Stated simply: without realizing it, we were selling kits below our cost.
I know absolutely nothing about Vans finances, but that doesn’t reasonable to me. Nor does the corrosion story nor orders drying up. What it sounds like to me is closing down the business to avoid lawsuits, and Van himself checking out into 100% retirement. Some other entity then takes over.
Maule did something similar IIRC.
Now would be the time to buy anything Vans at a good price (used) while the future of the company is unclear.
People are saying that – ‘below cost’ – all over VAF and they couldn’t be more wrong. I think orders absolutely HAVE dried up, or perhaps more accurately payments related to orders have dried up. Over the last couple of months, Van’s has been asking people to make their final kit payments earlier and earlier. Typically the final payment (80%) was requested pretty much as they went to crating. They weren’t that fussy about your place in the queue and would proceed to crate anyway, only holding back from it actually leaving the building if you’d not paid. Recently customers have reported firm demands for final payment with 2-3 months still to run to their published crating date. Van’s have been attempting to claw revenue forward to stay in the black.
I will paste below what I’ve just posted on VAF, because it may well be deleted. On Monday I will file a Section 75 claim with my credit card company, since neither of my kits was as advertised / described. Van’s can argue with them.
It’s not a cost / revenue problem. Anyone can calculate margins and set a price. It’s very simple math: work out what it costs to build, add your overheards and add your margin to reach a selling price.
It’s a cash flow problem. Van’s is a fundamentally profitable business that ran out of cash and became unable to pay its staff (the meeting was to furlough many of them) or its suppliers.
It ran out of cash because orders (deposits) and final kit payments dried up. When the LCP issue broke, and when it became clear it was being handled poorly, customers became cautious. They stopped placing new empennage orders, because who would be crazy enough to insert themselves into this situation? Those who were part-built held off ordering their next kit, firstly because they were waiting for the kit they had in hand to be sorted out, secondly because why would they increase their exposure while the future was uncertain? Those with orders on deposit declined Van’s request to make the final payment months in advance of an uncertain shipping date because it sounded shaky.
So Van’s was left paying all its usual costs, suppliers, utilities, staff working 24/7 in production – and almost no cash was coming in. No business can sustain that for anything more than a very short space of time.
That’s how we’ve arrived at where we are today. It’s not a pricing issue, it’s a cash flow issue caused by the decisions they made (LCP) in order to try and reduce the lead times
This is definitely not unexpected. I thought this was one big time buying tactic from the beginning. I also suspect they will declare bankruptcy next month. How could they not after all the lawsuits that will roll in from not even allowing refunds. What that means to Van’s long term survivability, I have no clue. But it will definitely negatively affect people with LCPs even further.
So many lessons to learn from this situation. I hope they find a decent solution. There is plenty of cash out there, but at what cost? I’ve read that the company is “employee owned” – it would be interesting to understand the actual structure.
I am told the parts were made in the Philippines – a legacy of the US having set up airframe repair workshops there during Vietnam (which the US withdrew from ~ 50 years ago).
In these places you can get good stuff, you can get crap, or anything in between, according to who does it and how much you pay. But a perpetual problem is – in fashionable corporate BS speak – vendor auditing. Often the company which makes it just buys it from elsewhere and unless you go there or have permanent staff there (Apple-style) you will never know this. And we now know Vans had no batch traceability so prob99 they had not much in the way of incoming goods inspection.
I would be totally amazed if the margins were less than very generous. I have been buying from China for ~30 years and while they have increased prices several times over that time, they are still cheap. Not as cheap as they think, but that’s another story.
Now we are seeing a stampede – this is normal, unfortunately.
The Man himself (Dick VanGrunsven) just released this video:
In essence, they are out of cash. Van himself has been funding the company for the last couple of months. Well, at least all you “poor victims” of LCP should be happy now – Revenge for having to replace a couple of parts 
IMO, anything can happen now. Perhaps someone will go in with capital and eventually take over. Kit prices will double, they will only produce a couple of kits (perhaps the -7 and the -12), and it’s the end of things as we know it. Dick VanGrunsveen is an enthusiast. A new owner may not be, but see this as a “business opportunity”.
This is a sad situation for the entire homebuilt community. But, it’s not entirely over yet. A similar thing happened to Sonex a couple of years back, but the one purchasing the company was also an enthusiast, so all is well, and perhaps better than before (by the looks of it at least).
Graham wrote:
Recently customers have reported firm demands for final payment with 2-3 months still to run to their published crating date. Van’s have been attempting to claw revenue forward to stay in the black.
Unless they do creative accounting it won’t help them stay in the black as they owe the customer until the goods are shipped. It will certainly help their cash flow.
This looks bad indeed. Just read the article in Kitplanes.
In the background, Van’s has “assembled a small team of experienced advisors to assist us” from Hamstreet & Associates, a Portland, Oregon-based firm that “leads troubled companies through financial and operational crises, and delivers results.” Mikael Via who had served as Glasair Aviation in the early 2000s and developed the Two Weeks to Taxi builder-assist program will be joining Van’s Aircraft as interim CEO. In addition, Hamstreet is expected to provide financial expertise as well as other interim officers to help Van’s move forward.
From what I remember, that Mikael Via bought Glasair in it’s time. He literally dumped all the planes to only produce the Sportsman in that “2 week to taxi” nonsense of his. Later he sold it to a Chinese firm, who has recently moved the entire operation to China (meaning it’s gone forever for all practical purposes).
Also, Lancair has been sold (again) The new owner will only focus on supporting the existing fleet for the time being. Which is a good ting in fact.
The UK LAA has recently said that the average customer age is 64 and is increasing by 11 months every year. They have more members over 80 than under 40. Even by GA standards that is a rapid increase, and it will be a factor in what happens to these firms in the future. It looks to me that for every actively flying member there is a dozen inactive ones.
LeSving wrote:
Well, at least all you “poor victims” of LCP should be happy now – Revenge for having to replace a couple of parts
@LeSving, I’m not sure what particular axe you have to grind but statements like that make you come across as a really unpleasant character. Before this latest news you crowed and gloated over affected customers, telling them to man up and that it was only a problem because they weren’t proper builders. Now you blame them for killing the company. The leadership killed the company with multiple breathtakingly stupid decisions – using lasers in the first place, having zero traceability, and zero QC. Customers only expected to get what they were sold, contracted for and paid for – punched parts (their sales materials describe everything as punched) that are fit for purpose. Your comment about “having to replace a couple of parts” shows you know absolutely nothing of the issue, and for that reason I’m not surprised you cannot empathise with people who are out five-figure sums with expensive piles of scrap sitting in their workshops and very little chance of redress.
There was some sentiment doing the rounds that LCP was only an issue in the minds of a small subset of customers, a bunch of cry-babies who ought to get real about it. The usual stuff in aviation – you pay your money, the supplier sends you crap and you have to suck it up and pay again if you want what you paid for. As I suspected, the volume of parts that Van’s has been asked to replace confirms that this is not the case. No-one wants these parts, no-one outside Van’s considers them fit for purpose, and pretty much everyone is requesting replacement. Van’s were facing having to do zero-revenue rework for something approaching a whole year’s worth of production, and with customers refusing to increase their own personal exposure to an impending bankruptcy by sending more cash before Van’s have delivered on their existing commitments, it was never going to be long before the business ran out of cash. I distinctly recall hypothesising exactly what has happened not so long ago, and the consensus of replies (including one from you I believe) was that it was silly speculation with no basis in reality.
I’m saddened that RvG made loans to the business personally to try and keep it afloat, and can only surmise that the leadership didn’t tell him quite how hopeless the situation was.
Peter wrote:
I am told the parts were made in the Philippines – a legacy of the US having set up airframe repair workshops there during Vietnam (which the US withdrew from ~ 50 years ago).
Not the parts. All parts are made either in house at Van’s in Oregon, or (latterly, using lasers) by subcontractors located close by. It is the quick-build kits that are produced in the Philippines, and latterly Brazil. Van’s ships the parts out, they get assembled and shipped back. It’s time consuming and expensive, and probably a poor decision in of itself. Too much opportunity for things to go wrong and for Van’s and its customers to end up with expensive piles of scrap.
Airborne_Again wrote:
Unless they do creative accounting it won’t help them stay in the black as they owe the customer until the goods are shipped. It will certainly help their cash flow.
Staying in the black (P&L) doesn’t matter one iota in a cash survival situation. You do what you have to do and cash is king – without it the power gets switched off and the staff don’t turn up anymore.
