My observations were in no way intended to be personal as to you, but to merely reflect business experience over 35 years as a CPA with a major accounting firm and substantial experience working with acquirers and investors in financially strapped companies, not to mention having bought and sold several companies myself.
Some other observations:
I am not ‘getting too exited over near term product innovations’. I AM fully aware that when you go from being a cash strapped new airplane company to a nearly debt free well funded new airplane company, your ability to develop current or new products is dramatically improved. In case you hadn’t noticed the K’s DID bet a lot of money on unproven new designs called the SR20 & SR22. It is called innovation.
It is comforting to know that the company’s financial structure is being strengthened significantly. But the fact is, that while the K’s DID bet much on their wonderful innovations, it’s no longer their money at risk, and the new guys will have different goals for realizing a satisfactory return on their huge investment.
I’d say we have seen most of the ‘easy’ efficiencies already taken. I have found from my experience in manufacturing that 80% of the efficiences are easy to find, and CD has dramatically lowered the hours it takes to build SRxxs. Now, they will spend far more time chasing smaller cost and quality improvements. Regarding what you refer to as “step out” improvements, I am afraid CD is already ahead of you. Let’s see, diesel power, de-ice, and air conditioning come to mind right away. All widely known to be under development.
Re “step out” improvements, what CD has already done is not the issue. It’s what the new guys want to do that will tell the story. And my bet is that they will want a satisfactory return on their investment dollars before committing any significant capital to new and untested innovations. Time will tell.
I think you would get an argument from the Klapmeiers for implying they became millionaires ‘overnight’, they didn’t. It HAS been a long pull. Since you are waxing philosophical, remember, we live in a capitalistic system that rewards the innovation, efficiency, and risk taking that the Klapmeier’s have undertaken and that IS good business. How they collect their just reward is up to them. They could have kept going without a partner and enjoyed 100% of the future cash flows (provided their debt service wasn’t too big an issue and bankrupted them), they could have sold the entire company and walked away with the proceeds, or they could do what they are doing and sell part of it. I trust they selected a suitable partner.
As for being made a millionaire overnight, it’s clear that the K’s have developed a major asset, but realization of that asset in terms of investable liquid captital is what affects people’s incentives. I’ve seen far too many acquisition deals where the prior owner suddenly got his hands on huge amounts of investable dollars, and his job performance dropped off. Acquirers became quite disgruntled with the comparative lower level of performance by the continuing former owner. Thus, the business philosphy exists in many quarters to structure an acquisition that involves continuing management by former owners in such a eay as to keep the former owners/continuing mangers well motivated, personally and economically.
As to the K’s keeping going without a partner, that’s not viable. Had they been able to do so, why would they sell out a majority ownership position and put themselves no longer in charge of what they had developed?
And too, like you, I very much hope they selected a partner who is motivated to keep the great ball rolling for Cirrus. The company’s historical contribution to GA has been outstanding, and over the long pull it has the clear potential to make additional substantial strides benefiting themselves and GA. We’re on the same page, here, which also is quite close to Jim Fallows’ observations, too.
Anyway, I am happy about the financing and you are not going to ruin it for me. :
Thanks for the ":
Cheers to ya,