Forced break and layoffs | Taiga fights for survival

One of Quebec’s rising stars in electrification, Taiga, is fighting for his survival. Its coffers are empty, its production is temporarily at a standstill and nearly a third of its employees have been laid off since the start of the year. By his own admission, there is “significant uncertainty” about his future.

Looking for financing, the manufacturer of snowmobiles and electric watercraft, which was loaned 15 million by the financial arm of the Quebec state in the spring of 2023, also intends to tighten its belt. This decision, announced Tuesday on the occasion of the publication of the fourth quarter and end of year results, is accompanied by bad news.

There will be a forced break, of indefinite duration, at the factory located in the Montreal borough of Lachine. In addition, 70 new layoffs are added to the thirty layoffs that occurred last February. Last fall, Taiga had more than 300 employees. Its workforce has since fallen by a third. The company’s president and CEO, Samuel Bruneau, was not available for interviews on Tuesday.

This comes with a serious warning: doubt about the Quebec manufacturer’s ability to continue its activities if it cannot find new sources of financing while reducing its expenses.

“There is significant uncertainty likely to cast significant doubt on the company’s ability to continue its activities,” underlines Taiga, in its quarterly financial report. There can be no assurance that the Company will be able to continue its operations and continue to meet its obligations and liabilities when they become due.

A sign that the picture was likely to be bleak, the company announced last Thursday that it was delaying the release of its financial results. Management also canceled the conference call with financial analysts.

As of December 31, only 5.3 million remained in the coffers of the young Quebec company. This is much less compared to the 23 million at the same date in 2022. However, it obtained a little oxygen on March 11 when Export and Development Canada (EDC) agreed to lend it 5.25 million more.

Last spring, Investissement Québec – the investing arm of the Quebec government – ​​Northern Private Capital, a private investment firm from Toronto, came to his aid by offering him private financing of 40 million bearing interest at an annual rate of 10% . Last October, it was up to EDC to lend him 15 million.

Return to earth

After a promising start on the Toronto Stock Exchange, where the stock was trading at just over $13, the stock steadily lost ground to close on Tuesday at 64 cents. This gave Taiga a market value of around 20.5 million.

“It’s the story of student entrepreneurs who invent extraordinary products,” underlines Louis Hébert, professor of strategy at HEC Montréal. But when you promise things, you have to deliver. The company also had extraordinary challenges to manage: the pandemic and parts shortages. This increased the pressure on the fragility of the model. »

According to the expert, Taiga is currently in a “very bad situation” and risks “downright running out of money”. The slope to climb back is steep, believes Mr. Hébert.

Snowmobile sales were disappointing at Taiga when the white carpet was delayed in many places in North America. BRP has also observed this slowdown, which means that the multinational will need 300 fewer people to assemble snowmobiles in Valcourt this year.

On the sidelines of a speech to the Canadian Club of Montreal on Tuesday afternoon, the Minister of Economy, Innovation and Energy, Pierre Fitzgibbon, was questioned about Taiga’s financial issues. The manufacturer had not yet announced the temporary interruption of its production and its layoffs.

“I don’t want to talk about a private case,” replied Mr. Fitzgibbon. Taiga faces challenges. I think they have good shareholders. We’ll see what happens. »

Taiga wants to restore luster to its finances by adjusting production to seasonal demand and adding sales through dealers to its distribution model to try to boost sales. The company produced 417 vehicles in the fourth quarter and delivered 242 units. Its stocks reached 33.2 million as of December 31 – double its annual revenues.

Shawinigan on the ice

In the summer of 2021, the manufacturer of electric snowmobiles and personal watercraft had obtained loans of up to 40 million from Quebec and Ottawa to build a new factory in Shawinigan, in Mauricie. This is no longer a priority.

“The company believes that it is unlikely that the construction of a factory will take place in Shawinigan in the near future as the company maximizes the use of its Montreal plant, which has a total production capacity of 8,000 vehicles” , specifies Taiga, in an email.

The amounts offered by the two levels of government for the project in Shawinigan have not been disbursed.