Van’s Bankruptcy Update, Next Steps

[airguy]

What would have been the sentiment if they had just stopped taking orders or only took a limited amount?

You would have immediately had a pile of people standing up and screaming "I'll pay 20% extra if you'll take my order!" (or 32%, in this case) And you would also have a lot of people saying that's too much money, I can't afford it, it's not fair.

Which puts us pretty much where we are today. Reduced market, higher price, and hopefully a healthy supplier.

 

[PilotjohnS]

Hindsight 20-20

In hindsight, I think this is exactly what Vans should have done. Limit kit orders to, like, 50 of each model per month. And when the shipping became extreme, no quick builds, only slow builds to limit exposure.

 

[Cholley6]

Quickbuild Quota

Maybe moving forward they should have a certain number of QB per year or order period. Limit their exposure and give them reason to start upping the price of just the QBs. It might make them a better money maker, even at lower volume, push more people to SBs that can be pushed out faster.

 

[lr172]

You would have immediately had a pile of people standing up and screaming "I'll pay 20% extra if you'll take my order!" (or 32%, in this case) And you would also have a lot of people saying that's too much money, I can't afford it, it's not fair.

Which puts us pretty much where we are today. Reduced market, higher price, and hopefully a healthy supplier.

Or you could do what Lyc did, just keep increasing the price until the demand drops and even stop taking orders once you reach a certain point of backlog. Then just drop it back down once the demand tapers off. As the stories shows us, taking heroic steps to try to grow capacity can be a serious blow for a financially unsophisticated company. Raising prices will push away new customers, but will not really upset anyone, especially if you tell them why. How many things didn't have availability issues post covid? REmember the oil filter hoarding a year ago? I STILL have real struggles getting brake pads. Did you try to buy a cylinder last year? This list goes on and on.

When you have a bubble like this, there is NO answer that prevents customers from complaining. You either tell them no, I can't deliver or you try like heck, go Chap 11, then have them complain.

 

[spatsch]

Doing the easy thing in business usually ends up being the wrong thing in the end. Just say “no”, it’s not that hard.

I am not sure they have learned this yet. They have now a multi year ( at least 2-3) well documented track record of giving themselves deadlines and missing them.

I am sure it is rooted by a strong desire to appease and help the customer as quickly as possible but by missing their own deadlines they achieve the opposite.

Even airlines got better at this. In the past airlines would tell you every 15 minutes that the flight is delayed another 15 minutes before they canceled it. Today they cancel them often way in advance. It’s a difficult message to send as the customer is unhappy and they loose money but it’s so much better then the 15 minute piece meal approach.

Now looking at the new Van’s they missed their self imposed deadline on sending out the new contract and did so only partially the day before the judge would have asked about it. They tell people that somebody will get back to them on questions and they don’t ( instead of just saying all info is in the FAQ if that’s not enough to sign the contract then don’t). So not sure they learned that lesson yet that sometimes giving the customer the hard answer rather than the nice answer early is better for everybody involved.

Oliver

 

[Walt]

In the old days, when aircraft were out of service maintenance was expected to give an expected ETA, we all learned to double the estimate and be a hero when you beat it, much better solution than trying to be a hero with an unrealistic ETA then getting reamed for missing it and really screwing up the schedule.

 

[RVbySDI]

In the old days, when aircraft were out of service maintenance was expected to give an expected ETA, we all learned to double the estimate and be a hero when you beat it, much better solution than trying to be a hero with an unrealistic ETA then getting reamed for missing it and really screwing up the schedule.

I call that the “Scotty, the miracle worker” management style:

https://www.google.com/url?sa=t&rct...usg=AOvVaw3nHvMfKp4MOmKyJbZJhTF4&opi=89978449

 

[Walt]

I call that the “Scotty, the miracle worker” management style:

https://www.google.com/url?sa=t&rct...usg=AOvVaw3nHvMfKp4MOmKyJbZJhTF4&opi=89978449

Yep that’s it

 

[lr172]

Even airlines got better at this. In the past airlines would tell you every 15 minutes that the flight is delayed another 15 minutes before they canceled it. Today they cancel them often way in advance. It’s a difficult message to send as the customer is unhappy and they loose money but it’s so much better then the 15 minute piece meal approach.

Oliver

that is based upon perspective. As someone with almost 2M miles across AA and UAL, the move to early cancellation was a real PITA. In the old days they tried and most times you eventually got home. Then they moved to the "oh, this looks bad, lets cancel all the flights" approach. Works well for them, but for the guy trying to get home it is all bad. This was done after they started booking up flights upward of 90%, so if they cancelled all of Fridays flights and if you didn't see it coming and made provisional alternate reservations, they offered you a new flight on Monday afternoon. When you cancel 5 flights with 200 passengers per and all flights are booked 90%, there is just nowhere to put them. I cant tell you how many times I had to drive home 12-16 hours due to this policy. Early cancellations benefit the airlines, NOT the flying public. THis was especially problematic with snow storms. It was just easier and cheaper for them to cancel the whole day and who really cared that no one could get anywhere. Some of this is on the Gov't for publishing "on time" statistics. Just more incentive to cancel flights vs taking the ding for being late. I remember 15 years ago, UAL wanted better stats, so added 45 minutes to the arrival time on every flight. However, they didnt account for gate availability. Every time the flight was on time, you sat in the penalty box for 30 minutes. Again, no issue for UAL as in their mind, the customer was happy due to arriving "on time."

 

[spatsch]

that is based upon perspective. As someone with almost 2M miles across AA and UAL, the move to early cancellation was a real PITA. In the old days they tried and most times you eventually got home. Then they moved to the "oh, this looks bad, lets cancel all the flights" approach. Works well for them, but for the guy trying to get home it is all bad. This was done after they started booking up flights upward of 90%, so if they cancelled all of Fridays flights and if you didn't see it coming and made provisional alternate reservations, they offered you a new flight on Monday afternoon. When you cancel 5 flights with 200 passengers per and all flights are booked 90%, there is just nowhere to put them. I cant tell you how many times I had to drive home 12-16 hours due to this policy. Early cancellations benefit the airlines, NOT the flying public. THis was especially problematic with snow storms. It was just easier and cheaper for them to cancel the whole day and who really cared that no one could get anywhere. Some of this is on the Gov't for publishing "on time" statistics. Just more incentive to cancel flights vs taking the ding for being late. I remember 15 years ago, UAL wanted better stats, so added 45 minutes to the arrival time on every flight. However, they didnt account for gate availability. Every time the flight was on time, you sat in the penalty box for 30 minutes. Again, no issue for UAL as in their mind, the customer was happy due to arriving "on time."

I don't want to make this a discussion about airlines that was just an example but I think it does benefit many people. Not being a 2M miles flier I was able to stay at home or rearrange my work meetings for a week later knowing the flights were canceled rather than spending a stressful and unproductive day at the airport. If I was on the road I could extend my hotel stay in a predictive fashion rather than spending the night miserable on an airport (which I ended up doing more than once before as by the time the flight was canceled I couldn't get a hotel any more).

But you bring up a good point that does apply. If you are conservative in the deadlines/expectations you set yourself some people will be worse off. E.g. if you are conservative on kit delivery timelines some people won't buy which might have if you manage to deliver early. So not everybody will win. But not focusing on the example I used I still believe the majority of Van's customers would benefit if Van's would set expectations they meet lets say 95% of the time... .

Oliver

 

[Carl Froehlich]

Maybe moving forward they should have a certain number of QB per year or order period. Limit their exposure and give them reason to start upping the price of just the QBs. It might make them a better money maker, even at lower volume, push more people to SBs that can be pushed out faster.

I think invoking some Jack Welsh Six Sigma thoughts on running a business might be helpful. The first rule is “is this a core business?”.

In other words, the QB offerings are, in my opinion, not a core business. They farm this work out and suffer the escalating costs of QA, shipping and rework.

I think Van’s should look for a new business model if they must maintain the QB offerings. The other option would be to drop QBs and focus on the core business of building kits.

Carl

 

[airguy]

I think Van’s should look for a new business model if they must maintain the QB offerings. The other option would be to drop QBs and focus on the core business of building kits.

Carl

This.

Let the "builder assist" shops do that work one-on-one with the customers. Just focus on creating and selling a good kit. With as much work as the builder assist shops are doing already, it might be good preventative action against the FAA reviewing the 51% rule on Vans kits.

 

[roadrunner20]

I think invoking some Jack Welsh Six Sigma thoughts on running a business might be helpful. The first rule is “is this a core business?”.

In other words, the QB offerings are, in my opinion, not a core business. They farm this work out and suffer the escalating costs of QA, shipping and rework.

I think Van’s should look for a new business model if they must maintain the QB offerings. The other option would be to drop QBs and focus on the core business of building kits.

Carl

Another option would be to separate the QB model. The QB arrangement could be made between the QBer & the customer. Van's could just drop ship the paid SB kit to a QBer.
Once upon a time, Vans stopped building the finished fuel tanks & would drop ship the tank components to the outside builder.

 

[lyosha]

As someone that ordered QB kits, and deals with pricing risk for a living, Vans is not pricing the risk associated with its QB business even remotely correctly and that is causing seven figure losses for the company that it then has to tax its core business to pay for.

You just can't price risk with rose colored glasses assuming that everything will work out. Like 2008 re-taught us on Wall St. failures are frequently systemic where you have zero valid product in several production runs in a row. There is serial correlation in the losses. Especially with as little control as they apparently have - having manufactured LCP parts for nearly a year before taking action.

Vans should just drop the business line. Leave the job for someone else who is better suited to take on the risk.

 

[dmattmul]

Core or non-core ?

I think invoking some Jack Welsh Six Sigma thoughts on running a business might be helpful. The first rule is “is this a core business?”.

In other words, the QB offerings are, in my opinion, not a core business. They farm this work out and suffer the escalating costs of QA, shipping and rework.

I think Van’s should look for a new business model if they must maintain the QB offerings. The other option would be to drop QBs and focus on the core business of building kits.

Carl

Great question. Vans core business is designing and engineering parts (Hopefully traditional punched parts in the future) then sell and provide services to purchasers to build and maintain said airframes. Ok, I've simplified it. With QB's they are doing just that and expanding their sales 30%? doing what the core competency already does. Maybe they can reduce their fixed costs to eliminate this 30% but seems they have now already invested to produce said parts in house via punch pressed. Vans used to brag about getting these built and delivered for ~ 10/hr. (Maybe less) I talked to Dick a few years ago at OSH and asked him what kind of boots on the ground do you have at these facilities. He told me they make regular visits, and I asked him regular or occasional? Didn't get an answer. The point is when you operate a manufacturing facility in Asia (Or really anywhere) you need to have people their full time. It's not cheap but price it into the kits. 600 kits at 800 hrs a kit add 1 dollar an hour and you get almost half a million dollars to pay someone. (Including cost for ex-pat relocation) I worked for a company that tried to do this part time and after a year it became clear we needed someone full time there. If they don't get QB going again soon the trained techs will leave and then getting restarted will be a bigger problem or they can shut this down and live with less parts and engineering overhead being covered.

Regardless, I hope they will succeed and never get into a bind like this again.

 

[lyosha]

then sell and provide services to purchasers to build and maintain said airframes.

What services does Vans sell?

Vans designs airplanes and makes parts out of Aluminum. Except in the case of the RV-12, it doesn't manufacture planes.

Is managing multiple remote (and in this case foreign to boot) assembly lines _really_ a defensible part of their core competency? really?

 

[dmattmul]

SB's ??

What services does Vans sell

Check out what S stands for....... (After s...... sales needed)

QB's are what % core competencies? (75%?) If they can manage builders (through builders support which is not free for Vans but is for you and me) who've never squeezed a rivet what makes one think they cannot manage techs that have squeezed millions? Just give them good core competency punched parts to build with, exact same as they give non QB kits. My 14 (flying) and 10 kits were QB built pretty well!!

Ultimately the final decision will go to those who have a lot more experience in managing kit build airframes (foreign and domestic) than any of us or at least me.

 

[Jonnyb]

Check out what S stands for....... (After s...... sales needed)

QB's are what % core competencies? (75%?) If they can manage builders (through builders support which is not free for Vans but is for you and me) who've never squeezed a rivet what makes one think they cannot manage techs that have squeezed millions? Just give them good core competency punched parts to build with, exact same as they give non QB kits. My 14 (flying) and 10 kits were QB built pretty well!!

Ultimately the final decision will go to those who have a lot more experience in managing kit build airframes (foreign and domestic) than any of us or at least me.

The only thing I would add here is that the primer issue was something that those techs managed to screw up. They couldn’t get the correct primer so used something else without checking with Vans first. From what I understand, the first thing Vans knew about it was when corroded kits showed up back in Oregon. But again their QC department failed and they sent some out.

To my mind there’s a few things that have failed here. There’s a failure of Vans contracting department to write contracts that allow for some sort of redress for parts or services that are sub standard. There’s a failure of the QC department in all sorts of ways. There’s a failure of cost and resource planning, and there’s a huge management failure in understanding the risks all this posed to the business.

To me, right now, Vans needs to go back to basics. Vans is a kit manufacturer and needs to build quality kits at a price that’s both affordable and profitable. Once you have that bit right, then look at taking on further risk, but make sure you fully understand and mitigate that risk as far as you can.