Cirrus – Klapmeier talk, product liability
I have just been in contact with a US pilot who went to a presentation by Klapmeier.
One of the points which Klapmeier mentioned was that liability is their biggest concern, and 1/3 of the year’s production is just paying for liability.
How is that possible?
I suppose that if say a company is making a 1% net profit and is spending 0.33% of turnover on product liability insurance, then it would be true! But that kind of statement is meaningless. If 1/3 of their gross profit (say 50% of turnover) goes on PL insurance, that would be outrageous, but despite similar claims having been made in GA previously, nobody has found substance in them in the companies’ published accounts.
" One third of the year’s production" in literal terms might be construed as " one third of annual turnover" which hardly seems plausible, and are his costs expressed as relating to an insurance premium or to actual settlement payments?
I can’t recall any wide scale liability claims against Cirrus, quite the opposite, they usually bang on about how many lives they have saved.
I suspect it’s meant as 1/3 of net profits.
Of course profits are after directors salaries, and in a private company the directors set their own salaries, usually based on profits ;)
Except it’s not a private company.
Who are the shareholders?
The Chinese government disguised in some private Chinese aviation holding company. They also own Continental.
And before they bought it, the majority shareholders were a VC outfit called Arcapita.
So, let me guess, these shareholders are drawing out almost all available cash as dividends. That is what I do in my business.
Technically, dividends do not reduce your taxable profit (in the UK regime, anyway) but they sure as hell reduce the available cash 
If they were interested in dividends, they wouldn’t let Cirrus develop this single engine jet. So they must be in for the fun of sinking money in aviation projects, like so many in the industry.
I think the Cirrus jet will be a winner. And I am not a Cirrus fan typically.
