Secondly, as far as indicating financial distress on the part of Cirrus, I didn’t see that in the letter. I’m not sure that the analogy is too accurate, but I wouldn’t think that Ford was in trouble for if it had a limited workforce and favored Expeditions over Escorts.
I have feeling a if Ford said “in order to move this Company aggressively, positively and directly towards being a profitable and sustainable enterprise…” we are completely shutting down production of our landmark product, for which people know our company, and imposing a delay on many who have deposited funds with us, in order to make instead a more profitable product, that people would react.
I guess what I would ask then, Stephen (or anyone else please), is if you are correct and it’s not an issue of viability - what is it an issue of? To me, this is a bold move, which will clearly anger some loyal customers. To what do you attribute this boldness?
I have a theory, not at all based on solid facts but here goes:
I figure the reason for those who have invested big bucks in the past and to a greater extent the current “institutionalized investor” is that they want to see a return on their money. They are looking for more than they could get in a more conservative investment (like tech stocks, if you catch my drift). One way to do this is to position the company to go public, i.e. sell stocks.
I would look for as many profitable quarters as possible and then a public offering whereby the current investors could, if desired, bail-out turning a good profit if Cirrus’ numbers were good enough to attract high stock prices.
The bad side of this would be if Cirrus, being a new company, became tempted to produce for good numbers and let other aspects slide. Namely quality,(good to date), customer support,(also good to date) et al. The current production change could also be a sign of this producing for the numbers philosophy.
They have just started plans for a new 65,000 sq. ft. building in that unknown town of theirs. SOMEBODY is expecting a return on their money other than way down the road from the sale of airplanes at even 30 a month. They were 85M in debt as of last month. Simple math would tell you it would take a long time to just get even.
Us airplane buyers can leave our deposits in @ no interest because we expect to get a new, high bang-for-the-buck airplane, at some point before senile dementia sets in and we just sit in the thing making vrum/vrum sounds. The investors want dollars for the risk they have taken and deservedly so.
This is just a guess but I would expect a public offering before the end of 2002.
If this does happen lets hope the great airplane we have come to know doesn’t turn into the aviation equivalent of what Detroit was producing in the early 70’s.
I have my Nomex suit on so flame away.