I’ve only met Van’s Aircraft founder Dick VanGrunsven once but it left a lasting impression of the man and a positive reflection of his company. I believe it was at an industry event in Palm Springs and the company he created, literally with his bare hands, was entering an entirely new phase. Rather than tirelessly perfecting almost foolproof kit airplanes for affordable aviation, Van’s was becoming an OEM, an airframer turning out finished aircraft that customers could fly away.
The platform for this toe dipping in aircraft manufacturing was a modest one. The RV-12 is Van’s smallest design and fits the Light Sport category, which is easier for manufacturers to navigate in terms of regulatory approval. Still, it was a big shift for Van’s and none other than its CEO was there to gauge public reaction.
For three days, VanGrunsven stood in the heat and wind, patiently answering the same questions over and over again, showing kids the controls, having his picture taken with countless happy RV owners and, I assume, mentally tabulating the results of his hands-on survey. He would have been in his 70s then and he was always there when I went past the airplane. I spent an hour shooting a video with him and he was unfailingly patient, kind and laughing with me about our fumbling quest for cinematic greatness.
Now, VanGrunsven could easily have sent some of his talented staff (no single employee would have accepted the punishing schedule, I suspect) but I doubt that was a consideration. Every self-made man operates to some degree on instinct and this was a gut check. Apparently he heard what he needed because the RV-12 SLSA is still in production.
This kind of hands-on management is pretty much nonexistent in companies as big as Van’s was even then and there are certainly those who would be critical of that approach. Business experts would likely argue that a CEO should be far too busy with much more important stuff than actually dabbing on sunscreen on a blistering California convention center parking lot. Given the recent events, I would argue that his willingness, or rather insistence, on spending three days of his valuable time that way is the biggest asset the company now has.
When a company files for Chapter 11, it accepts a new reality. It is no longer in control of its own destiny. Up until that point, it was calling all the shots and that didn’t work out so well. At this point, it doesn’t really matter why. The court now has the duty to try to minimize the damage to those who put their faith in the company going forward. It sucks for all concerned but it’s the only hope the customers, staff and VanGrunsven have of this all being turned around.
The company history and the relationships it forged over the years are now the greatest hope for that outcome. The lawyers and accountants are hard at work and the precise timeline of trouble that led to this juncture is undoubtedly documented to the fine decimal points. And all that matters in that it informs those now calling the shots on what not to do, and on what their duty is to the thousands of people who are directly affected by all this. And that is as it should be.
But what it doesn’t do is inspire the will to ensure the very best possible outcome for all those people. And that’s where we return to that hot afternoon in Palm Springs. VanGrunsven didn’t have to be there except that he couldn’t stand to be anywhere else while his company went out on a limb with a new idea and a new product in a way that had never been tried.
While they went about their business in Aurora the employees at Van’s shared that risk as did the thousands of customers who were anxiously awaiting the shipment of their dream project and those who were flying their aircraft and in need of ongoing support for it. They had no idea they were risking anything, but VanGrunsven did and he took personal responsibility for mitigating it.
He’s also stepped in to become the financial savior of the company by putting his and his family’s money up to get the company back on its feet. As many commenters have pointed out, he’s taken security against the company’s liquifiable assets and will never see the inside of a soup kitchen because of it. But he did not have to raid the proceeds from his life’s work to help fix this, except that he probably couldn’t do anything less.
And even though he’s technically retired and no longer the CEO (an employee group took over the company years ago), it’s VanGrunsven who has personally made the difficult announcements about the financial difficulties and the Chapter 11 filing, by inference at the very least taking personal responsibility for both.
I suspect he’s not the only one in Aurora with those values. Like minds tend to find each other so there’s likely a lot of others whose primary goal is now to ensure something like this isn’t repeated, assuming they all get the chance to try again. Changes have already been made and I’m pretty sure the company won’t ever unknowingly make parts and kits at a loss after the court-appointed suits have left the building.
But here’s the ticklish part. It’s now largely up to customers to determine the company’s fate. There’s a huge amount of work to be done and not much time to do it to get Van’s back on its feet. It needs customers to support that process so the question is whether the bankruptcy, followed by a 32 percent price increase, has shaken their faith to the point where they’ll look elsewhere for an airplane kit.
The early betting is that Van’s will emerge from this a better, stronger company and I think that’s the hope of most people involved. One of those working hardest to ensure that outcome will be a spry octogenarian with amazing endurance and determination and an obsessive sense of responsibility to those he knows will be either victims or beneficiaries of the final chapter of his life’s story.
I don’t pretend to know much about running a business except that when the going gets tough, the tough … “diversify.”
Even the mighty Grumman aircraft at one point in their storied career resorted to making passenger buses, of all things.
Was that the “Metrocat”?
It was called the “Flxible Metro”. https://en.wikipedia.org/wiki/Flxible_Metro
It is his name on the plane, and, if accounts are correct, his fortune going into keeping the company going after his successors messed up.
It is difficult with one-person businesses, when retirement looms. The idea of off-spring following in the footsteps is no longer at the front of minds — why struggle like Dad or Mum, when you can sit in a comfortable office doing a little light lawyering, thanks to the education they paid for you to get?
Just my personal observations, but there seem to be more cases of businesses being shut when the boss retires, or continuing under new management without the old name than before.
Successors, even if they’re family, often do not share the vision, and many are happy to just sell the enterprise to the highest bidder and take the money and run.
Did the lawsuit they were faced with a few years ago have anything to do with their financial problems. In my experience it takes a few years of burning equity to get into trouble.
Great column, Russ. Van has always had the largest hand in designing and developing the company’s offerings. For him it’s more than having his name at stake, he has the highest belief and enthusiasm in his airplanes. The wide variation available up until this announcement probably had some models stepping on sales of other models, so streamlining the product range is appropriate. 32% price increase – that’s pretty much in line with price increases on nearly everything else over the past 3 years. A problem with a small business growing into a medium or large business is that it becomes harder to adjust to changing market conditions if you’re used to the flexibility of a smaller business. Things changed, Van’s costs rose, and they weren’t able to keep up with the changes with the biz structure they had in place. They get a chance to reset now. I hope they succeed. They offer some exceptional airplanes.
Money does not solve money problems. This company has serious management problems. The same people that lead to the problem they are stuck with today are the same people that will solve the problem now? Good luck with that.
It would behoove many a CEO to watch their business from the most forward of front lines to see and feel the customers who ultimately pay the bills. Even in the best and most open organizations you’re unlikely to get but a filtered picture of the real word once the company has exceeded a certain size.
Good article Russ. Well-deserved praise for Van’s Aircraft. I recall the shiny RV-12 prominently displayed in front of the building. I served as an AOPA Expo exhibitor at PSP in the early 2000s and attended all other events throughout those years. Those conventions were truly epic moments for general aviation.
Every trip out to Aurora to “will call” my kits (to save on shipping), I have been overwhelmed by enthusiastic and proud employees. Also new pilots flying away in sparkling new ELSA RV-12 planes. Their company is filled with excellence. The LCP (laser cut parts) vendor and QB shipping price gouging hurt them a lot. Admittedly a little slow to adjust. They are far more than just a business, and should get through this.
Even though some might argue that continuing to pursue the RV-15 design should be shelved — at least for now — I think that’d be a big mistake. The interest and enthusiasm over it will replace a lot of the good will lost on this Chapter 11 problem. And if it goes right … will provide a good infusion of cash sorely needed.
During the pandemic, the number of orders increased dramatically and in response, Van’s hired and trained more staff, paired with wage and shipping cost increases. At the same time, an overseas contractor was found to be using an inferior primer, leading to aluminum corrosion forming on a large number of quick-build kits and requiring the company to scrap supplies and increase an already expanded level of production to replace the affected kits. This alone was a multi-million-dollar setback. As the company dealt with the primer problem, it began laser-cutting aluminum parts rather than CNC-punch parts and customers began to report small cracks at the edges of some holes on laser-cut parts. After extensive research and testing Van’s found that these parts did not meet design requirements and led to additional replacement needs for the customer base, with over 1,800 affected and some with more than one kit. The issues compounded with the changes in production and pandemic led to severe cash flow problems for Van’s which went unaddressed.
A business failure can came come down to something as simple as poor supplier supervision and nonexistent quality control.
Only thing that matters in this situation is cash vs cash burn. Hope that Van’s loan deal is in an irrevocable trust that survives him and his heirs.
“A perfect storm” unfortunately indiscriminate. I hate to see Van’s get hurt through well-intended ‘improvements’ like QB and lasercutting. It’s the subcontractors that failed it, may that be a lesson to all. China is not a reliable partner : quality and shipping, but also environmental protection and human rights. I sure hope we will not see a Chinese takeover. Perhaps some money can be recovered from the laser cut subcontractor ? I’m sorry for all involved : Vans, his team, all builders. I find the price increase sensible. If they can honour all deposits (especially the 3rd party ones like engines), then that will demonstrate good faith from Vans. Also : issue a huge bond and many of the wider community would chip in : lets say 2 or 3% annually, due in 2 or 3 yrs, perhaps even 5.
When I started my RV4 in 1986, time I spent building,meant nothing compared to the end result 33 months later. My little fighter has given me all the joy one can expect from a 34 year relationship. She is worth all the money or no money depending on your needs. For me she is beyond a dollar relationship.
A well off fellow at APA offered me 40 grand in 1989 shortly after I had her flying and I just smiled that RV smile. Right now at 76, it’s a race to the end. I hope I never have to see her fly over the horizon leaving me behind.
The current debacle probably had its roots in the new management manifesto which encouraged more, faster and easier to build. There’s no free lunch.
Russ, you touched on an extremely important management aspect. “Dick was out there interacting with his customers.” As a management consultant, I have observed many companies evolve and often see the rule of “5s”. Companies usually have transition issues at $5M, $50M and $500M. I have no idea what Vans revenue is. However, many companies have the same management issue as Vans. The founder leaves, steps out or retires and the company has issues. I have come to realize that entrepreneurs have an innate sense for their business and customers. The next management does not. In fact, many companies that employ MBAs to take over the leadership role have great difficulties. The MBAs run the numbers but lack the feel for running the business. One has to wonder if Vans would be in this trouble if Dick was still at the helm.