UPDATED FRIDAY 22nd August 17.49 GMT
****PRESS RELEASE****
Eclipse Aviation Targets Financial Stability as CEO Roel Pieper
Implements Operational Excellence Program
Company reduces workforce by 38 percent
ALBUQUERQUE, NM - August 22, 2008 - Today Eclipse Aviation(r),
manufacturer of the world's first very light jet (VLJ), announced a
reduction in workforce as a result of its operational excellence
strategy introduced by CEO Roel Pieper at AirVenture in Oshkosh, Wis.,
July 28, 2008. Eclipse is reducing its workforce by approximately 38
percent which includes temporary workers and people employed less than
six months. The reduction is an effort to achieve financial stability
as soon as possible. Eclipse is laying off approximately 650 employees
affecting all departments and facilities including Albuquerque, N.M.;
Gainesville, Fla.; and Albany, N.Y. Eclipse's total employment remains
at about 1,100. The impact of this action will be a slowdown in the
production of Eclipse 500s through 2008. In 2009, Eclipse intends to
increase production back to previous levels and higher.
"In my effort to take Eclipse Aviation to the next level of growth and
sustainability, I am 100 percent focused on operational excellence and a
plan to achieve it," said Pieper. "Financial stability is critical for
this company and unfortunately, a reduction in workforce was necessary
to achieve it. I am confident this action will set the company on the
path to profitability so that we can continue to lead the very light jet
category."
Eclipse will not be releasing any further information or conducting
interviews surrounding this press release at this time.
That's the official press release. However, I've have contradictory information. I believe EAC are trying to bend figures and 'make like' they're are going to continue with viable production capacity. This is difficult to square with what we know from Albany, IS&S and Hampsons. When you've been reading EAC press releases for as long as I have, you learn to 'parse' the words, then the phrases, then the sentences and finally the message as a whole. Note the careful use of words like 'about', 'approximately' and 'effort'. He's the CEO, and he is not able to tell the press how many people are going and how many are staying. And another thing. I thought all the 'temporary' workers were let go two weeks ago. While I know people have been hired (but not trained very well) in the recent past, I'm interested in how many that would actually add up to. Finally, for this update, I understand that several contradictory stories are flying around ABQ. A 'standard' version has the total number of layoffs (total) at just under '800' today, and another '400' on Monday.
Original post below
First, a post from 'Forward Observer' which is a perfect example of what the blog is about. He manages to intertwine personal relationships and political attachments with a true focus on safety. For these reasons alone, it would deserve promotion to 'headline' status. However it's also a good story in it's own right.
Second, I bring you disturbing news from Grand Prairie, Texas. It seems that Hampson Aerospace, whom we last heard of settling their dispute with Vern, have decided to take their chips off the table and leave the game. This is very serious should EAC be able to resume volume production. It must also send a clear signal to other suppliers, as it will be a tad difficult to fly an aircraft without a tail.
Finally, there is an imbalance in our 'coverage' of the traditional media. Not all have followed the EAC line over the past decade. Several are notable by their balanced coverage, including AINonline and AVweb. Some comments I made yesterday would tend to paint all journalists in an unflattering light. This was plainly unfair. So, credit where it's due, and inform your future reading habits by how your favorite source behaved in it's coverage of EAC.
So to begin, the post by Forward Observer. A few of the links didn't work (for me) so I cut them and I've done a little tidy up on the spacing, but it's otherwise as it first appeared yesterday:-
Forward-Observer said
Well, the FAA’s press release, at
http://www.faa.gov/news/press_releases/news_story.cfm?newsId=10273
trumpets that the FAA is getting right on that pesky Eclipse 500 plane - you know the very first “Special Certification Review” team to prepare a report prior to the September Congressional hearing.
All should be well, everything is fine- “Move along, Move along, these are not the droids you are looking for” could be the intended message. The FAA leadership in Washington is hot the trail, and will make sure everything is just fine. The press release even says “Jerry Mack, a former Boeing safety executive, is leading an oversight team of seven FAA experts.” Is on the job.
Wooaa fellah. Who?
Jerry Mack?
Who is Jerry Mack??
Well, for starters, he’s not even an FAA employee.
And to be represented as a “Senior Safety Executive” might be a bit of a stretch.
You see, Jerry Mack, appears to be an amazing person to appoint to lead a “Special Certification Review” on behalf of the FAA. He’s not working elsewhere right now, and he’s a personal hand-pick of the Senior leadership of the FAA’s Aircraft Certification Service to go look into this. Perhaps it was Mr. John Hickey, the Director of the Aircraft Certification Service, who may have chosen Mr. Mack for the job. After all, both previously worked for the Boeing Company.
I can see why Mr. Mack would be the person selected to take a look and see if the FAA was being fair in applying the rules to little ‘ol ECLISPE Aviation. What, pray tell, qualifies Mr. Mack to determine if the FAA applied the regulations properly, when it award a Type Certificate to the Eclispe 500? Well, let’s start with his recent employment. You see Mr. Mack wasn’t working for the FAA. His name does not appear in the employee web directory.
No, he’s an outside contractor that has been brought in to make things appear that All is Well. Mr. Mack previously worked for the Boeing Company. alright. But his most recent job title was not as an engineering safety evaluator. No, it was as the Vice President of Government Technical Affairs for several years.
In that job, his job was to make sure that the Government left the Boeing Company alone. He was paid some pretty big bucks to make sure that nobody from the Government could get too close to the Boeing Company’s secrets. Jerry Mack- Boeing vice president of Government / Industry Technical Liaison for Boeing Commercial Airplanes
Of course, Mr. Mack has had some other employment recently. It turns out Mr. Mack spent a good deal of time at the Aerospace Industries Association. Mack was elected as Aerospace Industries Association AIA’s Civil Aviation Council, and remained there for a period of time. His contacts among the head honchos at the FAA proved very valuable. It appears he is well know and well connected. He’s an ideal man for the job.
All should be well, everything is fine- “Move along, Move along, these are not the droids you are looking for” could be the intended message. The FAA leadership in Washington is hot the trail, and will make sure everything is just fine. The press release even says “Jerry Mack, a former Boeing safety executive, is leading an oversight team of seven FAA experts.” Is on the job.
Wooaa fellah. Who?
Jerry Mack?
Who is Jerry Mack??
Well, for starters, he’s not even an FAA employee.
And to be represented as a “Senior Safety Executive” might be a bit of a stretch.
You see, Jerry Mack, appears to be an amazing person to appoint to lead a “Special Certification Review” on behalf of the FAA. He’s not working elsewhere right now, and he’s a personal hand-pick of the Senior leadership of the FAA’s Aircraft Certification Service to go look into this. Perhaps it was Mr. John Hickey, the Director of the Aircraft Certification Service, who may have chosen Mr. Mack for the job. After all, both previously worked for the Boeing Company.
I can see why Mr. Mack would be the person selected to take a look and see if the FAA was being fair in applying the rules to little ‘ol ECLISPE Aviation. What, pray tell, qualifies Mr. Mack to determine if the FAA applied the regulations properly, when it award a Type Certificate to the Eclispe 500? Well, let’s start with his recent employment. You see Mr. Mack wasn’t working for the FAA. His name does not appear in the employee web directory.
No, he’s an outside contractor that has been brought in to make things appear that All is Well. Mr. Mack previously worked for the Boeing Company. alright. But his most recent job title was not as an engineering safety evaluator. No, it was as the Vice President of Government Technical Affairs for several years.
In that job, his job was to make sure that the Government left the Boeing Company alone. He was paid some pretty big bucks to make sure that nobody from the Government could get too close to the Boeing Company’s secrets. Jerry Mack- Boeing vice president of Government / Industry Technical Liaison for Boeing Commercial Airplanes
Of course, Mr. Mack has had some other employment recently. It turns out Mr. Mack spent a good deal of time at the Aerospace Industries Association. Mack was elected as Aerospace Industries Association AIA’s Civil Aviation Council, and remained there for a period of time. His contacts among the head honchos at the FAA proved very valuable. It appears he is well know and well connected. He’s an ideal man for the job.
http://aia-aerospace.org/aianews/press/2003/rel_01_29_03.cfm
In fact, here’s a photo of Mr. Mack hard at work in his job with the AIA. He’s shown here at the Paris Airshow with his arms around a couple of beauties:
In fact, here’s a photo of Mr. Mack hard at work in his job with the AIA. He’s shown here at the Paris Airshow with his arms around a couple of beauties:
http://www.aia-aerospace.org/images/paris05/paris05_0615_princi.jpg
(AIA Membership Manager Trish Ward, left, Jerry Mack in the middle, and Membership Assistant Vice President Michelle Princi on the right, at the Paris Airshow in 2005)
Now, you might remember some of the interesting things that happened in the time frame following Mr. Mack’s election to the AIA council. You see, it was in that time, Mr Mack, the vice president of Government/Industry Technical Liaison for Boeing Commercial Airplanes, found a few friends in Washington. It was shortly thereafter than another fine executive, namely one Ms. Marion Blakey, found a wonderful new job offer waiting for her over at AIA.
Remember that one? When the FAA Administrator jumped ship to go to the AIA and pick up a six-figure salary? Of course, some might say that’s politics getting into the mix. You might be right. After all, Mr. Mack has paid his dues. In fact, he donated handsomely to George W. Bush’s re-election campaign in 2004, and to John McCain’s run in 2008. Apparently $250 bucks to McCain 2008 is all that’s needed to cement your appointment to a contractor position, to investigate if management of the FAA was ok in it’s issuance of a type certificate.
(AIA Membership Manager Trish Ward, left, Jerry Mack in the middle, and Membership Assistant Vice President Michelle Princi on the right, at the Paris Airshow in 2005)
Now, you might remember some of the interesting things that happened in the time frame following Mr. Mack’s election to the AIA council. You see, it was in that time, Mr Mack, the vice president of Government/Industry Technical Liaison for Boeing Commercial Airplanes, found a few friends in Washington. It was shortly thereafter than another fine executive, namely one Ms. Marion Blakey, found a wonderful new job offer waiting for her over at AIA.
Remember that one? When the FAA Administrator jumped ship to go to the AIA and pick up a six-figure salary? Of course, some might say that’s politics getting into the mix. You might be right. After all, Mr. Mack has paid his dues. In fact, he donated handsomely to George W. Bush’s re-election campaign in 2004, and to John McCain’s run in 2008. Apparently $250 bucks to McCain 2008 is all that’s needed to cement your appointment to a contractor position, to investigate if management of the FAA was ok in it’s issuance of a type certificate.
Fair and balanced safety review?
Or political hack, former Boeing government liaison executive, hired by another former Boeing employee (Hickey), with bone fide political donations and connections, and now paid to say that everything is fine?
Maybe. Maybe not.
We report.
You decide.
Or political hack, former Boeing government liaison executive, hired by another former Boeing employee (Hickey), with bone fide political donations and connections, and now paid to say that everything is fine?
Maybe. Maybe not.
We report.
You decide.
Whew. There is a man with an opinion and the ability to express it.
Next Hampson Aerospace. They are located in Grand Prairie Texas, where they have been making the FPJs' vertical stabilizer, horizontal stabilizer, rudder and elevator. On Wednesday they 'closed their doors' and told the staff to contact HR at a nearby sister company for further information. After Albany, then IS&S and now Hampsons, who will be keen to continue working with EAC, even if they manage to get that critical funding? I'm told they are looking for something in the region of $200 million dollars. Pretty steep ask in the current climate, don't you think?
I'll finish with a reminder not to treat all journalists, or the media outlets that employ them, the same. There are a number who have called this company to account from day one.
Things are moving quickly. I'll try to stay in the loop as much as I can but remember you can always get me by email at
eclipsecriticng@gmail.com
Shane
421 comments:
«Oldest ‹Older 201 – 400 of 421 Newer› Newest»You might want to research the meaning of the word "integrity", since it's apparently not in your vocabulary.
God help whoever hires you.
To a degree I agree with you, however, 20year wasn't personally profiting off revealing information about Eclipse but instead raising safety and other issues. Also just because you receive a paycheck from a company, it doesn't mean you can't or shouldn't bad-mouth them. I wouldn't recommend doing everything 20yr did, but I wouldn't condemn it all either.
20yr,
You missed my point entirely. If you felt as strongly about it as you claim, and if you had any integrity, you would have quit immediately.
There is a name for someone who takes money to do something they know is immoral, but it's usually applied to certain "ladies".
All of the reporting and testifying to Congress in the world won't wash the blood from your hands.
Dave,
Would you hire him?
Hey> just zis guy, ya know?
A contract was broken with everyone at EAC if you want to get down to it.
There is know harm in hoping for a change, Hoping that one day they get a clue and due it right. It was hard to think about leaving when you get caught up in Verns hype. How many people bought into his hype and layed down millions to his company. you never worked there so you wouldnt know. After the haze fades away and you can see through all the BS, you start to vent, and question everything they due, then you realize that there full of it and the company is a shame. Especially after the E400 was built, thats when the moral went down the tube. BTW, I never signed a NDA
20YM
20 Year:
I agree with you about the quality of the E clipse, the working conditions, ect.
When I offered my opinion on the airworthiness of it's construction last year I was "just another disgrunteled ex-employee that was probably fired".
20yr,
Well said.
Would you hire him?
Seeing how I avoid shady dealings like the plague, have concern about the people I work with and am someone who does business on a handshake as much as possible, I imagine that 20yr would be great employee if he was to to work for me. I've never seen any indication that 20yr has tried to personally profit by selling inside information to the highest bidder and what he does say is mostly about safety issues.
Ever consider 20 year was trying to help straighten out the problems? Ever have a job that you spent all day beating your head against the wall trying to do the right thing?
Would it be nobeler to just run away?
Is a NDA valid when it forces you to ignore dangerous and perhaps illegal procedures?
I have seen both at Eclipse.
Hi Y’all - Boy, what a freaking mess. The realities posted/predicted by the critics are finally rising to the top. If you critics would all just shut your yaps, things would be just rosy over here at Eclipse. Damn you all to pieces.
Where is “amused” when you need him? Find the freaking duct tape – let’s tie him to the nearest flag pole I say!
Seriously however…
There was a very interesting post by Gadfly, which is about the 16th posting on this specific thread, which I suggest those who missed, go find.
**** If you have been overwhelmed by the postings, it’s worth finding and reading this one: ****
First line of post: “Some thoughts about Hampson, et. al., . . . and the ones working out on the floor in ABQ: August 21, 2008 1:25 PM ”
It would do us all good to read this one. There is ultimate wisdom that will help each of us here.
Gadfly, let me buy you a beer. Ask Shane to get my direct email. You know who I am….
MG
Thanks! I'll skip the beer, but Shane can put us in touch. The coffee is always on!
gadfly
May the "aircraft manufacturing experts" that are left get it together. This could of all been avoided if they would of listened at the beginning of the program and right after 5 flight test birds were built. The inno"vern"tor is not to blame but the ones who sold him on how they know how to manufacture aircraft.
Business model 101:
1. Market a product 2. sign up customers. 3. manufacture the product. It does not take a master's degree to figure this stuff out. All was lost at level 3.
PS: For those who really know about aircraft manufacturing what does DM mean? It starts from the start to the finish and is reocurring. Always improving. Missed on two important critical occasions.
baron
# Fred, you are excused #
thanks for caring of me ...
and i know that britt ,hold him in high esteem for his non-biased way to call shit , piece of shit !
why do you think that out of the 3 cars i have , none is french ?
(that's the other part of me speaking [german side] 1 Audi R8 , 1 BMW 745 , 1 Porsche Boxster, but that one is only a toy for when i am in Morocco , it's a convertible! )
hit the wrong button ! grrrr!
that is probably what is very different between inhabitants of "old Europe" and US ones ...
we tend not to pretend too much something is "top-notch" because it's coming from around the corner ...
and to come back to this UK pal , he is even translated in french for the pleasure of who wants to see his show ...
and he is as well the one who said about the Guy in BMW who decided to have the X5 built in USA (concerning quality of manufacturing ) that this should sited on a very sharp pole and left to rot in the sun ...!
so , all things being equal ... i do not take offense ! ;-)))
first i think we should give a cheer to Monsieur Shane for keeping-up ...
events are rushing for the exit like rats leaving a sinking boat (or sub. for gad ! ;-)) ) , so his head must be spinning for keeping us informed ...!
$$$ :
i partly agree ! you almost got it ...
i think all involved forgot or didn't want to see a basic principle :
in market economy , you very rarely get what you expect but always what you deserve !
I've just been 'catching up' on the posts.
Metalguy, Gad, I'll dig out the emails and put you together. Might take a few hours, as the inbox is FULL....
To anyone who emailed me from ABQ last night, remember a) I live (and sleep!) in Ireland, so while you were busy on the keyboard, waiting for an answer, I've been asleep and b) the inbox is, indeed FULL, so it will take some time to get back to everyone.
Black Tulip has submitted another gem, which will reach you all in a day or so. I think we need to let the current news settle down for a day or so. But don't worry, it's worth waiting for.
Finally, I would like to commend Fred, who just reminded us of a key 'truth'.
in market economy , you very rarely get what you expect but always what you deserve !
Shane
" 1. Market a product 2. sign up customers. 3. manufacture the product. It does not take a master's degree to figure this stuff out. All was lost at level 3 "
NOT SO, IMO -
This is the problem - the most important part of the process, is making sure you have the RIGHT product. To me, all was lost on level ONE. Vern thought he had a product that would sell 1,000 a year for 20 years, based on HIS idea of what the market for air taxi was. Once he had to INVENT the air taxi customer (Nimbus, Dayjet), BECAUSE THERE WAS NONE.. he knew he was up the creek.
BTW, finding out what the product NEEDS to be, is actually not that difficult - but you need to get your egotistical head out of your butt, not think you know better than the whole world, and listen to your customers.
- develop a spec (or a few) and some pretty pictures or a mock up if you have $100M. Talk to old timers, new comers, everyone in and outside of the industry, and especially OPERATORS. Established guys who deal with this stuff all day long. If they say NO, change it until they say YES.
So, Step 1, especially in an industry with long development cycles and very capital intensive production, MAKE DAMN SURE YOU HAVE THE RIGHT PRODUCT.
Vern = Wrong product - bad idea - poor business case - terrible execution - AMAZING MONEY RAISING!!! AMAZING, AMAZING, AMAZING!!! GOBS AND GOBS OF CASH RAISED - truly amazing.
Metalguy,
Wires crossed here this morning. Can't locate your contact details.
Please drop me a line to the usual address.
Shane
It has now been confirmed that SCRs are even rarer than the FAA first said:
http://www.aero-news.net/index.cfm?ContentBlockID=14bab8ee-9d20-4e6d-bba7-939c267517d7
To me, all was lost on level ONE. Vern thought he had a product that would sell 1,000 a year for 20 years, based on HIS idea of what the market for air taxi was.
I'm not convinced that Vern from the get-go wasn't just blowing smoke about both the market size as well as production capabilities. I think he was trying to cash out with an IPO before everyone realized he was just telling them whatever they wanted to hear.
I think he was trying to cash out with an IPO before everyone realized he was just telling them whatever they wanted to hear.
Then you can add that to his list of total failures. Once he switched engines, then blew off Avidyne, his prospects for an IPO were history. They never got anywhere near where they'd have needed to be.
One of his problems was that having set the expectations so high, anywhere real was down. No one buys a down story.
Dave, I am not so sure Vern didn't really believe...
"mental illness kicks IQs ass every time"
...just a possibility
BTW, (for Baron) I am also not convinced you don't have to have a screw loose to attempt something like this, so the statement intended in the best possible light. Maybe you need to be a little crazy to put it all on the line for such a big bet... especially in THIS industry -
Eclipse had another good delivery week this week.
They delivered 5 aircraft.
They have now delivered a total of 245 aircraft and 16 aircraft in August.
FC,
while it seems like they have made production progress (am I right on this?)... they are slowing everything down to a trickle. I know they lose money on every delivery, BUT... how is slowing things down going to help?
It would appear as if, speeding up might help - then again, we all know the plane does not enjoy enough demand.
Thoughts?
Eclipse set CY 2008 delivery expectations as follows:
Apr 2007 -- 925
Jun 2007 -- 747
Oct 2007 -- 530
Jan 2008 -- 455
Mar 2008 -- 400
Aug 2008 -- 250 (early this month)
It now looks like they will come closer to 163 aircraft deliveries for the year. This number is calculated by taking the 145 E500 aircraft delievered so far this year and adding 1 aircraft per week for the remainder of the year based on the run rate projected by Roel yesterday.
By the way, the blog predictions (from a year ago) continue to be the most accurate predictor of production run rate reality. The average of the blog's prediction from a year ago was that 183 aircraft would be delivered in 2008.
ATM,
For normal companies cutting the production rate by 80% would only put them farther behind the power curve.
For Eclipse it might actually make some sense. If they are losing massive amounts of money for every plane shipped and on top of that they are incurring huge liabilities in terms of "free" retrofits for every plane shipped, then it might actually make sense to cut production rates.
They do not have a viable company when they are shipping a substantial amount of the company's available cash with every aircraft delivered.
The question is, did they raise the price enough and cut the staff enough that they can achieve breakeven at a rate of one aircraft delivery per week?
Of course all these questions are irrelevant if they no longer have a supplier for the tail section of the aircraft.
I know they lose money on every delivery, BUT... how is slowing things down going to help?
Eclipse claims that during this time they're going to re-design/re-tool the factory.
The supplier conference should be interesting
the whole idea was to cut the cost by buying a lot of parts, systems, assemblies.
What MAGIC is going to be involved at the supplier level, so they can not increase the unit price to EAC, while they enjoy 1/10 the promised volume?
There is some logic (not complete, but some) regarding going from 100 of a part of system (conventional) to say 500... some savings and buying power based on volume... but even THAT's s thin argument unless you can have a wholesale change in production - towards rates that enjoy scale economics.
Perhaps the carrot of 1000 per year made some sense to shave 20%-35% of the cost/supplier price to EAC.
These are REALITIES though. The suppliers cannot charge the same for 1/5 the production, or 1/10 or 1/20 as will be the case.
Retool the factory - man that sounds like BS to me.
The product was DOA...
This new plan is DOA... IMO
"By the way, the blog predictions (from a year ago) continue to be the most accurate predictor of production run rate reality. The average of the blog's prediction from a year ago was that 183 aircraft would be delivered in 2008."
Let me be the first to make a prediction for the number of deliveries for the month of August 2009. I predict ZERO aircraft will be delivered. I would also like to predict that the exact same number can be used for all of 2009. ZERO.
I also have September 16th, 2008 as my pick of dates for bankruptcy filing. What is your date?
And no, I'm still not Vern but I AM enjoying the skies in my new Cessna Citation Mustang.
Kind of funny how the EA500 and 400 are going the way of the dodo. The "dinosaurs" will be flying for decades after their demise and subsequent visit to the aluminum recycling center.
Does anyone know the breakdown of the layoffs between the ABQ factory and service centers in ABQ, GVN, and ALB?
atm ...
few comments :
i think you're closing on truth about the 1°;2°;3° ...
vern , probably got high on bad acid in the time of the dot.com ...
with the marketing hype all around and what did seems at time a endless easy access to cash (the same one most are repaying in the form of a credit-crunch , now) ...
he probably got a flash-back and got confused with one of the first rule of good marketing :
"even if your job is make other believe that it is not the market which make the need for product , but the marketing making the need for the market , you should never ever get fooled by your own lies !"
if you combine this the "natural word" being on all lips of most "cuckoo" in the last few years in USA ( : I.P.O.) you then end-up this such a mess ...
You're-not-him :
this prediction is way too easy ...
prediction are usually about things no one know before !! ;-))
i can give an example = a very Wild prediction = when is Eac to become profit making ?
A : Never !
you see ? may be i am extra-lucid ! ;-))
http://www.abqjournal.com/news/metro/23103244107newsmetro08-23-08.htm
This article needs to be "degreased" as one reads between the lines to see how Eclipse slipped out of violating the "WARN ACT", and a careful reading of "severance pay" (a week's pay for every year worked at Eclipse). But fear not; enough politicians are involved to keep it all well lubricated.
gadfly
(They stopped at 'letting 600 go' for good reasons . . . and it isn't because they still need the remaining 1,100 employees.)
Things are happening so fast that I can't even keep up with the story. I'm running about 250 posts behind, trying to figure out where it's all going (as if I didn't know already...).
Just had a few thoughts and some scorekeeping:
- the critic blog is still alive and thriving. More posts than ever, higher quality content, highly entertaining and awesome writing skills from a lot of the contibutors
- Stan Blankenship was right all along.
- The drive-by boys are long gone, no one is amused
- Ken still cheerleading the Eclipse while trying to sell his 2nd plane. Ken, forget it. It's not going to sell, and you're not going to get your deposit back. Just add the loss to the cost of your first Eclipse. That's the cost of being a chump.
- Alexa - trying to sell his plane. Now an outspoken critic of Eclipse
- My friend who was planning on taking delivery in about 2 months, now set back about 6 months and meanwhile is out over $700k and likely will never see his plane or his money.
- The self-destruction sequence at Eclipse has been activated and unlikely it can be shut down
- Gunner. A hero.
- Vern. Disgraced & booted out
- The subpoena - gone and forgotten
Interesting how things have turned out.
I'd still like to know what happened with the lawsuit against Brian Skupa. Anyone know?
9Z,
The latest:
08/12/2008 CAL: PRELIMINARY INJUNCTION V
8/12/08 HEARING VACATED PER ORDER CONTINUING HEARING
THE PARTIES MUST SUBMIT A NEW REQUEST FOR HEARING,
NOTICE OF HEARING, AND AN ENDORSED COPY OF THE
PRELIMINARY INJUNCTION AT ISSUE.
08/11/2008 ORD: OF CONTINUANCE
FILING ORDER CONTINUING HEARING SCHEDULED 08/12/08 @ 9:00 AM
IS HEREBY CONTINUED AND PARTIES MUST SUBMIT A NEW REQUEST
FOR HEARING, NOTICE OF HEARING AND AN ENDORSED COPY OF THE
PRELIMINARY INJUNCTION AT ISSUE
08/05/2008 MTN: FOR CONTINUANCE
FILING MOTION TO CONTINUE HEARING (DF)
Looks like it go away.
Side note on the layoffs.
A lot of people that were "let go" were in the "Jet inComplete" department.
Probably a moot point, because there aren't a lot of parts in stock anyway.
I also heard there were enough components for only 28 more jets. After that, it might be lights-out.
Also, some jets are being delivered without the options that were ordered. The buyers get one of Eclipse's famous IOU's though, so that should provide some comfort.
9z,
yes my typing has gotten a lot better, since being admonished (I took it personally) by Gadfly.
This is my first and only blog! I thought the message was more important than the form... but learned that neatness counts!!
I can honestly say this discussion has gotten more intersting, and more professional. Looking back at the early days, I am thoroughly embarassed at some of the rude comments I made - it was a very HEATED debate... too colorful!
Many folks trying hard to get a plane for their deposit money - using all kinds of twisted logic - despite the apparent realities.
Its fun to see Aboulafia refer to this blog, and use terms like "drinking coolaid" and even "DOA"
Lets hope we have some pleasant surprises from ABQ - I cannot figure out how they will ever pull this off, but maybe we will be surprised in a good way.
PS. wouldn't it be coo-el if "I am not Vern" actually was!!!
Dave said...
It has now been confirmed that SCRs are even rarer than the FAA first said:
I was really surprised by the FAA statement on that:
Special reviews are regularly used by the FAA. In the past 10 years, the agency has conducted special reviews on the Liberty XL-2 (2008), Mitsubishi MU-2B (2005), Cessna 208 (2005), Twin Cessna 400 Series Models (2004), Raytheon 390 (2004), and the Beechcraft T34 (2003)
The FAA played fast and loose with the words. The Eclipse is undergoing an SCR, Special Certification Review. Then the FAA says "special reviews" are regularly used, but what they list aren't *certification* reviews. Not one of those listed was to check if the airplane met certification requirements. So SCRs *ARE* rare.
The FAA seems to in CYA mode by trying to insinuate such reviews are "normal" when they are, in fact, extremely rare. Also, 30 days is not enough time to do a proper SCR. When the MU-2 went through one in 1984, it took almost a year.
The report is already written. The only question is if Oberstar can find enough recently fired insiders to challenge the report.
I always keep in the back of my mind that someone on here is from the FPJ company.
I started reading this blog because of a post by Flyonthewall.
He was right on about the new guy in SP11.
I can see the following "review":
1- take statements from the inspectors that were not allowed to perform their duties
2- verify them
3- look at the issues they bring up, and see if they were "overlooked" by the FAA or somehow satisfied by EAC, pre-TC.
Other than this... I think it would be pretty tough to do a review in short order.
Flyger said ... Not one of those listed was to check if the airplane met certification requirements. So SCRs *ARE* rare.
You are right flyger. I was so puzzeld as to why the FAA did that.
I'm most familiar with the PA-46Malibu/Mirage SCR. That one, also took a year to complete. I don't know why the FAA didn't cite that as an example instead of the insignificant Liberty paperwork review. If you want a refresher on the PA-46 SCR and the BIZARRE actions of the FAA prior to the SCR you can read it here:
http://www.avweb.com/news/usedacft/182792-1.html
"Perhaps most important for current and future owners of the Malibu and Mirage, the FAA ordered a special certification review (SCR) of the PA-46. This SCR was perhaps the most comprehensive of any undertaken and required most of a year to complete. The conclusion was that the airframe and the autopilots were in full compliance. The results of the review are impressive....
As a result of this exhaustive review, 60 recommendations were put forward, many related to the autopilot, and many already addressed voluntarily by pilots through previously issued service bulletins."
I think unless we know the terms of reference of the review, we can't really prejudge whether 'it' can be achieved in 30 days.
It may be that all that's being done right now is determining whether there's a case to answer for the various topics mentioned in the FAA description of the review.
Obviously, there's no way a review that reaches meaningful technical conclusions about remedial action, modifications, training, etc. can be completed in 30 days.
At the risk of sounding naive, I don't believe that the people working on such a review would play fast and loose with the lives of the future passengers in the Eclipse 500. No-one would want deaths on their conscience, and your opinion of those involved must be incredibly low if you feel that they would rubber-stamp a document that would get people killed. (I mean, would you?)
The FAA's doing CYA in both directions (past and future), remember, and mods to the aircraft and training are easier for the FAA to spin than deaths caused by flaws they were given the opportunity to identify & fix (i.e. this review).
No-one would want deaths on their conscience, and your opinion of those involved must be incredibly low if you feel that they would rubber-stamp a document that would get people killed. (I mean, would you?)
Speaking broadly I do believe many in business willfully put people at risk and know that people will die and the same also goes for those in government. I believe many businesses calculate their liabilities for injuries/fatalities without anyone losing any sleep, just it is a matter of when things go to the extreme where fatalities occur needless out of an extreme quest for money. I believe there are many examples of this happening both in industry as well as with government regulators being willfully complicit and signing off on dangerous products.
9Z,
You mentioned of IOUs
Here is a listing of the ones that come immediately to mind.
Avio NG 1.5
Rad Alt
Stormscope
XM Weather
Moving Map
Jeppesen Approach Charts
Flight Director
Complete Autopilot
GPS
FMS
FIKI
Autothrottle
Lavatory
Entertainment system
EASA certification
FADEC SB
Free performance mod retrofits
Free Avio NG retrofits
Free FIKI retrofits
Service Centers in:
Van Nuys
Bay Area
Boca Raton
Chicago
Amsterdam
Madrid
Deposit refunds for price increase
Best price/performance value proposition in the industry
Anything else?
I suspect the owner fly-in in Sun River next month may be a little somber.
Uglytruth,
I always keep in the back of my mind that someone on here is from the FPJ company.
I'd been flabbergasted if there we 'alone' on this blog. In fact, I'm pretty sure that a) significant numbers of people, from all levels within EAC read the blog, daily and b) many of them believe 'us' over what their inept management are telling them.
ATman,
There was nothing wrong with your 'style' in the past. In many ways I like the varied patina of the blog, as I feel it helps display the wide variety of experiences we all bring to it. And this is my 'first and only' blog, as well. Other than Stan's, of course!
Hiflyer,
Explain to me how you can arrange a 'customer fly in' when almost half the fleet appear to be AOG?
Somber?
How about the "Death March" from Saul as the theme tune....
9Z,
You should hear what the depositors are saying about EAC! The mildest term being used is 'fraud'. Not for the first time, I'm with Gad on the almost inevitable outcome for members of senior management. Some time in the 'big house' looms in their collective future.
Finally, thanks to all those who contacted me via email today, with news clips, offers of assistance and eyewitness reports from 'the front line'.
Shane
Shane,
If deposit holders believe fraud has been committed (not a stretch), they could bring a civil RICO action against Eclipse and its officers. RICO is a very strong statute originally intended to be applied against organized crime, but it is fully applicable in a situation such as this one: a repeated pattern of fraud. A civil RICO lawsuit provides for trebled damages, unlike a conventional lawsuit.
9Z,
Reliable information reaches me that EAC dropped the Brian Skupa suit the week Vern 'departed' as CEO.
Just as it took a little time for our 'own' action to be formally wound up, it appears that this one is all but finished.
Hope they have to pay Brain a shed load of money as well. My only concern is that they will find some way to avoid actually transferring the cash.
Shane
TBMS,
Anyone who wants to take an action against EAC at this stage has some very complex calculations to go through.
1. What will it cost to win versus the probability that EAC won't be able to pay the award?
2. How long will it take to get it through the courts versus the time remaining to EAC?
3. When will someone else pull the plug versus the status 'you' enjoy pre (or post) bankruptcy?
It all comes down to the money. Some of the creditors of EAC have already decided to move away, quietly, and find someone else to work with. This is the sensible course, and draws a line under your losses.
The very fact that Gadfly (who is well known in ABQ and amongst specialist manufacturers) was approached to provide tooling for EAC shows how desperate things are. He's been a leading, vocal and identified critic in public for years...
Many of those owed money, upgrades or aircraft have tried to find a way out. Some have been successful others are in peril right now.
My own view is that anyone with a deposit who can still avail of the refund event caused by the price increase should try to execute the option. Anyone getting demands for the 60% progress payment should at most offer an escrow account. In no circumstances would any sane person give this company cash with no strings attached at this time.
Next week is critical for the company. I don't know how the meetings will go, but I suspect that the majority of suppliers will tell Roel to get stuffed.
The customers will have to be prepared to keep funding the company in the short term, by paying for upgrades, probably in advance, and I just can't see this.
The 'senior staff' may also be a problem, since I think that anyone with a sniff of a job elsewhere will be working the phones, hard, this weekend. Roel might find some key faces missing in the meeting room on Monday.
Enough! Time to get some sleep, if I can after what I read in the inbox today.
Shane
It all comes down to the money
Not always. Those who feel cheated by Eclipse and its officers could pursue this even if they know they aren't going to get back all or any of the money they put into persuing this. There might be some who get personal satisfaction if not financial satisfaction by making Vern appear for a judgment debtor exam. I don't see suppliers taking this course of action so much as customers who don't care that they'll lose more money but they'll make those who cheated them lives' more difficult.
You know, it is just amazing that Eclipse, even without Vern, still manages to trip on their own er, whatevers. So they issue a press release about how great the plane is before the Senate hearings. Now imagine the testimony:
Senator O: Mr. McConnell, am I correct that Eclipse has sold approximately 240 jets, starting about 18 months ago?
MC: Yes that’s correct Senator.
Senator O: I have here an Eclipse Press Release dated August 20, 2008 entitled “Eclipse Aviation Confident in Outcome of FAA Special Certification Review”. Are you familiar with this document?
MC: Yes, I wrote it.
SO: In this release you site some you say “Stringent Safety an Eclipse 500 Hallmark” and cite certain standard safety features. Can you tell me how many of the airplanes you have sold have “autothrottle”?
MC: (talks to lawyer) Well, zero, but ….
SO: Just answer the question please. And how many have “color weather radar”?
MC: Er, about 140, but…
SO: But these are standard safety features are they not? How many have “a dual-redundant flight management system with sophisticated aircraft performance computer”?
MC: Er, zero, but ….
SO: And how many have “"smart" electronic checklists”?
MC: Well, probably zero but no one really knows what that means so maybe they all have it.
SO: And how many have “intelligent …” well, never mind I doubt it. So please tell me Mr. McConnell, when did Eclipse decide that selling airplanes was more important than safety?
MC: December of 2006. No wait, I didn’t mean that I (talks to lawyer) uh, excuse me for a minute I need some air (rushes from room)
You can't make this stuff up. Well, I did, but Eclipse provided the raw material!
FlightCenter,
Thank you for the current delivery information and details on aircraft deficiencies. From the list, the lack of a ‘lavatory’ would seem the most urgent.
SO: But these are standard safety features are they not? How many have “a dual-redundant flight management system with sophisticated aircraft performance computer”?
Eclipse claims they met that on a video at the website, though right now I can't find it. They basically said nobody can agree on what an FMS is, so this is what we say it is.
eclipsegotmymoney,
imagine:
O: Mr Raburn, I hear you won the Collier award at EAC, and you claim to havethe best value in a VLJ, and you claim a terrifically safe airplane, is this correct?
V: Yes, sir, it most soitenly is.
O: OK, please explain why you bought a Cessna Mustang?
Instead of my deposit, I rather have one of those V-tail baseball caps I saw all those Eclipse employees wearing up at Oshkosh 2007. They look really keen and they're likely to be a collector's item that will be worth a fortune.
Dave, Dave, Dave,
Eclipse says they will have a dual FMS when they have the Garmins. You got caught like Eclipse wanted you to get caught. We planned for it therefore it is reality. Maybe McConnell doesn't even know it isn't approved yet. They have as yet delivered zero planes with Garmins. Zero. But the FMS is an important safety feature, right?
You got caught like Eclipse wanted you to get caught
I guess I should have inserted sarcasm tags in my post as I didn't take what Eclipse said seriously. Eclipse failed to deliver but they want to claim that they did.
To those who have been affected by recent events at the west end of ABQ:
It’s time to begin the final phase, of getting on with life. What’s gone on in “El Ciudad de Albuquerque” for the last few years, for better or worse, is an education in the University of Hard Knocks, with a Major in human nature, and Minors in manufacturing, accounting, etc., etc.
How each of you graduate is up to you.
And you have, and will continue to pay your own tuition.
New Mexico is a beautiful place to live . . . and we have the best political and judicial system that money can buy. If you’re looking for “restitution” or satisfaction in the judicial system, you will be disappointed . . . unless it comes from “outside” the state, at the federal level, or other . . .
But speaking as someone who came from another state, and observed the system, here, for almost forty years, you are not likely to recover your financial losses through the court system, unless you can pour a hot cup of coffee into your lap at a local fast food drive-through. (Since that’s already been done, it’s not likely you can repeat it.)
Over the years, I’ve noticed the “guilty” usually don’t fare too well after these events . . . even though they appear to have gone free. Don’t wish for what they have . . . it isn’t worth it.
As you leave these hallowed halls (or aircraft hangars), you will enter into the rest of your life . . . wiser, and able to carry with you your own integrity . . . worth far more than anything this little bird factory could ever supply. To walk out, and breath clean air . . . it’s great . . . ‘been there, ‘done that!
gadfly
¡Vaya con Dios, amigos!
...take statements from the inspectors that were not allowed to perform their duties...
Small note- I wouldn’t confuse Inspectors with Engineers. The Engineers filed the grievance, which in the end is resulting in the SCR.
The Inspectors are a different group within the FAA. By the way- I would expect to hear from Inspectors as well as Engineers at the Congressional Hearing in September.
The two issues- A. Engineers: Whether shortcuts were taken in the type certification process- and B. Inspectors: Whether the FAA applied unusual outside influence to the PC and Airworthiness Certification processes-..
are two separate issues, and two separate investigations, as has been pointed out previously on this blog.
I agree the SCR will probably result in a 2.5.
I believe the Congressional hearing will focus on a spotlight on some previously undisclosed issues that are of equal concern.
But that too will most likely result in a 2.5, with perhaps some personnel changes resulting within higher FAA management.
You will note that one has already taken place- the Rotorcraft Directorate Manager- the first senior FAA manager in the chain, Dave Downey, bailed out of the FAA last month to take a nice $300K+ job over at Bell, with a 200K+ signing bonus.
I would expect after the Congressional hearing in September, his superiors may also be looking to find a golden parachute position elsewhere.
Note: It is interesting that the FAA still can’t find anyone to apply for the Aviation Safety Inspector position in Albuquerque to oversee Eclipse. This job has been posted for over a month, and no one is applying.
http://jobs.faa.gov/announcement_detail.asp?vac_id=107016
The position was bid earlier this year, but no one was selected during that job bid cycle either.
I think those inside know that this is one political hot potato job that’s not worth the pay at the moment.
Personally, I think the changes being made right now are exactly what Eclipse needs to do to survive for the future.
If the changes mean they can focus on putting out a safe aircraft, instead of focusing on Ford-Style mass production numbers, they will be in a much better position for the future.
The layoffs are hard for the people involved, but probably exactly what is needed to lay the ground work for the culture change that will bring a successful company out of this in the long run.
My heart goes out to those who are being laid off. Sometimes things like that happen, and it is for the better in the long run. I once lost a position in a similar fashion, but six months later I found a much better position. I can now say yes, it took a toll on me at the time, but I ended up much better as a result.
How to tell if your boss is crazy
If your boss shows arrogant behaviors or attitudes, has a grandiose sense of self-importance, and takes advantage of others to achieve his or her own ends, then your boss may be a narcissist. This is the loudmouthed CEO who is always claiming that he’s doing “the next big thing.” He frequently needs an entourage of yes-people who suck up to him. Continued interaction with them can be downright toxic …
If your boss is preoccupied with unjustified doubts about the loyalty or trustworthiness of people, suspects that others are exploiting, harming, or deceiving them, because of unwarranted fear that the information will be used maliciously against him or her, then your boss may be paranoid.
If your boss is preoccupied with details, rules, lists, order, organization, or schedules to the extent that the point of the activity is lost and interferes with task completion, then your boss may be obsessive-compulsive. Maybe it makes the person feel like he’s in control of an uncontrollable situation, but “uncontrollable” means uncontrollable.
If your boss exhibits consistent irresponsibility as indicated by repeated failure to sustain consistent work behavior or honor financial obligations and a lack of remorse when having hurt, mistreated, or stolen from another, then your boss may be anti-social.
You should be watchful about joining a company where the CEO talks about unleashing economic disruption solely to destroy the competition. Companies that are created for such purposes seldom succeed. The key is what you do for your customers not to your competition.
On a scale of 1 to 10 how do you rate Vern?
Narcissistic
Paranoid
Obsessive-Compulsive
Anti-Social
On a scale of 1 to 10 how do you rate Vern?
Narcissistic 12
Paranoid 9
Obsessive-Compulsive 2
Anti-Social 8
Would you like some Wacky Wafers?
DI
Hey,
If you take Flightcenter's "How to tell if your boss is crazy" post and add the words - "Captain Zoom" to the end it also works! For example:
If your boss is preoccupied with unjustified doubts about the loyalty or trustworthiness of people, suspects that others are exploiting, harming, or deceiving them, because of unwarranted fear that the information will be used maliciously against him or her, then your boss may be CAPTAIN ZOOM!
But all that said, old Zoomer has been rather kind to EAC over the years. His loyalty came at a high price, but it was well worth the cost. He would faithfully recite the company's latest mantra and seemingly never feel a single pang of guilt.
And no, I'm still not Vern - but the skies are marvelous at FL 410 in a new Mustang.
As Gadfly has said we seem to nearing the end of an educationial experience. However, I prefer to think of it as the end of a class, not final graduation.
As such, I propose an unofficial 'Final Exam' to focus our minds on providing useful information from our collective experience, by providing key attributes of aircraft companies to be on the lookout for when considering employment, business dealings or purchasing a new aircraft.
Because unfortunately designing, building, certifying, marketing, selling and maintaining an airplane is not as easy '1,2,3' as some of us have stated...
Question #1: Identify the warning signs to look out for on a new aircraft program along with an actual case to justify your reasoning.
Question #2: Identify the characteristics of a good aircraft program and an actual case to justify your reasoning.
(Stan and Gadfly, let the others go for the low hanging fruit, I expect some good ones from both of you)
easybake
What you're requesting is called, "Post Graduate" . . . with all them fancy letters after your name.
gadfly
(PhD . . . "Piled higher & Deeper")
I'm convinced that we are about to see the next chapter in this saga (Chapter 11 perhaps), but I'm not convinced that it is coming to end. I wouldn't think that Roel would be *that* stupid to publicly set himself up as a company's CEO right before the company goes down the tubes unless he doesn't see Eclipse going under as the end of Eclipse. It would makes Vern look like Br'er Rabbit getting thrown into the Briar Patch with him getting fired. Roel has put much of the blame on himself by saying the money had already arrived now all these continuing problems that were going on before Roel took over now look like they're Roel's fault because he lied about giving Eclipse more money. From what has been posted on here I get the impression that even before Roel took over that he was stringing people along about paying them and then not delivering. Of course even if Roel did do all these things, there's plenty of blame to go around that can be layed squarely at the feet of Vern.
Roel has put much of the blame on himself by saying the money had already arrived now all these continuing problems that were going on before Roel took over now look like they're Roel's fault because he lied about giving Eclipse more money.
Where did Roel say the money had already arrived? I must have missed that one. The company said in a press release that they had received the "first funds" of a new round of financing, with no amount or party named. Where did Roel say the he had given Eclipse more money? No party was named, and that includes ETIRC.
What's the point of making stuff up?
Where did Roel say the money had already arrived? I must have missed that one. The company said in a press release that they had received the "first funds" of a new round of financing, with no amount or party named.
As CEO Roel is responsible. If Roel was to later claim it was a rogue press release (which Eclipse hasn't), that would be funny. If it wasn't a rogue press release, it was Roel.
Where did Roel say the he had given Eclipse more money? No party was named, and that includes ETIRC.
What's the point of making stuff up?
You're right, which is why post didn't say that.
guys ...
i won't change my mind on this :
sounds like tragi-comedy ...!
(a script where bad things happen in such an order and in such a manner that it becomes funny !in case one wouldn't know ...)
it look like they want someone to finally get more pissed-off than others and strike the final blow !
my 2 cents = take Gad advice ... pull back on your pants , react then move on ...
i doubt anything positive will ever come again ...!
Forward Observer said:
"If the changes mean they can focus on putting out a safe aircraft, instead of focusing on Ford-Style mass production numbers, they will be in a much better position for the future."
I agree that the first focus of building a plane should be safety, but I don't think that safety and mass production are mutually exclusive. Why can't a plane be mass produced? Ford built 15 B24 Liberator bombers a day during WWII.
As to "Ford style"; there was no style to EAC's manufacturing methods.
Chickasaw,
Fundamental problems remain at EAC, before the company can move forward.
1. Repay all the suppliers, depositors and IOU's.
2. Lower the cost of building it, at a realistic rate of production.
3. Raise the price the market will pay for an FPJ.
Point one. Anyone owed money right now by EAC is in a position to bankrupt it. That's 'Game over', so you have to deal with it.
Point two. As a number of key suppliers (who were tied into contracts) have decided to cut their losses and leave, the 'revised' rate of production cannot support the price currently being asked. Which leads neatly to...
Point three. Controller is awash with FPJ's (84 this morning) and NOT one of them even looking for the 'list price' of $2.15 million. In contrast, not one of the Mustang listings is prepared to sell without a premium! The market says it won't pay a higher price.
Go figure...
My thinking? Roel is doing the rounds next week, and this is my two cents worth on what may happen.
First he meets with the '130 senior staff', many of whom will have shares or share options. They are also the most highly paid. He will seek a pay cut, probably in the 15% to 20% range, to last for 6 months. Those that are no use and know they can't get work elsewhere will agree. Anyone who is any good will leave. Oh, and he will tell them their shares are worthless. But this meeting is not really important to Roel, as no matter what is 'agreed' here, all bets are off until after the funding position is clarified.
Next he has to talk to the depositors. This will not be an easy discussion. However, he will have to offer this group something, as they are the ones with the loaded gun, pointed right at the bankruptcy court. If he is lucky, he will buy enough time to proceed to the supplier meeting.
I'm not sure if there is much to be talked about here. As we know, a number of key suppliers have already announced staff reductions and will allocate resources to other customers. He can't really bully them, all he can really do is string them along with promises. Which many won't believe. The best the Roel can hope for is that he is able to spin a good line from the staff and depositor meetings and get at least a stay of execution.
When all of this is done, he has to meet with the real decision makers. I'm know the bank involved and they are a pretty hard nosed lot. At the very least Roel will have to enter a convertible loan scheme, putting up all his shares in EAC. They might even look for some personal assets to back the loans.
Now it gets really hard for Roel. I suspect that the process he has mapped out is simply a bit of window dressing. At the end, he will say 'I tried everything, but the company is kaput' and allow a bankruptcy.
It won't matter who pulls the trigger. There is hardly anything left to pay the creditors. Yes, there is probably something in the future maintenance and support for a small number of FPJ's, and the 'value' of this can be debated at length here.
But....
Eclipse Aviation Corporation will cease to exist. The staff will find other work, maybe in ABQ, probably elsewhere. Many suppliers are busy with other work and will move on. Shareholders have known for some time that the money was gone, and depositors might get lucky in court.
It's over.
Unless, that is, someone with exceptional nerves can come up with $200 million (or thereabouts) and a viable plan to sell about 100 FPJ's a year for $2.5 million. For 10 years. And finish the design. And survive the FAA and DOT hearings. And pay back the depositors, suppliers et cetera et cetera et cetera....
Thanks what I'm thinking.
What do you expect will happen?
Shane
Shane,
I agree with your analysis of the probable outcome at EAC. I was only pointing out that I believe that an aircraft can be built using automotive style production processes and techniques.
The problems at EAC stemmed from trying to implement processes without understanding the nuances of building a plane. After all, you can not pill over to the side of the road and call AAA when you have a problem.
I do have one legal question; does getting fired from EAC relieve Vern of any personal liability? He did have fiduciary responsibility.
Maybe somewhere someone is looking at all of this and thinking about rebaking the jet with proper electronics and with other problems solved. Remember, it does go 350+ knots while burning less than 400 pph of fuel. This will only be done, however, if the jet is cut free from its various anchors. The likely result has been seen thousands of times: get the assets (tooling, designs, TC, etc.) for a modest sum and go from there with a new company. That is what's likely. Even the TC won't have much value, since it is currently being questioned. Maybe EAC will fold up before this is clarified so a new owner of the TC would get that to deal with. The whole shootin' match might be worth no more than $1 million with the TC under question.
chicksaw:
I agree that the first focus of building a plane should be safety, but I don't think that safety and mass production are mutually exclusive. Why can't a plane be mass produced? Ford built 15 B24 Liberator bombers a day during WWII.
Mass production and safety issues
are indepedent of each other.
Mass production is a question of market size and product design.
WWII examples do not help. They reduce the view just to the output, but there are other issues like costs per unit, life cycle costs...
EAC is - even in the third production year - a pubertal company (changing minds (hire and fire, finacial situation..), depend on big friends (FAA, politicians)..).
EAC must first learn to produce a safe product (only possible if the design is according to real standards), deliver a product according to promises in time.
(That is something Ford achieves within four weeks. And Ford will not deliver a car without a heated rear window while explaning "pls wait we will soon deliver for free"!)
What is mass production?
10 000 cigarets (of one type) per year?
10 000 cars (..) p. y.?
10 000 Hummer p. y.?
100 787 p. y.?
How much money and credibility do you need for mass production - and that of the suppliers?
julius
(P.S.: I know that's not the view of a great entrepreneur - more of an undertaker. ..Macht nichts!)
Should the blog have a booth at Sun River? We could probably pick up several cheap (like Hampton's). We should chip in and buy Shane and Stan tickets (Shane's first class on Aer Lingus).
Think of the fun we would have meeting Ken, Alexa, South Africans face to face.
Think of the insight we could add to Eclipse company meetings.
The meeting o'the blog would have a great cocktail party (Guinness could be a sponsor, Shane?)
There is a little risk- we could be the only ones there, but, what the hell, everything to do with Eclipse has been a risk.
Members of the blog who own a PC12 could give other Boston members a ride out... we should stop in ABQ and pick up Gad.
See you at the party
Turboprop_pilot
Shane, have to agree with almost all of your conclusions.
The only modifier I would add is that RP wants to buy time to stabilize the situation - e.g. the TC issue will resolve quite quickly (less than a month until the FAA says what's required, according to their timescale). At that point, it's feasible to draw up a business plan for the longer term at realistic production rates.
You obviously have more 'inside' info on the level of debt the company's carrying, which is clearly the key factor deciding between BK and continued operation.
If they continue operation, there'll have to be a production stand-down while they sort out what they're building (I believe), make design changes to allow the a/c to meet its original spec, and ensure that only finished aircraft without IOUs are delivered. The time for the redesign will allow courting of new suppliers (you can always get someone to sell you stuff, it's just the terms ... strictly cash-with-order, I should think).
Basically, I believe that the same thing will happen from the market's point of view whether Eclipse goes BK or not - a 'new' Eclipse will emerge with realistic production numbers and pricing, and an airplane that's fit for purpose, based on the current design. (Unless the review requires far-reaching design changes which would render the basic airframe uneconomic - but the review's purpose is to fix the existing aircraft, not require a different one to be built). Existing owners will be offered an upgrade to the new spec but will have to pay for it (BK or no BK).
Now that Avidyne seems to have it's stuff together (new FMS, etc), wouldn't it make the most sense for Roel to make peace with Avidyne and just revert back to Avio v1.0? That would negate most of the needed upgrades to the fleet, thereby reducing Eclipse's outstanding liabilities for retrofits/upgrades. Only question is if Avidyne would play ball with Roel.
Quick thought for the upcoming meetings:
You probably deserve to know the following:
How many orders are there, really for the plane(s)?
Ask:
a- individual orders with initial deposits who have NOT requested refunds - North America delivery
b- individual orders with 60% deposits who have not requested refunds - North America delivery
C- fleet orders for NA with intial deposits (how many planes ordered and deposits have been received)
d- fleet orders for NA with 60% deposits
d- fleet options for NA - no money
e- how many total refund requests have been demanded (planes and dollars)
f- individual orders with 60% deposits who have not requested refunds - Europe delivery
g- indvidual orders with intial deposits who have not requested refunds - Europe delivery
h- fleet orders with 60% deposits who have not requested refunds - Europe delivery
i- fleet orders with intial deposits who have not requested refunds - Europe delivery
j- ETRIC "orders", amount of non-refundable deposit money
k- same as above for the e400.
L- same as above for the rest of the world.
I would ask for a list of the above, together with the PRICE they were all sold at.
Any interested party should be entitled to this data - it is REQUIRED in order to make any sort of decision regarding whether you will work for this company or supply this company.
Without this data, you are flying blind. If you believe the delivery/production numbers after all that's been BS'ed around, you are crazy.
- and -
Roel recently said he expects that in 2009 (IIRC) they INTEND (read road to HEll) to get back to current delivery numbers and even greated numbers of deliveries - - UNLESS he's willing to come clean on the order book, this is just more Vern-like BS.
If he really intends to get back to high nummbers of deliveries, and is throwing that out there, I think you deserve to know the demand for the plane after 12 years and the TONS of sales and marketing money that has been spent. If you are expected to make decisions on your future and the future of your company, at least you should be given a complete and accurate picture of the product(s) order book... afterall, this is what you will be banking on.
If they keep all the senior level staff they will achieve nothing with respect to regaining consumer and vendor confidence. A complete house cleaning is necessary and well established highly experienced industry experts are necessary to move (if possible) forward. They can not survive with the current crop of non-industry leadership they have in place currently. Right or wrong, good or bad the existing leadership is too tarnished to continue in their respective rolls and have not achieved any real modicum of success – do not pity them and blame Vern for all their failures. I am especially critical of using an auto plant manager (who was in that job for a very short period of time and greatly untested) to run production. Ford is not known as a place that creates and develops extraordinarily innovative production people. It’s more the “company” line and just apply our way (we can see where Ford is headed these days) “they manage – they do not lead”. Lean manufacturing is one thing but building plans and cars is completely different and will always be so….. Clean house and hire the very best no matter the cost and revamp the “corporate culture” immediately and maybe the company will have a fighting chance... Without it – they are domed to the same old ways of thinking, attitude and nonperformance… It appears that Vern hired mostly “Mini Me’s” that he could impose his misshapen philosophy upon... Originate – innovate – motivate and by god – know what you're doing before lives are placed in jeopardy… They need a big broom to sweep out the place come Monday morning before meeting with those with “skin in the game” otherwise they will run into a brick wall……
A few comments on EAC's condition and some context.
The founder's departure--a very important and telling indicator of the risk state and prospects of a venture--were preceded by several developments that probably should have generated more attention and questioning.
First, the company's CFO resigned two years ago. Then, Brian Barents, a board director, resigned last year. He had the most GA aircraft manufacturing experience (Lear, Cessna, Galaxy) and some have speculated that he became uncomfortable with the venture's condition. Next, the founder lost his position as chairman in the initial round of investment by Etirc. That alone indicated the level of risk that had developed. Lastly, the founder's complete disconnection from 10 years of venture work indicates the further level of risk and deterioration of the company.
Moreover, the current acting ceo is deserving of some empathy. He has no aviation experience, a thin management team with no turn-around restructuring experience and the company by all signs is technically insolvent--it is already effectively bankrupt (cash flow insufficient to meet day to day obligations).
The various statements and actions that are being witnessed are all classic ones resulting from a financial investor (Etirc is not a strategic investor) that has been left with--and previously as a rather passive board member likely uninformed about--a failed enterprise. He is taking severe actions to try and find some point of business stability short of termination, all with an eye to reducing ultimate financial losses.
Lastly, while it is interesting to hypothesize on the founder's motivations and actions, I haven't seen any discussion of the board members. All of them are high profile former ceos but who apparently had never taken any remedial actions as a group to change EACs fundamental business course, ones involving all the issues that are now so conspicuous: cash management and capitalization, aircraft completion, production levels, supplier management, employment practices, among others.
Among these, the company's production rate plans (which drove the company's cost structure) and aircraft engineering completion (which drove customer acceptance, price and after-market support costs) were probably the ones most deserving of fundamental board challenge and intervention.
This is an extremely difficult management challenge that very few executives ever have to wrestle with. Working through a Chapter 11restructuring with a +$billion revenue company that can qualify for DIP finance is one thing (e.g. many airlines); turning around an effective pre-revenue venture that has to rely on unusually large risk capital traunches for working capital and survival is another. It is perhaps the ultimate management challenge.
Moreover, the current acting ceo is deserving of some empathy. He has no aviation experience, a thin management team with no turn-around restructuring experience and the company by all signs is technically insolvent--it is already effectively bankrupt (cash flow insufficient to meet day to day obligations).
The various statements and actions that are being witnessed are all classic ones resulting from a financial investor (Etirc is not a strategic investor) that has been left with--and previously as a rather passive board member likely uninformed about--a failed enterprise. He is taking severe actions to try and find some point of business stability short of termination, all with an eye to reducing ultimate financial losses.
If Roel wasn't doing his job as board member and let himself be passive about Eclipse and therefore uninformed, it is a problem of his own making. It also doesn't look like Roel was passive with the whole Russian plant and being an Eclipse distributor. If Roel didn't bother to find out what was going on at Eclipse while he was on the board and became a distributor, he's got nobody to blame but himself as CEO now.
"All of them are high profile former ceos but who apparently had never taken any remedial actions as a group to change EACs fundamental business course, ones involving all the issues that are now so conspicuous: cash management and capitalization, aircraft completion, production levels, supplier management, employment practices, among others. "
The lack of visible action by these board members is puzzling indeed. These are high profile, ostensibly accomplised executives who would seem to have a reputation to protect. From the outside, they appear to have behaved as sheep. Makes one wonder what was happening behind the curtain.
Dave:
That's a fair and good point; the Etirc enterprise and distribution agreement would seem to indicate a deeper level of motivation for due diligence.
Apparently, something transpired or developed between January and July 2008 that may not have been visible in Etirc's initial survey of the company's condition, otherwise one might expect the current ceo to have taken a much more harsh position in his initial valuation and control demands; this assumes rational investor behavior.
Somewhat relatedly, EAC's largest source of orders--Dayjet--has stated publicly that they are selling E500s (among other drastic cash sourcing and cost reduction actions) to raise working capital after they could not close a recent investment round.
EAC's risk condition--and management challenges--is greatly exacerbated by Dayjet's failing enterprise condition. This also creates stress on Etirc's European/Russian plans as the Dayjet model was perhaps the most well-thought out one that came to market (or at least the most ambitious), with high visibility and expectations from the investment community.
As the air taxi channel was EAC's primary selling bet, it should command more blog attention/analysis I believe.
Thanks for the comment.
airtaximan,
there might be a chance that RP will check his position.
He will find out that compared to Feb. 2008 nothing has changed for him at EAC apart from his credibility, the money in his pockets (ok there is some income: CEO, board)...
And VR has .... off!
CW and Shane descibed what will happen.
Futhermore RP has to lose a reputation at University of Twente (NL) where he serves as a part time professor.
No easy way for EAC and for RP!
julius
deep_blue, dave,
you are right!
What about the board of directors?
I didn't perceive that under the chairman of the board/non-acting CEO the subpoena against the blog was started and that the chairman of the board/CEO stopped it later!!!
And there are other examples...
Seems that EAC suffered quite a lot of this laissez-faire attitude of the board while the board obviusly was more impressed by VR's ability to raise funds than to his deficit in fulfilling his promises and tasks as CEO.
julius
Vern was probably the master at working his board with nice hockey stick projections. His ace in the hole for those was DayJet. With DayJet looking strong, it made the whole story look plausible, even ETIRC's piece of it.
The emperor's clothes started to fall off when DayJet imploded on their financing. Now the centerpiece of Vern's story was gone, and what remained were redrawn hockey sticks that made no sense. Exit Vern, enter Roel. From here, there is probably no recovery possible.
Well, big differences between Ford's B-24 production in World War II, and Eclipse's production today.
Similarly- both got off to a difficult start. It took nearly two years for Ford to make it to one per day during WWII, with 40,000+ employees. and Henry Ford himself was in charge of that program.
Plus, Ford was being threatened with a government takeover of his business, and was basically given unlimited cash to do what he needed to do to make bombers.
Now, if Eclipse had unlimited cash sources forever, they too could probably ramp up and produce higher numbers. And Mr. Ford had a buyer for every single one they could produce, as fast as they could produce them.
However, there is an end to the cash stream here- and Eclipse has to make it work with the cash flow they get- no major government takeover in sight, and no Germany or Japan to deal with.
Except of course, Hondajet.
TBMS-r-us said "His ace in the hole for those was DayJet. With DayJet looking strong, it made the whole story look plausible, even ETIRC's piece of it. "
That's the key, I think. It's easy to forget, now, that this time last year, no-one knew how Dayjet would fare. (...and if you say you _knew_ you're lying - you can have had a gut feeling, or strong suspicions, or whatever, that Dayjet would fail, but you didn't _know_). So the wheels stayed on until Dayjet was shown to be a disaster.
I put a big proportion of it down to a bunch of rich guys being so out of touch with everyday reality that they thought small/medium companies and government employees would be allowed to pay substantially more to travel by air than the equivalent car journey. If you habitually travel business/first/charter, well Dayjet prices might seem cheap. But to the rest of us ... not so much.
Exit Vern, enter Roel...
I think Roel has his own version of the Hockey Stick...
Europe, Russia, per-plane-not-per-seat...etc...
Of course, he is better positioned, becasue he is providing the order to himself under this scenario.
I can almost smell it from here: "hello, Mrs. Banker, this is ERTICK here - we have the planes that 'normally' cost $2.15 million, and we are buying them for only $1.5M... can you lend us some money against the equity... we have 200 on order, that's $150,000,000 in equity - how about lending us $100M? - its fully secured"
Mrs. Banker: "who makes the plane?"
Roel: EAC in ABQ in USA
Mrs. Banker: "Who is behind that outfit"
Click...
more BS.
What do you wanna bet that ETIRC also believed the DayJet business plan, and thought they could just copy it. That would explain a lot. Remember, DayJet stumbled after the ETIRC investment. There's a sort of inertia in these business plans, it takes time for reality to impose itself. So my guess is that Roel was in too deep before he realized what was really going on. Now, as Deep Blue said, he's just trying to minimize his financial loss going forward. In all likelihood, he'll lose everything ETIRC invested and then some.
Ceri instinctively gets to the core air taxi issue (and really, it's the core VLJ issue): pricing.
Dayjet's rates are much too high to stimulate demand (or divert other mode users like auto).
The actual market size of users that can afford to regularly use and pay for air service at $2-4/mile is surprisingly small and for the density requirements of the air taxi business model (you need a large almost unlimited potential pool of users to randomly fill repositioning and/or new trips within network) is simply untenable.
Both EAC and Dayjet were going to market on price stimulation strategies. But both the E500/400 product prices and the Dayjet service prices are not sufficiently breakthrough to really generate significant new demand/substitution/migration. And they really can't compete on design/features: the trade-offs are too large.
The true EAC aircraft stimulation price is probably closer to $700K and the Dayjet stimulation price is radically lower than $1/mile. By "stimulation" I mean creating a whole new large group of buyers/users that create a new relative mass market.
Unfortunately, neither enterprise was able to generate or control any particular real cost advantage other than those assumed (somewhat erroneously) to emanate from very large scale production.
The aviation industry is a very long way from breakthrough cost design, either in product or service.
At the market level, SatsAir appears to be functional at a rather small scale level but is a different model than DJ. LinearAir is a small niche regional/seasonal service with mixed pricing and Pogo is not operational (nor is its plan of an air taxi design). No one is pursuing (or able to pursue) radical price reduction in the private air market.
BTW, Cessna was smart about Mustang pricing such that it does not canabalize but rather complements, its product line.
deep,
I don't know who you are, but your point is exactly what I've been trying to say for almost 2 years - not as well as you.
Do you think that charter, fractional owners, first class and last minute airline travelers would switch to lower cost air taxi?
There are 2000 jets in US charter... for example. If there was alower cost alternative... would many of these folks switch?
HOw much cheaper?
I think the light jet category is for all intents and purposes the same as Dayjet pricing... maybe a few hundred bucks less... no big deal... and the prop have dayjet beat (and the VLJs for that matter) on the E500 mission...
There are a lot of prop in charter.
Whats you opinion of an air taxi, using a jet?
Price, mission?
thanks
etrick always seemed to stay away from per-seat.
other than that, they thought e500 would be a platform for a new air taxi business, and they could make money charging for service usually taken on by charter companies - like scheduling and back office...
seems to me they were developing their own algorithms, too.
so, non-aviation guys, misunderstood a few things, and were banking on either the uninitiated customer or operator to go into business with them.
beware of any business plan that requires neophyte customers, except in a new market. This was in no way shape or form a new or revolutionary market - except to them.
BIG MISTAKE.
tbms r us is underscoring a central element in the entire EAC case study.
It may not be appreciated how integral the Dayjet venture was to EAC projections and management actions and the extent to which constituents relied on the air taxi promise for risk and investment decisions. DayJet may have represented well over 50% of EAC's net order book. Copy cat Dayjet firms were expected to follow.
DayJet did to its credit assemble a talented team, raised significant initial capital through a well-known transportation investment bank and generally marketed itself well.
But it also was under a critical eye for initial "proof of concept" metrics like revenue, yield, "load factor," repeat use and others.
It seems to have failed very quickly. It no sooner took delivery of almost 30 E500s, hired hundreds of employees and rolled out service to dozens of cities, than it abruptly, after barely a few months in the marketplace, fired 200 employees, cut service, idled planes and put most of them actually up for sale to raise cash.
This was a shock to financial investors and suppliers and somewhat of a surprise to industry observers (or at least a surprise as to how fast it failed and how aggressively the company initially "lit the fuse" on growth and costs).
Air taxi is now back to its original state (even worsened state) of uncertainty concerning its viability and therefore the core viability of aggressive VLJ sales growth.
That's the key, I think. It's easy to forget, now, that this time last year, no-one knew how Dayjet would fare. (...and if you say you _knew_ you're lying - you can have had a gut feeling, or strong suspicions, or whatever, that Dayjet would fail, but you didn't _know_). So the wheels stayed on until Dayjet was shown to be a disaster.
Most everyone explained why DayJet wouldn't succeed before DayJet got off the ground. It wasn't just a random guess. Many people on the blog for instance pointed out that DayJet didn't have the market all to itself and was competing with prop operators and many other charter operators. Eclipse basically acted like they had a new idea and were entering a new market, when in reality they were modifying a decades old idea in markets that had been served for decades by jets and props.
airtaximan: thanks for the comment and question. I've done much work in the "air taxi" and related markets and will put together a concise response for the blog over the next few days.
For a quick response in the meantime, I would say that yes, jet air taxi has a future and DayJet did some important building block work in this regard but the development cycle is decades, not years.
You make a critical observation about "neophyte" customers; you point to one of the most important elements in the development of an eventual large scale air taxi business for the mass travel market (because right now the traditional charter market, as you point out, covers the smaller current private air market quite well): consumer education and changing travel and purchasing behavior; it's a much bigger task than most observers realize.
Regards.
It's over.
Unless, that is, someone with exceptional nerves can come up with $200 million (or thereabouts) and a viable plan to sell about 100 FPJ's a year for $2.5 million. For 10 years. And finish the design. And survive the FAA and DOT hearings. And pay back the depositors, suppliers et cetera et cetera et cetera....
With Vern gone, no money, not much chance of raising money, a demoralized staff & management (or what is left of them), no-to-low inventory on parts, vendors that haven't been paid, Dayjet fast becoming DayFlop...
It's not a question of "if" anymore, it's just a question of "when".
Dave makes a good point. "Air taxi" (which is really short-hand for large scale, lower priced shared jet use) certainly has more traditional competition than may have been appreciated.
I would say however that DayJet did follow a variation strategy that tried to extend into a bigger market (and that's why there's an investment thesis) some of the benefits of traditional charter service by allowing consumers to buy the seat, rather than the whole aircraft.
Netjets is an example of modifying the traditional unit of inventory from whole jet to a share in the jet. Likewise, air taxi--and Dayjet was not the first to do this--attempts to further modify the inventory unit down to the seat.
But then you run into a whole new set of operational, distribution and cost/price challenges
airtaximan said...
b- individual orders with 60% deposits who have not requested refunds - North America delivery
The only customers who can request a refund are those subject to the new $2.15M price and have *not* yet sent their 60% payment. So there cannot be anyone who has put in 60% and who can ask for a refund.
The really hurting customers are the ones who thought they were lucky to miss the price increase. No Eclipse will ever be sold at $2.15M because the company will be gone by then.
The only customers who can request a refund are those subject to the new $2.15M price and have *not* yet sent their 60% payment. So there cannot be anyone who has put in 60% and who can ask for a refund.
I believe you could, but you'd be running into a brick wall. Eclipse in cutting the production rate breached the contract by taking and keeping the 60% when they at best would get someone's plane at 1 per week (or whatever it was) if you're one of the [un]lucky 30 where there's still parts to build theirs and it would be outright fraud to keep the 60% when you don't have the parts and at best wouldn't have them for another year per what Eclipse is telling suppliers. Eclipse can't just take the 60% from customers because it wants it, but the only way to wrestle it out of Eclipse would be to sue Eclipse. If more than 30 customers have paid their 60% and Eclipse has continued to keep that 60%, Eclipse has a lot of splainin' to do. I think for Eclipse that it is ingrained now for them to breach their contracts with the 60% where they don't deliver until much after 6 months, but with the recent events, it takes things to a whole new level.
"So there cannot be anyone who has put in 60% and who can ask for a refund."
anyone can ask for a refund... let's be clear - the mods are delayed, and in all likelihood never going to happen at EAC's expense.
No one got what they asked for. I personally believe even if you have received a plane, you could probably rightfully demand a refund.
Just my opinion of course, but I think this is a viable option for EVERYONE.
I even think someone could obtain a price for a G1000 retrofit (based on someone getting an STC) and demand from EAC the cost to mod their own plane and bring it up to what was promised, or closer to what was promised.
If I got stuck with an unfinished plane, and held a bag of empty IOU's, you bet your ass I would find someone who would give me a quote for the "repairs and mods" to what is essentially a broken-promise-unfinished-unsafe-plane and submit it to EAC.
Furthermore, if anyone in europe put down a deposit, progress payment, they would rightfully be entitled to demand a refund at this point. Even if there was no specific clause covering unlimited delays with EASA, there have been so many broken promised dates for EASA, that any judge would award.
BTW, in order for the customers to get anything close to what they deserve, they better start acting like they are alive and deserve better treatment and not die-hards.
deep blue,
if there are only 3 free seats on a plane there is a low chance that there is any business which is based on "on demand per seat".
IIRC Dayjet mananged to get 1.4 paid seats per plane. I think the prices are based on "per plane" plus some "overbooking".
Recently Dayjet stated, that the increasing oil prices wouldn't change the prices very much. Does this mean that there is a very high fix block in their calculation?
If you look at the other "Airtaxi operators" they give the impression that they simple use "Airtaxi" to suggest there is something new and less expensive than charter.
Even thoug Dayjet has increased the number of dayports there are enough resources for normal charter (or should I say: disruptive "on demand on plane to everywhere")!
julius
Shane said ... I'm know the bank involved and they are a pretty hard nosed lot.
Is there any public information that hints to or points to a Bank having loaned a non-trivial amount of money to Eclipse?
Conversely, Shane, you often mention "a Bank" as a major source of funds and major creditor. Do you know that for a fact? Is that a substantial amount? What order of magnitude? $1M, $10M, $100M?
The reason I ask, is that I'd be surprised any bank (vs equity risk inverstors) would make a loan to Eclipse in the past 2 years.
Deep Blue said ... I haven't seen any discussion of the board members. All of them are high profile former ceos but who apparently had never taken any remedial actions as a group to change EACs fundamental business course
You must not be familiar with the dynamics of a BoD in a private, VC funded company. Basically the board does nothing, other than meet (typicaly by conf call) every couple of months to get the mgmt team to organize their reports.
The ONLY effective controls on a private VC-funded ocmpany is the release of funds by the existing (current round) or potential (next round) investors.
Even in public companies, the Board does very little to buck the Chairman which is typicaly the CEO.
Let alone in private companies. Ouside board members (if there are any) are there simply as figureheads to lend credibiity and aid in rainins money.
You are SEVERELY overestimating the influence any outside board member has. Likely, they know less about the true state of the company than this blog. (And you know that I am one that does not assign great collective knowledge to this blog)
(And you know that I am one that does not assign great collective knowledge to this blog)
flightcenter is going to have a party with that comment, my friend!
Deep Blue said ... Apparently, something transpired or developed between January and July 2008 that may not have been visible in Etirc's initial survey of the company's condition,
DB, you are making some very good observations.
IMHO, this is exactly what happened.
Ed and Vern talked all the time. Ed knew Day Jet was going no-where. It is very possible, even likely that Vern managed to get Ed to hold off on the bad news until Eclipse got ETIRC's money.
After ETIRC's money went in, it has been a flood of bad news:
1 - DayJet stops all further deliveries and floods the market with 15 Part 135 certified planes.
2 - Avio NG goes nowhere, Eclipse throws in the towel and announces a scrap of 50%+ of Avio NG and go with G400ws.
3 - Throtle/FADEC problems, emergency AD, reports of blown tires, SDRs a plenty - again Ed was no longer holding the floodgates of bad news from Day Jet pilots.
4 - Failed production increases, again.
5 - Owners REFUSING to take delivery of planes with all the IOUs.
5 - (this is the big one) IT BECAME OBVIOUS THAT IT TOOK A *HUGE* AMMOUNT OF TIME/MONEY TO UPGRADE EVEN A SINGLE PLANE.
Put all that together and Pieper knew he was sold a bad big, pushed Vern out, realized the company could not make it, and decided to:
A - slow things down to see if they get better (Garmins, FADEC, certified, SCR, etc).
B - Try to find additional investors, that will now cram him, just as he crammed the original investors.
If it doesn't work, he will go CH11 and do DIP financing OR walk.
Conversely, Shane, you often mention "a Bank" as a major source of funds and major creditor. Do you know that for a fact? Is that a substantial amount? What order of magnitude? $1M, $10M, $100M?
I know that for a fact based on public records. I forget that name of the bank, but Eclipse used patents/trademarks as collateral. There's records in both the UCC filings as well as at the PTO. Without ordering a copy of the actual copy of the UCC filings, I don't know the dollar amounts or what all the collateral it covered.
Even in public companies, the Board does very little to buck the Chairman which is typicaly the CEO.
So since Roel has been the Chairman, it's been all his doing.
OK, I am NOW afraid - Baron puts forth a CONSPIRACT THEORY regarding Vern and Ed...
Can't you just BELIEVE these two were going about their respective businesses, and things just happend to unfold the way they did?
BTW, I don't think Ed ever "cancelled" his order... for 229, or 229+70, or 1430... whatever number... he never cancelled his order.
"You must not be familiar with the dynamics of a BoD in a private, VC funded company. Basically the board does nothing, other than meet (typicaly by conf call) every couple of months to get the mgmt team to organize their reports."
This statement ( and several others in this post) is a complete crock, my friend. As a VC and board member of about 40 private companies, I can tell you that any VC worth his salt is all over the company, especially when the company is challenged. In a VC backed company, the board often controls more than 50% of the votes and may have other special decision making peovisions incorporated in the investment agreements. You could not be more off base!
One of Eclipse's problems is that they did not have a board comprised of proactive investors, but relied more on "luminary" directors with little apparent concept of what corporate governanace is all about in a startup company.
Baron,
The bank is leading the effort to raise the funds. The amount being 'talked about' is $200 million. Typically this bank has a wide range of high net worth individuals to whom it and go and say:-
"We have a high risk aviation play, which requires 18 months to prove a business plan. You may lose your investment, or you could make a substantial gain. Here are the terms."
The only reason I continue to say that Roel might make a go of things is this bank. The word of their involvement gives EAC a very small chance of getting the funds. If they really are involved.
As to who the bank is, well I have a small problem. I only have one source, it's from within EAC and ever since I 'fired' Peg by mistake I'm being extra careful....
So I'm not really able to name names. You'll just have to trust me when I say that a) I know this bank and how they operate and b) I believe their involvement, even at this late stage, gives Roel a remote chance of pulling this off.
And trust me as well on the 'high net worth individuals'...
But my source could be wrong. Or the bank might do a little digging and not like what it sees. Another source says that RPM (Roel, Peg and Mike) are telling people they are not confident the fundraising will succeed.
Anyway, my earlier comments stand. The coming week of meetings with the staff, customers and suppliers is key. Without the support of all three groups there is little point in trying to raise the necessary funds.
You do agree they need funds, don't you?
Shane
Shane,
I think you probably know someone at the bank....
;)
NEWS FLASH
As you know there was a big layoff on Friday, and today another round of layoffs as the C shift came to work. ECLIPSE did away with the second shift but still maintained the 4 on 3 off 3 on 4 off work shift of some where known as the C shift. The total laid off I am told is around 650 this week, there might be about 350 total working at ECLIPSE as the work week starts tomorrow. This will be a nice run on the unemployment office in ABQ tomorrow. Another strange rumor that is buzzing around ABQ is the PIPER may be interested in the production facility when ECLIPSE goes belly up. They know there are great tax incentives and a labor pool in the ABQ area and as we know, they have a single engine jet in the works. The interest is STUR FRY WELDING was another topic that came up as well.
More info as I get it, but I’m running out of sources from inside ECLIPSE due to the layoffs, LOL.
20YM
Another strange rumor that is buzzing around ABQ is the PIPER may be interested in the production facility when ECLIPSE goes belly up. They know there are great tax incentives and a labor pool in the ABQ area and as we know, they have a single engine jet in the works.
As I recall Piper had looked at NM before, but opted to open a factory in FL instead. Perhaps if they were to get a really sweet deal, they'd also do ABQ. Perhaps a fire sale with tax incentives would have them engage in an asset sale (rather than taking over the business and all the liabilities that would entail).
The PIPER factory in Vero Beach Florida has been there for a long time, that is where they are doing the build up and testing as well as the attempt for there cert on the single engine jet. They where interested in having an additional facility out West.
20YM
airtaximan said...
anyone can ask for a refund...
Well, sure. My point is that only those subject to the price increase can ask for a refund under the terms of the contract.
The price increase, ironically, cause Eclipse to have a huge negative cash impact. First, none of the increased price airplanes have been delivered (that's months away). Second, it essentially stopped the 60% payments because it gave depositors a way out of the contract. Then, it produced a huge liability of money owed.
In the short term, it is about the worst thing the company can do to itself. They won't live long enough to enjoy any positive impact it could have had, and no customer will get a refund. So no gain and all pain for everybody.
ATM,
When the blog was asked in June 2007 to predict the number of aircraft Eclipse would deliver in 2007 and 2008, the answer came back exactly correct for 2007.
For those who may not have been around last year, the average of all the projections from naysayers to die hard supporters and the prediction of Black Tulip both came to the same answer, 99 aircraft.
After all the dust settled, this turned out to be exactly the number of aircraft that Eclipse delivered in 2007.
A lot fewer people participated in predicting E500 deliveries for 2008, but it looks like the blog is again going to be substantially more accurate than any prognosticator from Eclipse and will probably get the answer correct within 10% or so.
Meanwhile the official Eclipse plan in June of 2007 was for 216 deliveries for 2007 and 747 deliveries for 2008. Off by approximately a factor of two for 2007 and a factor of 5 for 2008.
Of course, there was at least one member of the blog who asserted that Eclipse would deliver exactly zero complete aircraft in 2007 and 2008 that met the original specifications. That position also turned out to have been exactly right.
Who would you trust when making a bet on the future of Eclipse?
Meanwhile back in Q2 2007, the blog suggested that Eclipse’s long term success was totally dependent on DayJet’s success and that DayJet’s business model was fundamentally flawed and doomed to failure. No DayJet, no Eclipse. It was the blog that noticed that the DayJet aircraft were flying less than 1 hour per day per aircraft on average.
At the same time, the blog suggested that Eclipse would launch a new airplane to distract depositors, investors and the media from the issues associated with the E500.
There were those on the blog that suggested that perhaps the Avio NG FMS wasn’t “complete” as originally announced and that it might be some time before it was certified. It was the blog that was first with the news that Eclipse would abandon their commitment to Avio NG’s GPS and FMS and switch to Garmin 400Ws.
It was the blog that noticed that aircraft retrofits were taking weeks longer to complete than what was promised by Eclipse.
As for sources of collective wisdom, you will find blog posts from aerospace and mechanical engineers, avionics software developers, DERs, QA and reliability engineers, and production line staff, many of whom have worked on the E500. You will find experts in aircraft production techniques from welding to riveting to composite technology. You will find posts from flight test pilots, Eclipse 500 pilots and owners, aircraft pilots of many levels of experience from single engine piston pilots to ATPs and military pilots with tens of thousands of hours. You will find posts from people who work for companies conducting Eclipse training and Eclipse aircraft management. You will find posts from people who seem to have read and understood every line of the FARs including the latest interpretation of A/C 23.1309 1c. Of course, some of the most colorful posts have come from the ex-customers and ex-depositors. There are posts from lawyers who understand how the court system works. There are posts from HR folks who understand employee rights. There are posts from people who have known Vern, Roel, and Ed for years. You’ll find CEOs of many successful companies, investors, and board members. You will find posts from air charter operators, FAA certification personnel, A/P mechanics, Eclipse vendors and Eclipse investors. There are people who remember why Eclipse made the design tradeoffs as far back as 1999. There are regular international reports from at least Germany, France and Russia. I’m sure I’ve left out many, many folks.
Of course, there are occasional posts from an itinerant, pub crawling, Irish ex-journalist who has a nose for a story.
Then there was Stan, who called it right from the beginning.
FC, that was a fantastic post, truly epic in its' scope and completeness.
Here here.
Here is one the blog missed...
The connection between Capt. Zoom and Vern. Ever wonder why Zoom Zoom printed drivel and Vern could do no wrong? Every wonder if it was only because Eclipse was a big advertiser? Ever wonder how someone so "attuned" to the industry could get things so wrong? Well I'm going to tell you why...
Vern Raburn spent a lot of time in Tulsa, OK in the mid to late 70s. He owned a computer store. He closed it to go to work for Microsoft. Zoom Zoom was also around Tulsa at the same time. The connection goes back nearly 35 years. The Zoomster was busy passing himself off as a medical doctor which eventually prompted an investigation by the FAA (Google: Captain Zoom Tulsa). At the time the parties in question were heavily involved in aviation and the blossoming computer industry at the same time.
Of all the stuff this blog turned up I'm surprised everyone missed this link.
No, I'm still not Vern, the Zoomster still isn't a doctor and I love the G1000 in the Mustang.
FC,
WOW! What a great compilation!
The Brits Fly the Musang....
Mustang Flight Test
In fact, it* reads like an excellent introduction to a new thread.
gadfly
(*flightcenter's blog, that is!)
CW, Eclipso, Gadfly,
Thanks for the positive comments, but more importantly, thank you for your excellent contributions to the blog.
ATM,
I wouldn't have said anything if you hadn't suggested it was time for a party!
Wytech said... One of Eclipse's problems is that they did not have a board comprised of proactive investors, but relied more on "luminary" directors with little apparent concept of what corporate governanace is all about in a startup company.
Which just proved my point.Eclipse was VC funded, and they had no clue about the company's true challenges. AS IT FREQUENTLY HAPPENS in private and public companies. The board is always the last to know.
Shane said .... The bank is leading the effort to raise the funds
OK Shane, I'm not sure if you are deliberately mudding the waters or if you only have half info.
What do you mean by "bank".
Is this?
A) An Investment bank leading an equity investment round?
B) The FINANCIAL ADVISOR side of a bank working for Eclipse for private placement (i.e. to raise the round) from other equity investors.
C) A traditional bank role, lending moeny to Eclipse (which your posts implied, and which I very much doubt is the case)?
Please help clarify.
FC - fantastic post! I would have added a very special mention for our very own gun slinging, Vern hating, SLAP busting freedom fighter who is high on my list of personal heroes....SM
FC
Brilliant.
FC,
thank you for your nice summary!
Thank you!
Baron,
The inbox this morning confirms the bank in question.
What I'm not able to clarify is the role it has.
When I can do so, I'll provide you with the answers we all seek.
And apologies for still being vague. I prefer to describe myself as 'careful' as what is a critical time for the company.
Shane
flyger,
"under the contract" I believe the customers were supposed to get plnes that would be retrofitted in short order, at the cost of EAC... including aero mods, new avionics (that still will not conform to the contract), and FIKI.
Also, EASA, for those in Europe.
Without the probability of these being delivered in short order, at EACs cost, I believe anyone could demand a full refund, and return the plane.
Also, those who have not yet been delivered, were promised a delivery date that could be years earlier than waht they are now being told is reality.
So, I maintain - pretty much all the customrs can rightfully ask for a refund, due to EAC non performance under the contract.
But, I see your point.
I was thinking of Gunner when I wrote this.
Of course, some of the most colorful posts have come from the ex-customers and ex-depositors.
Gunner has consistently provided some of the best color commentary on the blog.
FC,
you ARE the man..
of course, we got a bunch of things wrong, too.
Mostly BK date predictions, going back a year or so - but these were probably right, except for Vern unbelievable ability to provide more cash to throw on the fire...
Everyone should read the book you suggested "The Wisdom of Crowds".. especially before the upcoming US elections!!!
Bush??? explain that one!!!
Thanks
Baron95,
FAA records show that Eclipse has had a consistent relationship with The Bank of New York since 2006.
Eclipse has funded the cost of producing many Eclipse aircraft by taking out loans from The Bank of New York.
The public records show that Eclipse entered into many Security Agreements with The Bank of New York that identify individual Eclipse 500 aircraft by manufacturer's serial number and by registration number. In those Agreements, The Bank of New York is referred to as the "Collateral Agent".
Typically at the closing, when the aircraft is delivered to the final customer, and the loan is paid off, The Bank of New York files a release with the FAA releasing all right, title and interest in the aircraft.
Interestingly, Eclipse temporarily stopped using The Bank of New York to fund the production of new aircraft shortly after the Bank of Roel provided his initial investment in Eclipse.
However, after that source of cash ran out, Eclipse once again started taking out loans from The Bank of New York with aircraft on the production line used as collateral.
It will be interesting to see what happens if certain Eclipse 500 aircraft are not able to be delivered to customers and Eclipse is also unable or unwilling to make the loan payments for those aircraft.
ATM,
While plenty of people on the blog have predicted BK dates that have come and gone...
You'll almost always find someone else on the blog who will say, "not so fast..."
They typically mention Vern's amazing ability to raise funds.
Deep blue's recent assessment rings true whether there is a BK event in the near future or not...
...the Eclipse company and the product line, are already failed with little likely recovery/adaptation potential.
FC, of course.
I am usually the one to say don't count Vern amazing money-rasing ability out just yet... and the E500 is DOA.
I see no way out for EAC - but I am willing to admit that I don;;t have all the answers, and perhaps there is a way we do not see... AND, I doubt it!
If the collective wisdom of this blog cannot come up with a path to success for EAC... there probably isn't one.
"Eclipse was VC funded, and they had no clue about the company's true challenges."
B95,
Hard to argue that the Eclipse board was out of touch. However, the Eclipse board never included mainstream professional VC's. (I know and have worked with a majority of them.) It is true that some boards are ineffective, but thats not generally the case where professuional investors have significant equity positions in the company. Professional investors with big bucks at stake are rarely passive. I stand by my earlier "crock" description of your comments. These comments are far too sweeping to be generally accurate, and do not reflect the way that top tier VC's work.
Flightcentre,
A truly excellent post. You give me a real problem for the next headline, given the piece from Black Tulip.
Maybe, I'll run both!
However, there is one bit I'd have to correct:-
Of course, there are occasional posts from an itinerant, pub crawling, Irish ex-journalist who has a nose for a story.
Sadly, I have never been a journalist.
The rest, I'll happily admit, but I would never 'make the grade' in the profession of journalism. Too sloppy and much too long winded!
Shane
Hmm, lets see:
Vern had Sam Williams (a supplier/investor) on the board, Al Mann (big investor) then others with no stake as figureheads (all from the dino-age aerospace cos) -
I think there was not one pro VC involved, probably by design.
I think the only time anyone told Vern what to do, and he actually listened - was when they finally excused him from the company.
"I think there was not one pro VC involved, probably by design."
I know Vern and IMO it was by design. He had been there and done that in a previous venture.
Wonder if the same fate awaits Eclipse 500 owners: http://www.denverpost.com/headlines/ci_10292662
I'm going to let you in the secret of successfully predicting the future:
1. Make all the predictions you want. Make a lot of them, so you cover all the bases. For example, here are two: The price of oil will rise next month. The price of oil will decline next month.
2. Later, only mention the predictions that turned out to be correct.
3. Big profits. You now have a 100% success rate.
4. If somebody mentions that, for example, this blog has successfully predicted 10 out of the last none bankruptcies for Eclipse, attack his credibility.
ATM is oh-so-correct in praising the collective wisdom of this blog. The same blog that said that Eclipse HAD to raise the price of the E500. After Eclipse did so (undoubtedly because the blog said to), this blog then predicted that the prise increase would cause the demise of EAC.
But wait, there's more: the blog also said that Eclipse needed to cut their production and staffing, and should deliver far fewer jets per year than their target. Recently Eclipse announced that they were doing just that. Who says Roel doesn't read this blog?
Sadly, though, the "experts" then said that this move is the final nail in Eclipse's coffin.
No doubt, EAC should hire this blog to figure out its next move. With experts like these, who needs morons?
No doubt, EAC should hire this blog to figure out its next move. With experts like these, who needs morons?
just zis guy, ya know,
The cool thing is that we get to be the ultimate Monday morning quarterbacks. We have no responsibility for the outcome (thankfully), and can say anything we want (mostly, thanks to Gunner and the US Constitution). If you don't like what we have to say, too bad, because we all sure enjoy saying it.
zis guy,
I think you missed the point - the problem is that there is not enough demand for the e500.
EAC can continue to claim they will build 700 planes a year, but who will buy them?
EAC could continue to sell them at what they admitted was a BIG loss per plane... but who would continue to fund this?
And, yes, I reminded the blog that some here predicted the BK of EAC last year, only to be foiled again by VR with more fuel for the fire...
But, this blog has come up with MANY real predictions and insights that you would be hard pressed to find elsewhere.
Plus, I personally believe the thesis put forth by "The Wisdom of Crowds" - the "collective wisdom" of this blog has been pretty accurate - especially compared to the promises from EAC.
The prediction of the deliveries last year was remarkably spot on, even accounting for the wild variety of individual predictions.
So, I say to you, keep posting... your "left field" attitude balances some one "right field" - and the collective wisdom is better for it.
Thanks
FC said ... In those Agreements, The Bank of New York is referred to as the "Collateral Agent".
FC, thank you for the detailed info. I have a follow-up question then regarding the role of the Bank of New York.
Were they:
a - providing working capital - i.e. short term loans with the aircraft batch being produced as colateral, settled when Eclipse receives funds - this is quite common with contract mannufacturers, particularly on overseas orders.
b - providing escrow services, where customers are wiring the money to the Bank of New York, who keeps a lien on the planes which is release at delivery, or all the obvious variations on that.
If it is "a" above, I can see Eclipse being unable to renew the credit facility for a new batch without new money (deposits, progress payments) coming in.
Either way, this is likely to be modest amounts.
Zis Guy said: ”I'm going to let you in the secret of successfully predicting the future:
1. Make all the predictions you want. Make a lot of them, so you cover all the bases. For example, here are two: The price of oil will rise next month. The price of oil will decline next month.”
Don’t forget the big picture of the “critics” web site – that the Eclipse model is not workable for dozens of different reasons.
How long did it take the Titanic to sink? How long was the gash in her tender underside? How many compartments really flooded? These are the day to day topics of the blog that you refer to and yes, there are many many opinions on the details. It helps pass the time.
In the big picture however, she still sinks. As predicted.
So, I say to you, keep posting... your "left field" attitude balances some one "right field" - and the collective wisdom is better for it.
Does Zaphod not realize that he contributing to the collective wisdom of the blog? Zaphod's posts are a type of Cretan Liar Paradox.
Dumb question,
I've been trying to understand the numbers while out running this morning. Maybe it was the "runners high" that led me to this epiphany:
How much does it really cost to build the EA500? The Operations side of my brain eventually remembered that ...in a "simple" business model like that of a McDonalds, if it cost $5 million to build your Micky D's, then the first Big Mac off the assembly line cost $5 million ...and you amortize that cost over your 20-30 year mortgage/lease. But you still run the numbers of the business based on other **similar** businesses to ensure you hit your revenue and ROI targets in 24-36 months....
So here we have a $1 billion airplane and say only 245 delivered to customers. That averages out to $4,081,633 for *EACH* plane. In a traditional investment scheme, you invest X dollars with an expectation that each item off the assembly line will contribute towards your Return on Investment. I hated Finance class in college, so I'm fuzzy if the IRR, the Internal Rate of Return also plays a role.
Essentially, I'm starting to see this venture as a major bust. You can't sell the FPJ for $8 million, which would give you enough $ to pay all legacy costs. But whatever you do sell the jet for must cover a portion of your current fixed and variable costs. Eventually you have to pay for your initial RnD costs. And no matter how you slice this, I don't see this happening since it either has to occur via volume (selling lots of Big Macs in a 12-month period) OR by having a high retail cost per unit (a low-volume biz model).
If you look at monthly costs, I believe the company was at $50 million including payroll. Delivering 16 planes per month then averages out to a net cost of $3,125,000 EACH. Or, post-layoffs, say you cut that in half to just $25 million per month for labor AND parts. Delivering 16 planes a month (which WONT happen) would average to a net average cost of $1,562,500 each.
Even **IF** Roel is successful in getting more cash, say $200 million, then the total climbs to $1.2 billion, right? Over 245 planes DELIVERED, it averages to $4,898,000 (rounded up) for each plane. Each NEW plane delivered to a customer helps lower that average total cost ...but in this case, I don't see how Marginal Cost ever equals Marginal Revenue. Well, not unless you file bankruptcy and erase all the RnD put into the development of the FPJ over the last 10 years.
:(
You lost me there Dave...
EDT - you are spot on - can't see how anyone would pay the full bail-out costs. BK is the only way I can see for the aircraft to have a future...other than that you are looking at an Aerostar/ AeroCommander type of situation to cater for the existing fleet...
I have a question about the FAA special certification review. Just which version of the Eclipse 500 will the FAA be reviewing: the pre-aero mod with Avidyne avionics, post aero mod with Avidynes, post aero mod with IS&S et al but w/o Garmin 400Ws, post aero mod with IS&S et al and Garmin 400Ws, post aero mod with IS&S et al but w/o Garmin 400Ws and with new anti-icing system or post aero mod with IS&S et al and Garmin 400Ws and with new anti-icing system?
There's almost too much to choose from! With six derivatives of the same model, you' think Eclipse would be able to make money at this. ;-P
Even **IF** Roel is successful in getting more cash, say $200 million, then the total climbs to $1.2 billion, right? Over 245 planes DELIVERED, it averages to $4,898,000 (rounded up) for each plane. Each NEW plane delivered to a customer helps lower that average total cost ...but in this case, I don't see how Marginal Cost ever equals Marginal Revenue. Well, not unless you file bankruptcy and erase all the RnD put into the development of the FPJ over the last 10 years.
I don't see it either short of BK. Forgetting about paying back your investors for the $1B but simply breaking even on your expenses I don't see how Eclipse can do it (mostly due to self-inflicted injuries). At a low price there isn't enough demand to cover the costs and at a high price nobody would want to buy an Eclipse when they could have a Mustang instead. Because of all the screw-ups Eclipse has done (signing bad contracts based on non-existent volume and publicly burning bridges with suppliers), it costs about as much to manufacture an Eclipse as it does a Mustang on a per unit basis. It is a faulty business model because even if Eclipse could build 1000 units per year at $1 million each, there isn't a sustainable market demand for that many.
It should be interesting to see what happens with the supplier meeting because those suppliers have got to calculate whatever new money they might put into working with Eclipse could very well end up not seeing because of an Eclipse BK and Eclipse has a spotty credit rating. I'd say any supplier who wants to go on with this risks throwing good money after bad.
Wytech said ... These comments are far too sweeping to be generally accurate, and do not reflect the way that top tier VC's work.
Not to hijack the thread, but, I stand by my comments, and the evidence is EXTENSIVE, that board members, VC or not, are snowed ALL THE TIME. Even CEOs that are managing a business day to day get snowed. I've been on both sides of a VC investment, and it is just how it is.
Do you think the BoD, Co-Chairman, Co-CEOs of EADS/Airbus should have knonw that the A380 project was going to be 30 months late and cost Airbus $4.5B because?
Do you think the CEO/BoD of Boeing should have known that there was ABSOLUTELY NO WAY that the 787 would EIS in May/08 with ANA, when it was rolled out July/07 with no systems, non-airworthy fasteners and duct tape (not a joke)?
Do you think that NEA, Kleiner, and all the other VCs should have knonw that the $8B they collectively injected in .com companies in 1999/2000 in 2nd/3rd rounds on hopelessly flawed biz cases was going straight down the drain?
Yep. They were on the boards. Some managing directors ar NEA, Kleiner where in half a dozen or a dozen boards. What good did that do? They had NO CLUE what was really going on. NO CLUE that most of the advertizing $$$ being repported as revenue, was just flowing from one flawed .com site to another and vice versa.
Anyway, off the soap box. The BoD has limitted visibiity into a business. American BoDs are COMPLETELY dominated by a CEO/Executive Chairman 95%+ of the time. When the superstar CEOs get hired, it is their way or no way.
I really would like to see the BoD of GE give Jack Welsh s$#@ or the BoD of IBM give Gerstner s$@# - that would be so funny (if it could ever had happened).
I have no clue, where you guys got the idea that a BoD could help MANAGE a company. It can't.
Dave - there COULD be a market for 1000/year@$1m at some stage if Russia,China,India,Europe,South America come up to speed quickly. You could then say what Cessna is saying for the Mustang - 3of 5 going OS - for E500 that would be 600/year international and 400/year for North America - thse figures don't sound so wild.
The point is they can't build it for $1m and meet all the promises they made....
You lost me there Dave...
Zaphod's comments are paradoxical. This is the Cretan Liar Paradox:
http://www.bbc.co.uk/dna/h2g2/A471449
Zaphod is essentially a Cretan who is claiming "All Cretans are liars."
Dave - there COULD be a market for 1000/year@$1m at some stage
I don't doubt that, but we are talking about what was supposed to originally happen in 2005 with the factory going fullbore.
Shadow,
>>
For Immediate Release
August 25, 2008
Contact: Alison Duquette
Phone: (202) 267-3883
Statement on the FAA’s Eclipse Review
WASHINGTON, D.C. — On August 11, the Federal Aviation Administration (FAA) began a 30-day review of Eclipse Aviation’s Very Light Jet, the Eclipse 500. Jerry Mack, a former Boeing safety executive, is leading an oversight team of seven FAA experts with specialties such as flight testing, avionics, and certification. The team members are independent of the original certification group.
The FAA convened this Special Certification Review (SCR) team to look at: aircraft safety, certification of aircraft trim, flaps, screen blanking, and stall speeds. These issues were the subject of Service Difficulty Reports (SDRs) that have been filed by operators since the aircraft was certificated on September 30, 2006. The team will look at whether or not any of these issues were raised during the certification process and if any of the issues are currently a threat to safety.
Special reviews and fact finding investigations are regularly used by the FAA in accordance with agency policy.
<<
That's the revised FAA statement.
According to the last AD, there are three versions of aircraft flight manuals. If FIKI and Gramin modifications are in production then there are at least four versions!
julius
Thanks, Julius. But if previous SCRs took almost a year, then how can the FAA review all four variations in 30 days? Oh, I forgot about divine intervention. Sturgell must be down on is knees praying that the SCR team can do it. Pray, Bobby, pray!
I don't know if this has been posted before, but this is a Airwothiness Directive Concern Sheet posted by an FAA Flight Test Engineer:
http://www.regulations.gov/fdmspublic/ContentViewer?objectId=09000064806bf5d0&disposition=attachment&contentType=msw8
Thanks, Julius. But if previous SCRs took almost a year, then how can the FAA review all four variations in 30 days?
Easy - one per week! Also it will only take a day or two to look at the software code. Seriously, I don't see how there is enough time to do anything but a cursory examination.
Shadow
Pray, Bobby, pray!
Sorry it should read:
Pay, Bobby pay!
as it's not divine intervention,
it's just our Jerry Mack - see top of the thread!
julius
Each product has a price tipping point.
The demand for McDonalds hamburgers is probably exactly ZERO are prices above $50 or so.
At $3, there is demand for a few billion/year (or whatever it is they sell).
Somewhere in between, there is the inflection/tipping point.
The aviation market has even more discontinuities than run-of-the mill consumer products.
The highest selling GA model, the SR22, sells typically equipped for around $600K. So we should use that as the median of the market.
Entry level IFR planes are about half. Top line should sell for twice that.
That is why you see a little cluster around $1-1.2M (Mirrage, Baron, Meridian originally).
Then there is a HUGE jump to $3M.
IMHO, personal jets need to be at the $1-$1.2M (twice the price of the sales volume leader) to sell in meaningful numbers.
I think that anything above $1.5M severelly limits the volume.
A 5-6 place SEJ priced at $1.2M with decent payload/range should displace Mirrage, Baron, Meridian etc, which sell a few hundred on a good year.
The only catch here (other than having the planes in the market) is the FAA type rating requirements.
I think we all agree that they are way past the point of ever being profitable in any way, shape or form.
My question is even using there order book #'s with component expense, labor, buildings, taxes, general overhead, etc...when should they have pulled the plug? 300M? 500M?
What was the point of no return? Did they have a business plan that said we should be at point X by spending so many $'s. If not it's time to pull the plug? Or at least make major changes?
Just listened to a radio show about "risk management" and this fits in nicely. Poor judgment from the top instead of seeing the reality of the situation.
My point is when they passed that point either $ or completeness it was total fraud after that plain and simple.
Shadow: "But if previous SCRs took almost a year, then how can the FAA review all four variations in 30 days?"
It's in the wording of the FAA statement:
" The team will look at whether or not any of these issues were raised during the certification process and if any of the issues are currently a threat to safety."
They aren't tasked with resolving the issues, they're tasked with deciding whether they're a threat to safety. Basically, the SCRs job as described in this statement is to separate the wheat from the chaff of all the SDRs and other sources of feedback about the E500.
You can see how this dovetails with the Congressional investigation - it would be useful to be able to separate real safety issues from rumor/exaggeration, or issues which are annoyances but don't affect safety.
My question is even using there order book #'s with component expense, labor, buildings, taxes, general overhead, etc...when should they have pulled the plug? 300M? 500M?
What was the point of no return? Did they have a business plan that said we should be at point X by spending so many $'s. If not it's time to pull the plug? Or at least make major changes?
AUGH! Just a few days ago I found an older interview of Raburn talking about exactly that...actually he was explicitly saying that wasn't done.
Uglytruth: "I think we all agree that they are way past the point of ever being profitable in any way, shape or form."
Nope, strongly disagree, based on my lack of knowledge of their financial structure.
To say that they _can't_ be profitable, you need to know their level of debt, which I don't and which hasn't been defined in this blog (AFAIK) or elsewhere. We're all guessing about their financial state. Unless someone knows better, of course.
I haven't seen any evidence that they definitely couldn't be profitable following a nasty cram-down and a new business plan based on realistic sales volumes.
We presumably all agree that they've proved to be a very bad investment up to this point, though.
You can see how this dovetails with the Congressional investigation - it would be useful to be able to separate real safety issues from rumor/exaggeration, or issues which are annoyances but don't affect safety.
How does 30 days give you enough time to determine that?
Dave, I think we must be at cross purposes here.
7 people on the SCR team, plus (undoubtedly) some secretarial & other leverage. 30 days to read all the relevant documentation (SDRs, TC process docs, this blog, AFM, etc) and write a report.
You could do that on your own in the time available, I should think.
"and the evidence is EXTENSIVE, that board members, VC or not, are snowed ALL THE TIME. "
B95,
There is a reason its called "venture capital." If one knew in advance which ventures could be successful, any idiot could do it.
You obviously have all the answers, so we'll just let it rest there, confident that you have set us straight.
7 people on the SCR team, plus (undoubtedly) some secretarial & other leverage. 30 days to read all the relevant documentation (SDRs, TC process docs, this blog, AFM, etc) and write a report.
There's a two-part task:
The team will look at whether or not any of these issues were raised during the certification process and if any of the issues are currently a threat to safety.
If this was only to see if issues were raised during the certication process, I would agree that this could be done in 30 days and by strictly viewing paperwork, however to determine the safety of the aircraft for certification, I think you'd need more time, more people as well as more than just reading paperwork.
Dave:
"If this was only to see if issues were raised during the certication process, I would agree that this could be done in 30 days and by strictly viewing paperwork, however to determine the safety of the aircraft for certification, I think you'd need more time, more people as well as more than just reading paperwork."
Maybe. I dunno. The point I'm making in all this is that there's no prima facie case for saying that the time period alloted is unduly short.
Like any report written to a deadline, you might end up saying 'we concluded this about point x, this about point y, and had insufficient time to draw a conclusion about point z'. And you'd prioritize your work based on the perceived likely threat to safety. There's not much else one (or the FAA) can do.
The point I'm making in all this is that there's no prima facie case for saying that the time period alloted is unduly short.
What other SCRs went from the investigation starting to being completed with the report written in 30 days? Would you still be saying this if the FAA gave a week/day/hour? I don't think this gives enough time for the FAA positively declare the Eclipse is safe.
Dave:"I don't think this gives enough time for the FAA positively declare the Eclipse is safe."
Me: "The point I'm making in all this is that there's no prima facie case for saying that the time period alloted is unduly short."
... seems like we just disagree, then.
As above, ad nauseam (and yesterday, too) - the purpose of the SCR, as I interpret it (from the FAA statements) is not to 'declare the Eclipse is safe'.
Western Skies Industries files in NM for their out-of-state (AZ) judgement against Eclipse.
http://www.nmcourts.gov/caselookup/app
Dave,
You misspelled cretin :)
By the way, it is Gag Halfrunt who keeps saying that Zaphod is "Jist zis guy, you know?"
By the way, it is Gag Halfrunt who keeps saying that Zaphod is "Jist zis guy, you know?"
I know where my towel is.
Don't Panic!
ANN on Eclipse:
http://www.aero-news.net/podcasts/casts/7/ann-daily-aero-briefing-2008-08-25.mp3
Nothing we didn't already know as far as Eclipse, just FYI.
DayJet buys stuff for the Macon facility:
http://www.floridaucc.com/pls/ucc/retrieveimg?fno=200808895360
Douglas Adams was a charming, nice man, whom I was lucky enough to have met a few times.
He was also, without a shadow of a doubt...
As mad as a bag of cats.
I'm pretty convinced the his editor toned down the books, by a considerable margin. IMHO, the BBC radio plays get closest to his (very) left field view of the world.
Or rather, the future of our small planet....
Shane
Uglytruth said ... when should they have pulled the plug? 300M? 500M?
What was the point of no return?
Well that is just it... Eclipse is investment capital funded. There is no such thing as the point of no return. The last investor in crams the previous investors, whiping their profit potential, but creating new potential profit possibiities for themselves.
It is no different than a company going through serial bankruptcies, but with less drama.
So there is NO single point of no return. There are multiple, but only for existing investors.
If you don't understand this simple fact, you will never understand how companies like Eclipse linger for such a long time.
In very simple terms....
Investor A puts $200M for 80% of the company (assume founder/execs have the rest)and starts releaseing funds on milestones. Money runs out, investor A puts no more money in and is facing losing the entire $200M for liquitation value (say $10M), for a $190M net loss.
So, investor B, comes along and says, I'll put in $160M for 80% of the company. That puts the post money valuation of the company at $200M. Investor B lets investor A keep 10% and founder/execs keep 10%. They go along because their individual pieces ar now worth a lot more than outright liquidation.
The cycle starts a new. When that money runs out, Investor C comes laong and crams Investor A to a 1-2% position, founder/execs to a 5% position and for say $100M now owns 90%+ of the company.
Point is, investor C gets a free ride on the $360M invested prior and his ROI calculations is based solely on his $100M investment.
Fast forward to Eclipse. To a new "white knight" rescue/cram investor, the $1B+ already sunk into Eclipse is NOT a liability. It is a *huge* plus. They are riding for free on all that investment (minus the waste). They come in, dictate terms, and again base their ROI solely on their investment.
As a matter of fact, companies like Eclipse that are always "almost there" always on the cusp of "final certification" of "finally increasing production" can attract cram investors like flies to honey.
There is always a group that comes in and believes they can put in anohter $100M and solve all problems and make money.
You have to understand how this works. It is all about ROI on the last buck coming in.
Baron, then why doesn't investor A just come back into the picture and cram investor B and C? Or, for that matter, investor B just to screw over investor C for screwing them last time?
If true, there's a lot of screwing going on over at Eclipse. :)
Baron,
There comes a time when the cram-down stops working. That is when the BANKS who hold debt say NO to amending the loan covenants. If they trigger BK, they end up controlling the cram down, not management. Now, I grant you, they are very reluctant to do that, because after all, what do they know about getting this company back on its feet?
My point is simply that while the banks don't want to own the company, there are limits to how far they can be pushed before they balk. Debt secured by delivery positions that aren't going to be delivered obviously pushes them into new scenarios. But, we don't know how much debt there really is. If it's small, maybe they sit around and hope the next cram-down saves the deal. If it's big, they have to start thinking about salvage value.
There is always a group that comes in and believes they can put in anohter $100M and solve all problems and make money.
You have to understand how this works. It is all about ROI on the last buck coming in.
That is true depending on the terms of the deal. If an equity-backed business is doing well, what the status of the previous investments (and hence equity/debt) matters, however, I believe you were directly your comments only towards desperate equity-financed companies rather than all equity-financed companies.
I don't see it as worthwhile to buy the *business* for $100 million (or worse yet $200 million) assuming that all the debt/equity was wiped out in its entirety with said investment. What I could see is another group coming in and buying the *assets.* Like it had been floated on here with Piper...with Eclipse I see the parts of Eclipse worth more than the whole. Eclipse for instance might have some great facilities for Piper, but Piper wouldn't want to be saddled with all the retrofit liabilities, supplier liabilities, etc.
"There comes a time when the cram-down stops working."
There are multiple such times. One is when it becomes evident that the market/product/technology assumptions on which the venture is based are seriously flawed. This is, IMO, where Eclipse is today. Even if the assets were handed over at no cost to new investors, capital to reach sustainability does not appear to be warranted by the limited upside.
Ceri,
So if I understand your recent posts correctly, your position is that it is possible that:
1) Eclipse can be restructured as a profitable company,
2) A new Eclipse Aviation company will emerge after completing a series of design changes and that new company will deliver E500 aircraft that will meet all of the original specifications,
3) 30 days is enough time for the FAA to conduct an SCR, and
4) DayJet might in fact, a year from now or so, become a profitable company.
It seems that you are either still under the influence of the Vern reality distortion field or you have access to an infinite improbability drive.
I suppose you are correct, anything is possible.
However, some might suggest that the probability of all those things occuring is something like 2^279460347:1 against.
;-)
There comes a time when the cram-down stops working. That is when the BANKS who hold debt say NO to amending the loan covenants. If they trigger BK, they end up controlling the cram down, not management. Now, I grant you, they are very reluctant to do that, because after all, what do they know about getting this company back on its feet?
My point is simply that while the banks don't want to own the company, there are limits to how far they can be pushed before they balk. Debt secured by delivery positions that aren't going to be delivered obviously pushes them into new scenarios. But, we don't know how much debt there really is. If it's small, maybe they sit around and hope the next cram-down saves the deal. If it's big, they have to start thinking about salvage value.
My supposition is that Roel bought out the banks (debt holders) back in January. It was shortly after the ETIRC financing deal that the Bank of New York took everything out of hock for Eclipse.
Here's the Eclipse Aviation trademark released by the Bank of New York on 2/15/08:
http://assignments.uspto.gov/assignments/q?db=tm&qt=sno&reel=&frame=&sno=75909091
Per the FAA the change in ownership to Eclipse being a foreign corporation due to ETIRC happened on 2/15/08:
In addition, Eclipse states that it entered into a transaction with ETIRC Aviation, S.a.r.l., a Luxembourg S.a.r.l. (ETIRC), by which ETIRC will own more than 25 percent of the voting interest of Eclipse. As a result, effective February 15, 2008, Eclipse, the holder of a Dealer’s Aircraft Registration Certificate, no longer meets the qualifications of a U.S. citizen corporation as defined by 49 U.S.C. 40102(a)(15).
http://www.regulations.gov/fdmspublic/ContentViewer?objectId=0900006480406dbe&disposition=attachment&contentType=msw8
I think it was more than coincidental that the Bank of New York suddently gave up its liens to Eclipse's property the very same day that the ETIRC transaction changed the ownership of Eclipse.
B95 said: If you don't understand this simple fact, you will never understand how companies like Eclipse linger for such a long time.
I'm just a simple midwest guy that understands to never put himself into that position in the first place.
I have dreams also, but never in my wildest dreams would I consider screwing people over then looking for the next one to screw over. I do sleep well at night and don't have to ride around in a bullet proof SUV.
The good part of your post I take away is I'll never invest a dime in a VC business. Warren Buffet has it right. Buy value and don't loose money. There is no value in FPJ just smoke and mirrors (empty promises and incomplete AC).
The neat thing about this blog is people look at FPJ from all different angles and are coming up with the same conclusions. D O A !
Dave,
Maybe ETRICK wanted to buy rights to the trademark, and the only way to do that was for that particular loan to be repaid. It remains very unlikely that Eclipse paid off all of their debt when ETRICK came in. If they did, then Roel is a bigger fool than I thought. I am aware of other Eclipse bank debt to another bank. Again, we just don't know what the amounts are.
Maybe ETRICK wanted to buy rights to the trademark, and the only way to do that was for that particular loan to be repaid. It remains very unlikely that Eclipse paid off all of their debt when ETRICK came in. If they did, then Roel is a bigger fool than I thought. I am aware of other Eclipse bank debt to another bank. Again, we just don't know what the amounts are.
I think at least the Bank of New York balked, so Roel had to buy them out. I don't think the Bank of New York relinquished their rights for free. I just posted one example, but that wasn't the only thing assigned to the Bank of New York.
"The good part of your post I take away is I'll never invest a dime in a VC business."
So you dont want the invest in the next Google, Amazon, Microsoft, Sun Microsystems, Oracle, Compaq, and hundreds of other wildly successful venture backed companies? B95 presents a wildly distorted and incomplete view of the venture capital business. In my 20 years as a founding partner of a venture firm with $3 billion under management, I can tell you that what he describes is so far from the norm its laughable.
B95,
You make an excellent point about pricing inflection points. I agree completely. There is a price point where people will buy zero of a product and there is a price point where people will buy many, many products and there is usually a knee in that curve.
I would suggest that there is also a marketing inflection point or tipping point for products and brands.
There comes a point where a brand is so tarnished that reasonable people won't take the product even if it is offered essientially for free.
There comes a point where reasonable business people pull the product from the market or refuse further investment in the product.
We are unlikely to see a new car introduced under the Pinto, Edsel, or Vega brands.
We are unlikely to see a new and improved version of Vioxx released to the market any time soon.
Eclipse's brand name may have reached the point where the price point is much less important to selling the aircraft than the market perception of the product and the company behind that product.
Does the product meet its specifications?
Is it a good value when compared to its competition?
Does it hold its resale value?
Is it safe?
Is it reliable?
Is it dependable?
Can it be serviced conveniently and at a fair price?
Is adequate training available?
Can you count on the company to stand behind its product?
Can you count on the company's long term stability?
If you answered no to two of those questions, then your brand is in trouble.
If you answered no to four or more of those questions, then your brand is most likely in an unrecoverable spin.
FlightCenter asked Ceri:
So if I understand your recent posts correctly, your position is that it is possible that:
...followed by four suppositions.
I am not Ceri, but I do have opinions on the subject. So, one at a time:
1) Eclipse can be restructured as a profitable company,
IF previous investment in the company is treated as lost, as unrecoverable, and as unnecessary to recover, then YES it could be restructured to be profitable ( for "Investor D" ).
2) A new Eclipse Aviation company will emerge after completing a series of design changes and that new company will deliver E500 aircraft that will meet all of the original specifications,
"All of the original specifications" is a dead end, and not required for an "Eclipse 501" to form the basis of a successful venture. If the glaring flaws of the FPJ are redesigned out of existence ( and assuming that stir-fry welding actually is a sound method of construction ), we're left with an aircraft that is very slightly smaller than a Mustang, but uses considerably less fuel for a given flight. I think that there's as much room for that in the market as there is for the Mustang.
3) 30 days is enough time for the FAA to conduct an SCR,
30 days is enough time for the FAA to have answers ( good or bad ones ) for Congress' questions - and not enough time to 'build' a bulletproof cover story from whole cloth. The abbreviated time frame for the SCR was imposed ( and that's a good thing ), not chosen.
4) DayJet might in fact, a year from now or so, become a profitable company.
Have you heard the one about the flying pig? No, there's NO way that Dayjet even might become profitable a year, or two, or even three, from now.
Dispense with all of the original trumped-up pretenses of what the FPJ or Dayjet were going to be, "unblacken" the skies of all those minijets, & fix the glaring flaws in the aircraft, and we're left with an airplane - one that happens to be a docile, fast personal aircraft that doesn't use a whole lot of fuel.
YMMV,
DI
"All of the original specifications" is a dead end, and not required for an "Eclipse 501" to form the basis of a successful venture. If the glaring flaws of the FPJ are redesigned out of existence ( and assuming that stir-fry welding actually is a sound method of construction ), we're left with an aircraft that is very slightly smaller than a Mustang, but uses considerably less fuel for a given flight. I think that there's as much room for that in the market as there is for the Mustang.
I'm not so sure about that. I think that Eclipse hit its numbers on the FPJ by cheating...namely not including proper safety equipment, which lightened the aircraft and gave it better fuel efficiency than it would have if it was as safe as a Mustang (and even the Mustang might be too reliant on the glass cockpit and itself needing more backup equipment). I believe if the FPJ was made safe that it would add a significant amount of weight, which would cut down on the range and fuel efficiency - if it could be done at all (lack of space).
"Dispense with all of the original trumped-up pretenses of what the FPJ or Dayjet were going to be, "unblacken" the skies of all those minijets, & fix the glaring flaws in the aircraft, and we're left with an airplane - one that happens to be a docile, fast personal aircraft that doesn't use a whole lot of fuel."
So Dave I., what investment over what time period will be required of new investors to get to the point of realizing a return comensurate with the risk they will be taking?
Video of the local impact of Eclipse (the downsizing):
http://www.truveo.com/Eclipse-Layoffs-Create-Local-Impact/id/3539481973
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