September 1, 1995
Piper Aircraft President and CEO Charles M. Suma started off the press conference by bidding a sad farewell to a longtime friend. He credited his late 58-year-old pal with the development of many of the most enduring and endearing designs in general aviation — the Cub, the Aztec, the Tri-Pacer, the Cherokee series, the Navajo series, the Cheyenne turboprops, and the crown jewel of Piper's fleet, the Malibu Mirage. Suma's friend fought a long, hard battle, but in the end succumbed on July 17.
But the same blow of a judge's gavel that ended the life of Piper Aircraft Corporation gave birth to The New Piper Aircraft, Incorporated. The creation of the new entity begins a whole new era for a company that in the last 30 years has been up and down more times than the stock market.
The problems began in the late 1960s when the Piper family lost control of the company that bore its name. Under the ownership of Bangor Punta Corporation the company did well in the 1970s, as did most of general aviation.
Following the trends elsewhere in the industry, however, Piper began to lose money in the early 1980s. As happened in other parts of general aviation — and across all industries in the 1980s — Piper and its parent company were involved in numerous takeovers and mergers. Bangor Punta was acquired by Lear Siegler, Incorporated, (LSI) in 1984.
Later, LSI itself was the target of several takeover attempts. In a leveraged buyout, LSI was acquired by Forstmann Little in January 1987.
The new management tried to stem Piper's losses by whittling employment down to just 780 from the 1,800 who were on board a year earlier. To put that in perspective: In the early 1980s, Piper employed nearly 8,000.
Piper's financial woes of the mid 1980s mirrored those of the entire general aviation industry. New aircraft sales faced opposition from buyers who could select from a glut of low-time used aircraft built in the late 1970s and early 1980s. The pilot population was contracting. Product liability cases forced manufacturers to pay exorbitant liability insurance premiums, further driving up retail prices. The merger-mania of the 1980s put all of the big three GA manufacturers under the ownership of conglomerates that initially knew little about building light airplanes.
Forstmann Little made it clear from the beginning, however, that it had no interest in building light airplanes or being responsible for the liability risk Piper's 50 years of production carried. The conglomerate reportedly entertained bids for as much as $50 million for Piper, but balked when the buyers did not want to absorb all the liability risk associated with the 65,000 Piper aircraft still flying in the United States.
In May 1987, M. Stuart Millar, a California entrepreneur, agreed to accept the risk and reportedly bought the company for only $1 million to $2 million. Reports at the time suggested that Piper had $25 million in the bank and numerous nearly finished Cheyennes worth millions. Millar, with his homespun mannerism and grandfatherly charm, immediately captured the attention of the aviation media and aircraft owners. He gave the employees long- awaited raises, put the Super Cub back into production amid much fanfare, and introduced the bargain-basement-priced Cadet. He also slashed parts prices and began production of nearly the entire line of products Piper manufactured in the 1970s.
But Millar's attempts soon fizzled. He sold hundreds of Cadets at some $30,000 less than they cost to manufacture, according to Suma. He ignored pleas from staff members to trim employment roles, reduce cash outlays, and delay production restarts.
Meanwhile, the company was spending millions recertifying the Malibu after the design suffered several inflight breakups. Millar invested heavily in new product designs and in a company formed with aircraft designer LeRoy L. LoPresti. He also attempted to set up a new company in Lock Haven, Pennsylvania, Piper's original home, to build Navajos.
Within two years, Piper was again out of cash. The layoffs began and production was curtailed. Nonetheless, the company and its assets were sought by several buyers. Aerospatiale and then Transcisco Industries both looked the company over closely before canceling the deals amid concerns about product liability. Banks refused to infuse new cash for the same reason.
Finally, on July 1, 1991, Piper filed for protection under federal bankruptcy laws. At the time it had 45 employees and less than $1,000 in the bank. The one million square feet of air- conditioned production and office space in Vero Beach, Florida, stood quiet as a tomb.
Millar attempted to put together several deals to sell the assets. One involved a Canadian investment group that planned to move the production to Saskatchewan and to have some manufacturing done in eastern Europe. Like several others, that one never evolved much beyond the press release stage.
In May 1992, Millar stepped down as chairman and resigned his seat on the board of directors. Stone Douglass bought a controlling interest in the company and became CEO.
Meanwhile, Suma, who had started with Piper in 1976 as an aircraft assembler, became president and chief operating officer. Under his leadership, the trimmed-down company began to produce aircraft again and soon was turning a profit. As the profits rose, so did the number of suitors.
Despite the profitability, Piper officials were not able to put together a plan to emerge from bankruptcy. Liability concerns quashed deal after deal.
Everyone involved with the Piper case agrees that it was the signing of the General Aviation Revitalization Act in August 1994 that set in motion the series of events that allowed the company to exit bankruptcy. The bill relieved general aviation manufacturers of liability for aircraft after 18 years. Immediately after the bill was signed, new suitors appeared.
In March of this year, Piper announced a plan to sell its assets to the Philadelphia investment firm of Dimeling, Schreiber, and Park for $95 million. The plan was approved by the bankruptcy courts in May and confirmed on July 10. On July 17 the closing documents were signed.
Under its new "Building on Excellence" slogan, The New Piper Aircraft, Inc., will likely reintroduce the Navajo and the Cheyenne IA in the next two to three years and introduce a series of refinements to existing products. Within 10 years it will be flying some entirely new designs, according to Suma, who retains his position as president and CEO.
After the sale, Dimeling, Schreiber, and Park owns 50 percent of the company; Teledyne, parent of Continental Motors, owns 25 percent; and other creditors own the remaining 25 percent. Included in that last group are future claimants against the old company.
Under the new product liability legislation, owners of aircraft older than 18 years may no longer sue Piper or any other manufacturer for liability reasons. Lawsuits filed prior to or during the bankruptcy proceedings will be settled or paid with money put into a trust fund as part of the sale. Just as with other creditors, the claimants will receive only 35 cents on the dollar. In addition, the bankruptcy court limits any single claimant to just $2.5 million a year, regardless of the judgment.
Of the 65,000 Piper aircraft in the U.S. fleet, all but 9,000 are older than 18 years old. Within three years, all but about 1,000 will be more than 18 years of age, according to Suma, further reducing the fund's liability exposure. The new company will be responsible for all aircraft built after July 17, and it has purchased liability insurance to cover those costs, Suma reports.
The company plans to build 177 aircraft in 1995. The business plan calls for Piper to be building 310 aircraft a year in five years, but Suma predicts he will instead be delivering 500 to 600 per year by then; about 100 to 125 of those will be twins.
The bankruptcy courts required that the new company also carry a new name. Too bad that Piper Aircraft Corporation is no longer with us. But it's good news for the entire industry that The New Piper Aircraft, Inc., is alive and well. For those of us who have followed the company through the last tumultuous decade, it is a pleasure to report that Piper is back on its feet again.
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