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Wed, Jun 29, 2011

Rise and Fall: The Fortunes/Misfortunes Of The Cirrus Dream (Part 3 Of A Series)

Once The Leading Edge Of A GA Renewal, Cirrus Is Proving To Be A GA Embarrassment

News and Analysis By Jim Campbell, ANN E-I-C

Well... it appears that one of the proudest efforts in recent American aviation history, Cirrus Aircraft, is no longer a US-owned entity (in any way, as the US Minority Shareholders must sell, as well) . As ANN reported Tuesday (and alluded to in earlier reports), a Chinese company, CAIGA now holds the majority stake in Cirrus Aircraft (a process labeled as a "Merger").

ANN broke the news that this process was underway last year and took serious flak from the company, as well as some apologists in the Cirrus community, for our reports... and even dealt with categorical denials of a Chinese deal by Brent Wouters and Dale Klapmeier, claiming that such an arrangement, "made no sense." And once again, we have compiled another in a long line of circumstances in which Brent Wouters respect for the aviation community seems so meager that an outright falsehood is a regular part of his modus operandi.

 

Mind you; we've asked tough questions many times of a number of industry luminaries... and if someone doesn't want to answer the question, the proper response is something along the lines of a "no comment" rather than telling yet another in a series of well-documented whoppers. We've asked tough questions of Jack Pelton and never been lied to, we've asked tough questions of Alan Klapmeier and never been lied to (Dale, however, is another story), we've asked tough questions of former Piper Bosses Jim Bass and Chuck Suma (and so many other industry leaders) and never gotten lied to -- and while we may not have liked the answers we did get... we sure appreciate not being lied to. 

So... how do you trust a company that claims that the China deal is good for American GA after it lied (many times) about the deal (and so many other things), from the start? How is a company that touts itself (still) as an industry leader able to earn/keep the respect it once had while looking the GA world in the face and telling a bunch of fibs?

It started so strangely. As ANN kept asking Cirrus about the rumors and insider reports we'd gotten, Cirrus grew more and more indignant about being questioned about this and other matters... resorting (first) to rude and evasive responses (often from Cirrus' Todd Simmons... no stranger to telling a few whoppers, based on our experience), and then transitioning to outright falsehoods and even threats -- even though ANN asked detailed questions, took a lot of flak for same, and eventually found that all of Cirrus' denials were not based in fact.

The most vehement denials were made by Wouters, but late last year, Dale Kalpmeier chimed in. In November of 2010, ANN reported that, "Recent reports to ANN, however, suggest that an agreement with a Chinese entity is pretty much a done deal and announcements could come as early as next month -- a report refuted, carefully and with specific tenses and verbiage, by Cirrus Co-Founder Dale Klapmeier. These reports also raise the possibility that the company would eventually be moved out of North America, that the jobs in Duluth and Grand Forks would disappear and that an iconic aircraft uniquely identified with the rebirth of a fair part of the GA market (until the economy tanked) would no longer be produced as an American product."

The ANN report added that, "'It's way too early to suggest that we have a deal,'" says Dale Klapmeier. 'It's kind of like someone saying that they're going to buy a car next week and others then reporting that its a done deal.' Klapmeier does admit that there are a number of parties interested in getting involved with Cirrus but refused to confirm the imminent sale of the company to any entity, 'at this time...' even suggesting that there was at least one other bidder that was 'further along' than the Chinese agency currently confirmed as conducting its 'due diligence' on a possible Cirrus acquisition.

Klapmeier also refuted concerns about the company's potential move out of the country, 'That makes no sense... and no one we're talking to has indicated that they are looking to move Cirrus away from Duluth. It really makes no sense to take Cirrus out of Duluth.' Klapmeier was asked about the nature of any potential sale -- as to whether they were looking for a complete buy-out or an investment, and answered that, 'We'd prefer an investment and that's what we're trying to find... but there may come a time when we have to look at the alternatives -- including a sale.'"

 

In recent reports in local Minnesota media, Cirrus officials admit that the CAIGA program was under negotiation for well over a year... and according to the Duluth News Tribune, Cirrus Marketing flak Simmons admitted that "...discussions about the possible mechanics of an acquisition grew increasingly more serious in the past 12 to 18 months."

In the same report, the Duluth News Tribune reports that Brent Wouters claims that, "...there are no imminent plans to move any production from Duluth."

OK... at one point can anything he says be believed? Has he decided to tell the truth from here on out... and how can we believe that?

And the biggest question of all is this... if Cirrus has been less than factual in their dealings withe media and the GA world, has CAIGA itself gotten ALL the facts about the state of the company? Cirrus has refused to answer questions over the last few months, has refused access to CAIGA officials, and one wonders just what other surprises may be in store for us all.

OK... the deal appears done -- and yet so many questions remain. While the city of Grand Forks reportedly received over $2 Million late last week to work down the debt that Cirrus had owed the city for quite a while, Cirrus owes many more millions to suppliers, vendors, depositors, business partners and others... and reportedly faces a number of legal actions either in process or anticipated in the near future.

That said... what happens to the creditors? Can they/will they be made whole?

What happens to Minority Shareholders, who had to swallow this deal no matter what they thought of it? Early info suggests that Minority shareholders are going to take quite the bath...

What happens to SF50 depositors... some of who have been trying to get refunds from the company for the better part of a year (and possibly longer)?

What happens to the SF50 program, itself? Cirrus has both promoted and downplayed the potential of that aircraft development program in documentation published in the past year (in quite contradictory ways) so one might justifiably wonder if that aircraft will actually be produced... and if CAIGA has the will to see such a process through.

Can Cirrus survive the many claims and legal action that they may face in the near future? One company is alleging that Cirrus uses and may be attempting to sell Intellectual Property (in one case reportedly protected by patent) that it may not have the rights to. Other companies argue other IP conflicts, as well as late/non-payment, damages from same, and a number of charges of what may eventually be found to be fraudulent actions/activity (the courts or Law Enforcement will have to decide that). The next few years, now that there actually seems to be someone with money to sue (i.e., Cirrus was broke... so seeking legal remuneration was a waste of time until the bucks showed up), could be fairly litigious and ANN has talked to a number of parties that claim to be pursuing legal action.

How can Cirrus be trusted in the short and long term? With the many reports from 'burned' suppliers, vendors and other parties, the company's credibility has suffered greatly and while the current leadership is in place, Cirrus may find a cold shoulder from many in the industry, even if they finally start paying all their bills, from folks who were misled and harmed by previous actions and behaviors.

How will Cirrus be able to find partners for future development efforts? One of their most celebrated collaborations was the early selection of the BRS-developed emergency parachute system as standard equipment for every airplane... Over the years (and particularly after the forced departure of Alan Klapmeier), Cirrus has cut out BRS from the CAPS supply process (taking the program in-house) and reportedly even bought a critical supplier used by BRS -- cutting them out of the picture. While Cirrus did work alongside BRS to develop the CAPS for their airplanes (and may have a number of rights to tech specific to the airplanes), the parachute slider (a part of the deployment system) is allegedly patented by BRS and other processes are based on IP that BRS claims to own. Add that to other companies that claim to have been "thrown under the bus" by Cirrus (L3, Avidyne, TAT and others), and one wonders whether anyone could possibly dare to take the risk to do business with them.  

How will buyers treat a company that seems to pulling more than a few "bait and switch" tactics? For instance... Cirrus made a big deal about offering the newest Avidyne R9 system to new buyers, but reports (as well as our own inquiries) show that Cirrus is not very interested in selling such airframes (and our inquiries were rebuffed). The same goes for Tornado Alley Turbo... when Cirrus announced the availability of the new TCM Firewall Forward Turbo installation, they promised that the TAT option would still be available, but we can tell you that salespeople we've chatted with do not want to talk about anything but the TCM option... and several others have reported the same. Cirrus doesn't seem to treat a number of its partners very well -- especially those that used to have close relationships with Alan Klapmeier.

And... will the market trust with THIS Cirrus or even want to do business with a company that is owned by the Chinese? Ask Cessna how a number of people reacted to the news that some of the Skycatcher's assembly would be done in China... it was NOT pretty.

Yeah... lots of questions (and we have SO MANY more...).

We'll be looking into these and other issues in the coming days, but let me make one thing perfectly clear. I am as big a fan of the airplanes that Alan built as any person alive. I own a much loved SR22 Turbo (which is now being threatened by Wouters and his gang -- a wild story in and of itself), have great affection for the Cirrus community and desperately want to see this airplane AND THE COMPANY THAT BUILDS IT succeed... especially since so many of the rank and file who actually build these birds are some of the finest people I have ever met (and I count many of them as good friends).

BUT... based on what I know now about the current actions and management of this company, I simply can't recommend them to anyone under any circumstances. I simply don't trust them and I've uncovered too much evidence of apparent wrong-doing to feel comfortable with the current direction of the company and the damage they have done to themselves as well as the rest of the industry. I look forward to seeing what CAIGA will do with Cirrus, but if an early step doesn't include cleaning out the current senior management, I wouldn't give you two cents for this company's chances of succeeding in the remaining tough times to come.

More info to come...

FMI:  ANN Special Feature: Wouters 2010 Comments Revisited - 03.01.11, www.cirrusaircraft.com

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