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After CANNONDALE takes Chapter 11 - what then?(29 posts)

After CANNONDALE takes Chapter 11 - what then?bizlooker
Dec 12, 2002 6:46 AM
it seems certain Cannondale will be gone or in Chapter 11 within 2 months (maybe 3). most business posts say 6 weeks - but these things tend to drag out. Either way, what will happen to the order of Road Bike popularity?

Who will move into 3rd place? Fuji, Bianchi, Motobecane, Giant, Raleigh?? all have their limitations -- Fuji and Motobecane have limited dealer network (although growing and they might go into a lot of old Cannondale dealers). Bianchi has supply problems and CyclesEuro is always about to pull them from the USA - plus they are expensive. Giant and Raleigh have names with limited upper end appeal.

Some might think other brands would be in the running for 3rd place - but ones with good names start to high in price - and well priced ones like Jamis have zero name ID -- and focus brands - Like the all steel Merciers and Lemonds - are too focused.

Also interesting - how will Cannondale warranties go? Could it be as bad as GT?

anyone have any inside info?
Who are number 1 and 2?McAndrus
Dec 12, 2002 7:32 AM
As I'm sure you know, Chapter 11 is not dead: it's legal life-support. But I'm sure Cannondale will have a very difficult time defending its market while in Chapter 11. Old dealers will jump ship and new dealers won't be there.

I'd say Giant would move in. Their high-end is better than you might think and their worldwide distribution is a formidable competitive weapon.

By the way, who are numbers 1 and 2?
Trek and Specialized. My guess. nmBrooks
Dec 12, 2002 11:27 AM
re: After CANNONDALE takes Chapter 11 - what then?motta
Dec 12, 2002 7:48 AM
What makes you think Cannondale is number three? Number three in what? Name recognition? Quality? Sales? Who is one and two?
Frame Sale!! nmKristin
Dec 12, 2002 7:54 AM
I've been living under a rock, apparently.jtolleson
Dec 12, 2002 8:00 AM
I had no idea Cannondale was insolvent (or approach it). Companies re-emerge from Chapter 11 all the time, so I wouldn't sound the death knell yet. But what does it take to be a profitable bike manufacturer any more?

If Schwinn (family, hobbiest, recreational market) and Cannondale (recreational + market) both struggled despite having large volume AND name recognition, etc... what's it going to take?
C'dales bike business is profitable. Motorcycles and ATVDave Hickey
Dec 12, 2002 8:06 AM
are killing them. They should have stayed with bicycles.
Blame on moto Xpeter1
Dec 12, 2002 8:08 AM
If Cannondale is having problems, blame it on their Quixotic quest to become a player in the motocross market. (at the same time the mountain bike bubble burst). I love the concept of a U.S. motocross cycle, but I would have thought it would come from Harley, which has expertise in building and designing motorcycles.

(Although, since reliability is key in off-road racing, that automatically disqualifies H-D!)
I've been living under a rock, apparently.lampshade
Dec 12, 2002 8:11 AM
I also had no idea Cannondale was in trouble. If their close out deals are as good as Schwinn and GT's I will certainly be sporting a CAAD 7 the season after next!

I assume #1 and #2 are the big T and the big red S, respectively. I don't know what criteria was used to determine #2 though. I have alway pictured it as Trek #1, then C-Dale, Specialized, and Giant all about the same (in terms of volume and # of dealers). But what do I know, I ride bikes, not sell them!
They make motorbikes?Eager Beagle
Dec 12, 2002 8:31 AM
I've been riding them for years and have never even seen one. Mebbe they just never got to the UK. Folly indeed - the MX market is pretty stitched with some very classy well-established players - the Japs of course, puls KTM, Husky, etc.

Interesting, Harley kind of are in the MX market. Armstrong, a HD varient with a rotax plant was the standard issue despatch bike for the British Army for years as a 500, now a 350. And an utterly, overwhelmingly dreadful machine it is too.

They'd (Cracknfail, ho ho) be better off sticking to their knitting IMHO.
re: After CANNONDALE takes Chapter 11 - what then?Akirasho
Dec 12, 2002 9:05 AM
http://www.bicycleretailer.com/bicycleretailer/headlines/article_display.jsp?vnu_content_id=1777416

We abide.

Remain In Light.

Be the bike.
Does this always happen to companies that try to branch out?Kristin
Dec 12, 2002 11:16 AM
Do companies who play the acquistion game ever win? This has been the trend since the 1980's? Is aquiring a good idea or a bad idea for a company? My world has been altered time and time again by companies that tried to branch out into brave new markets and failed. They tie all their small boats together, declare a captain and then realize that its much harder to steer a such a makeshift ship. But captain don't seem to admits their in trouble until the boat is sinking and his drowning.

Acquiring also seems akin to gambling or "playing" the stocks. Some players find it difficult to call it a night.
Forgive that last sentance...not sure how that happened.Kristin
Dec 12, 2002 11:19 AM
But captains don't seem to admit that they are in trouble until their boat is sinking and their crew is drowning.
Wall Street demands growth............Dave Hickey
Dec 12, 2002 11:20 AM
Once a company goes public, Wall street demands growth. I've many good companies go out of business because they branched away from their core business.
Why Grow? We should ask that question more...Spunout
Dec 12, 2002 12:12 PM
of our communities. My city has a plan to grow. Why? So they can make more taxes, so they can spend more taxes,...

Why can't we stay the same size, and just improve on what we have? Such is the waste of the inner city in so many of our communities.

There are very stable companies that stay the same size, pay annual dividends, and stay competitive by improving processes and management. That is the key, in that growth covers up the faults of management. Badly managed companies look very good if they are constantly growning. Cannondale should have stayed the same size, paid dividends, and anybody not happy with the growth of the stock can sell it.
Why Grow? We should ask that question more...Q-Pro
Dec 12, 2002 12:44 PM
I don't think he meant that Wall Street demands growth only, but it surely doesn't accept a sinking stock price.

Taking on the "big dogs" while working with limited capital - comparatively speaking - entails finding a niche and capturing devoted followers due to a product that fits the need/desire best. What's it's product appeal that will lure moto riders away from other established brands; companies that have a history of success in racing and producing top quality bikes that have evolved to keep pace with, or lead, consumer market demands.

From the article it seems that C'dale had some quality control snafus early on that weren't helpful in making a good first impression. Nor does it seem to have captured any loyal group to give it the 'word of mouth appeal' that could help it's cause.

Makes me wonder if C'dale thought through their marketing strategy or just attempted to employ lots of early on advertising and hoped that would do the trick.
I totally agree....Dave Hickey
Dec 12, 2002 12:46 PM
I never said growth is a good thing.
Diversification is goodlaffeaux
Dec 12, 2002 12:11 PM
The problem with having one product is if the market for that product ever tanks your company is gone. On the other hand, if you do one thing, and you do it really well, you'll probably survive.

Shimano is a great example of diversifcation that worked. After gaining a huge market share in the bicycle industry, they branched out into fishing equipment - a market which they now dominate. If bike sales tank, they survive on their fishing line (no pun intended) until the market rebounds. Not a bad position to be in.
..but Campagnolo stays true. Maybe wheels for a Lamborg. nmSpunout
Dec 12, 2002 12:17 PM
Really? Their mountain and BMX groups were total failuresDave Hickey
Dec 12, 2002 1:35 PM
I agree that Campy has a niche in the high end road market but their efforts to expand into mountain and BMX were not successful. Campy went back to what they do best and that's producing quality high end road components(and I'm a Shimano guy!).
True, true. But (x'ing fingers) they stay away from toasters.nmSpunout
Dec 12, 2002 1:43 PM
LOL, at least so far..........nmDave Hickey
Dec 12, 2002 1:47 PM
The answer is very simple...No_sprint
Dec 12, 2002 10:06 AM
Trek will buy it.
True! Re-brand AL just like Lemond does Steel for Trek. nmSpunout
Dec 12, 2002 10:30 AM
Trouble is, Trek already has Klein in that market (nm)laffeaux
Dec 12, 2002 12:12 PM
Oh. I thought I was a genius there for a second or two! ;)nmSpunout
Dec 12, 2002 12:16 PM
No inside information, but....Gregory Taylor
Dec 12, 2002 10:39 AM
...if they go Chapter 11 (reorganization) I'd expect them to emerge without their motorsports division. Just a guess, but I'd bet that they are probably shopping for a buyer (haven't read the 10Q's or press releases) for some or all of the business right now.

If I were a really paranoid type, I'd stock up on stuff like rear derailleur hangers, frame decal sets, and maybe other proprietary stuff like the CAAD6 -7 bottom bracket parts. But only if you are paranoid.
Dealers will stop getting screwed over/get customer focused.grzy
Dec 12, 2002 3:22 PM
Stop breathing their own fumes?

Honestly have to wonder about C'dale and their business practices. Pretty good products - lousy company to work with - any wonder they have problems when the market turns down? This coming from some one who is on their thrid C'dale MTB. Most LBS's have had enough of dealing with C'dale and have dropped them - in bike rich Sant Cruz I now need to drive 30 miles over the mountains and into Silicon Valley to find a C'dale dealer for parts. This town is loaded with shops, but nobody wants to deal with them and their terms. They jam their dealers with huge amounts of inventory and make them carry it ala the Detroit auto makers.

Maybe C'dale will actually get customer focused and realizing that sponsoring a stable pro-athletes and foisting stuff on the rest of us isn't any way to run a business.

And what's all the big idea with motorcycles - who's the brain surgeon that thought they could take on Honda/Kawasaki/Yamaha and others and not take it in the shorts - especially after every other American motorcycle manufacturer has been on the ropes and needed government protection to keep the Japanese machine at bay (yes, even Harley during the Regan years).

Chapter 11 may be the best thing to ever happen to C'dale. It will force them to come up with a better business plan and toe the line or else pack it in. It's just the market's way of saying enough of you and your shenanigans (all else being equal).
Okay Guys and Gals: What is your idea for C'dale post Ch.11?Spunout
Dec 12, 2002 3:55 PM
Dump anything that is motorized. Sell one facility, cease operations in motorbikes. The tax losses will be useful further down the line, plus make it attractive in the marketplace (losses can be carried forward, so if you make a profit in five years, they can get a 30% premium on their profits).

Scale down production, back to the original group of craftsmen. Keep building bikes for Saeco, T-Mobile, Nutra-Fig as these are now your advertising media. Dump components all together, your strength is in aluminum frames. I don't know about that BB system, it just alienates dedicated Shimano/Campagnolo crank/BB users.

Keep the custom program going. Soften the sales model, give a stock frame to an LBS for every three custom orders.

This is my vision! Just a thought, who has more job security? Richard Sachs, or a welder at C'Dale?

My apologies on any tax and business laws, I am a Canadian CMA and not US CPA so YMMV.