ESOP's are usually setup with a loan. The ESOP buys the shares from the owner on loan, often a minority stake, and then they pay back the loan (with tax advantages) over time from their share of the profits. The employees didn't take money out of their pockets to buy the shares, so it is typically marketed as a retirement benefit where the value of their stake goes up over time as the loan is paid off and the company grows forever, sunshine and roses all that BS.

It all depends on how it was setup, the valuation at time of sale, and how the company is managed. It can sometimes be a good benefit for employees, but often it is not. It is usually done by the owner for the owner, as a way to cash out without selling.

Why WOULDN'T customers run away in droves? I think most will run. If I really wanted an RV, I would either buy used or wait a few years to see how things shake out. If a lot of buyers run or wait, the company won't survive without deep and patient pockets.

Great question. Let's say you want a sporty airplane and decide to build one. You go the Vans route and find yourself in this situation $20K in. You figure the price increase may mean another $10K on your $135K project.

So you have a choice to make. A)Hold on and wait for indicators which make you more comfortable (or less) with the situation. B)Send your secured deposit in for the next kit. C)Sell your project.

Different people will make different choices. Some will go forward because of the sunk cost issue. Some will park the project. Some will sell. Some want a nifty RV-X with 4 on the floor, cherry bomb mufflers, and a flame paint job, so they move forward.

I think a lot of people will move forward, and for those who don't, there will be a secondary market for the kits so the next owner can move forward with the project and subsequent kit orders. Both of my (flying) RV's were barely started kits I bought second hand.

You should warn those people. Finished tail kits are generally worth about the same as a box 'o tail parts. Maybe less. So if the strategy is to consolidate the parts to a kit then sell, do it. Don't spend tens or hundreds of hours assembling the tail kit. There's no financial benefit.

Thank You Van from the THOUSANDS of people who you helped to achieve the hobby of home building a GA airplane at their own pace and in their own space..
I remember years ago hearing you say and have also seen it written down that “if you have to borrow money, or this project may in any way cause a financial hardship for you or your family to please don’t begin”.
I also remember the convenience of my first RV being broken down into 4 kits to make it more easily to purchase, store, and build.
Payment was made from a personal check when kits were ready, and shipped accordingly.
We used to fly to your backyard for the homecoming fly-in, and a wonderful weekend of flying Labor Day weekend in Oregon.
It has truly changed my life, as well as THOUSANDS of other people, and allowed things to be shared that few can even imagine.

The company you created has grown beyond your control obviously, and now you have sacrificed your retirement sanity and some of your finances to try and save it. I realize this was not what you had planned.

There are few however who seem to know how to do it better, and even have the ability to look forward and be able to weather the challenges of a world wide pandemic without a hiccup.. Hopefully they will share some of their insights, and solutions….

Until then..
May god bless you, your family, and your company
Thank You
John

(Faithful Vans customer, and multi repeat offender with the infamous RV-Grin)

^^^^^^

Very well said, John.

Richard VanGrunsvan has been a standup guy and has done more for GA in the past 50 years than anyone I can think of. Things are tough at Vans Aircraft and you can’t blame anyone for protecting their interests, but I don’t think people change from who they fundamentally are.

Vans made two mistakes: it had a quality control problem, and it priced kits too low. But there are thousands of RVs out there, and they are proven good designs that have value. Vans is not going away completely. How it ends up restructured, however, and the extent of new kit development, remain to be seen. There are lots of forces making life difficult these days for piston aircraft. The Lancair ES (and the IV and Legacy ... happy to debate) are great airplanes whose designs and builds were never modernized to make them economical builds, and people who didn't belong in the IV got into them and that ruined it. They are amazing airplanes that are no longer sold. Vans hasn't faced the pilot/airplane mismatch headwind as much as Lancair did and they did a better job making their planes more buildable, but if great planes like Lancairs can go down, it makes sense to think cautiously about where RVs (which in my view are inferior but more modernized and build able designs) are going.

Cirrus, which copied and improved the ES (that's right) won the battle for folks with $. But one could have an ES for half the price, yet kits are not being sold. One can
have an RV 10 for even less, but will those kits continue to be sold? Hard to say. If not, I'm not sure I know why not, as I'm still baffled why ES kits haven't been modernized and sold. Same Qs for the two-place RVs and the Lancair Legacy. It seems to me hard to say wha5 will happen.

The RV-14 is Van’s modernized two place aircraft. Roomier and easier to build which is why I ordered a complete kit 3 months ago………

Then it has already been decided that customers won’t lose their deposits?

The existing customers have to get the shaft in some form. There is no other way out of the mess. If there was an ability to make them whole, there would be no bankruptcy.

New deposits are going into a dedicated account, which is effectively escrow.

Deposits prior to 10/6 were not sequestered.

Everyone is gonna pay more. The question is what is the status of those who placed deposits before 10/6. Will they ultimately receive the same or different outcomes as the folks who placed deposits after 10/6?

Irrelevant now.

Did you have to pay in full?

Does anyone have any visibility or understanding of how the Bankruptcy filing is proposing to deal with the couple thousand builders who have already installed defective LCP?

The Declaration of Clyde Hamstreet says "While the actual cost of mitigating the issue is unknown, a contingency reserve of $5 million was added to the Debtor’s November balance sheet for this program.

A book (paper) entry is one thing - having cash set aside is another. All this talk about deposits going into dedicated accounts - there isn't enough cash for that, even with another $6 mill DIP loan from Van Grunsven. That is why past paid deposits went straight to covering operating cash losses.

Their own (likely optimistic) cashflow statement shows cash losses (deficits) of about -$0.5 to -$0.4 million per week to the end of February. Just funding a LCP Mitigation Reserve would consume all new funding.

That is why they are bankrupt.

Did you have to pay in full?