KTM AG, a subsidiary of Pierer Mobility AG, finds itself in a challenging financial situation and is forced to undertake a comprehensive restructuring. In order to secure liquidity for the year 2025, Pierer Mobility AG requires bridge financing in the three-digit million range. This measure is part of a strategy to restore the company's economic stability and secure its long-term competitiveness. In the midst of declining sales figures, growing debts and a tense market situation in Europe and the USA, drastic steps are being taken to put KTM back on a solid footing.
Urgent need for financing and negotiations
As early as July 2024, it became apparent that KTM AG would need additional financial resources due to changes in liquidity planning for 2025. At that time, KTM generated over 95% of Pierer Mobility AG’s total revenue. Nevertheless, bridge financing is necessary to bridge the coming financial year. To this end, the parent company Pierer Mobility AG is in talks with the core shareholder Pierer Bajaj AG and other financial creditors. The aim of the negotiations is to secure sufficient funds for a stable operating basis and at the same time to create the financial scope for urgently needed restructuring measures. So far, however, there is no concrete information on the conditions or scope of this additional financing.
Reasons for the financial requirements: declining sales figures and high debt
Pierer Mobility is currently under severe economic pressure. In the first half of 2024, sales figures fell by 21.2% and turnover dropped by 27% to 1 billion euros (approx. USD 1.06 billion). The causes include falling demand in key markets such as Europe and the USA as well as high stock levels at retailers, which had to be supported by extensive support measures. These measures led to a massive increase in debt. At the end of 2022, Pierer Mobility’s net debt was still below EUR 300 million, while by mid-2024 it had already reached EUR 1.5 billion (approx. USD 1.6 billion). The financial burden caused by the increase in working capital and interest expenses is having a negative impact on the operating result.
Operational restructuring and production cuts
KTM plans to significantly reduce production volumes in order to reduce the high inventory levels to an economically sustainable level. In the first half of 2024, only 76,000 motorcycles were produced at the Mattighofen plant – significantly fewer than the 112,000 units in the same period of the previous year. In order to optimize the cost structure, overhead costs were also significantly reduced. In addition, Pierer Mobility reduced the Management Board from six to two members in October in order to streamline the management structure.
Staff cuts and relocation of development
The economic pressure led to significant job cuts at KTM. In the first half of 2024 alone, 373 jobs were cut, 309 of which were in Austria. This was followed in August by the dismissal of a further 200 employees, mainly in Mattighofen. The company has also relocated development activities to India and China, where partners Bajaj and CFMOTO are already involved in production. These measures are intended to reduce costs and increase efficiency, but the personnel cuts have also affected the team at KTM Forschungs- und Entwicklungs GmbH, which has been reduced from 850 to around 600 employees.
Share price and investor reactions
The financial challenges and the ongoing restructuring measures have also had a severe impact on Pierer Mobility’s share price. In November 2024, the share price fell by around 38%, having already lost more than 90% of its peak value since January 2022. Florian Beckermann, board member of the Interessenverband für Anleger (IVA), sees the development as a consistent restructuring, which nevertheless shows that even experienced industrial companies such as Pierer Mobility are exposed to major risks. Bank Vontobel points to the possibility that debt could be converted into equity, which would lead to a dilution of the shareholdings of existing shareholders. This could be part of the planned restructuring to strengthen the company’s financial base.
Future prospects and market development
Pierer Mobility is confronted with a weak economic environment, which is having a negative impact on the important German market in particular. While the European market for motorcycles remains stable overall, demand in the low-price segment is stagnating and a rapid recovery does not currently appear to be in sight. In the first half of 2024, Pierer Mobility recorded a net loss for the period of EUR 172 million (approx. USD 183 million), with the motorcycle segment posting a loss of EUR 78 million.
In addition to the operational adjustments, the company will introduce measures to secure its long-term competitiveness. This includes adjusting production volumes and implementing a leaner operating model. The aim is to keep costs and sales stable at a redimensioned level and thus create the basis for sustainable profitability. The company management announced that further details on the planned development in the coming years will be published at a later date.
Conclusion
KTM AG and its parent company Pierer Mobility AG are facing a year of restructuring and stabilization. The bridge financing and the planned measures are intended to create the basis for an economically sustainable future. It remains to be seen how successful the planned steps will be in their implementation and whether KTM can maintain its status as one of Europe’s leading motorcycle manufacturers.
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