KTM in a downward spiral: The two-wheeler brand urgently needs fresh money

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Alarm bells are ringing in Mattighofen. KTM AG is deep in the red and urgently needs fresh money. Almost 600 employees have already been made redundant and production has been cut back. The management is currently negotiating a bridging loan with creditors and shareholders.

For many years, there was only one direction for KTM: upwards. When KTM boss Stefan Pierer announced at the end of the noughties that he wanted to become the largest European motorcycle manufacturer with his brand, he was met with derision. A few years later, nobody mocked him anymore because he had made good on his announcement. His clever move was to enter into a joint venture with Bajaj, an Indian motorcycle giant, in order to have the small Duke models from 125 to 390 cm³, which had previously been developed in Mattighofen, built there from 2011. They not only sold extremely well in India, but also in Europe. In 2017, Pierer also entered into a deal with the Chinese brand CFMoto, where all 790cc KTMs are now produced. Over time, KTM bought up several other brands: Husaberg (now discontinued), Husqvarna, GasGas and, more recently, MV Agusta; the suspension supplier WP and several bike brands are also part of the group.

Huge overproduction

The year 2023 was still going well for Pierer Mobility AG, with KTM selling 280,206 motorcycles worldwide, Husqvarna 67,462 and GasGas 29,532. But KTM is struggling with a huge overproduction. Board member Hubert Trunkenpolz explained that they had produced over 200,000 motorcycles in Mattighofen in one year, although the plant was designed for a maximum of 170,000 units. He cited the corona crisis as the reason for this. Suppliers had not been able to deliver on time, which is why numerous motorcycles had been taken out of production and only completed later. This resulted in a loss of quality. However, KTM is the only manufacturer to have experienced such problems.

Quality problems

It was the customers who had to pay the price, as many of them turned up at the dealers with defects, some of them considerable, including seized engines. The loss of confidence led some potential buyers to decide against a new purchase. The matter became very expensive for KTM, with sales plummeting by around a quarter to 1.01  billion euros in the first half of 2024 compared to the same period of the previous year and a loss of 172  million euros on the balance sheet.

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KTM im Abwärtsstrudel (5 Bilder)

Even worse, however, was the increase in net debt from under 300 million to a staggering 1.5 billion euros. The KTM share fell on the stock exchange from 62.60 to just 8.61 euros within a year.

Job cuts

Employees have already felt the first effects of the earthquake, with a total of 573 redundancies – not only in production and development, but also at management level. The Management Board was reduced from six to two people. But that was just the beginning, a profit warning had to be issued and the forecast for 2024 had to be significantly revised downwards. KTM now urgently needs a three-digit million sum as bridge financing, but in view of the precarious financial situation, it is likely to be difficult to find lenders. Negotiations with creditors and Pierer Bajaj AG are now underway, as the Indian Bajaj Group owns 49 percent of KTM shares. The current status is not being disclosed, but there is a statement from the KTM management: "The aim is to stabilize costs and sales at a redimensioned level from the 2025 financial year onwards and thus create the basis for sustainable competitiveness and profitability."

Cost savings

That sounds like further job cuts. The company is taking a close look at where costs can still be saved. For example, KTM allows itself to ride with two works teams in the MotoGP. The constant further development of the RC16, the crew and the riders alone cost a fortune, with one team also running under the GasGas label –, although the Spanish subsidiary only builds off-road motorcycles. At the beginning of the year, KTM took over the traditional Italian brand MV Agusta. The price was not disclosed. But it put an additional strain on KTM's coffers at a time when it was already clear that the annual balance sheet in Mattighofen would end with losses.

Discount campaigns

Overproduction is a major burden, with several thousand Euro 5 models in Mattighofen and at dealerships that have to be sold by the end of the year, as the Euro 5+ emissions standard will be mandatory for new registrations in the EU from 2025. KTM therefore announced the "VAT-free riding" discount campaign at the beginning of October. The list price was reduced by the amount of VAT –. Of course, the buyer still had to pay VAT.

It's an act of desperation, because with some high-priced KTM models, that's over 4000 euros less. Bargain hunters will be pleased, but anyone who bought a KTM at the beginning of the year will now be mightily annoyed. Euro 5 motorcycles that will no longer be sold in 2024 will have to be offered at dumping prices next year by dealers with daily registration from December.

Takeover from Asia conceivable

KTM could also become a takeover candidate. The Indian Bajaj Group already has a stake in KTM and is in a very good financial position. In the first nine months of this year alone, Bajaj sold 2.25 million motorcycles, making it the sixth largest motorcycle manufacturer in the world.

CFMoto also has a business relationship with KTM; the Chinese company builds KTM's 790 models and CFMoto also distributes the KTM brand in China. A well-known European brand in their portfolio would suit them just fine. But Pierer Mobility AG wants to fight this tooth and nail. The outcome of the financing negotiations is still open. But Stefan Pierer himself has often bought up brands that have got into difficulties and knows how financial problems can end.

(dahe)