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 possible next steps in KTM’s restructuring process?
**Host:** Welcome back to our programme. Today we’re going to delve into the recent news surrounding KTM’s financial difficulties. Joining us to shed some light on the situation is Michael Stein, an economic analyst with years of experience covering the automotive industry. Michael, welcome to the show.
**Michael:** Thank you for having me.
**Host:** KTM’s announcement of near-bankruptcy and the subsequent filing for self-administration has sent shockwaves through the industry and the community. Can you help our viewers understand what led to this situation?
**Michael:** KTM’s struggles are a complex issue with various contributing factors. While the company has grown significantly over the years, it’s been facing a challenging economic environment.rising personnel costs, which have increased by a significant amount over the past three years, have put a strain on their finances. [ [1] (https://www.inkl.com/news/ktm-is-nearly-bankrupt-files-to-save-the-company-from-insolvency) ].
**Host:** So it’s a combination of internal and external pressures?
**Michael:** Exactly. External factors like changing market dynamics and increased competition have also played a role. KTM’s recent decision to cut jobs and implement short-time work hours are unfortunately indicative of the challenging times they’re facing. [ [[1] (https://www.inkl.com/news/ktm-is-nearly-bankrupt-files-to-save-the-company-from-insolvency)]].
**Host:** Let’s talk about the impact on KTM’s employees. The news reports mention 3,670 affected workers. What immediate challenges are they facing?
**Michael:** This news is understandably creating a lot of anxiety for KTM’s employees. They’re worried about their jobs and their livelihoods. There have been delays in November salary and Christmas bonus payments, which has caused additional stress. Thankfully, the insolvency remuneration fund will step in to ensure they receive these payments, albeit possibly with a delay.
**Host:** There’s been some criticism about the timing of KTM’s dividend payout in April, especially given the current circumstances. What are your thoughts on this?
**Michael:** The timing of the dividend payout does raise questions.
Critics argue that KTM’s management should have prioritized maintaining financial stability over distributing profits to shareholders, especially given the weakening economic outlook. However, KTM argues that the dividend was for the previous year’s performance and was significantly reduced, taking into account the anticipated challenges in 2024.
**Host:** What’s next for KTM?
**Michael:** KTM’s restructuring process is underway. They have 90 days to come up with a plan to turn things around. This will likely involve further cost-cutting measures, potential asset sales, and possibly even a search for new investors. The success of KTM’s restructuring will depend on a variety of factors, including their ability to address their underlying financial issues, navigate the challenging market environment, and regain the trust of their employees and creditors.
**Host:** Thank you, Michael, for your insightful analysis. These are certainly challenging times for KTM, but hopefully, their restructuring efforts will lead to a more sustainable future for the company and its employees.