should not only secure the continued existence of the KTM Group in the long term, but also create the basis for emerging stronger from the proceeding.
“A redimensioning of production should lead to a gradual adjustment in excess stock at KTM and its dealers over the next two years. This will result in a reduction in operating performance at the Austrian sites totalling over €1 billion in the years 2025 and 2026.
“The KTM restructuring process will result in additional potential losses, for example due to one-off expenses such as necessary write-downs and costs for staff reductions as well as the shortfall in fixed costs due to the reduced operating performance and other costs arising from the restructuring process.
“Consequently, for the current 2024 financial year, the company expects a negative annual net result in the very high three-digit million range due to the aforementioned reasons.”
KTM’s CEO, Stefan Pierer, has expressed his dedication to preserving the brand he has built over three decades and described the restructuring phase as a “pit stop for the future.”
“Over the past three decades, we have grown to become Europe’s largest motorcycle manufacturer,“ Pierer said. “We inspire millions of motorcycle riders around the world with our products.
“Now we are taking a pit stop for the future. The KTM brand is my life’s work, and I will fight for it.”
READ ALSO: Dani Pedrosa to continue serving as KTM test rider for 2025 MotoGP
Despite the financial difficulties, Pierer reassured stakeholders that KTM’s MotoGP project would continue as planned through 2025, reflecting a commitment to innovation and competitive performance in motorsport.
The current crisis has drawn parallels to past struggles faced by KTM, particularly during the early 1990s when the company underwent significant restructuring following financial difficulties.
This historical context adds weight to the gravity of the current situation and highlights the resilience required for recovery. Many industry observers are cautiously optimistic about KTM’s ability to emerge from this crisis stronger than before, given Pierer’s experience as a restructuring expert.
The implications of KTM restructuring extend beyond financial metrics; they resonate deeply within the motorsport community and among fans who have passionately supported the brand over the years.
As one of the leading manufacturers in MotoGP, KTM has contributed significantly to the sport’s evolution through technological advancements and competitive racing strategies. The company’s commitment to continuing its MotoGP efforts signals confidence in its ability to rebound from current challenges.
The company is actively seeking bridge financing from core shareholders and existing creditors while working towards establishing a sustainable operational framework moving forward.
Negotiations are ongoing, but no definitive agreements have been reached yet regarding the scale or conditions of additional financing.
