What happens next for the 3,670 employees affected by the impending insolvency of the motorcycle manufacturer KTM and two subsidiaries? They are worried about their jobs, and from Monday there will be company meetings with experts from the Chamber of Labor.
KTM no longer pays the salaries and wages for November as well as the Christmas bonus. Until the restructuring process is opened, it is not legally possible for KTM to pay this out, says spokesman Hans Lang. There is no comment on whether this will benefit the ailing company.
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Business KTM: From bankruptcy in 1991 to bankruptcy in 2024
The insolvency remuneration fund will step in and the employees will get the money from there. According to the Chamber of Labor, the processing will take at least a month. So the Christmas bonus comes after Christmas.
Criticism of the union
Wolfgang Gerstmayr, managing director of the GPA union, emphasized on Wednesday that the fund is financed from additional wage costs and criticized: “KTM boss Stefan Pierer, of all people, has repeatedly raised the mood against additional wage costs in the past. Now the public sector should step in for his company , although serious management errors are most likely responsible for this situation.”
Things are different when it comes to December wages and salaries. KTM will pay this again – not at the end of December, but next week, i.e. in the first week of December. The aim is to “soften hardship cases,” says Lang.
From January onwards, wages and salaries should be paid as normal or to the extent of the 30 hours to which working hours are reduced (internal short-time work). As reported, up to 300 additional jobs are to be cut. What other measures are to be taken will ultimately be included in the restructuring plan, which KTM must agree on with the creditors within 90 days.
Critical voices accuse KTM of having paid out a dividend in April. It was 50 cents per share. The year before it was two euros. The payout ratio fell from around 40 to 21 percent. Lang defends the dividend: “It was paid out for the past financial year and was significantly reduced despite the record year of 2023 because it was foreseeable that 2024 would be more demanding.” However, the slump in sales of this magnitude was not to be expected.
When asked how much of the bankruptcy was due to adverse circumstances and how much was due to management errors, Lang said: “A lot has been done right in recent years, but not everything.” He points to external factors: personnel costs have increased by 125 million euros within three years. “And this for a company that has a 96 percent export quota.”
What are some potential criticisms of KTM management’s decision to pay dividends earlier this year, given the company’s current financial struggles?
Winterschal
hello and welcome back to the show. Today we’re talking about the difficult situation facing iconic motorcycle manufacturer KTM. Joining me today to shed some light on what’s happening is [Guest Name], an expert on the automotive industry. Welcome to the show.
[Guest Name.]
Thanks for having me.
WinterschalNow, for our viewers who may not be familiar, could you give us a quick rundown of what’s happened with KTM?
[Guest Name]
Of course. KTM, a company synonymous with off-road motorcycles and racing, is facing a major financial crisis and has filed for insolvency. This means they need to restructure their finances in order to avoid bankruptcy. This news has understandably created a lot of uncertainty for their 3,670 employees.[[[[
Winterschal
That’s a significant number of people affected. This news came as a blow to many, especially considering KTM’s rich history. Can you tell us more about the immediate impact on employees?
[Guest Name]
Absolutely. Right now, employees are understandably very worried about their jobs. KTM is not able to pay November salaries and the Christmas bonus immediately.
Winterschal
What steps are being taken to ensure employees are taken care of during this difficult period?
[Guest Name]
Well, the good news is that the insolvency remuneration fund will step in and cover these payments. However, there will likely be a delay, possibly taking at least a month.
Winterschal
So the Christmas bonus will likely come after Christmas for many KTM employees.
[Guest Name]:
Unfortunately, yes.
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Winterschal
Are there any brighter spots for employees, perhaps regarding December wages?
[Guest Name]
KTM has said they will pay December salaries in the first week of December, which will hopefully provide some relief for affected employees.
Winterschal
What about the future? What are the next steps in the reorganization process?
[Guest Name]:
KTM needs to work with its creditors to develop a restructuring plan within the next 90 days.
This plan will likely involve cost-cutting measures, possibly including job losses.
Winterschal
The situation is undoubtedly stressful for everyone involved. There’s accruing a lot of criticism towards KTM management, particularly regarding a dividend payout earlier this year. What can you tell us about that?
[Guest Name]
Yes, there’s been some controversy about a dividend payout to shareholders in April. People are questioning this decision given the company’s financial struggles.
Winterschal
What’s the company’s response to these criticisms?
[Guest Name]:
KTM defends the dividend, stating it was for the previous financial year’s profits and significantly reduced from the prior year. They argue the decision was made before the full extent of the current downturn became apparent.
Winterschal
Has KTM acknowledged any responsibility for the situation?
[Guest Name]
While acknowledging that not every decision was perfect, KTM has also pointed towards external factors such as rising personnel costs and challenging market conditions as contributors to their current situation
Winterschal:
Well, [Guest Name], thank you so much for walking us through this difficult situation. It’s certainly a challenging time for KTM and its employees, and we can only hope for a resolution that minimizes the impact on everyone involved.
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