Van’s Customers Must Accept Higher Prices Or Risk Losing Deposits

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About 1,500 customers who have put deposits on a total of 3,500 orders for airplane kits, parts and complete aircraft at Van’s Aircraft will have until Jan. 15, 2024, to accept price increases or risk losing their deposits. As part of Van’s Chapter 11 filing on Monday (posted by a commenter on the vansairforce forum), the company submitted a motion which, if approved, would allow the customers to apply their deposits to a revised purchase agreement. If they don’t take the deal, their order will be canceled and they will become one of those on a long list of creditors who will have to make claims in the bankruptcy case to get their deposits refunded. If the court approves the plan, all those who’ve made deposits will get an email with links to a portal where the details of their proposed new purchase agreement will be outlined. They will be able to accept or reject the terms through the portal.

In the filing, the company says it will lose money on all those orders if they are executed under the original terms and that if it doesn’t get permission from the court to increase the prices the future of the company will be in doubt. “Rejection of certain Customer Contracts at this time is critical to [the company’s] near and long term reorganization prospects,” the filing said. The petition only applies to merchandise produced by Van’s. Some customers have also put deposits on engines, avionics and propellers made by third-party vendors and those transactions will be dealt with separately. The filing said Van’s “will be in discussions with those third party vendors to determine what can be offered to those customers.”

Russ Niles
Russ Niles is Editor-in-Chief of AVweb. He has been a pilot for 30 years and joined AVweb 22 years ago. He and his wife Marni live in southern British Columbia where they also operate a small winery.

36 COMMENTS

  1. To me, this is one of the saddest events in recent GA history. Van’s is the very last company I would have thought this would happen to. Their absolutely stellar reputation will be forever tarnished AND now people will view all other companies with a jaundiced eye, too. Long term … this is not good.

    • Since 2020, Trane and other manufacturers have executed unprecedented price increases almost every 3 months. I currently pay twice what an A/C unit cost in 2020. If Vans has been hit with the same increases in materials, I can understand why they are unable to lock in kit prices a year or more in advance of delivery.

  2. Sad events unfolding here, for certain. Leaves every Van’s owner and builder with an uncertain future.
    Shades of Bede Aircraft and a host of others we have seen come and go.

    I wouldn’t at all be surprised if the assets and holdings all went overseas.

  3. Everyone I know has a high opinion of Dick and his company. I’m sure there is an explanation; they didn’t suddenly abandon a lifetime of integrity. Maybe they have put out a statement; I haven’t seen it. We would all like to know what happened, just the straight truth.

    • An Oct. 27, 2023, announcement on the Van’s Aircraft website notes that the company is facing “serious cash flow issues” and has suspended business as usual for at least two weeks. AvWeb wrote a piece then to and I remember when I read it thinking “Oh no, this isn’t good…”

  4. What happened is very simple, inflation. When the value of money goes down, it takes more of it to purchase something. I’m sure that the thinking at Van’s when future prices were established the last 3 years of inflation were not correctly factored in. Hope they’re able to work something out as maintaining the company is in a lot of folks best interest.

    • Fiat money has been the downfall of nation after nation, and I strongly fear it will be the end of this one. When I was a college freshman, my entire year’s cost was $1875 – not eighteen-thousand – eighteen hundred. That fall, Richard Nixon took us off the gold standard, and as of my last reading, the dollar now has 3% the value it had then.

      The Constitution says that money is gold and silver. Period. It is the restraining chain around the neck of the Zuni warrior that is Congress and the only thing that prevents them from buying our votes with our own money and slaughtering our nation. Yes, I know all the arguments from the oh-so-smart financiers about gold as “antiquated” and “out of date,” but of course you only need follow the money to see why they hate it.

      The Day of Reckoning predicted for the last forty years is upon us. I hope we make it.

      • “ and as of my last reading, the dollar now has 3% the value it had then.”

        Beg your pardon, please double check those numbers.

        A simple inflation calculator shows that one 1970 dollar had the buying power of nearly eight 2023 dollars.

  5. Absolutely, inflation & supply chain disruption costs. Their – as with many – business plan was hatched and established as the rule in an era of minimal inflation. The timeframe between deposit and delivery doesn’t allow for price increases, and under such a structure inflation = chapter 11. They’ll work it out.

  6. Sounds like Van’s is being open about this situation and trying the best they can to rectify it. Unfortunately they like everyone one of us has fallen victim to the high inflation of the past two years caused by the administrations and congress’s actions. The choice seems clear, pay the higher prices or see Van’s fold and have absolutely nothing, no parts, no kits, no support and no return of funds paid. Bad situation all around.

    • U.S. inflation is and has been on par with inflation throughout the rest of the world for decades, and the last two years is no different. We live in a global economy – the administrations and congress can fine tune around the edges, but they cannot defeat the global macroeconomic conditions. Van’s problems are Van’s – more likely they didn’t make good use of all the Covid tax incentives to position themselves for the changing global financial landscape, and when the tax incentives dried up they found themselves up the proverbial creek without a paddle. Plenty of businesses have weathered the last several years and come out stronger, and plenty have failed. The difference is in how they managed their businesses and positioned their companies – those that failed are victims of their decisions and business strategies, not the government.

      • More like Covid tax incentives and governments’ hostile takeover of their nation’s economies during Covid caused this record inflation (got a small glimpse of socialism at its finest). We’d be wise to restrict our government’s ability to meddle in economics from now on. To be clear, the blame falls on Trump as much as Biden for that one.

        3 years ago Van’s couldn’t have predicted inflation to be this high, especially if listening to “the experts”. FYI, from Dec 2020 to Oct 2023 (latest data) inflation sits at 18%. A 3 year span “should be” around 6%.

      • No, US inflation has NOT been on a par with inflation throughout the rest of the world for decades. Inflation varies widely depending the country. Venezuela has ~500% inflation. Many other countries have very high inflation. Sovereign governments determine inflation by their policies, such as monetary, fiscal, and regulatory policies. So, inflation is locally determined. Our recent 9% arguably was preventable. Over spending with fiscal policy, and artificially low interest rates for too long, is what ignited inflation. Along with restricting our domestic energy production below what it could have been, the mismanagement of our ports with huge numbers of shipping containers awaiting is another. And the over zealous Covid shutdowns, causing many business failures. As mentioned, inflation varies locally. California has gas at $5 per gallon, Oklahoma at $2. Our recent 9% inflation was avoidable.

      • “Van’s problems are Van’s”

        If that is true, then customers should have no problem with the renegotiated price increase.

        However, methinks that those same customers are seeing the same price increases across the board in their daily purchases, with little or no increase in income.

  7. Having watched a bankruptcy from the inside as an investor (EPS engine) this is a difficult situation and It appears they are working very hard to give the existing people with deposits a way to apply them to future parts instead of just lumping them in with the rest of the creditors and probably losing all of the deposit.

    I feel that Van’s has a good product and when put on a better financial footing it will continue to service their customers well. ( parts etc. will be more expensive in the future but if the reorganization is done right they will be able to service their customers.) but they are in a tough spot now and they do not have enough money to pay all the bills and Bankruptcy is the result. This is a method to help the existing depositors not lose everything.

  8. Many might find themselves in the position of not being able to come up with extra funds to pay higher prices. They too having been adversely affected by inflation.

    And if the viability of the company is in doubt, do they want to be flying with possibly an obsolete air plane? If they are even able to produce one.

    Some will find it better to settle for ten cents on the dollar if the company is liquidated.

  9. Given inflation and the rising costs of everything, Van’s has very few options to attempt to ride out the rough patch. It seems to me they are doing the right thing and the people involved at Van’s are smart enough to choose a path that will be favorable to all concerned, including customers, to continue the business into the future.

  10. At least they didn’t go Chapter 7 (yet). And, Vans did say they would personally put in “A multi million dollar infusion of cash into the company”.
    Then the issue of stamped vs Laser cut parts still remains with a thunder cloud hanging above them. It’s really sad, as Van’s has to be one of the most successful kit/production aircraft ever over many years. Hope for the best for all those hit by this unfortunate news. Wonder if existing owners will have access to parts without months long delays or unfillment of orders placed?

  11. The average customer buys 2 1/3rd airplane kits? There are either some large fleet kit orders in here, or something else is off.

    • Quote” About 1,500 customers who have put deposits on a total of 3,500 orders for airplane kits, parts and complete aircraft”

      3500 orders which includes parts orders, various stages of kits, and whole aircraft kits. Probably includes engines and props as the parts orders too.

      Easy to see 1500 people with a count of 3500 orders accumulatively.

    • The actual court motion is easy to look at and provided by the OP in the VAF link above , (or go to Pacer.gov and search on case 6:23-bk-62260) and they actually list every single order with the person’s name and address. Each order is a separate contract.
      So you can see many people have 5 or 6 orders, some have 10+, some have one or two.

      The motion before the court is only a procedural request because BK rules prevent requesting to the court to batch-reneg on more than 600 contracts at a time, so they are asking the court’s permission to save admin costs of multiple 600-order motions and just inform all deposit holders of their intent in one go.

      There is also a separate motion on holding on to deposits during the BK proceedings.
      There is currently no unsecured creditor’s committee representing the interests of deposit holders

  12. Whatever the causes, here’s a dilemma for everyone who has given a deposit: Do I agree to pay more for a product from a company currently in bankruptcy, or do I give up my deposit and move on?

    I understand it’s reorganizing, etc., and I know the depositors may get some percentage of their deposits back someday, but that’s how it looks right now. I don’t envy those in this position.

  13. Mr. Niles;

    Thank you for the article. Not to nit pick, but the headline over states the “risk” involved regarding the possible loss of deposits. As such it’s a bit more sensationalistic than I’ve come to expect from you and a bit disappointing.

    While there most certainly is the possibility of creditors losing their deposits, it is not a large or even truly considerable one. Historically courts have prioritized customers whenever possible in corporate bankruptcy proceedings. As you mentioned, papers will have to be filed and considerable time and expense will be required to see the process through. But if creditors do follow the process, the chances they will be made whole are very good indeed. If not there are of course further options legally. It’s an ugly situation where no one comes out unscathed, but the actual funds are the least of it.

    I am of the opinion that the court will sell the assets in order to pay the creditors, essentially ending Van’s as we know it. It will still exist, because someone will buy it, but it will not be Van’s. I am very sorry for Mr. VanG. as he will have to bear the liability for his designs for the remainder of his life without control of or benefit from them.

    In short, regular folks are unlikely to take a hit, but Van’s is done forever. After reorganization potential customer would be well warned to evaluate the company as a new entity – because that’s what it will be. The experience, good will and brand trust built up by Van’s over the past years will no longer exist. That’s the lead item here.

    Or perhaps the lead should be that Van’s bankruptcy should teach us all to evaluate carefully any company we expect to have a protracted relationship with. There’s about to be a lot of folks hung up in the middle. Just like the Bede thing of days gone by. It can happen at any time.

  14. So sad indeed, but on a positive note, every Vans aircraft already built has just increased in price.

  15. This situation that Van’s find itself in at the present time all was exacerbated by the Laser Cut Parts outsourced overseas. July 4,2023. See their statement: “There are issues customers have reported regarding the laser cut holes appearing in some of the parts we’ve had manufactured via a laser-cutting process. That process was used to manufacture certain parts from February 2022 to June 2023.

    As many of you likely know: Some of the laser-cut parts made during that period have formed cracks in holes either when being dimpled by a builder, or when riveting a dimpled hole. There are a variety of variables that may contribute to this occurring.

    Van’s will manufacture and replace affected laser-cut dimpled parts with CNC punched parts. The linked update provides an initial description of our plan to prioritize that process, and we will update you as the process is executed and refined.

    In addition, we are conducting tests along with a nationally recognized testing lab to fully understand the situation. This is a complex process, and we are committed to working hard on it and communicating with customers regularly throughout until the work is complete.”

    INFORMATION ABOUT DIMPLED HOLE CRACKING REPORTED ON SOME LASER CUT PARTS
    Service Letter SL-00091 has been published. It refers the reader to the updated Laser-Cut Parts List as well as the Laser-Cut Parts Engineering Evaluation document and addresses the use and inspection of these parts.
    Update: November 5, 2023

    Coming Soon: Refined Laser Cut Parts Lists

    We’ve disabled access to the portal while we prepare the updated/refined data and customer lists.

    You’ll hear from us again soon. Thank you.

  16. The company on its website shared the following information:

    During this period of reorganization, we will continue to source, produce, and provide parts, service, and support to our customers. We will also be crating and shipping kit orders.

    Over the past few years, the company has faced a handful of complex issues, including unprecedented supply chain challenges throughout COVID, faulty primer that led to corrosion problems on quick build kits, and problems with laser-cut parts that were manufactured in response to high demand. As a result of this combination of issues, the company experienced serious cash-flow problems from which it could not recover through the normal course of business.

    During that time, Van’s built up a significant and high-value parts inventory. As we manufacture the additional parts needed to balance this inventory, we will leverage it to fulfill orders for kits and parts over the next 12 to 18 months.

    The purpose of the Chapter 11 filing is to allow Van’s to continue to provide ongoing support for its customers, suppliers, and employees for many years to come. We understand that this situation creates a hardship for everyone involved. However, without these changes we do not see a viable path forward that would allow Van’s Aircraft to remain in business and support its customers.

  17. I’m on my 7th RV. They’re great airplanes from a quality company. One of the lessons here is how difficult it is to produce general aviation airplanes or kits without deep pockets. The list of failed companies is much longer than those left standing. A sad fallout is potential erosion of pilot base. When I started flying, most of the pilots at my local airport were middle class folks building kit planes because certified ones were too expensive. There were plenty of articles about building the $40K RV; no longer. Just like the $500K Cessna 172, increasing kit costs will keep some talented people out of the flying community. Very sad.

  18. COVID is the culprit. What was the genesis of the so-called “pandemic”? Will we ever know? Sure feels like a false flag operation at this point.

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