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Schwinn/GT Debt Could Cripple Industry(6 posts)

Schwinn/GT Debt Could Cripple IndustryMeDotOrg
Jul 25, 2001 1:16 PM
from Interbike:

DENVER, CO (BRAIN)—Schwinn/GT's $30 million in industry debt could pose serious headaches for the bike industry, and everyone from Taiwanese suppliers to U.S. retailers may feel the pain.

Schwinn/GT recently filed a list of its 37 largest unsecured creditors in the U.S. Bankruptcy Court in Denver. That list reveals the company owes nearly $30 million to Taiwanese bike manufacturers.

Leading the list is Merida, which is owed $10,845,472. Schwinn/GT owes Ideal $3,597,626 and it is in debt to Acetrikes to the tune of $1,935,361. (To view the entire list click here.)

Schwinn/GT also revealed that it owes its secured creditors more than $135 million — twice the company's current selling price. It will be all but impossible for industry creditors, which are all unsecured, to recoup their losses. The company owes money to more than 1,500 companies

Pulling that much money out of the already struggling Taiwanese bike industry could severely weaken many companies. While Merida and Acetrikes may have the capital to cover their losses, many parts suppliers may not.

Many of these suppliers like Merida aren't personally accountable for that money. It just goes down the chain to the tire guys, saddle guys and all the small component makers. Those are the ones that will feel the brunt of this,î said Brad Hughes, president of Brad Hughes marketing.

Taiwan's bike industry is already in bad shape, Hughes said. He expects bike shipments from the island to drop from 6 million to 4 million units this year. ìThe entire country, not just the bike industry, is doing poorly. The stock market there is slipping and banks aren't going to extend more credit to anyone,î Hughes said.

While Taiwanese companies may suffer, U.S. retailers may feel the hurt as well. Schwinn/GT's massive debt will surely force Taiwanese suppliers to tighten credit extended to U.S. suppliers, which will likely create tighter credit for retailers.

These events will tighten the credit level overall and will extend to retail level, but to what extent I don't know,î said Mike Sinyard, Specialized's chief executive officer.

Schwinn/GT's debt will put some good companies in serious risk of survival,î he added.

Bicycle Retailer Editorial Staff
—July 25, 2001

http://www.interbike.com/01_2001/2001_07/2001_07_25_7069.htm
Interestinggrzy mnky
Jul 25, 2001 2:38 PM
But I think "cull" might be a better term. It takes two to tango - some one made the decision to give that much credit to Schwinn in the first place. I do agree that the small guys are really going to take it in the shorts, which is a bad thing, but that's part of the risk of being a small company. this isn't the first time Schwinn has been in trouble.

The big question is does Schwinn stay "dead" or does it rise from the ashes again?
Back from the dead? Only in WalMart..TrekRider
Jul 25, 2001 10:19 PM
or other department stores. There are no 2002 models in production, on the water, or in country. They will miss the opening of the season, probably will miss Christmas, and may not appear for IBDs until spring '02. This will probably spell the end of Schwinn for IBDs.

On the other hand, I'd look for rebadged ersatz Huffys/Schwinns in WalMart and other department stores as soon as the ink is applied to paper.

And on another note, have heard rumblings that Pacific is quietly talking with Trek, who was outbid for the Schwinn name by Huffy, to help finance a Schwinn buyout. Seems Pacific, DynaCraft, Mongoose, et al, are VERY worried about the direct competition from the Schwinn name. Imagine a parent in Toys R Us looking for a kid's bike.....seeing Huffy, Mongoose, Pacific, Next, and then seeing the Schwinn name, a name that they remember from childhood and that holds a reputation none of the other aforementioned brands holds.....at least for now. Guess which one the parent buys.

As for culling, UniVega has already succumbed to the culling.....and several other brands are tettering on the brink. Just like the airling industry when it was deregulated, too many brands in too small a market.....something has to give.
Back from the dead? Only in WalMart..SteveS
Jul 26, 2001 5:36 AM
Don't really know whether Huffy will take over the failed Schwinn/GT line in the end or not. What I do know is that this last "Schwinn" that failed is what, the third incarnation of the name? Really only a headtube badge. They are not and never were the Schwinn of Ignaz Schwinn, the company that produced out of Chicago and later Mississippi bicycles like the Schwinn Corvette, Jaguar, the real Paramounts, they only used the earlier names in their failed marketing effort. If I feel sorry for the loss of America's first great bicycle company, it is that Richard Schwinn failed after his family's company had thrived for generations. This last Schwinn was just using the same headtube badge, probably like the next version of Schwinn will do.
Back from the dead? Only in WalMart..ElvisMoab
Jul 26, 2001 8:47 AM
Richard Schwinn did not fail. He is doing very well making the "real" Paramounts (Waterford). You are confusing him with his dullard brother Ed.
They'll be back...TJeanloz
Jul 26, 2001 9:38 AM
We're talking about the #1 brand name in bicycles in the United States. When I started selling Schwinns, it was comparable to selling Litespeeds in a lot of ways- you could show somebody a cheaper, superior bike from Trek, and they still would pay more for the Schwinn. The name will most certainly be back.