The Austrian motorcycle manufacturer said it needs bridge funds to continue its operations in the face of 'challenging market conditions', and is in talks with shareholders. It is mostly owned by a JV between Bajaj Auto and businessman Stefan Pierer.
15 Nov 2024 | 28200 Views | By Sreejith Rajan
Austrian motorcycle manufacturer KTM AG is seeking urgent funding upwards of 100 million euros (Rs 892 crore) and is in talks with banks and shareholders. The company is mostly owned by a holding company funded by Bajaj Auto and European businessman Stefan Pierer.
The company also said it plans ...
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Austrian motorcycle manufacturer KTM AG is seeking urgent funding upwards of 100 million euros (Rs 892 crore) and is in talks with banks and shareholders. The company is mostly owned by a holding company funded by Bajaj Auto and European businessman Stefan Pierer.
The company also said it plans to carry out "even more far-reaching operational restructuring" with a view to reducing inventories at both KTM AG and the dealers and to "significantly reduce" its operating expenses by cutting down production in Europe, KTM's holding company PIERER Mobility AG said in an investor update.
It was not clear whether Bajaj Auto would use this opportunity to increase its indirect stake in the Austrian automaker. The Indian automaker holds a substantial stake in KTM through PIERER Bajaj AG -- its investment company jointly owned with Stefan Pierer, the Austrian businessman who acquired KTM in 1992 when it was facing bankruptcy and turned it into Europe's largest motorcycle manufacturer in the 2010s. Pierer tapped Bajaj Auto as an investor and strategic partner in 2007, selling an initial stake of 14.5%. Subsequently, Bajaj Auto increased its exposure to KTM to a higher level and entered into licensing and manufacturing agreements.
However, due to a continuing slowdown in Europe's premium motorcycle market and company-specific problems, KTM today needs urgent cash infusions to continue its operations, and is banking on the joint venture, PIERER Bajaj, to support it financially, and is also in talks with banks.
"The Executive Board is currently working on securing the financing of KTM AG, in particular on a bridge financing in the three-digit million range. To this end, discussions are ongoing both with the core shareholder Pierer Bajaj AG and with existing financial creditors," it said, adding that it was seeking a standstill agreement with the creditors.
The company also acknowledged that its European operations are not sustainable in their current form, and need to be truncated further so that it can be put on a 'stable operational and financial basis'. Times have been tough for the motorcycle industry in Europe, hit by issues including supply chain disruptions, changing consumer preferences, and the transition toward electric mobility.
"Against the backdrop of a challenging economic environment, an even more far-reaching operational restructuring is being driven forward with the aim of reducing inventories at both KTM AG and the dealer level to an economically sustainable level by significantly reducing production volumes. Furthermore, overheads are also to be significantly reduced once again,” the company said, adding that the aim was to stabilize costs and sales at a “redimensioned level” from 2025.
KTM, known for its off-road motorcycles and successful street bikes, has been a significant player in the European motorcycle market. It was founded by Hans Trunkenpolz as Kronreif, Trunkenpolz, Mattighofen in 1934 as a metalworking shop in Mattighofen, Austria. Initially a car repair shop, it started producing motorcycles in 1954 with the R100, its first motorcycle.
Through the 1950s and 60s, KTM established itself in motorcycle racing, particularly off-road competitions. The company grew steadily, producing motorcycles and bicycles. KTM focused on off-road motorcycles, gaining recognition for its rugged design and performance in motocross and enduro events. By the 1970s, it had become known for its off-road motorcycles, winning numerous racing championships. The company expanded its portfolio to include street bikes and mopeds. However, KTM faced severe financial difficulties in the early 1990s and declared bankruptcy in 1991.
In 1992, Stefan Pierer acquired the company through his Cross Holding company (now Pierer Mobility AG). Under Pierer's leadership, KTM focused on off-road motorcycles and began its transformation into a premium motorcycle brand. In 2007, KTM formed a strategic partnership with India's Bajaj Auto. This allowed KTM to develop and manufacture smaller-displacement motorcycles cost-effectively in India, leading to successful models like the Duke series.
KTM, under PIERER Mobility AG, acquired the Swedish motorcycle brand Husqvarna Motorcycles from BMW Motorrad 2013. KTM revitalized the brand, positioning it alongside KTM as a premium off-road and street motorcycle maker. It also acquired a majority stake in GasGas, a Spanish manufacturer specializing in trials and enduro motorcycles, expanding its presence in niche off-road segments like trials riding.
The company successfully entered the street bike market with models like the Adventure series and the Super Duke, becoming Europe's largest motorcycle manufacturer. Today, KTM is known for both its off-road and street motorcycles, with a strong presence in motorsport, including MotoGP.