News | March 28, 2003

VisionAire lured dreamers and investors

After more than 20 years in the aviation business, Mark Jones was intimately familiar with the uncertainty of airplane development when he read about VisionAire Corp.'s plan to build a less-costly business jet. Jones had handled marketing and sales for a number of aviation companies. He'd seen many manufacturers and service providers come and go, and he questioned this startup company's premise: a single-engine corporate jet. "People in the industry must think these guys are nuts," Jones said he remembers thinking after reading about the company Jim Rice founded in 1988. "Everyone in the industry knows real jet airplanes have two engines." Yet that initial reaction didn't stop Jones and scores of other aerospace professionals from leaving their jobs with established companies like McDonnell Douglas - or from forgoing pay for weeks - to join Rice in trying to develop a dream: the Vantage, the world's first single-engine business jet made entirely of lightweight composite material. But investors and employees have had to face the reality that the Vantage may never be built - at least not under their stewardship. Bankruptcy Judge David P. McDonald in January ordered the Chesterfield-based company to sell its assets to pay a $35 million debt, which included more than $1 million in back taxes. Del Potts said he's disappointed the company was forced into bankruptcy. He was one of about a dozen people still with VisionAire when it was shut down. Potts said he still believes the Vantage can fill a unique niche. "That's why I was very supportive all along and why I stayed to help see if we could make it happen," said Potts, who started as VisionAire's director of product support and customer service a week after he retired from Boeing in March 1998. He became the Vantage's program manager in November 1999. But some former employees say Rice and other executives doomed VisionAire's future by expanding too quickly and spending too freely on non-development projects, such as company-sponsored sporting events to promote the Vantage. Those decisions, say some former employees, also cost them weeks of pay or hurt them professionally. "I left a good career at Boeing for what looked like an exciting opportunity in my own back yard," said Carl Baggett, a former structural-design engineer with VisionAire. He said he worked overtime and sometimes took VisionAire stock in lieu of pay when the company was low on cash. Rice estimates that decisions by many VisionAire employees to take stock in lieu of pay netted VisionAire about $20 million in additional investments. Like Baggett, many hoped for a big payoff that never came. And they stayed until they could no longer afford to. "I had to accept another job for less pay," Baggett said. "Eventually I was able to return to Boeing, but only as a contract engineer." Dreams of aerospace history The Vantage, a six-seater priced at $2.2 million, promised to make private jet ownership affordable for thousands of business owners, entertainers and airplane buffs. The National Business Aviation Association Inc., an industry trade group, in 1998 called the Vantage the future of small aircraft. That's certainly what Tom Stark hoped. "As an aeronautical engineer, being in a position of developing a new plane, that's what you want to do," said Stark, a former McDonnell Douglas engineer who along with Rice came up with the concept for the Vantage. The dream even grabbed city officials and business executives in Ames, Iowa, where VisionAire had courted investors. The community of about 50,000 invested more than $315,000 in 1998 in a $6 million plant that was supposed to produce the Vantage. Investors there expected the company to eventually relocate to Ames and employ up to 150 people. Rice, a former fund-raiser for the Lutheran Church-Missouri Synod, attracted nearly $110 million in cash, equipment and sweat equity for VisionAire. At one time, the company had 155 orders for the Vantage and 40 for a smaller private jet. In the end, however, the company couldn't raise the remaining $100 million that executives said VisionAire needed to complete the airplane's development. While fortune enticed some to VisionAire, a dream to make aerospace history lured many, including Mindy Davis of Manchester. "I spent most of my career in military aircraft, and business aircraft was exciting, especially an all-composite aircraft," said Davis, who left Boeing Co. in August 1997 for a contract-engineer job with VisionAire, where she worked on the plane's interior structure. If the Vantage went to market, she saw herself retiring from VisionAire. The dream seemed possible until January 1999, when Davis and about 175 colleagues were called together in the company's hangar at Spirit of St. Louis Airport and more than 100 of them were let go. Company officials said they were running out of money. Davis, by then a full-time chief engineer, was one of those asked to stay. And she did, forgoing pay for weeks on promises from Rice that new investment would arrive any day. "I trusted him, because I didn't think he would lie to my face as a good Christian," she said. "But he lied to me." Rice said he never lied. He said he is personally liable for $1.8 million, and if his creditors don't agree to a payment plan, Rice said he could lose his home in Wildwood. "I wouldn't have gone and hocked everything I had to put into the company if I didn't believe the money was coming," he said. But Rice said it grew increasingly difficult to attract investors after VisionAire disclosed in December 1998 that the Vantage had performance problems. A few months later, two former employees sued the company for $30 million for invasion of privacy. Rice said VisionAire didn't have to publicize the Vantage's stability problem, because it could be fixed. But the plane was too heavy to meet performance criteria that customers were promised. The problem had to be corrected, Rice said. The lawsuit and technical problems hurt investor confidence at a time when the stock market was beginning to fall, he said. The suit was later dismissed. "By the time we were able to get the lawsuit out of the offering documents, the whole economy had started taking a licking," Rice said. "Some of the people who invested in us were the kind of people who invested in Nasdaq stocks." A tough business Nonetheless, some critics say Rice's overall handling of millions of dollars turned off some new investors. When VisionAire test-flew its demonstrator aircraft in November 1996, it had 30 employees and had spent about $5 million, said Fred Miller, an investor and former member of VisionAire's board of directors. Six months later it had more than 250 employees, Miller said. By the fall of 1998, VisionAire had gone through at least $50 million more in cash investments, Rice said. But VisionAire was no closer to producing the airplane, Miller said. "I wasn't happy about the design problems, but I felt they were fixable," said Miller, a former president of the Chamber of Commerce in Ames. "But the money problems weren't in terms of how it was managed. We had raised and spent all this money and, in my opinion, we couldn't document that we had achieved what we spent it on." That sentiment and the belief that VisionAire had missed its opportunity led Miller and a few other investors last year to ask a judge to force VisionAire into bankruptcy. "I felt it was unfair to potential investors to lure them into this project," Miller said. Rice said VisionAire can document how it spent the more than $60 million in cash it raised and that reports from engineers with Israel Aircraft Industries in Tel Aviv confirm that VisionAire has a plane capable of meeting performance criteria and of winning certification from the Federal Aviation Administration. Rice added that it costs substantially more to build a ready-to-sell production jet than a demonstration airplane. And not since Bill Lear developed a business jet 36 years ago has a startup company succeeded in developing a new private jet, Rice said. "It's a tough business, and you've got to stick to it," Rice said. "Unfortunately, we were thrown into bankruptcy." Despite VisionAire's bankruptcy and competition from six other companies, Rice said the Vantage still could make history as the first super-light business jet. "We are the only one that has an engine that is FAA-certified," he said. That's why Rice and a handful of former VisionAire employees continue to scout for investors to buy the jet's intellectual property out of bankruptcy. If they succeed and Rice is involved, he said he will make sure past investors, including employees, get a stake in the new company. "The team of people at VisionAire, when they closed the doors and left, are still hanging together and working out of their homes" to try to find investors or buyers, Rice said. "We still believe there is, first, a market; second, that we have a good airplane design; and third, somewhere out there are the funds to finish the development and certification of the plane." Milestones at VisionAire December 1988 - Founder Jim Rice incorporates VisionAire. September 1993 - Burt Rutan, famed airplane designer, completes refinements on the Vantage. October 1995 - VisionAire gets 16 orders for the Vantage at the National Business Aviation Association annual trade show. November 1996 - VisionAire flies demonstrator aircraft. May 1998 - A $6 million manufacturing facility to build the Vantage is completed in Ames, Iowa. December 1998 - VisionAire announces performance and weight problems with the Vantage. January 1999 - More than 100 employees, mostly contract engineers, are laid off after Rice says the company is running out of money. March 1999 - Two former employees sue VisionAire for $30 million, claiming invasion of privacy. Suit later is dismissed. December 1999 - Engineers correct weight and aerodynamic design problems. Early 2002 - Israel Aircraft Industries confirms the modified design. July 2002 - Some investors force VisionAire into Chapter 7 bankruptcy; a month later, the company converts to Chapter 11. January 2003 - Judge orders VisionAire to liquidate assets to pay $35 million debt.