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Is Zenith charging enough for their kits?
Probably not going to get a real answer but the current situation with Vans Aircraft has me wondering.
If you haven't been following, Vans has filed for restructuring under Chapter 11 bankruptcy laws.
I understand Vans has a slightly different sales model than Zenith which has lot to do with their current situation. In short, Vans takes cash deposits in order to get in line for a partial kit/full kit / engine order. After receiving the money a customer gets their kit 6 months or more down the road. During the pandemic, this was out as far as a year or more.
In the meantime, Vans was using the deposits as part of their general fund account, meaning they were spending the deposit money on daily operations. Recently (but too late), they started putting the funds in an escrow account to be held there until the ordered kit was shipped.
Then Vans got hit with the laser cut parts fiasco where the process caused micro tears in some of the kit components sheet metal, essentially making them unairworthy and unrepairable. They estimate this may cost the company 500K.
What it boils down to is that Vans may not have been charging enough for their kits in order to maintain healthy operational funds, as well as to cover any unforeseen issues like the laser cut parts problem.
So, I'm just wondering if Zenith is charging enough for their kits to keep the business healthy, and be able to cover some level of unforeseen future problems? My hope is that they are because they have great products and a great company.
At the least, I hope they take the Vans issue serious enough to look closely at these issues and make any adjustments necessary to stay healthy. Adding a few hundred dollars to their kit prices is not likely to discourage many buyers as they are in a unique situation.
Replies to This Discussion
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Permalink Reply by Matt Pope on
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I think there must be more to the Vans story, like gross mismanagement after Dick retired, because in the latest video he mentioned they got rid of a senior manager. That's only speculation on my part, but they also said Dick and his wife have loaned the company $2 Million as a stopgap, and yet they still need to file under Chapter 11 to keep the creditors at bay, so unless the laser cut parts fiasco cost a lot more than $500K and they didn't have appropriate insurance to cover it, something else must have happened too.
I don't know anything about the inner workings of Zenith, other than it's a family business and that Sebastian seems to be doing a good job at the helm. If he decides to retire, then maybe I'll start to worry... :)
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Permalink Reply by alan smith on
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I agree, having owned a company, somebody { probably one of the many chiefs in both accounting and management} wasn't concerning themselves when reading the p&l s, or the balance sheets both now and projected. A large company like Vans with a large client base will just restructure like alot of companies do. When you get to big, people look out for their jobs and don't want to say the sky is falling. It would appear that Zenith has a better handle on what's going in and what's going out, never the less I had better hurry up and finish my plane.
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Permalink Reply by John Austin on
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I think it's fairly likely that the Vans fiasco has given all the major kit manufacturers a reality check! However, Vans' problems are likely due to a unique combination of events leading to a "perfect storm" of cash-flow problems and not an industry-wide problem. Vans not only had the laser-cut parts problem, they also had problems from a Philippines facility shipping quick-build wings and fuselages with incorrectly applied primer and subsequent corrosion problems.
Zenith prides itself on keeping its manufacturing processes in-house to the fullest extent possible, so I think that's a huge plus for quickly detecting and correcting problems as they arise.
John
N750A
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There is a lot more to Vans issues than just the laser cut parts but that is probably better discussed on their forum. At Oshkosh I asked Roger about a quick build Super Duty Option. His comment was we can get kits out the door or build quick build kits. We are focused on getting kits out the door. They were the only vendor I talked with that gave me a five month shipping estimate. Everyone else was two years.
Maybe that is a good indication they have the right focus.
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Came across this article my Marc Cook: Van's Bankruptcy: How Did They Get Here? It's a really well-written, concise explanation and confirms my belief this is strictly a situation unique to Vans Aircraft and not an industry-wide concern.
John
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Permalink Reply by Jon LaValley on
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I guess you never know for sure, but in this video posted November 2, 2023 Sebastian discusses the Vans situation (before chapter 11 was announced) and mentions that they don't use customer deposits for operations:
https://youtu.be/a11PTd_w27s?t=622
-Jon
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Permalink Reply by Sebastien Heintz on
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Good discussion.
In answer to Gary's original question, I believe we are currently charging a fair price, and that the price we charge does indeed cover our expenses. (Of course, in today's inflationary economy, costs and prices do need to be monitored closely and updated as needed).
We have grown our business in large part because our kits and parts are affordable. Chris Heintz's design and business philosophy was always to develop kit aircraft that are 1) easy and quick to build, 2) simple and fun to fly, and 3) affordable to own and operate. This philosophy has worked well for us over the years and will continue to guide us in the future. On November 2nd, Roger and I discussed how Zenith differs in its operations, and how 2023 is a good year for Zenith (and most others in the industry) and the MOSAIC announcement.
While I don't know the inner workings at Van's Aircraft, I think most of their liquidity problems are quite simple: they did not control (limit) their expenses and didn't address their problems (laser cut parts, increasing costs) in time, instead allowing the record number of new deposit dollars flowing in to mask these looming and existing issues. It appears that the company lost more than $3 million back in 2022 (despite record sales and new orders). It's very unfortunate that new customers will be forced to pay for these past mistakes, and that this is becoming another example of a kit manufacturer spending customer deposits and not delivering on them. Very sad.
Let me know if I can help answer questions about how Zenith Aircraft operates.
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Permalink Reply by Gary Welch on
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Thanks Sebastian! Its great to hear it from the horses mouth, so to speak.
I know you understand this, but for many of us our connection to our airplanes is, to a great extent, an emotional one.
Zenith Aircraft represents much more than just another aircraft manufacturer to me. It's also many years of dreaming, and studying, and learning, and building, and so many memories with family and loved ones! Its an important thread that weaves through our lives and creates a lifetime of joy, passion and adventure.
You are not in the business of producing aircraft, you are in the business of making dreams that come true.
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Gary: Well stated.
And that's why my job is one of the best in the world: Helping to make customers' dreams come true.
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Permalink Reply by Peter Chapman on
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Late to this discussion but:
Zenith is probably selling for enough, and plan to stay in business, covering all those cost increases that have happened for materials, parts, shipping, & for labour. Their kit prices have gone WAY up.
I was recently helping someone sell a partly completed Zenair kit.Looking at the invoices from 2019 the kit was worth $33,000 Canadian. Current prices for the same kit parts would be around $60,000! Over 80% more in just 5 years.
Notes:
(A decrease in the Canadian dollar vs. the US dollar, in which the kits are originally priced, does make up a small portion of the increase in cost. So for US readers, the cost difference will be slightly less.)
(One had to be careful when comparing kits, as a paid Option some years back might be a Standard item for no extra charge now. I took that into account. And of course there are always small upgrades to the design so a perfect comparison is impossible.)
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