By Coy Jacob
Like high-dollar annuals and premature overhauls, factory bankruptcies seem to be a fact of life in the world of GA manufacturing. With few exceptions, every major brand has faded into Chapter 11 at least once or, at the least, taken a production hiatus, only to re-emerge with new owners, new promises but, alas, often the same old product.
The latest company to perform the Houdini act is Mooney, now known as Mooney Airplane Company or MAC for short. In an announcement that seemed to surprise only the people staffing the Mooney booth at Oshkosh, Mooney announced its decision to enter Chapter 11 in July, 2001. In early 2002, Mooney was acquired by Advanced Aerodynamics & Structures Inc., a developmental company that launched the aborted JetCruzer turboprop. AASI has since withdrawn from that project, changed its name to Mooney Aerospace Group and will concentrate on Mooney, for now.
The timing may, of course, be terrible. Mooney is attempting its comeback at a time when the GA market is soft bordering on a depression. Cessna’s numbers are flat, Piper is in retreat and all face stiff competition from Cirrus.
Since declaring bankruptcy and embarking upon the long climb back, Mooney has experienced revolving door senior management, with four major top-level shufflings during the past 18 months. Buyers notice such chaos and in a market already thinned by a weak economy, Mooney can ill-afford wavering confidence.
In order to make sense out of the bad press, marketing faux pas and the upper management revolving doors, we spent several days at the factory in Kerrville, Texas. We also had numerous phone conferences with MAC’s New York bankers and Mooney board members. Production manager John Cullen served as our guide while we were in Kerrville, pointing how production is being made more efficient.
At the factory, we asked pointed questions of nearly everyone in management and we spoke with the hands-on workers on the production line. We also poked through the parts bins and looked at the new airplanes coming off the line.Our impression? Mooney is doing the right things to come back to life. But in our view, it will take canny management, a recovering economy and plain good marketing for things to turn around. Potential buyers looking for guarantees won’t find them, something that’s true of most manufacturers in the GA realm.
Can Mooney Compete?
Why did Mooney descend into bankruptcy in the first place? We’re not sure we can provide an accurate answer. It’s easy to blame the previous management and while that may be fair, it’s also fair to say that Mooney has, for most of its history, fended for itself in the harsh world of making airplanes. Cessna and Beech have been a part of larger corporate conglomerates in recent years and thus they haven’t closed their doors or been sold off.
But they’ve suffered much the same as Mooney has in terms of anemic sales and fickle demand. Unfortunately for Mooney, it has had no corporate Daddy Warbucks in the wings to help negotiate the shallow shoal water. Further, Kerrville is off the beaten track in terms of aircraft production workforce. In Wichita, you’ll find skilled riveters on a street corner. In Kerrville, they have to be imported or, more likely, trained.
In addition, Mooney has essentially only one product line; a high-performance single-engine to market to a relatively narrow market niche. In the harsh reality of the current GA world, Mooney may not be as competitive as it once was due to a crowded field.
While Mooney has upgraded its products over the years – the Ovation is as good an airplane as any company has ever made, in our view – its costs remain high and with the likes of Cirrus, Lancair and Diamond selling hard, Mooney’s niche market share is being nibbled away. Every sale has to be fought for.
While all three of those companies are on the upswing with varying degrees of reliable capital and modern, clean-sheet production facilities, Mooney is a throwback to the smokestack days of airplane building. It must constantly turn itself inside out to squeeze efficiencies out of an airframe that has more parts and pieces than the competition and requires a lot of welding and riveting to build.
The foundation of the Mooney airplane line is some 40 years old and likely would have passed into history a decade ago save for two factors: Al Mooney’s passion for speed through efficiency and Ralph Harmon’s genius for strong, light structure. Harmon, Mooney’s chief engineer in the 1960s, had been at Beech prior to that and had been through loosing several test pilot friends to structural failures.
He vowed that the same thing wouldn’t happen with a Mooney and he designed the structure to deliver on the claim. To this day, Mooney’s signature strength and efficiency remains unchallenged. On performance alone, Mooneys hold their own with anything Cirrus or Lancair builds.
The product line couldn’t be simpler: the entry-level Eagle has been dropped in favor of what amounts to the original Ovation. Next up the price chain is a tricked-out Ovation II DX with high-end avionics and pricier still, the turbocharged TLS Bravo. What’s lacking? A six-place single, such as Piper’s Saratoga or the Beech A36? Not really. Mooney’s forte has always been high-performance, four-place aircraft, which is a substantial market.
Introducing either a six-placer or, at the opposite end of the spectrum, a trainer, probably wouldn’t pay the cost of development. Mooney has dabbled at both the high and low-end of the market and not done well at it.
Some owners believe Mooney already has a down-market winner in the dormant J-model/201 airframe. That’s intriguing but not likely to see a dollar of developmental money, says Tom Bowen, Mooney’s chief engineer. The company has made the switch to the so-called long-body airframes, which offer more cabin comfort and volume than the J-model ever could.
For 2003, Mooney has plans to revamp and lower the panel height about two inches, as the majority of airframes are being delivered with Garmin 530/430 combinations. Otherwise, few changes are planned or, in our view, needed, although one idea we like is turbonormalizing the Ovation. This would make it a 200-knot plus airplane on less fuel than the TLS uses and the Ovation is already one of the most efficient new aircraft in the GA fleet.
The standard stripped down Ovation will sell for $299,450, factory direct. It comes with a single Garmin 430, a transponder and an audio panel and you can add options from there. The Ovation II DX is priced at $384,950 and has practically everything you’d want in a serious IFR machine, including speed brakes, a GNS 530/430 combination, Bendix/King KI256 flight director, KFC225 autopilot with altitude pre-select as well as Garmin’s GDL49 datalink system and the Garmin GTX 330 Mode-S traffic system reviewed on page 4 of this issue. TKS certified de-icing is a $39,990 option.
The turbocharged M20M/TLS or Bravo seems to have its engine woes behind it. The oil-cooled cylinder head for the Lycoming TIO-540-AFB engine appears to have worked as claimed. While some owners complain about higher-than-POH advertised fuel flows at cruise and in climb and warmer CHTs, the Bravo is undeniably the fastest new four-place piston airplane you can buy.
Fully equipped, a Bravo goes out the door for $434,950. That makes it top of the scale when measured against other singles but given its capabilities, the price may not be entirely out of line with a Cirrus SR22 selling for $364,000, with comparable equipment and non-certified de-icing. For buyers shopping on price, however, the TLS may be at a disadvantage against Cirrus. It?s undeniably more expensive.
Cabin width has always been an issue with prospective Mooney owners but the fact is that when you actually stretch a tape across the typical M20 cabin in the elbow area, the width is 43 1/2 inches, about the same as a Bonanza and many other four-place singles but narrower than a Cirrus.
The Cirrus and Lancair enjoy a bit of high-tech glitz compared to Mooney line, but the Mooneys remain competitive in basic capability. We think the airplanes can be sold but the factory will have to exist on economics based on 75 to 150 airplanes.
Mooney has, from time to time, shot itself in the foot with regard to marketing and sales. It once had a robust dealer and service network but alienated many who operated it by turning to factory direct sales a decade ago. Since then, it has dabbled in a little of each but more recently, we think the company blundered again when it chopped prices dramatically last year in a desperate attempt to attract buyers.
Under its initial post-bankruptcy management, Roy Norris thought a quick fix to marketing new Mooneys was to reduce prices by 20 percent, reasoning that buyers would besiege the factory with orders. In the current economic climate, that simply didn’t happen quickly enough to do much good.
What publicizing the discount did do, however, was to immediately alienate what was left of the old dealer network and reduce any bargaining power the factory may have had to accept trades.
Thus, when current owners came knocking looking to trade-up, they were told that the factory couldn’t take their old Mooney or any other brand in trade; owners would have to sell their own old airplanes. We can’t imagine a more discouraging way to sell airplanes.
So what’s the plan now? Mooney’s marketing vice-president, Nicholas Chabbert, who comes from a stint as U.S. sales manager for Aerospatiale, has devised a strategy of using three to five factory sales reps who are equipped with demonstrators and spread across the country, as well as a select few private sales reps who are required to have a demo, which they will purchase.
These sales reps will be called MTRs or Mooney Team Reps and will have a written agreement with the factory and defined territory. While finishing touches are being put on this concept as we go to press, we think previous dealers are responding favorably to this idea. We see that as a good thing, since someone is going to have to service the airplanes the MTRs sell.
Variations of this concept have worked for other manufacturers and we wouldn’t be surprised if it’s kept in place for some time at MAC. We do, however, look for prices of new models to creep upward slightly, which will do two things: it will give Mooney the margin it needs for long-term profitability and will provide the cash flow necessary to honor trade-ins, a must for closing some deals. On the other hand, owners shouldn’t unrealistically expect high-dollar trade-ins against discounted airplanes. If the factory rolls over again because it’s giving away airplanes, where’s the gain?
Where’s the Money?
The current Mooney ownership bought the company’s assets through a complex arrangement negotiated between Congress Financial, a New York bank, the federal bankruptcy court, the defunct AASI and the previous owners, the Dopp family. The new owners – a consortium of private investors and venture capital sources – specialize in buying companies in trouble or in bankruptcy and then installing talented management teams to bring them back to profitability.
In Mooney’s case, the investors brought in several experts from the Israeli Air Force and the aerospace industry who concluded that MAC was a viable investment worth the time and money. We were happy to hear about the current owner/investors receiving several credible offers to sell out, which indicates to us that the company is deemed as having true market value. The investors declined the sale offers, which is also encouraging, indicating they’re interested in Mooney as a long-term investment.
We spoke with Mooney board chairman Sam Rothman, a New York-based investor, as well as MAC’s investment-banking firm of L.H. Financial, also based in New York. Originally, this group acquired AASI’s assets and had plans for acquiring other GA lines which still may be up for grabs. When Roy Norris was running Mooney last summer, there were discussions with Raytheon about buying the Bonanza and Baron lines. If those discussions are still underway, they’re in the background. Rothman told us Mooney’s management is concentrating on returning the company to reasonable profitability with its existing product line.
Many in management left good paying jobs in commercial transport or military aviation or other industries to come to Kerrville and be part the new management team. We got the impression that these folks feel they can make a success out of the company. But we’ve heard this before. By its nature, aviation seems to attract investors and managers who tend to gloss over the ugly realities of making a buck in this business. We can say that our impression is that the management team is no longer top heavy. CEO Nelson Happy trimmed some high-dollar management positions, something we see as a good sign.
The only consistent complaint we heard is that the managers feel that the investor/owners interfere too much in the daily operations of the plant. The Mooney team would like to be left alone to build airplanes. While we would like to be able to say beyond a doubt that all the working capital and research and development money necessary to run the factory for the next three or four years is locked away in a vault, this is simply not the case. From our interviews, we sense that the current investor/owners are committed to providing a sound foundation for Mooney to ply the market and to help future buyers of new Mooneys feel comfortable with purchasing from a company digging itself out of bankruptcy.
It appears to us that as a group, MAC’s investors are over the hump and have invested enough of their own and borrowed money so that they’re committed financially, philosophically and emotionally. Further, they appear to be running the operation lean enough to turn it around, provided the sales are there. We think the potential is there but Mooney will have to do everything right.
In its favor, we found morale at the plant to be high and the workers enthusiastic. Clearly, the workforce is happy to be back building airplanes and we found a can-do attitude at all levels.
From direct experience, we can say Mooney is answering the phone and providing the level of technical service it was always noted for. In our estimation, that’s a start and a good one.
The rest is up to buyers. If Mooney can attract them again, it has an excellent shot at success, in our estimation.
Coy Jacob is an Aviation Consumer contributing editor and owner of The Mooney Mart in Venice, Florida.