Building the RV10 - Video 18 - Vans Aircraft Financial Problems
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- เผยแพร่เมื่อ 7 ส.ค. 2024
- Some quick thoughts about the financial troubles at Vans Aircraft.
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My name is Brett Myers and I live in Lubbock, TX. I'm a finance professor at Texas Tech University (with a background in Mechanical Engineering). I'm currently building a Van's RV10 in my garage. It's kind of like an airplane that you buy from Ikea, and I'm sure it will work just fine. Van's Aircraft is probably the largest provider of kit airplanes on the market.
I am not affiliated in any way with Van's Aircraft. I'm posting these videos primarily for my own documentation and enjoyment as well as a desire to keep my extended family in the loop with what I am doing. They are for entertainment purposes only and shouldn't be used as a source for building advice or tips. Again, I am a finance professor. I'm not sure I'd take finance advice from a finance professor, much less advice on how to build an airplane.
#rv10 #vansaircraft #rv10build #vansrv10 #buildrv10 #rvbuilder #vansrv #buildingairplane #vansairforce #experinmentalairplane #rvaircraft #rvairplane
vans rv10 build
Prospective Vans builder here. I wonder why, why ITNOG they had to outsource to the other side of the world. How they thought they could control de quality so far away. But you know, labor is cheaper in the Philippines, let’s s do it. I really hope they come out of this for all you guys in the middle of the building process, but new customers we will pay the price. Your analysis was right on the post and glad to find your channel. You have a new follower.
A well balanced non hyped video. Thank you sir. I also wish Vans all the best as I'd like to build an RV9
Really hoping to build a 10 in the next couple of years and hope they are able to turn this around. Even if I don't eventually build, I love what Vans represents - and I hope it can live on for many more years.
Seriously.
Well said and agree. I just hope their new prospective prices don't price me out of continuing by -10 build.
The inflation in GA parts has been crazy. I think increased prices is gonna add a year or so to my build.
I have seen many aircraft companies fold and Van's wouldn't be the first. If they only had one problem to solve but they have a number of expensive issues to deal with and that doesn't give me much confidence that they will make it.
I don't think the current owners will make it out with their equity intact. But given where Vans is right now, if an investor comes in with enough money to fund operations for a few months and can finance the replacement of LCP, they can probably walk away with a majority stake in the business.
Best way to make a small fortune in aviation is start with a large fortune.
Some have said want to make a million?? Spend two million.
Yep, just like farming.
I think your analysis is spot on. None of us builders want them to close down fully or discontinue their operations. But they will definitely make some significant changes. Those who have their kits are in a better place then those earlier in their build.
-They need to streamline and fix production issues.
-I honestly see quick builds coming to an end or having significant changes to cost/timeline.
-possible changes to their third party items like engines, props, etc. We may need to go direct to these providers. Luckily one of us with the kits can do that anyway now, it’s a small incentive to do it via vans anyway.
For me, I’m going to keep pounding but will be watching extremely carefully until it’s time to order my fuselage next.
I agree. I've got all my kits ordered and have received most of them but am still missing some important items (like Berringer wheels and brakes, the front landing gear, and lots of little things). I also have a bunch of laser cut parts. Anyway, I'm still gonna chug away. I would be stunned - stunned - if Vans didn't come out of this. I'd bet the ownership will change, and at the end of the day, that might be a good thing. But I bet, after a period of reduced service, they're gonna be right back at it and most people won't notice much being different. Well, except higher prices...
But we'll see!
Excellent video summarizing the situation! I wish you the best with your project.
Nice thoughtful analysis- you summarized what I was thinking better than I could have.
I wish there was time for them to do a crowd-funding raise- I think the could raise a lot of equity from the builder community, but doubt they have the time. Private Equity is a tough master to serve and I'd hate to see employee owners wiped out.
That's a good idea, How much do you think the average donor would give, times how many donors?
I want to see Van succeed., He seems like a straight shooter, although the current management has to go, in my opinion.
Great commentary. I agree with your sentiments (RV-14A builder from Central Oregon).
Very well said! Great to hear your perspective on the situation
Thanks. Very much enjoy your videos.
I feel for you. This highlights the need to keep on top of quality control even for non-certified aircraft. I'd expect that Vans will come out of this but not without casualties.
Nice balanced analysis buddy, helps calm the nerves
I think some people are upset by the fact that they were still taking kit orders when some of the upper management allegedly knew they were in big trouble...not a good look....a lot of pissed off base customers.
Yeah, a lot of people are not happy, and I understand why. To be fair to Vans, financial distress tends to creep up (to paraphrase Ernest Hemingway) "slowly, and then suddenly." It's easy to say Vans misled people, but more likely, Vans may have not seen this coming as well as they should. Easy to see in hindsight though.
good video - thanks for sharing. particularly hard situation because of the nature of the business - kits are shipped in groups, not all at once. someone buys a group of parts, starts building - it could take years but you know that when you're ready you can order the next group of parts and keep rolling. but now, maybe not. I really feel for anyone in this situation and sincerely hope some solution will come about.
the 'coming clean' video by Mr. Van is admirable in some respects, but what the fan boys don't seem to want to admit is that Van's had to have seen all this coming for quite some time before it really blew up :(
I'm anxiously awaiting video #19 to see how things are moving forward for you in light of the current situation at Vans.
Just stumbled across your page. I'm just up the road in Dalhart. Always wanted to build up a RV10 but looks like prices will be beyond my means for a while. Good luck on your build!
Thanks! Every time the price goes up, it's like: add another year to the build.
Great analysis, hoping this plays out well, close to your predictions.
You are the only person capable of giving clear information. Thank you
honestly wish I lived closer to the headquarters. My work schedule allows me off days and free time. With their reputation and what they have done to make GA affordable i would donate time / for the love of GA to help get things back in order.
Same with me. At this point, I've read a lot of what people have had to say and my assessment is that they are an engineering-first company and got slammed by a business environment that they were not prepared for. Frankly, much larger, more business savvy enterprises have made worse mistakes. I think they're good people.
I’m in the same boat but I have to tear my wings apart to replace 1011 and 1010 ribs. Uggghhh BUT I AGREE they will pull through in the end.
Wow, that sounds absolutely miserable. All of my wing ribs are punched - the only parts of my wing kit I'm not sure about are the aileron and flap spars and nose ribs. So I'm probably going to have to completely rebuild those.
@@buildingthe10do you have any photos in blue plastic with your ribs being covered in it??! I’ve heard some of punched ribs are not covered in blue plastic ??
@@jerseypilot83No, I didn't take any photos. I just remember taking off the blue plastic on the ribs as well as processing them. The punched parts all have a smooth side and a side with a lip, and I remember that on my ribs (because I take extra care on the side with a lip). The first time I noticed parts that didn't have this (what I now know are laser cut parts) were on the ailerons and flaps. The punched parts that don't have blue plastic are heat treated. My understanding is that blue plastic = punched parts. No blue plastic = maybe punched, maybe LCP.
I didn’t see or hear anything about Van’s temporarily ceasing kit orders. Doing so doesn’t make sense and kit order pages are still active on their website. The only thing regarding kit orders that has been announced is that shipping could be delayed.
On their website they say that "kit orders will not be processed" during the next few weeks (www.vansaircraft.com/2023/10/business-announcement-from-vans-founder-dick-vangrunsven/). The are almost certainly going to raise prices, and allowing people to lock in prices now would probably not be a good financial move. Anyway, I interpret this to mean that they are not taking orders.
@@buildingthe10 ahh, I see it now. I glossed over that part.
Luckily, I have plenty to work on for now and I wasn't affected by the LCP issue.
Well said!
Being an employee owned company makes the recovery much harder
I think their biggest mistake was trying to grow to meet the increased temporary demand during Covid by outsourcing some parts production. Hindsight is always 20/20 but they should have just let the lead times increase and wait for all the people who were bored during covid realize they wouldn't have enough time or money to take on one of these projects. I think they will survive just fine, maybe just with new owners however.
I was interested in Rotary Air Force RAF 2000 back in the day when they were bought by a foreign entity and everything repriced for profitability and out of reach of the original base. I am afraid this will be the case here, unlikely to find an angel investor that is not profit motivated and it is hard to think it will ever be the same enthusiast based company unless they can do it on their own.
I believe these companies are going to have to revisit domestic production of kits.
well there is something good about it, Van's needs to and is going to Right the Ship. That's a good thing. Could not continue as it was because that wasn't working.
Someone needs to ask how the decision making changed. Was their some management change internally? VANS had a great history - not flashy but solid. All of a sudden they just lost their way on the mgmt side. They go all in on outsourcing and do almost no quality control - some of the holes that were laser cut make NO SENSE that they'd get through inspection just once back in the US before being shipped. Their treatment and response to complaints by builders felt like it did a 180 - they were SUPER slow to react to complaints. If you don't fix / get rid of whoever the new person was that came up with all these innovations you are going to be screwed.
I don't think it was the decision making that changed so much as the business environment. In particular, the shipping of QB kits got much more expensive (after they had already locked in a price), as did the aluminum parts (inflation combined with longer lead times meant that, by the time they produced the parts, their costs were much higher than they were when they locked in the kit price). They had a dramatic increase in orders during Covid which increased lead times substantially. And they got hit with a double whammy of quality control issues: laser-cut parts and QB kits that had bad primer (as well as LCP). Most likely, they were simply overwhelmed. I think Vans has been run by engineers and enthusiasts, but even business types would have had a hard time managing this. But that's just my two cents.
We need vans.😢
Welcome to Albuquerque (we have your weather)
Lol, you seem to get our weather right before we do!
at one point your language was imprecise and implied that all of the Van's aircraft built were 4 seat models (as you had just referred to that with Cirrus). Just a nitpicking detail that those who know vans would understand, but one who does not, would hear it and perhaps think it differently.
True. My comparison to Cirrus was more to illustrate the scale of Vans’ operations. I think a lot of people hear “kit plane company” and think they make, like, 10 planes a year.
I have a CNC and program CAM all the time. You are talking about lead in and lead out...the crappy part is, if they had just made a few different selections (literally 3-5 button clicks) they may not have had this problem with the laser cut parts...
even with a perfect toolpath the laser still hardens the edge too much to not fracture when forming. its actually 2 fails in 1. then not inspecting and shipping crap is the nail in the coffin.
They aren’t in denial, and they’ve recognized it. Hopefully the glasair guys can help.
Let’s get someone building those parts (they had to ship overseas and back) on this side of the pond? Would that help?
Haven’t heard anyone suggesting Vans has any chance of recouping cash from the overseas companies who produced the faulty parts. Maybe?
Very unlikely..
The issiue - do we believe in VANS or not.
Vans definitly has a lot of customers and reputaion. That's why this issiues will be fixed. Everything will be ok, but maybe a bit later.
As i heard it's a huge demand for RV-15. It's no way to get reall bunkruptsy with such conditions. It's a sikness of growth.
Either way they need cash, though. So they're gonna have to figure out a way to get that.
Given the current circumstances, Vans needs to reprice everything currently on order and offer either a refund or supply at the revised price, depending on customer's preference.
Builders are creditors of Vans. If it goes to bankruptcy court, builders' interests would likely be wiped out. Hope I'm wrong.
Let me ask you this. What if the new owners come in and file for chapter 11? That will definitely hurt the builders. Court cases take a minimum of one year. And then to resolve a court decision would take another 6 months. I think that you're looking at a year and a half to get your parts, best case.
Companies usually file for bankruptcy at the behest of creditors (who want to get repaid). As far as I know, Vans doesn't have much debt, and I don't think that creditors breathing down their neck is one of their problems. I have never been aware of a company filing for bankruptcy in order to get out of customer commitments (though I am no lawyer, and maybe this happens). But even if they could do this, it would be incredibly stupid to do so - it would forever break customer trust and who would ever write them a check again? From what I understand, what they need right now is cash - because they don't have enough to fund operations. The way they will likely get this is to sell an equity stake - maybe even a controlling stake. For example, you come in and say "here's the $10 million you need to supply new LCP, pay employees, and all that other stuff, but now I want a 70% equity stake in the firm." Something like that. That's how I see this playing out.
Also, firms can (and usually do) continue to operate. For example, GM went through bankruptcy in 2009, but most customers weren't even aware of it. So unless liquidation is on the table (I can't imagine this being the case for Vans), even if they were to get through bankruptcy, it's entirely possible that customers won't see a complete standstill in operations. But again, unless Vans has a lot of creditors who want to take collateral (or something like that), I don't see how this happens.
@@buildingthe10 My interest in Vans is this. I'm a fiberglass man. I once built a Velicity, flew it awhile and sold it. But I got the itch again and bought an rv6 from an estate. My goal is to turn it into an "A"; and change the engine to a 360. Fairly simple and a small investment.
Here's the situation with Van's.
A company can file a voluntary bankruptcy, and many do using chapter 11, which is the reorganization bankruptcy, and the sooner they do, the better for all of us.
As you know the problem is with the RV 12. I'm just going to guess and say there's a thousand of them out there, and in my opinion every one of them is worthless. The owners, in my opinion are going to have to take the motors out and sell it, because the motor is going to be worth more than the motor and the plane. I base my opinion on this, an airplane is not like buying a car. In my opinion no buyer is going to want to touch an RV 12 much less buy one no matter when it was built.
Now, you non RV 12 owner's can basically wait for your parts, because after all, you have to, but the RV 12 guys, in my opinion, are not going to roll over and take it. I foresee a huge class action suit against Van's,
1000 planes times an average cost of $20,000 is two million (My mistake, it's twenty million dollars} plus legal fees. I doubt Van's we'll have this money considering they won't be able to sell a kit during the course of the lawsuit.
And for Vans to expect renumeration from a foreign corporation is silly. In my opinion, the only way to save Van's is to sever the RV 12 line through Chapter 11.
I'm fortunate, my RV6 was certified in 2002, before Van's would ever consider having parts made in a foreign country.
@@josephmistretta6211 If they got sued, that might push them to bankruptcy. But that hasn't happened yet, and I'm not hearing any real concerns that it might happen. At least beyond the regular we're-in-the-US level of maybe being sued.
@@buildingthe10 in my opinion, I think that they can avoid liability from a lawsuit by filing chapter 11.
@@josephmistretta6211 where are you getting your information on the 12? It’s a very popular kit and used in flight schools…Vans is in very deep and will most likely have to limit the kits they sell, but I see the 7, 8, 10, we and 14 surviving.
Just checking in. How are things?
Coming along just swell... I'm sure you've heard the knews about Vans filing for Chapter 11; I was expecting a buyout, but this is good news (given the alternatives). I'm moving forward with my build...
@@buildingthe10 Thanks for the reply! Glad to hear it!
I doubt the work ethic of the Vans employees had much to do with the current state of the company.
Agree.
Hope you got your kits…
I've got most of them, but some parts are still on back order. Not small parts, expensive parts, like the front landing gear and Berringer wheels and brakes.
I feel for the builders. I bought an RV-4 that the builder couldn`t fly. Loved the airplane. Got stabbed in the back by van`s when I sold it.
Problem is I guess builders have no option but to buy, so they may close the company, avoid the liabilities and a new company starts up at higher prices. Unlikely to be good for builders either way sadly. Depends on the degree of liability but if it's too great no-one will buy it. Sad.
I'm not so sure - the fact that Vans has run out of cash means a potential buyer or equity investor has an edge in bargaining. Basically, if you can fund the LCP and QB costs, you get to buy Vans. Or at least a large stake of it. But new equity investors have a pretty strong bargaining position because they can go to current owners and say "would you like to own 100% of an insolvent company, or 20% of a company that exists?" I don't know what the numbers are, of course - Vans is a private company and doesn't disclose its financials. But if I had to bet, it would be that somebody is about to get a huge equity stake in the company for relatively cheap.
If they can't pay suppliers, suppliers stop shipping and demand any further orders be pre-paid in full prior to shipment. You can only raise prices on kits so much before sales take a big old dump. They are trying to keep that mass appeal with average Joe builder. With that comes lower pricing. Go to higher pricing, then your market will shrink considerably. At some point you cross the line to the unaffordable and unrealistic zone and lose all the average Joes. Now you're left marketing to just rich guys who can simply afford to go out and buy a 500k airplane, so why would they mess around with Vans kits. When you raise prices on food, people have to suck it up and pay the higher prices because we all need food. Nobody "needs" a very costly hobby airplane. Allegedly Cleveland tools had too many eggs in the Van's customer basket and is having business issues now as well. There is a domino effect.
True, but they can't sell the kits at a loss, either. And the unfortunate reality is that costs have risen dramatically.
A group of us were thinking of going down the rabbit hole of buying an 8 QB kit in recent times,two of us in the group had a gut feeling that things were not what it seemed…..end of the day we dodged a bullet!…..phew! I feel for those that have been sucked in of late having laid out big bucks whilst Vans must have known they were taking g money full knowing they were going down the toilet!🤮🤮🤮
I think you are wrong. I think you need to plan on putting some big time cash into this as Vans has a big cash flow problem and you builders are the cash. I hope Vans stays around but I wouldn’t count on it. Oh, I used to own Mooneys. Get my point?
As bad as it got for Mooney, they still exist.
@@buildingthe10 I hope for you and GA that you are right but prepare for the worst.
How to make a million dollars in the airplane industry? Start with TWO million dollars. I'm actually surprised Van's survived at all through the scamdemic and the complete collapse of post scamdemic work ethic. Getting quality out of anyone is about impossible anymore. I built an RV8...long ago and what is happening now seems impossible to me. Richard Van Grunsven is one of my heroes. He made my dream of aircraft ownership a reality and I pray that he and his beloved company can survive this. The company made some serious errors in judgement and perhaps lost sight of costs and quality through these difficult times. Van himself is long on years and the stress on him must be terrible. May Van, his family, the company, and all current builders of these wonderful aircraft, carry on to success.
Im worth 22 million and speak Spanish to get non union non low IQ workers locally. Let them know I can buy them out for fair market.