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KTM's financial difficulties continue to cause headlines, with the group owner Pierer Mobility Group filing for bankruptcy protection on Friday. There have been a number of developments since then, including reports of a development pause over the winter for the MotoGP project. So here is a summary of where things stand as of today. Before reading this, it would be helpful to read the previous story I wrote on KTM's financial issues.

What's going on?

On Friday, Pierer Mobility Group, the parent company of KTM, filed bankruptcy protection procedures (under Austrian law, judicial restructuring proceedings with self-administration) for three of its subsidiaries:

• KTM AG, the motorcycle division comprising the brands KTM, GASGAS, Husqvarna, and MV Agusta
• KTM F&E GmbH, a separate company which houses KTM's R&D department
• KTM Components GmbH, another separate company which produces a range of parts for KTM.

Why did KTM do this?

KTM and PMG were forced into taking measures to protect themselves from insolvency after a creditor called in a loan to the amount of €247 million, according to the Austrian Alpine Creditors Association (AKV), the organization tasked with assisting creditors in insolvency proceedings.

This triggered a change in KTM's financial solvency that allowed other lenders to call in their loans to KTM AG, rendering them technically insolvent.

How much do KTM owe?

According to the filings by the AKV, and to this very detailed story by Gerald Dirnbeck of German language publication Motorsport Total, the various companies owe the following:

KTM AG had a turnover of €1.96 billion in 2023, with a profit of €108.9 million. In the insolvency filing, the company is listed as having 2380 employees, assets of € 316,872,061, and debts of €2,739,654,000, owed to 1,624 individual creditors.

KTM F&E had a turnover of €164.8 million in 2023 and made a loss of €9.3 million. It had 1320 employees in 2023. It had debts of €105,450,000 with 566 creditors, and assets of €14,959,625.

KTM Components had a turnover of €235.4 million and profits of €7.5 million in 2023, and employed 530 people. The company had assets of €15,963,047 and debts of €79,123,000 owed to 332 creditors.

Just under half of the debts of those three companies, totaling over €2.9 billion are owed to Austrian banks, around €1.3 billion, according to Motorsport Total. Another €365 million is owed to suppliers.

Where did these debts come from?

When travel was restricted during the Covid-19 pandemic, consumers were left with a large amount of disposable income. That money got spent on luxury goods, including bicycles and motorcycles. (I hesitate to use the term 'luxury goods' for two vehicle types I personally regard as completely indispensable, but I realize I am in a small minority in this.)

Bicycle and motorcycle manufacturers expanded production to meet demand. KTM more aggressively than some others, both in terms of motorcycles and bicycles.

But as inflation and interest rates rose over the past couple of years, demand has started to drop off a cliff, leaving motorcycle and bicycle manufacturers and dealers with vast amounts of unsold stock. According to the AKV, KTM's excess stock of unsold motorcycles is valued at around €1 billion.

With production costs vastly outstripping sales, losses soared. Sales dropped from €1,388 million in the first half of 2023 to €1,007 million in the first half of 2024, and a profit of €179 million to a loss of €102 million in H1 2024.

In October, the Pierer Mobility Group issued a new warning on its financial results, pointing to sales declining much faster than expected.

To steal a phrase, KTM's ambition outweighed its talent. They expanded too much, relying on the market continuing to grow, and not taking account of the fact that economies can go down as well as up.

What is KTM proposing?

KTM is proposing a restructuring program for all three companies which involves reducing production and cutting the number of people it employs. Plans are already in place to cut 700 staff by the end of this year.

More importantly, the proposal also entails creditors writing off 70% of their loans to the three companies, with the guarantee that the remaining 30% will be paid back within two years. Creditors who refuse this proposal will still be owed the entire amount, but risk losing it all if KTM goes completely bankrupt.

Now, to the big question as it pertains to motorcycle racing in general, and MotoGP in particular.

How does all this affect KTM Racing?

KTM Racing GmbH is another separate company and a subsidiary of the Pierer Mobility Group. It is responsible for all of the Austrian manufacturer's racing activities across all of its brands, including KTM, GASGAS, and Husqvarna. That covers MotoGP, Moto2, Moto3, MXGP, AMA motocross, Supercross, Rally Raid, Dakar, and more. It is housed in a separate building shared among all racing disciplines.

It is not directly involved in the insolvency proceedings, nor is it named in them. It is financed through a range of sources, including major sponsor Red Bull. Of course, KTM AG is the source of most of the company's revenue.

KTM regard racing as their primary marketing avenue. Hence the company slogan, Ready To Race.

How does it affect KTM MotoGP project?

As part of KTM Racing, the MotoGP project is currently unaffected. According to GPOne.com's Paolo Scalera, who hosts a podcast with Tech3 KTM rider Enea Bastianini's manager Carlo Pernat, KTM sporting director Pit Beirer called the riders over the weekend to reassure them that the MotoGP project would go ahead in 2025.

A story on Motorsport.com also confirms KTM's intention to continue to race in MotoGP next year. According to Oriol Puigdemont, the leaders of KTM's MotoGP project held a meeting with all concerned at the last race in Barcelona, informing them of KTM's difficult financial situation and that they will continue racing in 2025.

Puigdemont also reports that the intention is to pause development of the project over the winter, and start again at the Sepang test in February. He also notes there were signs of that at the Barcelona test, with a limited number of fairings on display, as well as the fact that neither of the factory's test riders, Dani Pedrosa and Pol Espargaro, rode that day.

KTM were testing more than just fairings, however. I saw two very different tail units and exhaust configurations, hinting at a new engine for 2025, and an updated version of their ride-height device.

The Motorsport story is not the only report of a development pause for KTM's MotoGP project. I have also heard from other sources of projects feeding into the MotoGP program being put on hold.

This is likely to have a negative impact on the KTM MotoGP project, however. Engine designs are to be frozen for the next two seasons, to allow the factories to start work on the new 850cc engines to be introduced for the 2027 MotoGP season.

This means that for the three European manufacturers, the engine they homologate ahead of the opening MotoGP round in Buriram in March next year will be the design they are stuck with for 2025 and 2026. It will be important not to go into the 2025 season with a serious performance deficit.

What of the future?

Predictions are very difficult, especially about the future, to borrow a phrase wrongly attributed to Mark Twain, Yogi Berra, and Niels Bohr, but first recorded by Danish politician Karl Kristian Steincke. And the reason they are difficult is because much depends on whether KTM's proposal for insolvency protection is accepted, and the company can reorganize. Without the debts, KTM looks like a much more financially sound business.

Given that racing is so central to KTM's brand identity, Motorsport reports, it is felt within the company that to end its racing activities would be a huge loss of face and a huge setback for its marketing arm. It would fundamentally undermine both the company's self image, and the image of the brand in the market. It would do more harm than good.

And as KTM Racing GmbH is a separate company, it could easily be taken over or sold to another entity, such as Red Bull or even part owner of KTM AG, Indian motorcycle manufacturer Bajaj.

If I had to make a prediction, I would expect KTM to be racing in MotoGP in 2025, and would be confident of them being on the grid in 2026. However, if they are to be racing in 2027, they will need to start developing their new 850cc MotoGP bike to fit the new regulations as soon as possible, but by the middle of 2025 by the latest. KTM will have to be much surer of its future by then, or the chances of KTM being in MotoGP in 2027 will start to diminish.

No doubt all this financial unrest will be causing concern for the factory's MotoGP riders. Some may even try to get out of their contracts early. Pedro Acosta is the rider most likely to be capable of doing that, should he so wish, as the Spaniard made a massive impact in his rookie season. Widely regarded as the next Marc Márquez, he came very close to beating the much more experience Brad Binder in his first season. If he wants to leave, a rival factory will find the money to pay off any exit clauses for both KTM and for a rider they want to replace him with.

For Brad Binder, Enea Bastianini, and Maverick Viñales, it looks more likely that they will have to hang on for two years and find an escape route at the end of their contracts. But that is a long way away.

Below is the corporate structure of KTM and the Pierer Mobility Group:

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