The stream of news coming out of KTM seems to be a flood at the moment, doesn’t it? And lately, it’s even more so, as the company’s shareholders see a big change. That’s right, Indian heavyweight Bajaj Auto has now received a go-ahead from the Austrian Takeover Commission to take control of Pierer Mobility AG, the parent company of Austrian motorcycle maker KTM AG.
So what’s the first thing Bajaj did after assuming control? Change the name of KTM’s parent company from Pierer Mobility AG to Bajaj Mobility AG, of course!
But that only scratches the surface. There have been a lot more developments over the past few days. “So far, what we observe is that there is an opportunity to reduce the overheads by more than 50 percent,” Bajaj Managing Director, Rajiv Bajaj, explained to India’s CNBC-TV18 recently. “That covers R&D, that covers all marketing areas, including racing. That covers all the operational areas.”
KTM
Rajiv Bajaj was also highly critical of KTM’s former management. “The previous management has already reduced headcount from 6,000 to 4,000, which is still considered too high,” he revealed. “Interestingly, of these 4,000, only about 1,000 are blue-collar; 3,000 are white-collar, which is perplexing because the blue-collar employees make the motorcycles. Future volume shifts will impact blue-collar employees relatively lightly; the issue will be with expensive white-collar headcount.” He finished by saying that “This is a problem not caused by 99% of KTM employees. This is a problem of the erstwhile top management of KTM, and most of them are gone.”
Wow. That’s as scathing an attack on former KTM ownership as any I’ve seen in the last few years.
Bajaj Auto’s shocking proposal to lay off more than half of KTM’s white-collar personnel has sent shockwaves through the motorcycling world, and it appears the factory’s MotoGP program will suffer the most. With rivals like Ducati and Aprilia maintaining their aggressive development efforts, any protracted halt at KTM risks expanding the performance gap.
KTM
This year, KTM’s RC16 already demonstrated the repercussions of limited development. Factory riders and team engineers suffered with recurring tire issues and chassis configurations that resulted in severe rear-end noise and a lack of front grip.
KTM’s MotoGP program is not the only department that will take the hit either. It recently surfaced that KTM also decided to end its subsidiary GasGas’ motorcycle production in Spain, with the intention of moving production to its factory in Mattighofen, Austria.
“This allows us to consolidate our expertise, optimize production processes, and strengthen efficiency within the company,” a KTM official was quoted in the Austrian newspaper Salzburger Nachrichten as saying. While KTM commented that only 20 of the 300 employees at GasGas’ factory in Girona, Spain, will be affected, it’s not yet clear what the fate of the rest of the staff will be.
GasGas
KTM’s own production schedule is so far behind that the 2025 model year 1390 Super Duke GT will not begin production until at least 2027. “To put it very simply and bluntly, European manufacturing is dead,” said Rajiv Bajaj. But models made and exported from India deliver an EBITDA (Earnings before interest, depreciation and amortization) margin of “over 30 percent.” Now that is a damning stat.
As an aside, Bajaj also partnered with Triumph for the production of its recently launched 400cc models. “Every single Triumph motorcycle that is made today is made either in Thailand [or], more recently, India,” said the Bajaj MD. “If Triumph could do this 15 years back, why not KTM?”
Bajaj
Bajaj sees the restructure as necessary to restore order, reduce waste, and return KTM to profitability. If it works, then making the case of other options will be moot.
Either way, KTM’s factory riders and engineers must prepare for a leaner period in which progress takes longer, and on-track pain may be the cost of salvaging the ailing motorcycle brand. Share your thoughts in the comments.
Sources: CNBC-TV18, Salzburger Nachrichten
