Legendary Austrian motorcycle brand KTM is up against the ropes at the moment getting pummeled. It was revealed during the company’s current insolvency hearings that it is sitting on a whole year’s worth of inventory, to the tune of 265,000 unsold motorcycles. In all my years on this big planet I’ve never seen company mismanagement on this order of magnitude. KTM owes its creditors some $3 billion, and apparently can’t move product to save its own ass. The future of orange is up in the air, and it probably won’t be a soft landing.
How the hell do you overbuild an entire year’s worth of inventory? The brand was hitting record sales numbers in 2023, and management apparently decided to crank up production, but never cranked it back down. A rough 2024 left the orange bike maker insolvent and loaded with unsold inventory and unpaid staff. The brand has resorted to layoffs, restructuring, and halting its MotoGP development program. KTM is rumored to pull out of MotoGP altogether, though denies it.
Predictably, almost all of this turmoil can be pinned on billionaire company CEO and corporate holdings company namesake Stefan Pierer. Management pushed KTM into overproduction for several months, despite plummeting sales.
Reports from Germany’s Der Standard indicate this number was disclosed during KTM’s insolvency hearings. Because outright bankruptcy would leave thousands of workers in the lurch, the Austrian government is pushing for a restructuring of the company’s debt, holding hearings with creditors and stakeholders to attempt to paint a way forward for Big Orange. Lawyers have argued that KTM’s issues stem from mismanagement, and that blue collar employees should not be punished for the missteps of their wealthy overseers
“In his presentation, lawyer Vogl also went into the causes of insolvency and also worked out a number of management errors,” says Der Standard, adding, “In 2023, sales had increased; although demand had decreased, motorcycle production was not reduced. From the resulting storage structure, the liquidity requirement increased by around 440 million euros between January 2023 and October 2024. More than 265,000 motorcycles are now in stock – that’s how many are usually sold in a year.”.
What’s the way forward for KTM? It seems likely that an outside investor will step in and rescue the ailing motorcycle manufacturer. India’s Bajaj already owns 49.9 percent of the company, and seems likely to increase its holdings for greater control of the restructuring. 49.9 percent of nothing is nothing, after all. 50.1 percent of the company is currently owned by Pierer Mobility. It seems likely that Stefan Pierer will be forced out of the company for his role in this disaster.
This case is one that will be studied in business schools for decades to come. Instead of burning cash in down times, it’s probably best to shore up your defenses and ride out the storm. What a fiasco!
