The FACTS
1. Total deliveries. 259 aircraft since the 31st of December 2006, although not all are currently in the hands of customers. Some have been retained in companies associated with EAC, or 'loaned' to ex CEO's. S/N 260 was in process of being delivered to a company who had paid EAC not less that $1,288,000 when the aircraft was 'seized' by the bankruptcy process. It's the subject of it's own legal action and I'm sure we will hear more.
2. 'Operations' income, per the 'Statement of Affairs' was $318,000 in 2006, $102,694,000 in 2007 and $210,185,000 (to the date of filing) in 2008. Interest earned (presumably from depositor funds) was $1,659,000 in 2006 and $4,047,000 in 2007. As a historical footnote, DayJet paid $20,000 in 2007, for something....
3. Current spending. In the calendar year prior to filing, EAC had paid $61,606,000 to creditors, and $85,443,000 was listed as the amount still owing. There was $81,455,000 (September 2008) of inventory in stock. There were 28 (give or take one, see s/n 260 above) FPJ's in production at the end.
4. Refunds. Something called "Olympus Aviation Corporation" looks like it was the last one to succeed in recovering a deposit ($175,000) which it did on or before 24th October 2008. That left 22 'pending' lawsuits seeking deposit refunds at time of filing. It's not clear how many aircraft these suits involve.
5. Property held for another person. There was $85,787,857 (and 64 cent) held by EAC, the vast majority of which is for 'City of Albuquerque' or 'Wesco Tools'. The items from Wesco I understand (tools etc) but the City seems to have provided all sorts of stuff, including computer servers and things like a 'Teletronics-Data acquisition unit -Exp AC 106' (listed at $53,523.79). The list is varied, and goes on for a long time.
6. Receivable balances. EAC list $20,720,225 as owing, mainly from customers.
7. Deposits. EAC list 'Creditors Holding Unsecured Nonpriority Claims' (and this is truly AWESOME) of $568,143,152.55. A chunk of this is money claimed by suppliers, but I gave up counting the number of 10% and 60% listed, after I got to 300. In another document, ETIRC were shown as having paid $8,900,650 (and 39 cent) as deposits for FPJ's. At least they had the sense to avoid the Con Jet, which tells its' own story...
Speculation, short term
Roel will buy the assets, probably with input from Al Mann. There will be a round of cuts, including staff reductions. Suppliers will be offered some small amount of cash (cents on the dollar) and be promised the earth to stay on board. Depositors well get some sort of 'coupon' to salve their wounds, but the price of the FPJ will be increased by a similar amount, so they will still have lost everything. Customers will be told that parts are more expensive and that all repairs must be paid in cash before return of the aircraft.
Speculation, medium term
Within a short period, probably less than 6 months, Roel will be facing further cash problems with suppliers and will end up having little or no choice on Chapter 7. Sales of aircraft were already tailing off, which is one of the reasons EAC ran out of cash in the first place. New victims will be hard to find, once the remaining Faithful (and there are very few left of them) have paid up for the aircraft he can build in that time.
Speculation, long term
Much more difficult, post Chapter 7. I wonder how the avionics can be supported, given the very high order of integration within the FPJ. AvioNG is touted as a major strength of the package, whereas most people see it as a liability. P&W can be relied upon to support the engines, but will be able to 'think of a price and double it'. The airframe will present special challenges when repairs to the FSW joints are required. Further AD's will present problems, and the whole area of 'upgrades' to keep EASA happy presents it's own pitfalls.
My opinion
The facts presented in the Bankruptcy documents prove that the numbers don't add up now, and have never added up at any time. A whole range of people were sold a concept which had never any chance of becoming a reality. The City of Albuquerque, depositors, suppliers, banks and shareholders are all left nursing wounds they won't forget in a hurry.
I wish the new owners all the best of Irish luck. This 'business' is a crock, was always a crock and has no chance whatsoever of being anything other than a crock.
But I am biased.....
Shane
224 comments:
«Oldest ‹Older 201 – 224 of 224It would appear that P&W is taking the position that the little problem with the engines that is now holding everyone to 37K will be taken care of at the first hot inspection. That could be awhile for most owners. FAA does not seem interested in a software fix either. Fuel burn is quite a bit more at 37k versus 41K. Oh well, just par for the course.
“Officials in the City of Albuquerque are running for cover.”
For the record, the “gadfly” will take no aggressive action to influence the local manufacturing community. Anyone who has not yet read, and believed the record, deserves whatever they get.
It is amazing that in such a small family of competing companies (manufacturing components/devices for “secret” projects, anyone with an ounce of common sense and simple logic has been able to explore the so-called “great minds” within Sandia Labs, Los Alamos, and Air Force Weapon’s projects . . . ‘almost embarrassing, to the point of being suspect of espionage.
It has been noted for at least the past forty years that if a machinist gets a cold and “sneezes” . . . within minutes, someone on the other side of the Rio Grande Valley will call to say “To your health” (Gezundheit). (Secrets in New Mexico do not exist in practice . . . regardless of everything you have read.)
Bottom line: No machine shop within the Land of Enchantment, “Adobe Architecture”, and Green "Hatch" Chile, would touch Eclipse with a ten foot pole. We would rather take our chances with plague infected rats (and there are plenty of those mammals in this area), than to “make chips” (“machining parts”, for those in Rio Linda) for the likes of Eclipse . . . unless they paid in advance, and delivered the material on our doorstep. Even then, we would be suspicious of a scam.
Eclipse’ “Welcome” has worn thinner than an onion skin. And we doubt folks like our governor can make enough money manufacturing “license plates” to pay off the debt.
gadfly
(Oh wait . . . I forgot: The gated community just south of Santa Fe (on NM Highway 14) has a small herd of Bison . . . Maybe the inmates earn “spending money” selling the meat from their efforts. It all depends on the “convictions” . . . the Santa Fe prison is for the State of New Mexico, and might not contribute to federal offenses . . . and our governor has been seeking “White House” positions, of late.)
Joe P.
Good luck in finding another position quickly. Try Honda Aircraft in Greensboro, NC, unless you want to go overseas.
Shane said... Remember, this chap has a serial number well past 1500.
Are you sure he (you) didn't mean "position" number 1500 instead of serial number? I doubt Eclipse would assign serial numbers that far ahead.
Of course, close to final assembly/delivery time, a serial number must be assigned (to account for options, color, etc). Either way, if it was not delivered it is an asset of the corporation.
And yes, ATM, the judge will be looking at every possible opportunity to "do the right thing", but it has to be within a reasonable interpretation of the law. Else, it just gets reversed in short order. And there are few things in life a Federal judge likes less than to be reversed on a appeal.
Regarding the coupons, if you believe that the EA500 will sell for $2.whatever million than a coupon for $900K is real money (1/3 of the price). The depositors would be no worse off had they simply agreed to a price increase.
I know it sucks. But it sucks less than being left with no coupon.
Well, I don't think Eclipse is going to be running off to Russia any time soon. Their stock market is down - what - some 72% in the past year. It's an oil based economy, and oil is trading down another $2.00 in Asia this morning, which means it is retesting it's November lows.
What does all this mean? If I knew that, I'd be sitting between Bawney Fwank and Nancy Pelosi passing out billions of dollars to my banker friends so they can fund their retirement plans and year end bonuses.
But I'll tell you what I think it means. It means that there is NO huge market left for E500's in Russia. Or Europe either. There wasn't a huge market before when the Russian economy was good and the E500 was priced at $985,000, or at $1.6 million. There is little to no market left now, and with the price at $2.8 million I'd be surprised if they sell more than a couple per year in Europe AND Russia combined.
If the market is so hot over there, then why is no one else getting the business? Where are all the small jets? What, we're all supposed to believe they are just waiting for the E500 and then the demand will appear?
This is a joke. Just like before.
I hope the faithful enjoy their new "coupons" good towards the purchase of a $2.8 million E500.
drillingahead said...
Fuel burn is quite a bit more at 37k versus 41K.
Would you care to quantify that AT THE SAME AIRSPEED please? Is it 2% more?
Or are you just assuming it is a "quite a bit more"?
Sorry to hear that Joe P. If I understand correctly you are in line maintenance or related area. That being the case, assuming you are willing to relocate, you have an excellent chance of landing another job in short order, due to the high turnover. Knowing as little as I know about your personal situation, I'd put my application in at AA-Tulsa. They have a fair amount of turnover and it is a first rate operation. Union, yes, but that unit is fighting every day to win business from outside AA, and they do awesome work.
I'm not trying to minimize your predicament, and I know it is presumptuous to be making suggestions. I wish you all the best. You certainly come across as a very knowledgeable and experienced person, with good technical as well as business sense.
And for the record, yes, the IAM is nowhere in the same league as the UAW as far as "incinerating" jobs. The UAW is a well-oiled burner of jobs. The IAM has a itsy-bitsy campfire stove by comparison.
Once again, good luck.
Fear not, Obama is taking over tomorrow and all our problems will be solved in a forthnight. Or so goes the cult.
Joe P.
sorry to hear about your happening ... but you got a thing wrong : US firm in your field CANNOT afford to have you in staff , Middle-East ones can pay your price , that's the difference !
9Z :
the market in Russia has NEVER EXISTED ...
Now that this Unfinished piece of dirt HAS to be sold for more (or at least the same) than a mustang , who is willing to be stupid enough to try ?
Someone paid the 60% for a position around 1500??? Either that is a typo for 500, or they have found the bigger fool.
What an idiot. Please pass this persons details around. I'll buy some Lehman share certificates off ebay to sell to him :)
These guys provide a rock solid foundation for Piepers future. How could the Wedge ever go bankrupt with "position holders" who will bend to positions like this.
I know it sucks. But it sucks less than being left with no coupon
you just reminded me of a story :
a patient goes to see his doctor ...
the doctor says "you are going to be upset with me for a long time , but as soon as you will have paid me , you will drop dead !"
patient answer : "would it be better for me to die now ?"
sound a bit the same ... between cholera and plague , which one would you choose ? (about coupon!)
a bit like the promissory-notes RP had in mind a while ago ... with such arguments , he will probably sell ocean front mansion in Arizona very soon ...
Baron,
I meant what I said. I know the serial number in question, as it was confirmed to me by a third party. Perhaps the following will 'remind' everyone of the process Wedge put in place, and which formed the core of this Ponzi scheme from day one.
Your assumption below is correct. When a customer paid the funds to reach 60% of the purchase price, a serial number was assigned to that customer. A few months later, it would be requested that the customer assign their specific “N” number over to Eclipse for the purpose of a test flight for CofA. Upon execution of the remaining funds, the “N” number would then transfer with the aircraft back to the purchaser. The “wedge” on numerous interviews defended his deposit schemes stating that the 10% was to secure a position in line and the additional 50% was to purchase the parts for that particular aircraft. However, the agreement with the vendors was that they would be paid a number of days after the aircraft was delivered. The whole scheme was dependent on a “hockey stick” ramp up to keep the company running.
That from a reliable source, two days ago, who has been 'closely associated' with EAC.
Freedom,
This particular individual is not alone. A number of victims fell for the 'special offer' in December 2007. You remember, I'm sure, when Wedge offered to lock in the price at $1.25 million, for those who had paid their 10%, but not the progress payment. Check out the details on our original blog, for November 27th 2007. Read the paragraphs at the bottom, where Wedge outlines the 'savings' the victims, sorry, customers, can achieve.
Scary, eh? In retrospect, that type of stuff convinces me Wedge knew all along he was scamming people.
Shane
Baron95,
There is a nice rule-of-thumb about all aircraft turbines – turboprop, turbojet or turbofan. Fuel flow is proportional to indicated airspeed regardless of altitude. So an aircraft maneuvering at low altitude at 180 knots will have the same fuel flow as the aircraft showing 180 knots at 41,000 feet. Indicated airspeed can be taken as a proxy for mass flow which translates to a constant fuel /air ratio.
The second rule-of-thumb is to convert indicated airspeed to true airspeed, add two percent per thousand feet of altitude. To the extent that rules-of-thumb are handy and accurate this should help you answer your question about Eclipse efficiency at various altitudes. If the Eclipse runs out of steam at FL410 then these aren’t so helpful, as indicated airspeed would suffer.
Shane, people like that were the basis for the old saying "more money than sense"!
I guess if you are sitting in your bank all day approving NINjA, negative geared loans for a half million bucks to illegal tomato pickers to buy block houses in Compton, you sort of lose perspective of what a half million $$ means :)
Since those $900K were probably just a years bonus for an IB from Lehman, easy come, easy go...
I'd venture that it is really differcult, if not impossible for an honest person to burn $ 2 000 000 000 on a start up, even if they truly, irrationally, believe in their dream.
Take someone unencumbered with integrity, and it all gets a whole lot easy.
This whole thing reminds me of Cheech and Chongs dog shit sketch.
Baron, I just find it curious that the price increase equals the "coupon".
RP: we'll be back to rate production in 2009
RP: we're providing a coupon equal to a price increase (price increase osensibly due to lower production volume and higher costs)
- why do I think I smell a last ditched effort to bilk the lowest hanging fruitcakes? Again...
I imagine a price decrease equal to the coupon, after all the coupons are spent, or there is no order book at all, because everyone refuses the new price.
So, you can have your coupn and a higher priced jet equal to the coupon, and maybe take the fist and last EA50's at the unrealistic price of $2.XXM and be left holding a plane by a company that is out of business, which they will be unless they LOWER the price and sell planes. Oh wait, they cannot make any money at the lower price...
get it?
ATman,
The price increase that Roel has INDICATED may not actually turn out to be the final price. He clearly left himself wriggle room and for sure can charge more for EASA aircraft or any options the victims request.
Some of the deposit holders spent less than $100k, and some progress payments are for more than $1 million. So, the suggested price increase is both more AND less than the proposed coupon.
Freedom,
I'm pretty happy that this mess has burned through something closer to $3 billion. The various BK Court documents show funding (income, secured loans etc) in excess of $1 billion, spending of the same order and 'shareholders' funds of approx $700 million. It's harder to break it all down, but I'm happy that its all closer to the upper end of estimates.
Put it another way. I pretty sure that they've sold every single FPJ delivered so far at an average loss of between one and one and a half million dollars.
Each. That only covers the raw materials and direct labour. It makes no provision for warranty costs, the service centers', R&D, the screw ups, Wedge's egomania at trade shows, the ConJet et cetera, et cetera, et cetera.
There is a black hole in this business. I'm happy that it's in the software end of things, but even 'small' things are oddball. An example from the Court:-
Why, on 29th August 2008, did Pratt & Whitney Canada repossessed 24 engines sold to Eclipse, valued at $5,165,744?
Were these engines on their way to ABQ, or even in a warehouse there? Was this the 'trigger' event that forced Roel to implement the much talked about Chapter 11 plan, or had P&W gotten word that Roel was thinking along these lines? How many of the 27 aircraft that are on the line now actually have engines attached?
This is a classic case of the deeper you dig, the more questions you raise.
At least we now know how much the P&W 610 costs. So, also, does everyone else.
Chapter 11's a bitch, eh?
Shane
With this outfit, anything you take in your hand will turn out to be warm, squishy and smell :)
Shane,
You nuggets of information are really interesting.
It is clear the Eclipse were sold at a big loss. You put a number of $1 -1.5 million per aircraft on that, but that was still based on cheap parts supplied under high volume contracts.
Those contracts are dead.
We talk about the EA500 selling for $2.5 or 2.8 million, but what if the real cost of manufacturing an EA500 at a rate of 1/week, under new, cash up front supplier contracts is actually
$3 million or $4.5 million.
If you are a EACng vender who is not:
1/ Insolvent
2/ BK
3/ So desparate for any cash flow that you will sign for any work Roel offers,
you must be in a pretty good bargaining position right now.
Say you make wing to body fairings, and had an old contract for 5K per set @ 1000 sets per year, payment a month after A/C delivery, have written off your 650K investment in tooling/set up + the 300K in arrears, and moved the three workers onto Boeing 787 galley panels, what do you do when Roel comes begging?
I would guess that most cases, the companies which could afford to write off the EAC losses and move on are set up for significant production rates for other projects, and aren't really that interested in employing a half an FTE to make 1/week of eclipse widgets while the semiautomated equipment that was supposed to make 20/ week take a big chunk of floor space.
Mooney has been able to start/stop for all these years because their supply change is made up of mom and pop companies which can make one widget a week for them with a fat profit to cover the hassle.
Pieper has bought an excellent list of extremely dumb, rich people, willing to take any reaming and come back for more. We can now take our second row seats and watch round two, which will be short.
PW610 = $215K under the old contract (renegoiated a couple of times).
What does Roel have to pay when he goes to PWC cap in hand today?
2x?
More?
If Flightcenter has the inclination, it would be very interesting to see if the flight hours of EA50s are declining as more aircraft go AOG. I know Ken has no problems, but perhaps there are a few less fortunate that are seeing problems.
Is it too hard to get flight hours per month going back to last summer or spring for the fleet as a whole?
Thanks, Turboprop_pilot
FJT makes an excellent point. The entire negotiated input cost base for the aircraft will recalibrate up. All true costs including overhead will also recalibrate (tax holidays; state subsidized real estate; stock option compensation versus cash etc). Moreover, any potential buyer faces increases in financing costs as the airplane will require more equity as debt advance rates go down. Given the training uncertainties, the likely scarcity of parts and the absence of a credit manufacturer backing a warranty, the total insurance costs will skyrocket as well. Frankly, I'm suprised PW would even want to put their engines on this airframe anymore. Their true risk-adjusted return on EAC sales, at this point especially, is probably negative (including liability).
One of the great ironies of EAC's volume strategy (and they aren't the first or last to try it as a start-up) is that it may have actually increased total cost, including building up sizable direct and indirect costs through the supplier base. PW may be one of the few suppliers that could diversify out of EAC with sales to Cessna and EMB, although as some have suggested here, this particular thrust category may simply be untenable.
I suspect that the "business case studies" of EAC may generate some good insight into how a firm can actually lower cost and through what process/stages. The entire EAC "family" of suppliers and EAC itslef, may have realized significant engineering improvements, cost management techniques and production processes by going at a true development versus commercial pace; even to the extent where build rates were not even calculable yet. It is amazing how much of the business world still responds to a very simplistic volume/price schedule.
Mr Price why do you wish such things as a 3 billion dollar figure? Nobodys going to prison...if that's your agenda. Why don't you tell everyone why your happy that even the most innocent of early depositors got screwed.
BassMaster,
I'm not sure if I've already welcomed you to the blog, so this is a 'just in case'.
1. The numbers are the numbers. The 'Schedules' which EAC submitted to the Court provide all the detail required, but even the 'headline' numbers are staggering. We will likely never know how much the original shareholder put up, but it had to be enough to carry Wedge and his ego from 2000 to 2007. EAC burned AT LEAST $2 billion, and I'm pretty confident it was in the region of $2.7 billion.
2. Prison. The executive team at EAC thought it possible. In fact, they were horrified to find out the liability insurance the company had taken out was limited to $15 million, as it limited their options to buy off angry depositors. Hence the 'hard line' on refunds (even though they paid out the last one in October 08) and the denial of access to the books of the company for prospective bidders until instructed by the judge. These executives are not paranoid. There are HUNDREDS of angry people out to get them. And yes, since I believe that EAC was/is a Ponzi scheme, it is right and proper that the guilty go to prison.
3. None of the depositors, early or no, are 'innocent'. They saw a cheap jet, suspended the normal 'if it looks too good to be true' common sense and got taken. I'm sorry that it's happened, and can provide you with details of all I've done, in the background, to help, but they got suckered and have to live with the consequences.
Shane
Bassmaster,
He's only happy becasue all along we predicted the number was north of a $Billion and those that would take EAC's side disagreed and said we were nuts. Then we figured the number balooned to more than $2B, and again, basically, the smart guys with the deposits and the company to promote would hear nothing of it, and said we were crazy.
I'm not happy its a $3B mess, but, I take solace in the fact that anyone with an internet connection and Radio Shack calculator could have kept track.
It was shaping up to be a multi-billion dollar mess, no matter what the faithful wanted to say, or believe.
Their justifications were in the absurd category.
PS. I hope you are a good fisherman
New Post up.
It's official, EAC is dead, long live EAI.
Shane
PS Congratulations to President O'Bama, the second Irish American to make it to the White House...
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