Hobbico Bankruptcy: Declining Sales Led to Filing of Chapter 11, Over 300 Job Cuts Could Follow at Champaign, IL

Hobbico Bankruptcy
iStock/PeterTG

Hobby products manufacturer Hobbico, Inc. has gone through the process of filing for Chapter 11 bankruptcy protection. Located in Champaign, Illinois, layoffs could follow as a result of Hobbico’s Chapter 11 protection, leaving 332 employees. Hobbico’s bankruptcy can be attributed to several factors, including heavy debt and, perhaps most importantly, Hobbico’s sales decline over 2017. The company plans to continue operations during the bankruptcy process

Hobbico’s Chapter 11 bankruptcy filing stated that it had between 200 and 999 creditors that were owned money. Between $10.0 million and $50.0 million worth of assets are owned as part of Hoobico’s debt, with liabilities of between $100.0 million and $500.0 million–all aggravated due to Hobbico’s sales decline. It also cited, “an increasingly competitive industry, market headwinds and a series of one-off events with key suppliers.”

The company informed employees that if Hobbico layoffs in 2018 were to occur, they would likely start in April.

Declining Sales Led to Closure & Layoffs at Hobbico Warehouse in Reno

Hobbico’s layoffs in 2017, prior to the current cuts, included a seven percent reduction of its workforce at its 200,000-square-foot Reno, Nevada facility; it had 650 employees at the time. According to another business, the layoffs in Reno, as well as additional ones in Champaign, were due to declining sales, the loss of two major suppliers, and an ongoing lawsuit with Traxxas, L.P., one of Hobbico’s vendors.

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But now, that same warehouse appears to be shutting down entirely. Hobbico’s warehouse closing was, interestingly, not announced by the company itself. Instead, the information comes from the Facebook page of accessories manufacturer Moore’s Ideal Products, LLC, which posted well wishes to those that had lost their jobs as a result of the facility’s closure.

Just as the closure itself wasn’t announced, there has been no word of the actual number of employees that would be laid off as a result.

U.S. Drone Industry Challenges Resulted in Layoffs, Closure & Bankruptcy

One product that was supposed to provide income growth was drones, which are currently riding a wave of popularity as their affordability improves. However, manufacturers have struggled with production, with many companies downsizing their operations.

Here are three recent examples of the U.S. drone industry decline:

  • GoPro Inc. (NASDAQ:GPRO) announced that it is closing its drone business operations due to the market being overly competitive. The drones themselves were never able to live up to all the hype following their announcement in late 2016. GoPro’s drone closure will result in hundreds of layoffs.
  • Less than a year ago, drone startup Lily Robotics, Inc. filed for Chapter 11. The company had already begun taking pre-orders on its drone cameras before production began, receiving over 61,000 orders, or over $38.0 million in sales. Lily Robotics’ bankruptcy, however, meant a lack of funding to produce the drones, so all this money had to be returned to customers.
  • Yuneec International also saw cutbacks in 2017, in both its production line and employee headcount. Since the company is private, the exact number of Yuneec layoffs was not announced; however, it is estimated that between 50% and 70% of employees. This is a company that had a bright future, receiving $60.0 million through Intel Corporation’s (NASDAQ:INTC) venture capital division.

 

 

Sources:

Hobbico files for bankruptcy; layoffs next?,” The News-Gazette, January 10, 2018.

Hobbico to Shut Down its Reno Warehouse,” HobbyKing, January 9, 2018.

Low sales behind layoffs at business,” IllinoisHomepage.net, September 28, 2017.

GoPro quits the drone business,” The Verge, January 8, 2018.

Drone Startup Lily Robotics Files Chapter 11,” CFO, February 27, 2017.

Layoffs hit Drone-Maker Yuneec, and Could be as High as 70% of U.S. Staff,” The Drone Girl, March 17, 2017.

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