Lender balks at delays; Grob declares insolvency

By Charles Alcock

>> September 2008
Business Aviation

Grob Aerospace GmbH filed for insolvency in Germany on August 18 after its main source of capital suddenly withdrew financial support for the new SPn light business jet program. Grob CEO Niall Olver said that the undisclosed investor had pulled out due to delays in the SPn certification program and resulting increases in the amount of money required to get the aircraft into service. Grob is urgently evaluating alternative means of financing the program and keeping its manufacturing arm in business.

On August 7, Grob flew the fourth prototype of the SPn for the first time. Until the latest news of further delays in the program, the SPn had been expected to complete certification during the fourth quarter. This now appears to be in doubt, although Olver insisted in a press statement that the new twinjet is “well on the way to achieving certification.”

Originally, the SPn, which was unveiled to an unsuspecting aviation industry at the 2005 Paris Air Show, had been due to complete certification by the end of last year’s third quarter. However, the fatal crash of the second prototype in 2006 introduced a delay of at least nine months.

The insolvency relates purely to Grob’s German subsidiary, which employs around 500 people (including 380 permanent staff) at its Tussenhausen-Mattsies factory in southern Germany. The Zurich, Switzerland-based Grob Aerospace AG holding company is still solvent, as is its new U.S. subsidiary in Portsmouth, N.H. Grob AG, which owns the copyrights for the SPn, is developing a completions and delivery center for the SPn at St. Gallen-Altenrhein Airport in Switzerland and expects to open this facility in the second quarter of next year.

A court in Memmingen, Germany, has appointed Munich-based insolvency administrator Dr. Michael Jaffé to handle the affairs of Grob Aerospace GmbH. He is expected to make decisions about the future of Grob’s manufacturing operation over the next four weeks. “Our goal is to keep the plant going right now, and in parallel we are investigating plans for a lasting consolidation [of Grob Aerospace GmbH] including with new investors,” said Jaffé.

“The severity, and significance, of this situation is not at all lost on us,” said Olver in a press statement, “and we are working relentlessly toward a successful outcome, and to preserving the fine reputation, engineering excellence and terrific company spirit that Grob Aerospace embodies. To resolve the situation expeditiously, all possible options are being evaluated. Given the significant support we have enjoyed to date, I remain confident that this disruption will be overcome and that we can move forward in confidence in the near future,” he continued.

Olver, who is chairman of Grob Aerospace AG, stated that the Swiss group will provide “any possible support for a lasting solution.” Grob has been in business for 37 years and has built more than 3,500 composite aircraft. Olver said that he is convinced this track record will attract new investors, and he predicted that the German factory can be kept open with support from Grob’s staff, vendors, customers and public bodies.

Grob now has orders for more than 100 SPns. This covers more than two years of production output at Tussenhausen-Mattsies, which can produce around 48 of the jets annually.

Also in question now is Grob’s future role as prime composites contractor for Bombardier’s new Learjet 85. However, Bombardier expects Grob to fulfill its commitments to the program. “Business is proceeding as usual and, under the protection of German [bankruptcy] laws, Grob will continue operations for the Learjet 85,” said a Bombardier spokesman.

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