Transparent Troubles | Inside The PIERER Mobility Group 23

The PIERER Mobility Group has made consistent headlines this year – not in celebration of its vast success in different disciplines, but because of missed financial targets shared in mainstream press. Triumphs in the FIM Motocross World Championship and SuperMotocross World Championship have been dismissed as widespread focus has jumped to the financial setbacks.

PIERER Mobility AG's standing on the racetrack contrasts sharply with its current position within the stock market. The leaders in the Houses of Brands have no desire to keep this hidden, however, and released a status update in the summer that reported sales of just above one billion in H1 (January to June). Such a number looks impressive, but that was a decrease of 27% on the previous H1 and was presented amidst a loss of 200 million euros in the same period. Understandable, then, that consumers on different continents were quick to assume the worst.

This report was intended to inform consumers of the steps planned to address the loss and reflect the steadfast confidence at the company's headquarters in Mattighofen, Austria. The PIERER Mobility Group remains the same threat that it has been for some time with impressive products, multiple brands that boast unique purposes and a relentlessness from owners. This sense of calm was rather evident in a recent jaunt to the headquarters, where tours and discussions led to an enhanced awareness of the landscape.

"The situation is unpleasant but manageable," Florian Kecht (Chief Sales Officer) remarked over dinner. It's a short but powerful statement that describes the seriousness of the situation. Crucially, however, it is not critical. The ebbs and flows of business are well documented and the PIERER Mobility Group is in an irksome phase at the moment; one that most who work within KTM have not experienced because of its impressive climb to the pinnacle of off-road sport across the last decade. It is that success that has contributed to the 'shock factor' – no one expects such a juggernaut to fall victim to the current climate.

The solution to overcome this hurdle has been made clear. Internal focus will move on from constant growth and return to a 'premium' mindset – a concept that has been lost in recent years. This strategy extends across all facets of the PIERER Mobility Group. The first move is a 'right sizing' initiative – code for a restructure that makes it easier to be profitable and meet objectives – and to balance supply and demand. 14% fewer motorcycles will be produced in order to ensure that there will be no KTM, Husqvarna or GASGAS bikes left on shop floors. The intent is to end up with one less bike than the market demands. 

In short, production will align with realistic demand rather than inflated pandemic-era forecasts. The production volumes have been reduced by around 25% to relieve production pipeline and dealership pressures – shifts have been reduced from 12 to six on the production line with approximately 200 roles eliminated to streamline their business model. These calculated movements will aid them in their pursuit of the 'premium' mindset, where their existing projects will be benchmarked with no shame or emotional attachment. Each step will be taken in an attempt to offer a better product and brighter future.

The production of motorcycles – or the location of that – is a hot-button issue that has swept across social media platforms. It has been assumed that production of popular steeds like the KTM 450 SX-F has been relocated to China, but this is inaccurate. It was clarified that a small percentage of road machines come out of that nation. Specifically, the KTM 790 Duke and 790 Adventure models are made there. It was on that recent trip to Mattighofen that this scribe witnessed the assembly line for off-road models, one that must be seen to be believed. The meticulous detail that went into each bike, on Austrian soil, was hypnotic.

It takes just 35 minutes for a bike to be assembled on the Austrian production line (using parts that were previously assembled in the same building) and declared "ready to race" – a process involving 22 skilled employees. Each component affixed to the bike is crafted and rigorously tested on-site; engines undergo two rounds of testing, and each fork has a unique log number documenting its test cycle. The forks are even rechecked prior to shipping to ensure that no damage has occurred in storage. This punctilious process underscores leadership's frustration with unfounded reports suggesting motorcycles are manufactured in East Asia.

The source of confusion is apparent. KTM has a strategic partnership with CFMOTO – a Chinese manufacturer of motorcycles and all-terrain vehicles – that became much more prominent in 2017. The partnership is one that benefits both parties; CFMOTO can access KTM's distribution network in Europe and advanced technology, while KTM benefits from an enhanced presence within the Chinese market. Asia is, of course, a pivotal portion of the world to conquer. China has a position in the PIERER Mobility Group global footprint, but there is no intention to move the production of their core models there.

The commitment to quality, modernization and optimization thrives within Mattighofen's unique set-up, where production motorcycles and factory race teams exist in close proximity. The fiery pursuit of championships burns as bright as ever, despite an ever-changing landscape and rumors about the manufacturer's competitive outlook. "Consider that we spend something in the range of 100 million euros on our global racing activities each year," Kecht pondered. "If you put this 100 million into perspective, compared to our revenue, I think that I am correct when I say that we are probably the most engaged and committed company to racing.

"How can anyone say that we are pulling out of racing? To put it very straight: We are here to win races, as long as we are here," he affirmed. "We are here to make our heroes and products shine to support our brand. Someone once told me that the business is the brand and the brand is the business. I think that this could not be truer for our house of brands concept – our whole strategy is based on differentiation. The reason that our brands co-exist so successfully in our portfolio is because each brand has its own very unique space."

This is in reference to the fact that KTM is an edgy, sharp and "ready to race" machine whereas Husqvarna exists as a unique, premium offering. GASGAS focuses on 'fun' and the entry-level consumer. This explains the recent shift in most competitive race series, where Husqvarna and GASGAS representation has dwindled in favor of a stronger KTM presence. It is not that less will be invested in the on-track activities, that would cause additional problems, but instead the color orange will be reinforced. It is a return to the default approach that catapulted them to the pinnacle of motorsport.

This is an exercise in clarification. Some have latched onto select details, transparently shared by the PIERER Mobility Group, and rushed to assumptions that have only added to the turbulence in Austria. Yet, the passion to 'win' with Austrian machinery remains unwavering.