Van's Aircraft reveals financial difficulties, production changes

Van's Aircraft revealed its recent financial difficulties to customers, addressing the changes in place to ensure ongoing operations. Founder Dick VanGrunsven made a video, speaking directly to Van's Aircraft builders and owners, sharing that the company can work through the challenges. Due to "a number of factors" Van's said it is facing serious cash flow issues. The company shared in an included questions and answers portion that a combination of events over a short period of time has increased costs, doubled inventory levels slowed deliveries and strained cash flow "to the breaking point." These problems must be addressed promptly to ensure ongoing operations. Van's has assembled a team of advisors to help with the financial analysis, planning and operational improvements. From now until mid-November, the company will focus on the internal changes required to address the issues. While this is ongoing, day-to-day operations at the company will be affected. While the company navigates a financial recovery process, shipments will be delayed, kit orders will not be processed and refunds will not be issued. The company is unable to conduct factory tours or demo flights. Van's is adjusting operating hours beginning Monday. The company will be open 8:00 a.m. through 4:00 p.m. Pacific Time every business day and the builder technical support hours will be shifting to 9:30 a.m. to 4:00 p.m. These will be permanent changes. Van's broke down some of the factors that led to the problems. Like many businesses across various industries, the pandemic brought a financial strain due to the required operational changes, supply chain problems and shutdowns. The number of orders increased dramatically and Van's needed to hire and train more staff, paired with wage and shipping cost increase, more than five-fold. "Stated simply: without realizing it, we were selling kits below our cost," Van's said in its statement. At the same time, an overseas contractor was discovered to be using an inferior primer, which led to aluminum corrosion forming on a large number of quick-build kits, requiring Van's to scrap many and increase an already expanded level of production to replace the affected kits. This alone was a multi-million-dollar setback. In January 2021 the company paused shipping of the QB kits to investigate, some customers had their kits replaced and others had them held in a warehouse while the team investigated the concerns. In March 2021, Van's announced it had changed the primer being used and it would be a permanent change. Assemblies with the updated primer were expected to arrive in April. Throughout the investigation, Van's announced price increases for kits and freight and updated customers on shipping timelines. When the company fell behind on shipping orders, it needed to outsource some aluminum parts manufacturing, which increased costs. The timely option was to laser-cut rather than CNC-punch some parts. Customers began reporting small cracks at the edges of some holes on these parts, which led to extensive research and testing. Van's discovered many parts did not meet design requirements, which was communicated to its customers. While the testing proved that the laser-cut parts were functionally equivalent to punched parts, many builders found it unsuitable for use. This led to an exorbitant number of requests to replace the laser-cut parts and cancel orders. Over 1,800 customers are currently affected by this issue and some have been given more than one kit. The internal review will investigate inventory, production and shipping capabilities as well as operating efficiencies. During the investigation, Van's will evaluate how to satisfy builder concerns over the laser-cut parts while reviewing the costs of parts and kits. The assessment is expected to be completed by mid-November. Through this process, prices are likely going to increase. Van's hopes to keep prices low while still maintaining the highest quality products and services. During the internal assessment period, Van's will not be issuing any refunds or processing requests for cancellations or returns, including those for the laser-cut parts. Customers can still order parts but there may be a delay due to temporary employee reassignments during the assessment. "We are working hard to resolve our production issues and to resume filling orders for kits and parts as soon as possible," Van's said in its statement. "Over the next few weeks, many of our staff members will be working on special assignments, which will delay shipping in many cases. We will update you on our progress and timing when we know more." The laser-cut concerns will be addressed through a replacement program that the team is working to finalize during the assessment period. Van's is working to produce replacements for the parts classified as "Replacement Recommended." With the large number of parts needed, the production process will take time. The company said it has not begun shipping the replacement parts through the program and Van's is doing everything it can to produce them as quickly as possible. Van's said it would update customers regarding progress and timing at the end of the assessment phase and post updates as it learns more. "All of us at Van's truly appreciate and value the loyalty and confidence you have shown us over the years," Van's said. "We will provide further information on the findings and conclusions from our assessment, including any changes that might affect you."