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Within one week of announcing it had filed for Chapter 11 bankruptcy, Van's Aircraft announced the new kit pricing as well as changes to kit contents and ordering policies. Van's shared on Saturday that kit prices were rising by about 32 percent and the company is standardizing kit offerings as well as implementing new policies.
Van's announced on Dec. 4 that it filed for protection under Chapter 11 of the federal bankruptcy code as part of the reorganization of the company following financial difficulties. In October, founder Dick VanGrunsven released a video speaking directly to Van's Aircraft builders and owners, sharing challenges the company has faced and a plan to move forward. Due to factors like increased costs, doubled inventory levels, slowed deliveries and strained cash flow the company reached a breaking point. Van's assembled a team of advisors to help with financial analysis, planning and operational improvements.RELATED STORIES:Van's Aircraft files Chapter 11 bankruptcyVan's Aircraft reveals financial difficulties, production changes
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 and to ensure continued operations, the company acted. After announcing the Chapter 11 filing, Van's shared the new plans for existing customers moving forward. Customers with existing orders or in need of replacement parts will be contacted about their kits and information about the parts replacement program. The affected customers will be given the new prices and receive access to a website to review and act on the details of the existing orders and proposed order modifications. Customers can choose to apply the full amount of their existing deposits toward the purchase of the same kit under the new terms and conditions and with the price increase. The customers can choose to accept the modified orders on the website.
With the latest update, Van's shared that after the internal assessment and cost review, the kit prices will be increased by approximately 32 percent. The prices of individual parts and components will also increase, some as much as 32 percent and some lower. The price changes, while large, are necessary to continue operations and send out products to customers with existing orders. As well as the price updates, Van's is implementing new policies pertaining to how the company packages and sells kits. Van's will begin standardizing kit offerings, making several as to what is included or not included in each kit. The company is also implementing a no-deletions policy and revising kit deposit terms and the payment schedule.The changes to kit prices and policies will apply to new orders, as well as the orders placed before the company filed for Chapter 11 bankruptcy protection. Van's will continue to openly communicate with customers with open orders, notifying them of changes and giving them the opportunity to review modifications made to previous orders and to accept the new terms, conditions and pricing.
Deletion/Addition of parts from kits
Van's will no longer be allowing the deletion or addition of parts to empennage/tail, wing, fuselage and finish kits. In the past, the company has allowed customers to make many deletions, additions, modifications and customizations to kit orders, whether it was standard or quick build. With this, there was extensive variation among the kits that were picked, crated and shipped each day, ultimately impacting the purchasing, planning, costs and revenue. There are still many kits with several options to choose from on the order forms, but the deletion of individual parts or additions of extra parts in an order is no longer allowed.
Customers can still order these additional parts but they will be packaged and shipped separately from the crated kit. These changes will allow the company to continue efficient warehouse operations and ensure the kits are delivered to customers in a timely and cost-effective manner.
New Deposit amount and terms
A deposit equal to 35 percent of the order amount must be received to complete a kit, engine or propeller order. Until Van's receives the deposit the order is pending and without a deposit within 14 days of the order being submitted, the order will be canceled without further notice. Customers who buy parts or kits from Van's will need to review, sign and return the current purchase contract and waiver and release of liability agreements. These must be on file before placing a pending order or shipping kits or parts.
The deposits for kits will be held in a new customer deposit account, which is not used for Van's general operating expenses. The kit deposit will remain in the account until Van's begins to manufacture, source and or assemble the kit components. Customers will receive a "Notice of Production Commencement," after which the deposit will be transferred from the deposit account into the Van's operating account. About 60 days before Van's crates the kit, the customer will be given 14 days to submit the remaining balance due for the order.
With these changes, Van's hopes to improve operations for both customers and employees. The company has shared each phase in the reorganization process with the public, starting with the initial steps to replace kits and parts to the recent Chapter 11 filing.
"We appreciate your support and look forward to continuing our mission to provide incredible, achievable, total-performance airplane kits - and helping you fulfill your goal of building and flying the airplane of your dreams," Van's shared in its latest update.