KTM AG is undergoing restructuring amid insolvency, with a regional court allowing self-administration to continue. Layoff projections have decreased from 500 to 300, providing some relief to employees. Despite financial struggles, including significant revenue losses and job cuts, the company has attracted interest from potential investors. Operations in Mattighofen are paused due to high inventory and production issues linked to new emissions standards. KTM’s debt totals at least 1.8 billion euros, with creditor claims due by January 16.
KTM AG’s Restructuring Efforts Continue Amid Job Cuts
The regional court of Ried announced on Friday that KTM AG will continue its operations despite facing insolvency. This decision was shared following the report day session, affirming that self-administration in the restructuring process will remain in place. Encouragingly, the anticipated number of layoffs may be reduced by 200, which brings some relief to employees. The discussions also encompass the subsidiaries KTM Components GmbH and KTM Research & Development GmbH, with the fate of KTM AG likely steering the overall direction of these entities.
Positive Developments in Layoff Projections
KSV insolvency expert Karl-Heinz Götze reported that KTM AG’s self-administration status will persist, indicating that the company has adequate liquidity to sustain operations until the examination day session. Notably, three potential investors have expressed interest in injecting fresh capital into the KTM Group via its parent company, Pierer Mobility, aimed at supporting the restructuring plan. As per the Alpine Creditors’ Association (AKV) and Creditreform, the anticipated job cuts may be less drastic, with only 300 layoffs now expected instead of the previously feared 500. Furthermore, employees can expect their wages for December to be disbursed without delay.
For November salaries and Christmas bonuses, affected employees will be compensated through the insolvency compensation fund, with applications already submitted. If all goes as planned, these payments could arrive by the end of January, according to Sabine Wenzelhuemer, an insolvency expert representing around 3,500 employees through the Insolvency Protection Association for Employees (ISA).
Initially, the year was marked by a series of unfortunate events, including the loss of 373 jobs at Pierer Mobility, primarily affecting the KTM location in Mattighofen, followed by 120 layoffs at KTM Research & Development GmbH. The motorcycle manufacturer reported a significant revenue decline of 27 percent, totaling 1 billion euros, along with a loss of 172 million euros for the first half of 2024. The financial market authority is currently investigating whether the company adhered to ad-hoc obligations appropriately. In response to declining sales, an additional 200 job cuts were announced in August, although early measures were said to be in place to improve results in the latter half of the year, as claimed by CEO Stefan Pierer.
However, the situation evolved differently than anticipated. By mid-November, it became clear that KTM required a substantial financial infusion, leading to the announcement of another 300 layoffs and a production halt for January and February. Following the initiation of a European restructuring procedure by Pierer Industrie AG, KTM AG and its subsidiaries filed for insolvency. To date, 250 of over 3,600 employees have already been laid off, with more expected. Employees remain uncertain about who will be impacted next. Additionally, the Vöcklabrucker Metallgießerei GmbH, a subsidiary of the insolvent KTM Components GmbH, has also filed for bankruptcy, resulting in 134 more job losses.
As for production, operations in Mattighofen have already been suspended, with an operational interruption set for January and February due to excessive inventory levels. KTM currently holds approximately 130,000 motorcycles in stock, many of which do not meet the new Euro5+ emissions standard taking effect next year. The company’s insolvency has been attributed to rising operational costs and the economic downturn.
According to creditor protection associations, KTM’s debts have reached at least 1.8 billion euros, with around 1.3 billion euros owed to banks. Creditors have until January 16 to register their claims, with an examination day session scheduled for January 24, followed by a vote on the restructuring plan on February 25. The proposed restructuring plan offers creditors a recovery rate of 30 percent, payable within a two-year timeframe.