BIKE: The decline and fall of the American bicycle

[Roger Baker]

CAMPO and CAMPO's director Mike Aulick have the foresight to understand  
that bicycles are pathetic in importance compared to the real cars we  
need to get around in the real city we live in. That is why CAMPO does  
not even bother to gather data on bicycle use in the Austin area.  
Bicycles will always be insignificant compared to the jet planes that  
important high tech people will use to visit the giant future high tech  
city of Austin that the CAMPO politicians all agree we will become in  
the year 2030.

We must have the courage to go deeply into debt so as to pave our way  
to prosperity by building the $184 billion in transportation corridors  
that TxDOT, Gov Rick Perry, and the road contractors who contribute to  
his campaign all understand is the key to the mighty Texas economy of  
the future. Clicketh thou thither:

http://www.time.com/time/magazine/article/0,9171,1101041206-832224 
-1,00.html

So what does it matter if we cannot compete in making steel, textiles,  
cars, ships, machine tools, televisions, computers, hard drives,  
petrochemicals, fertilizer, that we are outsourcing our service jobs,  
or that we are only barely breaking even on our agricultural trade  
nowadays?

None of that is very important  so long as our moral-values President  
has the courage to show the oil-producing regions of the world the  
lessons they need to understand about fighting to defend their own  
freedom at any cost. When you see it that way, the fact that the USA  
can't still seem to make good bicycles at a price that American  
customers are willing to pay seems pretty damn chickenshit, doesn't it?  
-- Roger

                         ********************************

http://www.washingtonpost.com/wp-dyn/articles/A29737-2004Dec2.html

A Rough Ride for Schwinn Bicycle

As the World Economy Shifted, So Did the Fortunes of an American Classic

By Griff Witte
Washington Post Staff Writer
Friday, December 3, 2004; Page A01

  MADISON, Wis. -- In the glass atrium that marks the entrance to the  
Pacific Cycle company, the old and the new of the bicycle business are  
displayed side by side. Each is called the Schwinn Sting Ray, and each  
in its time has been a bestseller.

  But the similarities end there. In the space of a generation,  
everything about the process of designing, producing and selling a  
Schwinn has changed.

The old Sting Ray broke the conventions of bicycle design, boasting a  
banana seat, high handlebars and extra-wide tires. In the 1960s and  
early '70s it became not only a symbol of middle-class aspirations, but  
also a provider of thousands of jobs that paid good wages with health  
and retirement benefits.

Today's model, which projects the rough look of a motorcycle, comes  
from China, where the average factory worker makes less than a dollar  
an hour. It is a symbol of a different sort -- an illustration of how  
global economic forces and the sometimes clumsy responses of U.S.  
companies transformed middle-class jobs into low-wage work both at home  
and abroad.

In a nation that measures jobs in the tens of millions, changes to a  
few thousand barely register. But when multiplied across a wide range  
of industries, the rise and fall of companies such as Schwinn help  
explain why the economy has become less forgiving of workers who lack  
higher education or specialized skills.

  "We're missing a big, important part of our society. Either everyone  
has to go to college or everyone has to have very low-paying jobs,"  
said Richard Schwinn, part of the fourth and last generation to run the  
firm that bears his name. "I'm not sure that's a great balance."

The Schwinn Bicycle Co. went bankrupt in 1993 and sold off the brand.  
But at its peak two decades earlier, the Schwinn family oversaw a labor  
force of 2,000, the majority of whom never made it past high school.  
Several thousand more U.S. workers benefited from jobs at Schwinn  
dealerships, or in the steel and rubber factories that supplied parts.

Richard Schwinn, a large, bearded man with the bearing of a lumberjack,  
now oversees an empire of 17 at a small custom bike factory in rural  
Waterford, Wis.

About 75 miles away, in Madison, Pacific Cycle manages the Schwinn  
brand from a sleek office with just 80 workers. Pacific, part of a  
Canadian conglomerate, has a couple of hundred employees in California  
warehouses, taking in the bikes imported from the seven Chinese  
factories where most Schwinns are produced.

 From California, the bikes fan out to mass merchants such as Wal-Mart.  
Once there, cashiers making less than $10 an hour ring up the latest  
Sting Ray at prices much cheaper than the original. Pacific sells more  
than a quarter of all bikes purchased in the United States, with just  
about 350 U.S. employees.

This is the outcome the Schwinn family had desperately sought to avoid.  
But like many companies struggling to decipher how American production  
and service workers fit in a globalized market, Schwinn erred badly.  
Industry insiders say the family's dogged but ultimately flawed  
determination to stay American-made contributed to its doom.

  "They did a lot of things right over nearly 100 years," said Gary  
Coffrin, an industry consultant. "But at the end, there were a lot of  
things that caught up with them."

Building a Brand

  The Schwinn factory jobs paid what in today's dollars would be around  
the national average of $17 an hour, with benefits -- the kind of job  
that has been getting increasingly difficult to find.

Many jobs disappear because their products or services become obsolete  
-- think buggy whips -- but the world still needs bicycle makers. Just  
not many American ones.

In 2002, 41.4 million Americans rode a bike six times or more. But 99  
percent of the bikes sold in the United States today are imports. "It's  
still a going industry," said Michael Kershow, former counsel for the  
now defunct Bicycle Manufacturers Association of America. But in terms  
of U.S. employment, "it's really a shadow of what it used to be."

Imports held only a sliver of the market when Schwinn dominated the  
industry. It was founded in Chicago in the 1890s but rose to prominence  
through Depression-era innovation that redefined the bicycle as both  
durable and stylish. Its marketing genius was to cultivate a network of  
small dealerships run by people who knew bikes, and who were eager to  
promote the brand. Schwinn dealerships became a staple of downtowns,  
typically employing a manager, a full-time worker or two and perhaps a  
few teenagers in the summer.

As employment rose at Schwinn and other factories after World War II,  
so did the fortunes of the middle class. From 1947 to 1979, median  
family income more than doubled, from $21,201 to $45,989 in  
inflation-adjusted terms. The gap between rich and poor narrowed, as  
the middle 20 percent of families gained ground more rapidly than the  
top 5 percent.

Frank Greco's family was one that benefited  . He started on the  
Schwinn assembly line at 25, grateful for the opportunity since he was  
just back from the service and lacked a college degree. "They paid good  
-- 80 cents an hour," he said.

Greco's fortunes improved with the company's. By 1950, Schwinns  
accounted for one of every four bikes sold in the United States. Buying  
a Schwinn became a sign of making it in the middle class, just like the  
picket fence and the station wagon.

Greco stayed for 40 years, rising to become a foreman. "I made a  
living. I bought my home. I raised my children. I got paid every week  
for what I did. I told [then-chief executive] Edward Schwinn when I  
retired, 'You don't owe me 2 cents,' " he said.

Schwinn was at its busiest in the early 1970s when a nascent  
environmental movement coupled with a sudden exercise craze spawned a  
bicycle boom. Dealers began making pilgrimages to Chicago to appeal for  
more bikes.

  "We could only build so many," said Jack Smith, the executive in  
charge of distribution  . "I'd tell them, 'I'd be glad to give you  
more. But who am I going to take bikes away from to give them to you?'  
"

Imports Roll In

As tastes began to change, however, Schwinn didn't. It continued to  
churn out the same heavy, tough-to-maneuver bikes that had been the  
mainstay of the industry for decades. "Durable? Yes. Lasts forever? You  
bet," said Jay Townley, an industry consultant and former Schwinn  
executive. "What the customer wanted? No."

Competitors like Mongoose became pioneers in the burgeoning BMX market,  
while newcomers such as Specialized and Trek offered mountain bikes.

There were new entrants from abroad, as well. In the aftermath of the  
bike boom, the tariffs on foreign bikes were lowered and it became  
easier to import. Entrepreneurs in Korea, Japan, Taiwan and eventually  
China, stood ready to feed American demand for ever-cheaper goods by  
supplying components and whole bikes under U.S. brands, or their own.

Schwinn was among those that began to shift to foreign parts and  
imported bikes. But in its initial forays into globalization, it got  
burned badly. Its foreign suppliers, especially Taiwan-based Giant,  
soon became its toughest competitors, applying Schwinn technology and  
techniques to their own, cheaper lines. The Schwinn brand lost its  
cachet, its bikes indistinguishable from many of the rest.

The total cost of just the parts for a Schwinn Varsity made in the  
United States might have been $70, but a Taiwanese producer could  
deliver the whole bike for that price, Richard Schwinn said. "Once that  
came up, you say, 'Oh, party's over.' " Compounding the problem was  
that Schwinn had failed to invest in its Chicago factory. It had become  
a relic -- a rickety, fire-prone facility incapable of producing the  
quantities of lightweight bikes that consumers demanded. In 1983,  
Schwinn shut it down.

That decision foreshadowed a broader decline in U.S. manufacturing,  
with the sector supplying 5 million fewer jobs today than at its peak  
in 1979. Meanwhile, family income growth slowed, rising only about 15  
percent over nearly a quarter-century. Americans without a college  
degree -- who make up about three-quarters of the adult population --  
now earn lower wages in real terms than they did a generation ago.

As it became clear the Chicago plant was doomed, the Schwinn family  
made one last attempt to preserve its heritage as an American  
manufacturer. While competitors focused their strategies overseas,  
Schwinn opened a plant in Greenville, Miss., in 1981. The location was  
no accident: A century earlier, Southern farmers migrated en masse to  
northern cities like Chicago in search of steady factory work. Now  
northern factory owners were looking south to traditionally  
agricultural, anti-union areas where they could cheaply hire the  
descendants of those farmers who had stayed behind.

The plant struggled from the beginning. Costs were high and the quality  
uneven: The bikes coming off the assembly line in Greenville weren't  
necessarily any better than the ones shipped from Asia. Wages may have  
been low in Greenville compared with Chicago, but they were still  
several times higher than those paid to laborers in China or Taiwan. As  
the plant hemorrhaged money, Schwinn's leadership pulled the plug in  
1991. The company declared bankruptcy two years later.
Tommy Hart, who ran the area's economic development office, managed to  
acquire the last bike that rolled off the assembly line in Greenville.  
He had coveted a Schwinn as a kid. But as his own son prepared to leave  
for college, the pleading began: The bike would be perfect for getting  
around campus. Couldn't he take it with him, if he promised to take  
good care of it?

"I let him talk me into it," Hart said, sighing deeply.

It wasn't long before the bike was stolen.

"That was the last U.S.-made Schwinn bicycle," Hart said. "And the  
crook doesn't have a clue. To him, it's just another bicycle."

The Road Not Taken

As Schwinn declined, another U.S. manufacturer moved into the breach  .  
Unlike nearly every other major bike company, the three-decade-old Trek  
Bicycle Corp. still makes a considerable share of its bikes in the  
United States -- any bike that costs more than $800, about 30 percent  
of its production. At its Waterloo, Wis., headquarters, about half of  
its 785 employees work in manufacturing, and the plant is expanding. An  
additional 440 Trek employees work elsewhere in the United States.

Still, to make its expansion pay off, Trek will have to sail against  
the trade winds; it makes a higher profit on its lower-end,  
foreign-made products. "It's definitely getting tougher to compete. You  
can get a complete bike offshore for what it costs us to weld one,"  
said Zapata Espinoza, Trek's brand manager. "But being made in America  
is not just about the warm feeling of giving jobs to people. We control  
the process. We invented it. And we're doing it the best way we can by  
keeping control of it."

For Schwinn, this is the road not taken, a model for how a company can  
simultaneously retain at least some U.S. manufacturing and stay  
competitive. Even though Trek's share of the total bike market is  
small, it dominates among customers at the high end. Industry insiders  
say a slimmer Schwinn with quality domestic manufacturing could have  
joined Trek at the top. Instead, Schwinn got caught in the middle:  
unwilling to move down to the mass-merchant level where most customers  
now shop; unable to compete for serious riders willing to shell out top  
dollar.

"Schwinn was in such a dominant position. It's shame on them," said  
Chris Hornung, chief executive of Pacific Cycle. "They should have had  
my business and Trek's business."

Instead, Hornung has Schwinn's business. He bought it out of bankruptcy  
in 2001, the second time Schwinn had gone belly-up in less than 10  
years.

Hornung's strategy has been simple: Import quality bikes from Asia. Get  
them to mass merchants such as Wal-Mart. Keep payrolls to an absolute  
minimum.

Since applying that strategy to Schwinn, the brand has lost the support  
of most independent dealers, whose ranks are in decline. But it's been  
a hit among mass merchants, with the Sting Ray expected to top many  
kids' Christmas lists this season. "The bikes that we're putting the  
Schwinn brand on and selling to Wal-Mart are absolutely the best bikes  
that Wal-Mart has ever sold," Hornung said.

Grudgingly, Richard Schwinn has to agree. Reviving the Sting Ray, he  
said, "is probably the coolest thing they've done."

  Schwinn is fatalistic about the fall of his family's company. The  
cause wasn't his family's mistakes, he insists, so much as the  
worldwide pressure on prices to keep sinking lower, a phenomenon to  
which he sees no end.

  To many economists, this is how things should work, with efficiencies  
making products cheaper and creating new opportunities at the high end  
-- in building satellites, if not in bicycles. Schwinn is less sure the  
trade-off is always worth it. What happens to a worker who has mastered  
the art of welding a bike frame, but whose command of advanced physics  
is shaky? "I know I have the right to life, liberty and the pursuit of  
happiness," he said, smiling wryly. "I didn't realize I had the right  
to the lowest possible price."

And consumers do pay less for the new Sting Ray under Pacific's  
ownership. It may not be the engineering marvel that was the old  
Schwinn, but it retails at Wal-Mart for $180, about a third of the  
original's price in today's dollars.

"People complain that a Schwinn is not what it was. True," said Greg  
Blake, an engineer at Pacific.

"But," he said, "it doesn't cost what it did, either." 
-------------- next part --------------
A non-text attachment was scrubbed...
Name: not available
Type: text/enriched
Size: 15702 bytes
Desc: not available
Url : http://lists.bicycleaustin.info/private.cgi/forum-bicycleaustin.info/attachments/20041203/ac01ee62/attachment-0001.bin