KTM's Parent Company Isn't Doing Hot, Shifting More Production to China and India

"what caused KTM’s downfall was its debt rose from 255 million to 1.7 billion euros between 2023 and the end of October 2024."

Good god!! How could ANY honest, intelligent corporate manager allow that to happen? There's got to be massive corruption involved, as those numbers are so far offside.
 
xrljoel said:
"what caused KTM’s downfall was its debt rose from 255 million to 1.7 billion euros between 2023 and the end of October 2024."

Good god!! How could ANY honest, intelligent corporate manager allow that to happen? There's got to be massive corruption involved, as those numbers are so far offside.
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It's all good until it's not. Acquisitions were likely almost entirely debt funded. Keep the factories pumping out bikes to juice management bonuses for bikes shipped. When was the last time an executive was held responsible in a manner that would make others second-guess choosing personal enrichment over long-term corporate health or shareholder enrichment? The hammer would have to be huge. Push all C level and board to personal bankruptcy. After that, other execs may think differently. I don't know if there is any mechanism or appetite to follow that path.
 
GreyGhost said:
It's all good until it's not. Acquisitions were likely almost entirely debt funded. Keep the factories pumping out bikes to juice management bonuses for bikes shipped.
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Not really. Production is based on an agreed forecast and budget, with terms and decisions approved by all stakeholders since funding is secured upfront from banks. The forecast originates from the sales and marketing teams, starting with the individual sales reps who estimate, "I can sell this many bikes," followed by sales managers who set targets, saying, "You need to sell this many bikes." This process escalates up the chain of command.

Finance often steps in to determine what is realistic, as they are responsible for securing the necessary funds. Meanwhile, production planners within the supply chain may advocate for higher production numbers to keep the factory running efficiently. The management team’s bonuses are typically tied to meeting the agreed forecast and make the bikes in time. Sales managers are paid to achieve those numbers. Likeswise, sales budgets are created to be used to create sales programs and discounts.

The issue arises because sales forecasts are often created by salespeople, who may overlook historical data or broader market conditions. Compounding this problem, the supply chain is slow to adapt. Sourcing and tooling decisions are made months or even years in advance, so when the factory ramps up production based on a forecast (made-to-stock) and the market slows down, it’s often too late to pivot.

While it’s easy to blame executive teams and say its corruption because they want their bonus, the reality is that multiple factors contribute, including misreading the market. Some competitors have managed this better, creating forecasts aligned with what the market can handle. KTM sold out their inventory during COVID and were hoping the demand surge would continue—but even they couldn’t fully predict the market’s behavior.
 
Trackday said:
Not really. Production is based on an agreed forecast and budget, with terms and decisions approved by all stakeholders since funding is secured upfront from banks. The forecast originates from the sales and marketing teams, starting with the individual sales reps who estimate, "I can sell this many bikes," followed by sales managers who set targets, saying, "You need to sell this many bikes." This process escalates up the chain of command.
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In another life I had to deal with this. I'd get a product allocation and then try to figure out how to spread it around most effectively.
You aren't going to sell many ATVs and snowmobiles in the GTA, and you aren't going to sell many sport bikes in Timmins.
 
Trackday said:
Not really. Production is based on an agreed forecast and budget, with terms and decisions approved by all stakeholders since funding is secured upfront from banks. The forecast originates from the sales and marketing teams, starting with the individual sales reps who estimate, "I can sell this many bikes," followed by sales managers who set targets, saying, "You need to sell this many bikes." This process escalates up the chain of command.

Finance often steps in to determine what is realistic, as they are responsible for securing the necessary funds. Meanwhile, production planners within the supply chain may advocate for higher production numbers to keep the factory running efficiently. The management team’s bonuses are typically tied to meeting the agreed forecast and make the bikes in time. Sales managers are paid to achieve those numbers. Likeswise, sales budgets are created to be used to create sales programs and discounts.

The issue arises because sales forecasts are often created by salespeople, who may overlook historical data or broader market conditions. Compounding this problem, the supply chain is slow to adapt. Sourcing and tooling decisions are made months or even years in advance, so when the factory ramps up production based on a forecast (made-to-stock) and the market slows down, it’s often too late to pivot.

While it’s easy to blame executive teams and say its corruption because they want their bonus, the reality is that multiple factors contribute, including misreading the market. Some competitors have managed this better, creating forecasts aligned with what the market can handle. KTM sold out their inventory during COVID and were hoping the demand surge would continue—but even they couldn’t fully predict the market’s behavior.
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That’s a little simplistic and not how a company KTM's size would create the production and distribution plans.

First, Marketing sets the initial targets based on the total available market, existing share, market intelligence, and internal capabilities. Sales interacts to determine reasonableness, capability and whether they have the resources needed to achieve targets - they don’t set them.

Once revenue and volume targets are created, that information is fed into the annual planning process where finance, product development, and production create plans to support the revenue and unit targets. A cohesive annual operating plan emerges from the combined work.

Once accepted, KPIs, bonuses, and contingencies for unexpected events are added but the executive team or in the case of a company KTM's size, a board-level compensation committee for execs, then a departmental execs for staff.

Then GO!

Companies then monitor progress against the plan and market situation in near real-time. They report detailed results to internal stakeholders monthly, then external stakeholders and regulators get a limited reports quarterly.

Executives, Directors and Officers have a duty to report accurately and a responsibility to creditors and stakeholders. They must also manage the business and make necessary adjustments to raw materials, inventories, procurement, SG&H expenses, headcount, in a prudent and responsible fashion for the benefit of shareholders.

KTM had an epic failure in leadership and management. It will be studied and the subject of business lectures for years.
 
Scuba Steve said:
Seems delusional I would imagine they are going to get ordered to stop spending.

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That order may not come until the creditor's meeting, which is supposedly sometime in February, and right now they're operating on hopes and dreams that someone will buy out the operations.

KTM is under contractual obligation to Dorna (MotoGP) for a certain time period, too, so they can't just shut down with a snap of the fingers. At some point, someone needs to weigh the cost of breaking the MotoGP contractual obligation against the cost of keeping the team going.
 
Brian P said:
That order may not come until the creditor's meeting, which is supposedly sometime in February, and right now they're operating on hopes and dreams that someone will buy out the operations.

KTM is under contractual obligation to Dorna (MotoGP) for a certain time period, too, so they can't just shut down with a snap of the fingers. At some point, someone needs to weigh the cost of breaking the MotoGP contractual obligation against the cost of keeping the team going.
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They have a lot of contractual obligations. Dornas shouldn't get more or less weight than the others.
 
Brian P said:
That order may not come until the creditor's meeting, which is supposedly sometime in February, and right now they're operating on hopes and dreams that someone will buy out the operations.

KTM is under contractual obligation to Dorna (MotoGP) for a certain time period, too, so they can't just shut down with a snap of the fingers. At some point, someone needs to weigh the cost of breaking the MotoGP contractual obligation against the cost of keeping the team going.
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Who exactly is dorna going to fine if the contract is broken there is no money left

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Scuba Steve said:
Does the MotoGP program die if the company does at the end of March

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The factory support for race teams is already dead.
 
GreyGhost said:
They have a lot of contractual obligations. Dornas shouldn't get more or less weight than the others.
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At this point, there is still at least a theoretical possibility of a hail-mary from Red Bull or some other party interested in buying out the MotoGP operations without incurring a penalty. If they shut it down now then that penalty becomes guaranteed.

And, yes, can't get blood out of a stone, but those responsible for managing the company while in administration still have at least a theoretical obligation to maximise return for creditors, which means attempting to not incur that penalty (by trying to sell the MotoGP operations as a going concern).

February creditor's meeting is probably when decisions get made.
 
Brian P said:
That order may not come until the creditor's meeting, which is supposedly sometime in February, and right now they're operating on hopes and dreams that someone will buy out the operations.

KTM is under contractual obligation to Dorna (MotoGP) for a certain time period, too, so they can't just shut down with a snap of the fingers. At some point, someone needs to weigh the cost of breaking the MotoGP contractual obligation against the cost of keeping the team going.
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I doubt very much there is nothing but volunteer work going on.

Creditors don’t determine what happens with day to day operations, all they do is vote on whether or not the proposed haircut is better than liquidation.

Contracts like the one with Motogp would take the same haircut, likely worse if KTM wrote contracts under a corporate setup just gor racing. Judging by the dizzying number of subsidiaries, KTM racing will probably just shutdown.

As they say, no blood from a stone.
 
Brian P said:
At this point, there is still at least a theoretical possibility of a hail-mary from Red Bull or some other party interested in buying out the MotoGP operations without incurring a penalty. If they shut it down now then that penalty becomes guaranteed.

And, yes, can't get blood out of a stone, but those responsible for managing the company while in administration still have at least a theoretical obligation to maximise return for creditors, which means attempting to not incur that penalty (by trying to sell the MotoGP operations as a going concern).

February creditor's meeting is probably when decisions get made.
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Why are you giving Dorna priority over creditors? Any penalty assessed should just be one of many unsecured creditors that get back close to nothing.
 
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