Reports that MV Agusta is again facing imminent bankruptcy may be exaggerated, but all is not well among the army of Armani suited "boutiqistas" at the Varese, Italy, manufacturer's headquarters.
A press release of 22nd March announced that the company had filed a "Composition" with its creditors - a variation on the theme of what is known in the United States as a Chapter 11 creditor protection filing.
The intention being to allow the company some time in which to restructure its finances - in MV Agustas' case that means dealing with the 40m euro of debt it has on its books.
The filing gives MV Agusta to the end of the year to renegotiate its finances, and in the meantime has been granted a 'payment holiday' while it seeks new sources of finance.
Last year the company says it achieved 100m euro in sales, which was +30 percent up on 2014; indeed the company has seen turnover grow from 30m euro in just five years and says it currently has a back-order problem that represents +42 percent unit growth over 2015, with March alone seeing sales up by +36 percent.
However, part of that back-order problem has been caused by the slowing down of production a while ago - contrary to some reports, production has not been stopped.
It is reported that last year saw the company produce some 8,000 plus units, and there does now appear to be a greater realism about the ambitious plans that called for that number to get into the 15,000 to 20,000 bracket.
|MV Agusta CEO Giovanni Castiglioni is now having to accept that plans to see the present 8,000 unit production level increased still further to the 15,000 plus range are unrealistic and unaffordable|
While there are plenty of industry observers who are saying that MV Agusta has over-populated its product offer too quickly, especially in the naked bike segment, and that it should rationalise its focus and play to its strengths, especially in its traditional sports niche and with the popular and successful three-cylinder engines, MV's problems have not been that it is unable to sell its motorcycles.
It is simply under-capitalised and overburdened with debt for the range it is trying to produce and the demand it is trying to create and meet. The debt burden it is carrying is preventing it from being able to service existing debt (while keeping production rolling) or from being able to raise additional capital.
One thing that is certain is that the relationship between MV Agusta and its 25 percent owner, the German auto maker AMG (Mercedes), has broken down entirely.
Reports suggest that AMG and the majority owner, the Castiglioni family, headed by 35-year old CEO Giovanni Castiglioni, are entirely opposed in their view about what should be happening to the company.
Some media outlets have suggested that AMG are unwilling to invest further without having at least a controlling stake. However, while it is clear that the Castiglionis certainly don't want to relinquish control, it would also appear that AMG have simply decided that they no longer wish to be in the motorcycle business as they just cannot see adequate ROI ever coming from what must appear to them to be a money-pit.
At the time that AMG paid a reported 30m euro for their 25 percent stake, many observers were saying that it was insufficient - despite the fact that two years earlier Harley-Davidson had returned ownership to the family for just one euro, with debts cleared, major investments made to fund R&D and production improvements, and having gifted the new owners a $20m dowry that was supposed to be enough to meet 12 months worth of operating costs.
The trouble is that at 15 percent of turnover, the R&D spend needed to fuel a now 20-model range has continued to suck the company dry at a time when growing sales were increasing their dependency on and exposure to supply-train creditors.
The company took a 15m loan from a consortium of Italian banks some 18 months ago, to top up its cash flow, but that too has proven inadequate and, worse, it came with strings that prevent AMG's shareholding being reduced below 20 percent without the loan being first repaid in full - reducing the options for using further equity to repay that debt or raise fresh operating capital.
The new realism that appears to now being accepted at Varese is that the company is going to have to grow down, go smaller, in order to be able to survive.
It may well be that the product offer will have to be rationalised, falling back onto their "upper premium" models as a foundation for a more modest re-financing package with longer-term debt repayment terms agreed with their creditors and a massive costs reduction drive that is bound to see their 260 strong head-count reduced drastically.