[Walt]

I suspect the entire home-building movement is going to change drastically in the near future. The cost of building has gone from affordable for many, to out of reach of most. I built my 7 raising 3 kids on ‘blue collar’ wages, a new engine now costs almost as much as I spent on my complete aircraft which included a new engine and Hartzell. I feel extremely fortunate I got into this game when I did, no way could I afford it in today’s market. Today’s average young worker can’t even afford to own a home, this hobby has unfortunately moved to the 1 percenters. Heck some folks are spending as much on their paint jobs and interior then it cost me to build the airplane, times are a changin.

 

[spatsch]

I suspect the entire home-building movement is going to change drastically in the future. The cost of building has gone from affordable for many, to out of reach of most. I built my 7 raising 3 kids on ‘blue collar’ wages, a new engine now costs almost as much as I spent on my complete aircraft which included a new engine and Hartzell. I feel extremely fortunate I got into this game when I did, no way could I afford it in today’s market. Today’s average young worker can’t even afford to own a home, this hobby has moved to the 1 percenters. Heck some folks are spending as much on their paint jobs and interior then it cost me to build the airplane, times are a changin.

I am not quite as negative. I think part is the rise in cost the other is rise in expectations. E.g. on a recent post elsewhere I read that you obviously had to delete all the substandard parts from the kit to the tune of thousands in extra costs. As I used all those part on my RV I felt somewhat insulted considering that I obviously have been flying for 800 hours in a substandard RV and didn’t even know about it. Next is avionics I just looked at a 80k$ stein panel. I grant you it’s a piece of art but a simple panel with a g5, cheap EMS, ADS-B and radio can be built well under 10k new and cheaper used. Then we get to builder support… . Constant speed props … Interior … Paint …

So as I totally acknowledge that prices went up what went up even more is expectations and those are totally under the builders control.

Oliver

 

[JMS1198]

I suspect the entire home-building movement is going to change drastically in the future. The cost of building has gone from affordable for many, to out of reach of most. I built my 7 raising 3 kids on ‘blue collar’ wages, a new engine now costs almost as much as I spent on my complete aircraft which included a new engine and Hartzell. I feel extremely fortunate I got into this game when I did, no way could I afford it in today’s market. Today’s average young worker can’t even afford to own a home, this hobby has moved to the 1 percenters.

Unfortunately, very true.

 

[RV6_flyer]

Customers should stick together and demand that deposits remain in escrow until the COMPLETE kit is shipped...the only way to protect yourself moving forward. The price increase is easier to swallow (although I should have received my kit over the summer and been done with this) if my deposit and purchase is protected by escrow. No escrow means no further dealings with Vans. I believe Dick is a good man, but he took his profits and that's what he's lending the company now (lending the company the spent 22m in deposits). The manner in which this situation is handled will have an impact on whether or not new builders will be willing to trust them in the future. Even with their estimate of 70 percent moving forward, still leaves 6.5m in lost deposits. New builders will shy away for good reason.

Ever have a custom house built or major remodel done to a home?

Typically the low cost guys will have the down payment go to purchase material and want progress payments done along the way. They do not have the capital to pay for everything before it is completed.

IF you want to pay a LOT more for your aircraft parts, the manufacturer would front all the money but then collect a lot more for using the manufacturer's money or interest on borrowed money that the end purchaser will need to pay.

There is an old saying that you do not get something for nothing.

Not being able to use down payment money to purchase material needed to produce the parts (kits) will kill the low cost manufacturer.

 

[squeakersc063]

I suspect the entire home-building movement is going to change drastically in the near future. The cost of building has gone from affordable for many, to out of reach of most. I built my 7 raising 3 kids on ‘blue collar’ wages, a new engine now costs almost as much as I spent on my complete aircraft which included a new engine and Hartzell. I feel extremely fortunate I got into this game when I did, no way could I afford it in today’s market. Today’s average young worker can’t even afford to own a home, this hobby has unfortunately moved to the 1 percenters. Heck some folks are spending as much on their paint jobs and interior then it cost me to build the airplane, times are a changin.

Most of the money in building a Vans is really only true if you're buying everything new or bespoke. If you're able to buy a used engine and rebuild it yourself, do your own wiring, use second hand avionics, and don't panic when parts don't go together perfect and can do a repair yourself you can knock the price down on the total aircraft by over half. Even with all the new stuff and even with the price increases, I'm looking at a plane that can outperform a half a million dollar Cessna 172 off the factory floor.

 

[Karee Brinlee]

Engine refunds and other un-useful thoughts

Guys and Gals,
I am so sad for everyone caught up in this mess. The only skin I have in the game is my complete RV7 project. Lucky for me I have everything I need to get it flying.
I am a little upset that Van's has builders who have fully paid for engines and other items that may get screwed.
I think that if someone had completed a purchase, the BK court should demand that those builders should be made whole first. If you have an engine that is outsourced, no price increase and you either get a full refund or you get what you purchases. Do do anything other than that will leave the builder community with a bad taste in our mouths forever.
I can not feel the same about Van's in the future knowing others got bent over.
As far as kit deposits, I can see Van's giving the builders an option at this time. **** happens and it did.

As for me, I don't plan to take out my anger at Van's on my RV-7 and sell it out of frustration.
But I do believe that unless Van's takes care of these fully paid and deposited engine builders, it will affect the price going forward or, because of fewer kits being built and flown, the demand will stay about the same and my value will stay about where it is.

A lot of us builders are not rich. The straw that breaks the camels back may have just fallen for many builders. May be a bunch of kits on the market soon.
KB

Note, I am just having coffee and am in no way smart enough to be taken seriously so take what I say as a grain of salt in an ocean of smarter humans.

 

[MacCool]

I suspect the entire home-building movement is going to change drastically in the near future. The cost of building has gone from affordable for many, to out of reach of most. I built my 7 raising 3 kids on ‘blue collar’ wages, a new engine now costs almost as much as I spent on my complete aircraft which included a new engine and Hartzell. I feel extremely fortunate I got into this game when I did, no way could I afford it in today’s market. Today’s average young worker can’t even afford to own a home, this hobby has unfortunately moved to the 1 percenters. Heck some folks are spending as much on their paint jobs and interior then it cost me to build the airplane, times are a changin.

I suspect that the reasons for those changes are more extensive than just the rising prices. Van's recent travails clearly highlight the concept that kit builders have to trust 4 or more years of their life and a lot of money to a company who could go from stable to Chapter 11 well within the time frame of that airplane building project, putting the project's completion in jeopardy...or at least drastically changing the time frame and/or the planned-for budget.

 

[sahrens]

Not every kit manufacturer

I am fortunate to have a flying RV-7 that I built. When I decided to build again I tried another RV kit and sold it. I was looking for something else.

At Oshkosh I went to every other kit manufacturer and almost everyone of them said the same thing. It would be 20 - 24 months before I received the kit; Kitfox, Rans, etc. I stopped by Zenith and they said if you give us a deposit today we should be able to ship by 15 December, that is six months.

I gave them a deposit and they shipped the entire kit on 14 December. The entire kit was under 50K including shipping. Of course I still need an engine / prop and avionics.

Granted the Zenith 750 SD might not be your cup of tea. But if someone wants to build an airplane there are other great choices on the market.

 

[psvalentine]

You are saying Van’s intentionaly stole money. I could not disagree more.

I’m far more optimistic. As in:
- Lycoming will honor the price they quoted for our engines.
- Van’s will use new investor money to fill the empty engine/prop deposit buckets.

Yesterday I got an encouraging note from Van’s that the long awaited back ordered RV-10 front seat are soon to be shipped out to customers. If Van’s was really out to screw us they would not be doing that.

Carl

I'm very interested in any information you have about the seats and rails. Did the email say how many seat orders will be filled? Anything about the rails?
I too am optimistic that Vans' will come through in regards to the engine deposits.
Susan

 

[Carl Froehlich]

I'm very interested in any information you have about the seats and rails. Did the email say how many seat orders will be filled? Anything about the rails?
I too am optimistic that Vans' will come through in regards to the engine deposits.
Susan

The rails came with the fuselage kit. The note last week from Van’s said they are expecting delivery of 100 RV-10 front seats.

Carl

 

[Aerodon]

I don't believe that Van's will further mark up the engine, nor ask for additional deposit.

On the Interim Budget, attached as Exhibit A to the Interim Order Authorizing Debtor's Us of Cash Collateral, Van's shows $100,000 per month as Cash Needed to Fulfill Lycoming/Hartzell Orders in Budget Period.

I would believe that if Van's has a contract with Lycoming to deliver engines at a set price thenLycoming is bound to that contract. Thus if Van's pays Lycoming, then Lycoming must ship the engine at the agreed to price. No need for us to pay additional.

Unfortunately, I am building a RV-12 and I don't see Rotax on the budget...

I don't think you are thinking this through. If you paid a $10k deposit on a $40k engine, they will have placed an order with Lyc. When the engine is ready, Lyc will ask Vans for $40K before shipping. Vans should ask you for $30k, but they do not have the ability to prioritize your $10k over other creditors. And it gets worse, if Vans does not follow through on that order, Lyc will gladly cancel that order and sell the completed engine to some lucky guy at today's price. It is probably in your best interest to pay Lyc the $40k, get your engine and then file a claim against Vans for the 10k?

 

[N82VM]

I don't think you are thinking this through. If you paid a $10k deposit on a $40k engine, they will have placed an order with Lyc. When the engine is ready, Lyc will ask Vans for $40K before shipping. Vans should ask you for $30k, but they do not have the ability to prioritize your $10k over other creditors. And it gets worse, if Vans does not follow through on that order, Lyc will gladly cancel that order and sell the completed engine to some lucky guy at today's price. It is probably in your best interest to pay Lyc the $40k, get your engine and then file a claim against Vans for the 10k?

Unless something changes you can’t pay Lycoming. You have to pay Vans who will pay Lycoming. Lycoming does not take payment directly from customers.

I’m not going to throw good money after bad if I’m asked to pay anything more than the 75% balance owed.

You may be better off getting an engine elsewhere and getting in line as a creditor for your deposit.

 

[GregInIdaho]

I don't think you are thinking this through. If you paid a $10k deposit on a $40k engine, they will have placed an order with Lyc. When the engine is ready, Lyc will ask Vans for $40K before shipping. Vans should ask you for $30k, but they do not have the ability to prioritize your $10k over other creditors.

Nonsense. None of the deposits are unsecured claims at this time. They only become unsecured at the time you reject the contract. If you do not reject, you don;t have a claim. Van's has been authorized to use the cash they have, and to continue to pay bills and run a business, which includes punying up for the 25% of the lycoming engine.

 

[GregInIdaho]

2 hours of labor taking an order, processing it, and maybe a call or two with a customer in between order and delivery. At $100/hr that’s pretty generous for paying the employees and overhead.

2022 had 400 orders. When those ship they’d be making $1200/engine. $480,000 a year just for taking and processing an order. I would love to reap 600% over my costs on anything I sell.

I’d say that’s a pretty good ROI, especially when the other products you sell are causing customers to make this additional purchase

Lycoming had 400 orders. That is not to say that Van;s had 400 lycoming orders.

 

[PCHunt]

I've decided to get my information from Vans Aircraft, and not from Vans Air Force forum.

WAAAAY to much speculation for me.

 

[gasman]

2 hours of labor taking an order, processing it, and maybe a call or two with a customer in between order and delivery. At $100/hr that’s pretty generous for paying the employees and overhead.

2022 had 400 orders. When those ship they’d be making $1200/engine. $480,000 a year just for taking and processing an order. I would love to reap 600% over my costs on anything I sell.

I’d say that’s a pretty good ROI, especially when the other products you sell are causing customers to make this additional purchase

An easy way to avoid this when you are ready to purchase your Lycoming, cut out the middle man (Van's) and order right from the factory...$$$$$$$...

 

[Tandem46]

An easy way to avoid this when you are ready to purchase your Lycoming, cut out the middle man (Van's) and order right from the factory...$$$$$$$...

Yeah, that’s not gonna happen. The very first post in this entire thread has a letter from Lycoming:
“At present, Lycoming does not accept direct orders from customers for engines.”

 

[didja]

An easy way to avoid this when you are ready to purchase your Lycoming, cut out the middle man (Van's) and order right from the factory...$$$$$$$...

Unfortunately, you cannot purchase directly from Lycoming......

 

[lyosha]

Nonsense. None of the deposits are unsecured claims at this time. They only become unsecured at the time you reject the contract. If you do not reject, you don;t have a claim. Van's has been authorized to use the cash they have, and to continue to pay bills and run a business, which includes punying up for the 25% of the lycoming engine.

Along with fixing the QB corrosion issues, providing LCP replacements, deposits on propellers, and paying salaries.

At some point you do the math and realize the amount of money they need is ~5-10x the amount of money they have. This isn't speculation, this is just elementary school math at this point...

 

[GrahamF]

Along with fixing the QB corrosion issues, providing LCP replacements, deposits on propellers, and paying salaries.

At some point you do the math and realize the amount of money they need is ~5-10x the amount of money they have. This isn't speculation, this is just elementary school math at this point...

Spoken by someone who gets it.

Then look at the cashflow plan. Over the next few months, they apparently expect to receive $120k per week in new deposits and anywhere between $500k and $1m each week in final payments.

Ask yourself whether, having just hung every customer with a deposit (and some who've paid in full) out to dry, there is enough trust for customers to send them this much cash over the next few months.

 

[lyosha]

Spoken by someone who gets it.

Then look at the cashflow plan. Over the next few months, they apparently expect to receive $120k per week in new deposits and anywhere between $500k and $1m each week in final payments.

Ask yourself whether, having just hung every customer with a deposit (and some who've paid in full) out to dry, there is enough trust for customers to send them this much cash over the next few months.

For sure a valid question, but the same question can be posed to any of the other classes of products that Vans offers.

Cue the speculation whether the low margin products like propellers and engines are more appealing to take the hit on than high margin products like parts and kits.

The money that was sent to vans and that vans needs to give to lycoming to get you your engine needs to come from somewhere, and it's not the Vans checking account. Either you have to re-send it or the kit builders have to subsidize your engine purchase with more-expensive-than-otherwise kits, which is charging Peter to pay Paul (and risk further reputational damage in the highest margin class of customer that Vans is most dependent on for long term survival).

 

[rv6ejguy]

The money that was sent to vans and that vans needs to give to lycoming to get you your engine needs to come from somewhere, and it's not the Vans checking account. Either you have to re-send it or the kit builders have to subsidize your engine purchase with more-expensive-than-otherwise kits, which is charging Peter to pay Paul (and risk further reputational damage in the highest margin class of customer that Vans is most dependent on for long term survival).

I'm not sure how Van's reputation could suffer any more damage if they don't do deposit holders right. The solution is called recapitalization. Maybe not something the company wants from a share ownership perspective but if they want to have decent business volume going forward, they may have to look seriously at this. Nobody is going to wait 4-5 years to get their parts or their money back while Van's claws their way slowly out of the hole. Few people are likely to send money to them for new orders unless it's put in a true escrow account IMO.

I think the company has perhaps mis-read how customers will react.

 

[lyosha]

I'm not sure how Van's reputation could suffer any more damage if they don't do deposit holders right.

Maybe I'm confused by that sentence, but I would imagine more damage would be done if they don't do deposit holders right...

Recapitalization ("selling to China") is unpopular with builders and also as I understood as per their filing in court not an option because they have too many liabilities. They're not worth the 20MM+ that I understood they claim to have to come up with to cover the liabilities they have unless at least 70% of us agree to pay 32% more for kits. Unless I got my numbers wrong, which is possible because I haven't combed through anything with my usual rigor and am going mainly off what I understood from the court date.

There is a world in which they try to lock in higher margin contracts before they try to sell to increase the value of the company.

 

[N82VM]

Low Margin

People keep calling engines and props "low margin". Yes relative to the final price it is a low margin. If my production and overhead to produce such a thing resulted in low margins it would be burdensome and not worth it.

I'll take phone calls and place orders with Lycoming which costs almost nothing ($200 is generous) and turn that into $1200 all day long. Effort/Reward ratio is high. I'd call a $200 cost to receive $1200 HIGH margins. It's only a burden when you incorrectly use a deposit for a purpose it was not intended.

 

[lyosha]

People keep calling engines and props "low margin". Yes relative to the final price it is a low margin. If my production and overhead to produce such a thing resulted in low margins it would be burdensome and not worth it.

I'll take phone calls and place orders with Lycoming which costs almost nothing ($200 is generous) and turn that into $1200 all day long. Effort/Reward ratio is high. I'd call a $200 cost to receive $1200 HIGH margins. It's only a burden when you incorrectly use a deposit for a purpose it was not intended.

That's fair weather logic. One of the things Vans needs to decide on if it wants to take the liability going forward.

Clearly the ratio of margin to liability is something the company has screwed up significantly - which is all over their bankruptcy filing.

 

[rv6ejguy]

Recapitalization ("selling to China") is unpopular with builders and also as I understood as per their filing in court not an option because they have too many liabilities.

Might be unpopular but might be the only way to survive long term.

Who said anything about China? I think Van's could have value for an American investor despite the liabilities. Any buyer would know what the liabilities were and have to be ok with that before signing to buy.

JetEXE (American company) just purchased Lancair.

 

[N82VM]

It's only burdensome when you don't know how to separate monies. Geez I have more than one checking account. My mortgage funds do not mingle with my general funds. If they did, I certainly would not spend them on something not intended, lest I not have a house. While capable of separating it in the same account, I do not do that in order to reduce the risk of error.

 

[lyosha]

It's only burdensome when you don't know how to separate monies. Geez I have more than one checking account. My mortgage funds do not mingle with my general funds. If they did, I certainly would not spend them on something not intended, lest I not have a house. While capable of separating it in the same account, I do not do that in order to reduce the risk of error.

You are assuming the only thing that can go wrong is what has gone wrong in this instance - that funds that should be earmarked for CapEx are used for OpEx.

But there are many failure modes in intermediary agreements, and I'd be amazed if there wasn't a world in which Vans was on the hook for the price of an engine when a buyer backs out.

 

[stigaro]

The money that was sent to vans and that vans needs to give to lycoming to get you your engine needs to come from somewhere, and it's not the Vans checking account. Either you have to re-send it or the kit builders have to subsidize your engine purchase with more-expensive-than-otherwise kits, which is charging Peter to pay Paul (and risk further reputational damage in the highest margin class of customer that Vans is most dependent on for long term survival).

They are already doing this though. The engine deposit holders are subsidizing the QB kits. It seems the QB kits are the highest risk items Van's sells and the rather small markup on these kits is not near high enough to justify the risk. The original corrosion issue affected only QB kits and the LCP issue is going to cost more to fix for QB's than SB's.

Van's may want to think twice about making the upcharge for QB's more commensurate with risk or get out of the quickbuild market entirely.

 

[lyosha]

They are already doing this though. The engine deposit holders are subsidizing the QB kits.

At this point nothing is subsidizing nothing. It's all gone. And in the present failure mode, engine deposits have the distinction of offering only 1k of cashflow for 10-20k of liability. You're not going to subsidize much 1k at a time.

Van's may want to think twice about making the upcharge for QB's more commensurate with risk or get out of the quickbuild market entirely.

100% agree. With the multiple disclosed multi-million-dollar losses it's incurred from that business for sure they should be re-evaluating their contracts and modus operandum there hard and I don't know that the currently published relatively modest 25% increase in overhead makes sense to me, dollars and cents wise.

 

[Walt]

Originally Posted by stigaro View Post
Van's may want to think twice about making the upcharge for QB's more commensurate with risk or get out of the quickbuild market entirely.

100% agree. With the multiple disclosed multi-million-dollar losses it's incurred from that business for sure they should be re-evaluating their contracts and modus operandum there hard and I don't know that the currently published relatively modest 25% increase in overhead makes sense to me, dollars and cents wise.

When I suggested years ago that Van's start assembling QB kits is the US to reduce the associated rising costs of shipping and have better quality control, my suggestion was quicky Poo Poo'd and deleted. I don't think Van's ever had a QA department, much of this debacle could have been avoided with a little oversight. Like many in this EAB business, the purchaser unwittingly becomes the QA inspector.

 

[KatanaPilot]

There was an offer

Might be unpopular but might be the only way to survive long term.

Who said anything about China? I think Van's could have value for an American investor despite the liabilities. Any buyer would know what the liabilities were and have to be ok with that before signing to buy.

JetEXE (American company) just purchased Lancair.

Van had an offer on the table prior to filing Chapter 11. Details were not made public at the first hearing, but would be interesting to most of us if they were.

 

[lyosha]

Here's the other thing that needs to be said with regards to those of you with engine orders.

A likely reason there's no word from Vans yet is likely because they are trying to negotiate a price break with Textron and offset some of their liabilities, making the case that a strong Vans aircraft is good for Textron so they should help Vans by absorbing some of Vans' screwup. Same thing with avionics, propellers.

As people have said, Vans going under is bad for business for a lot of downstream folks and Vans is no doubt trying to get concessions under threat of bankruptcy and loss of orders. And this is most likely good for builders because the less of the bill for the situation gets left with us, the less we have to pay.