Stung by the trade war with China that’s dried up investment capital, light sport manufacturer Icon said Friday that it’s reducing its workforce by 40 percent and cutting production to fewer than five airplanes a month. COO Thomas Wieners said in a conference call Friday afternoon that the workforce will decline from 650 workers to about 400.
Wieners said two funding rounds were expected from Chinese investors for 2019. “The March round didn’t come and September is not going to come,” Wieners said. Although he declined to give the amounts of the funding, the September tranche was the larger of the two. It has been reported that at least $89.5 million has been invested in the company thus far.
With current investment, Icon was equipped to produce as many as 20 aircraft a month, but Wieners now says the company will match its production to market demand, with a three- to six-month look-ahead window. Although Icon has said in the past that it had as many as 1800 deposits, Wieners declined to say how many of those represent hard orders. He conceded that deposits are one thing, sales contracts another.
Icon has two factories, one in Tijuana, Mexico, that produces composite components and a second in Vacaville, California, where final assembly of the company’s A5 amphibian is done. Wieners says the workforce cuts will occur across the board and will affect all of the company’s departments. “We will continue to sell airplanes, continue to allow demo flights and continue to provide a top-notch owner experience,” Weiners said in the conference call. All 40 service centers will remain open, as will Icon training centers.
As of last week, Icon said it has produced 100 A5s. Wieners says both factories are sufficiently equipped to continue production, albeit it a rate far below what the company envisioned. According to Wieners, the company is not anticipating further staff reductions once the current restructuring is complete and the $389,000 price tag on the A5 is expected to remain the same.
I think the article needs a little more journalistic skepticism. Whenever a company announces it’s laying off “40% of the staff” and says there won’t be more staff reductions, it usually means “no more staff reductions until after lunch.”
5 planes a month for a 6 month outlook? So they have 30 orders sold? out of the announced 1800?
And they need to keep two factories open to match that production?
January 2019, Icon Ramps Up Production
August 2019, Icon Reduces Work Force, Cuts Production
Is it just me?
The old start-up “fake it until you make it” mentality. Only they didn’t end up making it.
At SOME point, realism has to enter the decision making equation. Somebody in Icon has fiduciary responsibility to act … um … responsible vs. pouring more money they don’t have down a rat hole. Lack of Chinese investment capital isn’t the problem, it’s the $389K price for an LSA. This thing is another Skycatcher.
I totally agree Larry 389K is way too expensive for a low flying water toy! Too many service centers and few sales completed and a backlog of 1800 deposits, money that has more than likely been spent. I see bank rupture in the near future, sad but china was or is their last chance for funding and they are savvy investors.
It’s not just the super high price of this toy, it’s that Icon monitors your every move and you can’t just sell it anytime you want. Their business model eliminates the very “freedom” that was supposed to be whole vision of the aircraft. Heck, you can buy a boat AND an LSA for 1/10th of the price (and have the best solution for both). Done.
As a VC, I have always been fascinated by ICON. One of ICON’s founders also created a new and more stupid kind of skateboard. Nobody wanted to buy the skateboard, either.
By my own estimates, total investor funding raised for ICON is closer to $400 million since 2006.
want to deal with the Chinese?? expect this and more…
Exactly and it will only get worse. Sometimes the obvious is never seen until it’s to late.
I have no love for the PRC but ICON’s fate can’t be laid at the feet of the Chinese.
THey’re done,
This company has badly managed from the start. They used to have a huge booth at EAA air venture Oshkosh. Then the booth got smaller and smaller over the years till this year no booth at all. The first aircraft off the production line was given to the EAA young Eagles and then it was taken back because it wasn’t completed. They also gave out media rides one year in a aircraft that was not certified to carry passengers.
Then of course there was the two fatal accidents didn’t exactly help one being a test crew and the other a famous ex baseball player. The second one wasn’t Icon’s fault but there videos almost the aircraft look like you could fly it like a fighter jet. When it well known to be underpowered there has other crashes recently as well which must make people think this aircraft is dangerous.
I don’t agree with the pessimism expressed above. This is a good company that has carefully engineered a pretty good product. I do think that the first sentence in the article is politically motivated, regardless of the source. Chinese investment is great, but trade agreement revisions are part of healthy competition between cultures, and they are very necessary for the USA’s industrial survival.
The founder’s at Icon have been amazing, balancing product safety concerns with the necessity of making a small profit for those investors. Let me get on my soapbox about the concept of 3D transportation and getting our young kids to adopt the concept, and see the potential:
Take a look at google earth and you can plainly see that man’s imprint on this green earth is primarily the destruction of trees and habitats for transportation right-of-ways. How can we expect to absorb carbon dioxide without our indigenous trees? We are still crawling on this earth like ants in only two dimensions, while in four generations of science-fiction movies we have been promising the younger gen that the ‘future’ will include 3-dimensional personal transportation. Meanwhile, the product-liability attorneys (lack of significant tort reform) have been killing general aviation.
Fact of the matter is, a small aircraft above 5000 ft, or a large aircraft above 10000 ft has no significant impact on habitats, human or otherwise. Cars are (literally hitting them) killing animals by the millions, while the 2D infrastructure destroys the habitats. Thanks for your support of 3-dimensional travel, and thank you to the founders at Icon for your heroic efforts to bring us a healthy future. btw, WE can invest in these companies ourselves!
Like I said above … it’s not pessimism … it’s realism, Dean.
Companies that “engineer a pretty good product” that customers clamor for at a price that the marketplace can absorb and justify are usually successful. Schedule slips, onerous purchase / maintenance / resale rules, crashes by both experienced and inexperienced pilots, poor capitalization of the Company, and more do not a successful Company make. “Engineering” goes a lot further than just designing a usable product. And as far as pure engineering is concerned … seems to me they’ve had hull issues. How is THAT a good product?
In the heyday of GA, there were SO many C172’s sitting on airports in Kansas that they couldn’t find space or enough ferry pilots to move them. At that time, you could buy one for less than $50K. My 1975 C172 cost $21K new. Now that the price is ~$400K, they take delight in announcing unit sales (once in a while, larger flight school sales). Price is a seminal ingredient of a successful engineering effort; $389K for an Icon that may or may not be subsequently maintainable because the Company isn’t around … ain’t it. When Cessna brought it’s ‘concept” LSA to Airventure 2006, people went crazy. When they brought the Skycatcher to Airventure 2007 and priced it at $109.5K, people were disappointed but bought it in droves because — well — it was a Cessna. And THEN reality set in. And all of that was from a large well capitalized Company. In the end … the bulldozers finished them off.
In many ways, Icon is similar to the early days of Jim Bede and his BD-1. Jim was a pretty decent designer in Ohio but had no real management ability to produce or market his BD-1 which morphed into the AA-1 “Yankee” built by the American Aviation Company. Even that missed the mark and had to morph again into the AA-1A Trainer. In the end, he had to be removed so the Company could prosper. Then he went on to huckster his BD-5 which took the same path. I view Icon the same way. The Icon A5 may well be OK … I dunno … have no interest in it and haven’t flown it. But the people running the Company are doing it with OPM and doing a bad job of that, too. As Glen T aptly points out, the glitzy black Icon booth with dancing girls and multi-media videos and blaring sound systems was noticeably absent at Airventure 2019. In and as of itself, THAT is telling.
And then we’re gonna “save the planet” if only hoardes of Icons flying in 3 dimensions comes to pass. Give me/us a break. I have it on “expert” authority that the planet only has 12 years left so … what’s the point? But the 1,500 private jets flying heavy hitters into Davos to talk about “climate change” are likely flying above 10,000’ so … it’s OK … no impact on the planet. Geesh!
I love this amphibian’s design. Reminds me of the Sia Marchetti
N9314NS F33 Riviera I owned in 2004 which was a sorta updated See-Bee.
Great visibility, retractable tip floats & water rudder & gear Reservable prop
But also had it’s faults i.e. too heavy. very noisy, glide ratio of a polished crow-bar, proposes. Sea level only.
With respect to our climate. perhaps one should read why our movement
left the UN. Read “CIMATE-GATE.
Burt Rutan has a little something to say about it. See:
forbes.com/sites/larrybell/2012/09/09/a-cool-headed-climate-conversation-with-aerospace-legend-burt-rutan/#2a1c00cf7e03
Larry S., good article. Thanks.
Dean:
If you think the ICON aircraft is going to provide even a miniscule capability for young people to ambulate in 3 dimensions, I suggest you think again. This aircraft has never been marketed as anything more than an expensive toy….an exclusive, adrenalin-pumping “motorcycle” capable of accessing the third dimension. Look at the videos that were running at OSH for several years; it was all about skimming over Lake Mead at 50′ and high speed. No surprise about the two accidents; these airplanes were being advertised and operated in a wholly unsafe manner appealing to rich speed-junkies with (usually) limited aviation acumen. (Their marketing campaign specifically targeted high networth men under 40 years old with a propensity for risk-taking…the fighter jock personality.)
And it’s my contention that any aircraft not capable of IFR flight is not a viable mode of transportation. This is not to say VFR and Light Sport aircraft aren’t great and enjoyable, but they really aren’t capable of demonstrating a reliable and robust way of getting from Point A to Point B.
It doesn’t matter if the product is any good or not. At 5 a month and 400 employees (after layoffs), they are at $60K per employee in revenue. They won’t even cover employee expenses at that figure, let alone manufacturing costs, cost of capital, liability insurance, etc., etc. They are a cash burn operation at this point, and at $400K each with very limited capability these planes are novelty items. The bulk of their deposits were taken when the price of the plane was a fraction of what it is now. Most of those deposits will not be converted. The design of the plane will survive, but the company will not.