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"New Ownership At Hartzell Raised Prices Within One Month"

While it's painful for those of us that need to buy products from this company, this is a good thing for the industry - it opens up space for competitors to come into the market. Another common tactic of the PE firms is to cut heads, let the company run on momentum for a couple of years, and then sell at a huge profit. Happens every day across the globe. Works great when you have a "captive" market, or if you think you do. It's a struggle if you want to run a company that simply creates long-term value for the owners, customers, and other stakeholders - you have to compete with people with a lot of cash and a very short-term view.
 
Better pray this guy doesn't get Van's in his sights... Rajeev Amara. Van's is pretty vulnerable at the moment. P.S. Glad I don't have a Hartzell.
 
bmellis11 said:
That was one option that could have saved them. The other was not to burn through millions of dollars through bad business decisions.
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No doubt. Many decisions accumulated to bring them to this point. Definitely an interesting business case.
 
Opens up trade space. Let the others swoop in with a “loss leader” strategy and Hartzell will be bankrupt by the 2nd quarter.
 
Toobuilder said:
Opens up trade space. Let the others swoop in with a “loss leader” strategy and Hartzell will be bankrupt by the 2nd quarter.
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Competitors wouldn't necessarily need a "loss leader". With the kind of price hikes Hartzell is doing, e.g. from 50% to 200%, a competitor could still increase their prices (gross margins) while offering a significantly lower price than Hartzell. Assuming of course the competitor has a product to sell in this space. So what competitors are there for a constant speed prop for an O-360 or O540 and their IO counterparts: McCauley, Whirlwind, others? I think their will be some interesting board meetings at the competition today.

Chris
 
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Seems to me that whatever entity owns Hartzell at the moment will always have employees' mouths to feed as well as corporate profits to achieve. Like the rest of us, when the money printer goes "Brrrrr...." there is no remaining choice but to accept and get aboard the inflation train - it's a rising tide that lifts all boats. I don't imagine any aerospace company would be immune to this anymore than the grocery stores.

Will Van's understandably necessary and overdue price hikes "open the space" for competitors to come in and offer us a lower priced total performance aircraft kit? Arguably that's what the future will bring, by the same logic.
 
MacCool said:
If Van's had raised their prices a while ago, perhaps they wouldn't be in Chapter 11 right now.
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That may be true, but your motivation for raising prices should also be considered. Increasing prices should be the last option. First you have to make good, sound business decisions, negotiate best prices with vendors, eliminate inefficiencies etc., then only do you increase prices. In the case of Van's when they saw demand jump during the pandemic, a good strategy could've been to increase prices then in an effort to manage demand vs. outsourcing manufacturing though. This was obviously a risky endeavour since you both lose control over manufacturing/QC as well as taking on a whole new manufacturing technique. The engineers may have told them the quality will be acceptable but engineers are notoriously bad at PR and relationship skills. They simply could(would) not factor in the potential client response to LCP. This is where senior management should've stepped in and said "Hey, let's limit our risk exposure and not go all out for LCP." Okay, I'm way off the topic. Sorry MOD's.
 
I paid $619 for this in December 2021: https://www.aircraftspruce.com/catalog/eppages/inlinelycoming_07-00762.php. It is now $1295 (and both prices do not include the +$200 core charge). Adjusted for inflation, the price should be closer to $680 (Per the BLS CPI calculator).

It does not seem likely that Hartzell is covering manufacturing loses here or adjusting prices for inflation.

It seems more likely that a highly leveraged buyout of Hartzell was executed, and we are now being asked to finance it.
 
MacCool said:
If Van's had raised their prices a while ago, perhaps they wouldn't be in Chapter 11 right now.
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I would hypothesize that Van’s problem was not so much their current prices, but the lag between when the price was locked in and when the parts were actually produced and delivered. The Chapter 11 bankruptcy proceedings seem to be mostly about resetting the order backlog. Of course, they also have to adjust pricing because their cash flow has probably ground to a halt (though I am still occasionally buying stuff off the web store, and it’s shipping!). But even with their dire financial situation we did not see Van’s increase by 50%, or in the case of the starter above double the price.
 
Bill Boyd said:
there is no remaining choice but to accept and get aboard the inflation train - it's a rising tide that lifts all boats.
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If it lifted all boats, inflation would not be objectionable. But it doesn't, and it is.

If your income has risen as much as Harzell props, Vans kits, real estate, and other such things, I guess it's not a big deal. But the fact that Hartzell kept prices in line until right after they were acquired by a PE entity suggests it's not just inflation.

I love Hartzell propellers, and would love to have one for my aircraft. But I hope the market does not reward this action by the company and instead sends market share to their competitors, because the high the price of flying goes, the smaller our community becomes. And in the end, that hurts us all.

--Ron
 
Northernliving said:
Sadly, there is a long list of good old companies in America destroyed by private equity.
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What one has to realize is that when PE buys a company, an additional layer of overhead is added. They will want 10% of EBITA or more, resulting in price increases for them to remain competitive. The only thing PE brings is depth of capital, allowing a cash strapped company to invest in eqyipment, buildings, etc. so, PE never good for the customer. Certification of new props and the installation on certified airplanes will definitely take a lot of investment for a new competitor. Hartzell did many of their certs when the requirements were less.
 
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