CAMit shuts its doors (apparently). What's the future for Jabiru?
 

So, the ABC and others are reporting that CAMit, the manufacturer of the Jabiru engine amongst other things, is closing up shop.

Is this the results of CAsA support for the aviation industry?

What next to go?

Is the Australia Government trying to generate a world record in trade and current account deficits...?

Sigh...

.......Yes :(:(

there are legions of economists in Canberra who have built their careers on demonstrating that Australia is prevented by basic economic theory from manufacturing anything at all.....

they believe our destiny is to be a quarry and a farm and they will stop at nothing to prove they are right.

the champagne corks will be popping in treasury tonight as the CASA headquarters rocks to the tune "another one bites the dust".

good job CASA, you have successfully destroyed yet another business. I'm sure your management will sleep soundly tonight.

......Now the next target must be Jabiru itself.

Maybe we should outsource our aviation regulation responsibilitys OS rather then our manufacturing industries......

Now ya talkin' :ok::ok::ok::ok:

I can speculate
 

I have no idea why Camit folded but I can speculate ....

First there was the OH&S bull****e that cripples workers and costs heaps in productivity.

Then there was the insurance you blokes seem to love so much. Public liability ****e springs to mind but also include workers comp that pays vast sums to idiots who cannot take responsibility for themselves and costs way more than it should.

On top of that there was the general fear that liability may become an issue anyway - thanks to insurance companies and fearmongers, the latter of which are becoming all too common in Australia.

Then there was pressure on the bottom line from their clients, forever wanting a cheaper product.

Then CASA came knocking and wanted compliance with regulations that either didn't exist or where they did, no one could understand them.

Finally the Aussie grubs in grubment land came along and waved the legislation book. Again no one could understand what was written in it.

Then finally the banks in a time of almost zero interest rates insisted on charging exorbitant interest and got away with it because no one wants to take them on.

Just speculation. I must be bored.

You missed one uncle Bob.

That is the psychology graduate looking to apply their new found skills for a buck under the government's mental health awareness program. There must be a crush of them heading that way once the news got out that another one bit the dust.

There's a hidden factor behind the collapse of many Australian manufacturers and businesses - and that is the monstrous cost of industrial/commercial properties.

Most businesses rent their factories and offices, and the rents are nothing short of horrendous.
A very large percentage of the price you pay for products from businesses operating from the commercial areas of our cities goes towards rents (and property outgoings, which are tacked on to the already high rents).

This is why purely online businesses have a substantial competitive edge (over "bricks-and-mortar" businesses) - if they can operate with minimal property requirements.

Just recently, in my neck of the woods, a long-established truck dealership moved out of a suburb on a major highway, about 7km from the CBD, to a newer, bigger, and fancier commercial property, in a new commercial area about 19kms from the city.

This major truck dealership has recently folded, to the chagrin of many truck owners. Discussions have revealed that the fancy new commercial premises were costing the dealership over $30,000 a month in rent.
That is just the basic rent cost. Outgoings (land and water rates) often add another 10% to the cost of the rent.

Commercial property is essentially vastly overpriced here in Oz. It has rocketed in values out of all proportion to other costs and business outgoings.
Rents are based on commercial property values, so the higher the values go, the higher the rents go.

Strangely enough, we haven't seen any major correction in commercial property values - one that is well overdue. Yet, I can tour around any commercial areas here and find a wasteland of empty factories.
Some commercial areas have around 20% vacancy rates, and the commercial vacancy rate is getting worse, not better.

In another large country, far away to our North - a place where a sizeable percentage of the worlds manufacturing now takes place, commercial property is relatively cheap, and in this country, if you show interest in starting a commercial manufacturing operation, you are welcomed with open arms by the local Govt body, and you are often given a factory rent-free, for an extended period, until your operation is successful, and producing profits.

Of course, that factory given to you, rent-free for 2 or 3 years, wouldn't do anything to assist your business competitiveness, would it? :rolleyes:

I was of the belief that they actually owned their premises in this case or at least they were financed to do so.

Camit borrowed to upgrade to support key customer just before GFC. AUD then went over parity.
Watched a major customer seemed hell bent on frittering away a good product with alterations and "upgrades" and then announced they would source parts elsewhere to save cost.
Due to reliability problems sales dropped to near nil
Camit re released original engine and sold direct to end users - IP was shared so nothing stopping them although much was wasted trying.

CASA then decided to take action against that key customer, damaging their product further and never even talking to CAE who had solutions and a new offering.
End result is continuing limitations on all aircraft who dont replace to "upgrade" specs......yes the unreliable ones.

Camit has done a great job with not much and has many OEM applications and happy cutomers, just couldnt hold on long enough.

Now theres no more spares except what their customer can get made OS cheaply, no idea what certified engines will do.
BUT now theres a whole new model out shortly with everything fixed. Not really tested or approved yet but it will be OK trust us.

Im not sure they realise how badly they have damaged themselves or brand by their course of action

A friend from here is establishing production in USA of his products. Just purchased 10 acres 8 miles out of Dallas area for US$230,000 plus a holiday from the local council for 5 years on rates/taxes etc plus they'll build his driveway off the highway..

and the USA thinks it's expensive...

The price of commercial real estate is only part of the cost because the labour has to live in overpriced residential real estate too.

People who think price inflated housing makes them rich are nuts and are trading their future competitiveness for a capital gain that they can't realize without selling up and leaving the country...

...but I digress.

Yes Andy, you digress. The view that housing (or industrial land) is an investment that should yield a return causes all sorts of angst. Talk to anyone wanting to buy their first home. But I digress too.

Back to the company I know absolutely nothing about, it could also be that the owner, sick of the points I mentioned in #6 and burdened by real estate as in #7, paying exorbitant interest rates as in #10, has been doing 60 hours + of work each week.

This 60 hour week is exacerbated by thinking about the business during remaining awake hours. The net result is kids that he hardly knows, a wife who thinks she is married to a machine shop, and a general feeling that life must hold something better than just a continual grind to make toys for others when the return is sweet FA.

Realising that the sale of the business is impossible because return on investment is less than bank interest (thanks to the real estate value), the owner may have simply decided to get out while the going is good by liquidating the assets.

Hopefully they end up with something more than a debt and can get on with something more fulfilling.

All pure speculation of course, I don't know these folk but I wish them well. Building aircraft engines has been the dream of many, at least they lived it for a while.

As for Jabiru, I also sincerely wish them well and hope they don't find themselves in a similar position. I for one think the machine would be improved with a Rotax 912.

Australian wages, cost of doing business and housing prices are the proverbial pyramid scheme...when the music stops let's see who's dancing///

Same problem with Rotax or Lycoming... they could fold next week... who really knows? I agree it's unlikely, but nobody really knows.

Land cost
 

You'll find that in Texas, and in particular Houston, practically all property is much better value than in Australia, Australia land of the "planner", or just about the tightest land use laws, i.e. Government control over private land, in the world, according to the Economist. Houston with a fast growing population of 6 million has no, repeat no, land zoning. Therefore market forces prevail with all of the market efficiencies that flow therefrom. Why is our dollar so deflated? Why are your cups and saucers and GA aircraft so low in value in the view of the rest of the world? The city dweller thinking his home value is rocketing ever upward is chuffed to see this artificial zoning inspired value increase. Result? The western world's biggest (mortgage bloated) banks and new owners, if they can get in at all are saddled with 30 year debt. Think I exaggerate? Google real estate Houston and you will find residential property at half ours compared with Melbourne or Sydney. Think that in terms of much lower mortgage burden, smaller and more proportionate banks. Capital available for schools, roads and hospitals. No thousands of planners to pay from the public purse and they have to work in the private sector. No endless AAT hearings and no lost opportunity costs. As one Houstonian put it, "it never ceases to amaze me how Houston reinvents itself".. It is free to do so. Of course proposing a move in this direction here would have most people questioning one's sanity. Never mind that this was the case, no zoning, in Australia during our period of greatest growth. Not to worry our Crown form of government always makes us subjects subject to the whim of our betters, be it Spring Street or Canberra. Can'tberra, the socialist, soulless and highly stratified home of zero freehold to near 400,000 dependent on the dopes that pay taxes and pay exorbitant fees to the dishonestly named Government Business Enterprises, monopolies, that now substitute for responsible government. The Commonwealth corporation, unhampered by Public Service law, who accepts a letter of expectations from the Minister. These instruments of government, government by remote control, with little incentive to do anything except to ego rule the roost and create 'work' and perks. Example of clever CASA make work, the senior instructor that had to cough $8000 up front to restart the flying school at Warrnambool using CASA's own supposed standard manual. Would not have paid this in the States. Would not have to have waited six months. That one example but one out of the total shambles of a totally dysfunctional regulator that has smashed a perfectly good industry.

Its not the first time that rumours of its impending doom have surfaced.

https://camitaeroengines.net/blogs/newsA response to recent rumours

August 17, 2016 • CAMit Update

A few rumours have been circulating recently, to different effects: that CAMit is about to close its doors, that we have already laid off employees, and more.

We want to address these rumours and mention that they are not true.

One of the questions asked just last night on the Jabiru & CAMit Aircraft Engines Yahoo! group* was this:

A couple of weeks ago at Oshkosh, a high ranking official of Jabiru USA told me that Camit was about to close their doors, employees had already been laid off, etc., etc. Can't say that I believed a word of it but stranger things have happened.

What say you?
Our response to the question was as follows:

Sales 101:
If you want to limit your competitors sales,
Say they are about to go out of business
Say they are about to come out with a new model
This combination definitely works I can assure you. In this case there is very little risk for an owner as most parts are interchangeable.

The real risk is lack of competition which always increases costs and reduces service.

CAMit has been running a very useful R&D program where the risk for the market is "if it is not continued".

Given that this program has been run for many years on a zero budget, imagine what could be done with more resources?

So, supporting a useful product helps keep it available, lowers costs and funds future R&D. The market usually decides in its own interest provided it is aware of the facts.

Yes, we do need your support!

Ian
CAMit

Too late mullo, it's well and truly over. Seems that those runours above were true regardless of what the owners said. Based on what we are hearing elsewhere, they knew this was coming for quite some time. The receivers are actively engaged and working on it.

ASIC insolvency notice link for Camit P/L below. The company is owned by a discretionary family trust, and Camit P/L has been declared insolvent, and has been placed into liquidation yesterday (12/10/2016).

The liquidators will examine whether the business can be sold to another interested and unrelated party as a going concern, or whether an orderly disposal of the companys assets, will be the order of the day.
I suspect there will be very few takers for the business as a going concern, unless it is offered to Jabiru themselves, at an attractive fire-sale price.

A lot depends on the number of, and the amount owing, to trade creditors - and who can form the largest voting block at the coming creditors meetings.
The vote will hinge on what can be salvaged from the companys assets to cover its liabilities.

If the largest block of creditors votes for an orderly liquidation as the method of recovering any monies owing, then all the moveable assets of the company will be auctioned off, for very little actual monetary return.
The reason for the poor monetary return from a liquidation auction is because the assets are usually very specialised, and can rarely be utilised elsewhere.
If auctioned, some of the CNC machines will be snapped up - but normally at low prices - but a lot of the specialised equipment, and parts and components already manufactured, will be virtually given away.

Remember that banks and finance institutions usually hold all the aces (i.e. all the voting power) at creditors meetings, and trade creditors usually end up with the bath water, after the banks have thrown the baby out.

If this business has financed its property (its premises), and a sizeable proportion of its manufacturing equipment (keeping in mind that CNC equipment is horribly expensive and is rarely purchased outright), then the banks and finance houses will merely sell off the property and equipment rapidly at fire-sale prices, just to "square their books".

These institutions care not a whit about manufacturing knowledge, business goodwill, and the areas where the items will bring best prices with negotiated sales - they will have already written off any losses by the company, and allowed for them in their losses accounts.

Camit P/l - Insolvency Notice

Pretty sure Jabiru wouldn't want it. They are heading towards cast barrels and cylinders now, which is something that CAMIT wasn't geared for.