The Mech Touch Chapter 1069
1067 Massive Sums
"Home sweet home." Ves muttered as he looked out the expansive windows of the penthouse office of the LMC's headquarters.
He missed the omnipresent grey clouds with its rainbow color shine. How many times did he dream about returning home? It felt so good for him to be back in the saddle.
Below the ground, the Mech Nursery churned out mechs after mechs on a daily basis. The LMC employed thousands of employees, all working to satisfy the market demands for the company's two iconic mech models.
When the Barracuda landed at the manufacturing complex, Ves arranged for someone to settle Chette, Jannzi and Rhode Larkinson. At the same time, Ves called up all of his core confidants to his penthouse office in order to get up to speed to the current state of the LMC.
As Ves turned around, he turned his gaze to a set of couches where his key subordinates waited for their boss to get down to business.
Calsie Doornbos looked relieved now that Ves returned to helm the company. While she managed to hold down the fort in the founder's absence, the responsibility of operating such a huge company was not for the light-hearted. It was admirable that she managed to hold out for so long without running the LMC into the ground!
As a publicist and marketing manager, Gavin Neumann did not hold a high position within the hierarchy of the company. Nevertheless, the man was adaptable and possessed a sober perspective with regards to mechs. The young man was ready to work as Ves' executive assistant at any time.
Melkor Larkinson hadn't escaped the war entirely untouched. Ves already heard that several skirmishes and attacks took place on Cloudy Curtain, but his cousin did an admirable job in repelling those opportunistic attacks. Not only that, but Melkor also managed to learn on the job as he led the Avatars of Myth. Ves saw echoes of Captain Byrd and Major Verle in his cousin's demeanor.
The only odd person out of this intimate gathering was Ketis. Wearing iconic poofy black beret, the pirate designer barely seemed to have reigned in her dangerous vibe. Ves wanted to palm his face when he saw her. Even though she wore modern trendy clothes, the giant scabbarded greatsword floating behind the couch made it clear that she was barely civilized!
Held within her arms, Lucky purred as the daughter of the frontier stroked his bony plated surface. His exterior looked a little darker and more metallic since the last time Ves spotted Lucky back at the military hospital on Bentheim.
In any case, Ves confirmed that Lucky still carried his personal comm on his collar.
"Lucky, come here, boy."
The mechanical cat didn't obey the words of his owner. Instead, he continued to squint his eyes and purr as Ketis kept stroking his back!
Ves exasperatingly sighed and walked all the way towards the couch and made a grab for Lucky's collar. With a quick snap of his finger, he detached his personal comm from his cat.
Lucky woke up from his petting session and hissed at the thief who snatched his collar!
"What are you so touchy about?" Ves snorted at his pet while he snapped his comm around his wrist. "This comm is mine in the first place. You were just a convenient holder to hang up my comm during my military service. Now that I've been discharged from the Mech Corps, my comm can finally return to its rightful owner!"
Ves ignored the yowls from his indignant pet and took a seat on one of the couches. He idly stroked the thin band of his comm like Ketis stroked Lucky's back. As far as he was concerned, his reunion with his personal comm and the System it held within was long overdue.
He couldn't wait to activate the System for the first time in years. Still, he thought it best if he addressed more immediate business first. Right now, he wanted to know where the LMC currently stood!
"Okay, Calsie. Tell me the basics. How many mechs did we sell and how much profit did we earn?"
The former temporary CEO of the company knew the key figures of the LMC by heart. "The LMC grew rapidly in the three years since you've been gone. The board of directors pushed for a rapid expansion in production capacity in order to maximize the sales of our silver label mechs. Right now, the manufacturing floor of the Mech Nursery is host to one Dortmund production line, five Benson production lines and eleven Hanover production lines!"
Ves frowned at that. That was a lot less production lines than he expected, yet he wasn't familiar with the Hanover line of production equipment. As far as he knew, a complete Benson production line cost around 3 billion credits, and the LMC acquired five of them in total for a total worth of 15 billion credits!
That was already a huge investment, so the mention of eleven new Hanover production lines gave a sense of foreboding in him. There must be a reason why the LMC stopped making use of the perfectly serviceable Benson production lines.
"How much does a Hanover production line cost?"
Calsie seemed hesitant for a moment. Eventually, she bit the bullet. "Around 8 billion bright credits for each complete production line."
"What?! 8 billion credits!?" Ves thundered. "Why in the hell would you pay almost three times for a Hanover compared to a perfectly serviceable Benson?"
"We used to host more Benson production lines, but we've sold them back in order to ease our acquisition of the Hanover production lines. Compared to the Bensons, the Hanovers are much more geared towards mass production. They work faster and more precise. They produce less errors because they feature a higher degree of automation. This means they are more efficient and produce less waste, which improved our profit margin over time."
All of those arguments sounded logical to Ves, but the upfront cost of those production lines were ruinous! How could the LMC be thinking of acquiring luxurious production equipment when it only offered two products in its mech catalog?
Ves wanted to saw open the heads of those idiotic directions who wanted to pursue growth above all else and see how much of it consisted of greed.
"Okay then." Ves sighed. "So we have sixteen production lines in total. How many mechs are we producing per month?"
"Right now, we are manufacturing at capacity, which roughly means we are shipping around a 150 mechs a month. Recent publicity has given our sales a strong boost, so every production line is practically around the clock. In fact, we can pump out mechs at a faster rate. The reason why we are only producing this much is because our production equipment require regular maintenance. We are also obliged to fabricate spare parts, which take up a small amount of production capacity as well. Furthermore, while we've expanded our testing ground, it still takes time for our test pilots to put our freshly-fabricated mechs to their paces."
That sounded reasonable to Ves. This meant that every production line pumped out almost ten mechs a month on average.
"Okay then. Let's move on to money. How much operating income did the company make during my three years of absence and what's the current financial state of the company?"
Calsie smiled. "Mind you, while we are now sitting on top of sixteen production lines, it took time for us to acquire the funding and means to expand. During our gradual expansion, we've sold around 3500 silver label mechs. Our product margins from those sales has fluctuated over the years due to inflation and the rising cost of raw materials, but we've managed to make a profit of 26 billion credits from selling so many mechs."
"26 billion credits!"
"That's not the extent of our profits. As our Blackbeak and Crystal Lord models proved to be a sleeping success, other mech companies began to grow envious at the profit margins we've achieved. Upon your instructions, we refused to offer any accommodations with regards to the licensing contracts. Even so, seven mech companies still decided to license the Blackbeak design while twelve mech companies licensed the more expensive Crystal Lord design."
Ves abruptly shot his back a little straighter. "The MTA put a high valuation on the licenses of my two designs."
"Every mech company who licensed the LMC's mech designs paid full price." Calsie grinned. "That means the Blackbeak design netted you 21 billion credits in licensing fees while the Crystal Lord design granted us a whopping 60 billion credits! Even though the MTA took a ten percent cut, that still means we've earned more than 72 billion credits just from licensing your designs!"
72 billion credits! Ves was practically over the moon when he heard that sum. Ves never expected that his earnings from licensing out his designs would dwarf the profits the LMC accumulated over three years!
"Those licensing contracts also came with per-unit licensing fees, right?"
"Right." Calsie nodded. "Every mech company who produces a copy of a licensed design or a variant of it is obligated to pay us a fee. For example, the bronze label Blackbeaks nets us 1.5 million credits in royalties per copy. Best of all, the mech companies pay this fee at the moment the mech rolls off the production line, so we don't have to wait for the mech to be sold to receive our cut. In total, we've earned around 12 billion credits from royalties on your mech designs alone!"
This profit structure showed why design studios existed. As long as they gathered a bunch of capable mech designers together, they could pump out a large number of designs and variants a year. As long as some of them got licensed, they stood to earn billion of credits without lifting a single finger!
While the design studios merrily focused on designing mechs, other mech companies needed to toil over the production and marketing of their licensed designs! It was an incredibly lazy business model that attracted many mech designers who didn't want to bother with the production aspect of their profession.
Still, even if he could earn a lot of easy money by pumping out designs all day, Ves believed it was better to take charge of his own production. Many high-ranked mech designers started their own companies and engaged in production for a reason. Working at a design studio tended to make the mech designers who worked there become out of touch with the practical side of mech design.
In total, the LMC earned well over 100 billion credits in operating income! Yet this sum did not cover all expenses. It left out the cost of overhead as well as other expenses such as taxes and interest payments on the big pile of debt the company took on to afford the fancy new Hanover production lines.
With good news comes the bad. Ves couldn't avoid the issue any longer. "Talk to me about our debt and other expenses."
Some of the money they earned got gobbled up by the overhead. Just the salaries for thousands of employees bled the company of hundreds of millions of credits a month.
The cost of maintenance, security, depreciation and so on took out a substantial bite out of their operating income. The money they spent on paying taxes, some of which were deductible and some of which were not, drained the company of several billion credits annually.
On top of that, the company forked out a generous amount of dividend payments to its shareholders at the same time!
While Calsie didn't get into the nitty gritty details, she didn't mince her words when it came to the LMC's current debt obligations. "Times have been rather difficult as the war went on. Many of the mech companies which licensed our mechs eventually went bankrupt or moved on to mech models as their profits dried up due to the worsening market conditions. The worsening sentiment affected our company as well. If not for your recent publicity which allowed us to run all of our production lines at capacity, we were only barely keeping our heads above the water."
In total, the LMC accumulated 54 billion credits in debt. The interest rates of those loans varied a bit, but it still amounted to several billion credits per year!
Ves frowned at the sums. "Don't you think the banks are ripping us off?"
"There is a limit to what the banks and financial institutions are willing to agree to." Calsie shook her head. "With so many mech companies struggling for cash, demand has outpaced supply. We haven't been able to obtain more favorable rates."
While Ves looked very severe, inwardly he sighed in relief. He expected worse. While owing 54 billion credits was not something he could casually brush off, Ves still found it to be a manageable sum considering how much money the LMC raked in just from relying on two of his aging mech designs.
Now that Ves was back in charge, the LMC would quickly be able to resume its growth in time!