If you can do a chargeback for 120 days, why wouldn't you?

If you can do a chargeback for 120 days, why wouldn't you?

I may well do so but I still want to build and there is not another kit that meets my requirements. [/quote]

I predict that these are the reasons why Van's will ultimately survive and we'll only see a temporary slump in sales and popularity. The RV series are about the only kits that can do double duty as fun machines and cross country machines. There are other kits that can do one or the other, but not both.

Excellent analysis of Van’s situation in Kitplanes magazine.

TLDR version: They were losing money on every kit sold, but made up for it in volume.

https://www.kitplanes.com/vans-bankrupt ... 8850512I7C

It's a good read, and not that long for the whole thing. The bottom line for me is that although the above is true, the circumstances of the time caused it to hit them before they realized it was happening. The laser hole cracks were just the last straw.

I'm impressed with the rapid growth in orders - 1500 to 4000 per year is HUGE growth over 2 years, for a complex manufacturing / assembly operation.

Think about all the people, processes, factory setup, inventory management, suppliers ... everything they put together in 40 years. It took 40 years to get to 1500 kits a year... now you've got 18 months to double that. More than double it. With the founder retired and many of the longtime leaders headed out the door too.

That's a heck of a challenge, and it's not surprising mistakes were made.

Here's a lesson for everyone - if your business is humming along and suddenly orders go 2.5x... raise prices by a LOT. You have no idea what your costs are going to be to meet that kind of growth. It's not efficient to grow that fast, mistakes will be made, so you're covering for a higher cost structure plus mistakes.

Worst case, you do 1.5x the business profitably instead of 2.5x the business un-profitably...

Here’s the part that confounds me on this whole thing. They admit that the costs have gone up and they were selling kits too cheaply while also acknowledging that this problem was 3 years in the making.

I conclude that the per-unit-margin was neglected for this entire time. This means that the party responsible to review purchasing costs, labor costs, or the overall profitability did not do this task for three years.

I also think the moment Richard had to make the first loan should have been a triggering event to put all of this under the microscope. Instead, he made multiple loans over a length of time.

I really feel bad for the Van family and the overall loss to GA. However, I can’t shake the feeling that no one had urgency to stop the bleeding.

The Van family was in the driver seat the entire time.

The article describes net profits on the order of about 5%. That seems awfully low. Is that normal for a manufacturing company?

Only in China.

Maybe for a high-volume, highly commoditized products. Even then I would expect closer to 10%.

Or maybe you do 0.8X-1.0x the business profitably. The idea of trying to grow that kind of business that rapidly is not smart in the best of times. To try to do it in a time of supply chain issues, labor shortages and retirement of longtime employees was stupid. 50% growth from a good year would have been super aggressive IMHO. A lot of other companies wisely chose not to do that!

Not raising prices as their costs were going up was even dumber. How are they running a business and not carefully tracking major expenses? Especially if they are locking in prices before locking in expenses in a period of high inflation. The first thing I would have done in 2020 is eliminate price guarantees. How do you not notice a global pandemic and realize that it is going to introduce a lot of uncertainties? You get a price when the kit is ready to ship, if you don't like the price, no problem, it gets offered to the next guy on the waitlist. Everyone else used COVID as an excuse for rising prices, longer waits, and changing policies, and consumers mostly accepted that. There is no excuse for selling at a loss when you have record demand and trouble delivering product.

COVID or no COVID that's just business 101. If you have more customers than you can handle, its time to raise the price until it evens out. That's not mean and that's not greedy, it's just managing the market to deliver the best you can to the customers that you have.

I think they did, but missed the inflation variable. When they *took* the order (say $10,000 for a kit that should have cost $7,500 to make), there was a 25% margin on the order.

Two years later, they made and shipped the subkit, and it cost 'em $9,500 to make it because of inflation. So they only *really* made $500. But on the sales sheet, it *looked* like they had made $2,500.

But by that time, they were selling the next kit for $13K, knowing it cost $9,500, so everything was fine, right? Well...

It is the accounting vs finance issue. You may win one game and get your ass kicked in the other. Gotta carefully watch both scoreboards.

I think they did, but missed the inflation variable. When they *took* the order (say $10,000 for a kit that should have cost $7,500 to make), there was a 25% margin on the order.

Two years later, they made and shipped the subkit, and it cost 'em $9,500 to make it because of inflation. So they only *really* made $500. But on the sales sheet, it *looked* like they had made $2,500.

But by that time, they were selling the next kit for $13K, knowing it cost $9,500, so everything was fine, right? Well...

It is the accounting vs finance issue. You may win one game and get your ass kicked in the other. Gotta carefully watch both scoreboards.