Update from November 26, 2024: Apparently negotiations between KTM and core shareholder Bajaj regarding urgently needed interim financing have broken down. Because on Tuesday, November 26th, the news hit like a bomb: “KTM AG is preparing an application for restructuring proceedings with self-administration.” Even if the word “insolvency” does not appear in the ad hoc announcement from KTM parent company Pierer Mobility AG, it means nothing other than an application for insolvency of KTM AG, in which the previous management remains in office and able to act.
Reorganization process with self-administration
The statement literally says: “Today (November 26, 2024), the board of directors of KTM AG made the decision to submit 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 procedures provide the opportunity to continue to manage the assets under supervision and to restructure the KTM Group independently. All other subsidiaries of KTM AG, in particular all sales companies, are not affected affected.
The aim of the procedure is to agree a restructuring plan with the creditors (of KTM AG, editor) within 90 days. By resizing the group, the aim is not only to secure the continued existence of the KTM Group, but also to create the basis for coming out of the process stronger. A resizing of production should result in the excess inventory at KTM and its dealers being adjusted over the next two years. This will result in a reduction in operating performance at the Austrian locations totaling over EUR 1 billion in 2025 and 2026.
Negative annual result in the high three-digit million range
The restructuring process results in additional loss potential, for example through one-off expenses such as necessary write-downs (e.g. for capitalized development costs) and costs for employee reductions as well as the shortfall in fixed costs due to the reduced operating performance and other costs that arise as a result of the restructuring process.
The company therefore expects a negative annual result in the very high three-digit million range for the current 2024 financial year for the reasons mentioned above.”
What happened so far:
It started around a year ago: Shortly before Christmas 2023, KTM’s parent company, Pierer Mobility AG, announced the relocation of jobs to KTM partner Bajaj in India and to production partner CFMoto in China. This was accompanied by a reduction of around 300 jobs at the KTM location in Mattighofen, Upper Austria. The decision was justified by “adverse economic conditions in Europe.” In January 2024, Pierer AG reported “record sales” for 2023 and, with 381,634 motorcycles sold worldwide, a further increase in sales of two percent.
2024 will be a fateful year
But in 2024 the numbers plummeted: Sales fell by 27 percent and global motorcycle sales fell by 21 percent. The debt rose from 300 million to 1.5 billion euros. At the same time, KTM managers had to admit to quality problems such as running-in camshafts on many 790s and some 890s and general overproduction. In the expectation that things would continue like this, too many motorcycles were built in Mattighofen. KTM has been trying to counteract this with significant price reductions since September 2024. A number of KTM models were suddenly reduced by around 20 percent – an extraordinary step in the motorcycle industry.
Pierer trims the board
The surprising reduction in the size of Pierer AG’s board of directors from six to just two people was also not a good sign. KTM founder’s nephew Hubert Trunkenpolz also had to vacate his post. Stefan Pierer himself stayed.
Suddenly KTM needs millions
Then, on November 12, 2024, the hammer came: a message from Pierer Mobility said that KTM was missing money. A lot of money: The company needs a “three-digit million amount” to bridge the gap. In addition, there will be a production stop in Mattighofen from January 2025 in order to reduce the excessively high inventory of unsold motorcycles. According to CEO Stefan Pierer, production will only start again from March 2025, but then only in one-shift operation, which makes further layoffs more than likely.
EICMA rumors: MV Agusta to China after all?
Just a few days before these alarming reports, there was nothing at the Eicma trade fair to indicate such a crisis. The KTM trade fair stand in Milan was bursting with new products. But there were rumors: For example, there was talk of a possible sale of MV Agusta to China – KTM only took over the majority in MV in the spring. Or it was said that Red Bull would join KTM.
Will the Red Bull legacy save KTM in the end?
And in fact, Austrian newspapers later quoted unnamed sources who reported that there were currently negotiations between KTM and the energy drink manufacturer about joining as an investor. After all, Red Bull is already a sponsor for KTM’s MotoGP and rally activities. Remarkable: Less than 24 hours after this rumor was published, Pierer Mobility AG issued a denial. There are no discussions between the Mattighofen group and Mark Mateschitz. The son and successor of the Red Bull founder, who died in 2022, is currently the richest Austrian.
And what’s the status with Bajaj?
Pierer Mobility AG, however, confirmed that negotiations were ongoing between KTM CEO and majority owner Stefan Pierer with his Indian partner Bajaj about a financial injection for Mattighofen. The financially well-funded Indian group Bajaj Auto (sales 2023/24: almost five billion euros) is already a core shareholder of KTM through Pierer Bajaj AG. It could have been that Bajaj helped the Pierer brand out of trouble. However, the report from November 26, 2024 shows that the negotiations with Bajaj have failed for the time being. However, it is still possible that the Indians will completely take over the Austrian manufacturer, along with its sister brands Husqvarna, GasGas and MV Agusta. But possibly without Stefan Pierer.
