Restructuring at KTM: Bajaj Auto to Implement Significant Workforce Reduction, Impacting MotoGP Operations

KTM is set to undergo a major restructuring that will see its workforce slashed by over 50%, with significant implications for its MotoGP operations, according to Bajaj Auto. The Indian automotive giant, steadily increasing its stake in the Austrian motorcycle manufacturer, plans to drastically reduce expenses across multiple departments, including those supporting KTM’s and Tech3’s MotoGP teams.

Rajiv Bajaj, Managing Director of Bajaj Auto, revealed the company’s intentions in an interview, stating that the move aims to streamline operations and eliminate what he described as excessive overhead. "We observe an opportunity to reduce overheads by more than 50 percent, including R&D, marketing (including racing), operations, and general administration," Bajaj told CNBC TV18.

The planned workforce reduction follows previous cuts implemented by KTM’s former management, which had already reduced headcount from 6,000 to 4,000. However, Bajaj believes further streamlining is necessary, particularly within the company’s white-collar workforce. "Interestingly, of these 4,000, only about 1,000 are blue-collar; 3,000 are white-collar, which is perplexing because the blue-collar employees make the motorcycles," he noted. He further suggested that future production adjustments would primarily affect white-collar positions, rather than those directly involved in manufacturing.

Bajaj drew parallels between KTM’s organizational structure and observations made by Mark Zuckerberg regarding management layers in large corporations. "It reminds me of Mark Zuckerberg’s words about managers managing managers managing managers who manage the people who do the work. The management overhead and bureaucracy in this otherwise excellent organization were astonishing," he said.

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Bajaj was critical of KTM’s former management, though he stopped short of naming former majority shareholder Stefan Pierer. “We were all taken by surprise, most of the industry was quite shocked at how rapidly this developed,” he said. “My mind goes back almost 30 years to what my first management guru, Dr John Wallace, told me: the single biggest reason for corporate demise is corporate greed. I have really witnessed this play out at KTM over the last 12 months in particular.”

He continued, “Broadly, I would say there were three types of greed. First, operational greed, best exemplified by what happened in the last couple of years when KTM Austria kept producing and overproducing, even though the spike in demand post-COVID had declined. As a result, KTM distributors and dealers worldwide were carrying over a year’s worth of inventory, which was preposterous. Second, what I would call strategic greed. Companies often get into businesses they have no business getting into. In the case of KTM Austria, the best example was getting into the bicycle business, specifically the electric bicycle business. These two factors combined to take KTM to insolvency in a matter of months.”

He also stated that, “Now, you might say that Bajaj was part of it, and I would concede that yes, we were also part of what went wrong, but as a minority partner, we could not prevent this. I can share that we did our best to resist it, so much so that it led eventually to the third kind of greed, which I may call governance greed, where certain decisions were taken either without our knowledge, without our information, or sometimes without following due process.”

The impending workforce reduction raises questions about the future of KTM’s MotoGP program. Both the Red Bull KTM Factory Racing team and the Tech3 GasGas Factory Racing team rely on significant technical and logistical support from KTM’s headquarters in Austria. Cuts to R&D, marketing, and operational departments could potentially impact the teams’ ability to develop competitive machinery and maintain a strong presence in the highly demanding world championship.

KTM’s MotoGP Performance: A Mixed Bag

KTM’s MotoGP program has seen a mix of success and challenges since its debut in 2017. The Austrian manufacturer secured its first MotoGP victory in 2020 with Brad Binder at the Czech Grand Prix, followed by another win later that year with Miguel Oliveira at the Styrian Grand Prix. In 2021, Oliveira added a third victory for KTM at the Catalan Grand Prix.

However, the 2022 season proved to be more difficult, with KTM struggling to consistently challenge the frontrunners. Brad Binder managed to secure a single victory at the Austrian Grand Prix, but overall, the team’s performance fell short of expectations.

The 2023 season saw some improvement, with Binder achieving several podium finishes and consistently challenging for top positions. The team also benefited from the emergence of young talent like Augusto Fernandez, who showed promise in his rookie season with the Tech3 GasGas team.

Despite these improvements, KTM still faces a significant gap to bridge in order to consistently compete with dominant manufacturers like Ducati. The planned workforce reduction could potentially hinder the team’s ability to close this gap and further develop its MotoGP program.

The Broader Context: Bajaj Auto’s Increasing Influence

Bajaj Auto’s growing influence over KTM has been a gradual process spanning over a decade. The Indian company first acquired a minority stake in KTM in 2007 and has steadily increased its ownership since then. Bajaj’s investment has played a crucial role in KTM’s expansion into new markets and its ability to develop a broader range of motorcycles.

However, Bajaj’s increasing control has also led to some concerns about the potential impact on KTM’s identity and its commitment to high-performance racing. The planned workforce reduction is likely to fuel these concerns, as it suggests a shift towards a more cost-conscious approach that could potentially compromise KTM’s racing ambitions.

The Road Ahead: Uncertainty and Potential

The future of KTM’s MotoGP program remains uncertain as the company prepares to implement significant workforce reductions. While Bajaj Auto insists that the restructuring is necessary to ensure the long-term financial health of KTM, the potential impact on the racing program cannot be ignored.

The success of KTM’s MotoGP efforts will depend on its ability to maintain a strong technical team and continue developing competitive machinery, despite the planned cuts. The team will also need to rely on the talent and dedication of its riders, who will be tasked with maximizing the potential of the available equipment.

Despite the challenges, KTM’s MotoGP program still holds significant potential. The Austrian manufacturer has a strong track record of innovation and a passionate fanbase. With the right leadership and a clear vision, KTM can overcome the current challenges and continue to compete at the highest level of motorcycle racing.

Bajaj voiced confidence in KTM’s revamped management, as it charts its new course as a leaner and more efficient organization. “This is a problem not caused by 99% of KTM employees. This is a problem of the erstwhile top management of KTM, and most of them are gone,” he said. “What we have now in place is a wonderful new team that I personally feel very confident about. The entire team is already in place, barring one vacancy, which will be filled in the coming months. It’s a combination of some of our older colleagues, who are still very passionate and committed to KTM, particularly in areas like product planning, R&D, and legal, and some outstanding new colleagues, led by our new CFO and new CHRO.”

Although Bajaj has already injected several rounds of capital funding to keep KTM afloat and now effectively controls the Austrian manufacturer, the Indian conglomerate is still awaiting approval from the European Commission to formalize the takeover. This approval is a key step in the restructuring process and will provide Bajaj Auto with greater control over KTM’s operations and strategic direction.

The coming months will be crucial for KTM as it navigates the challenges of workforce reduction and strives to maintain its competitiveness in MotoGP. The decisions made by the new management team will have a significant impact on the future of the company and its racing program.