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It's official: Cannondale files Chapter 11(45 posts)

It's official: Cannondale files Chapter 11PaulCL
Jan 27, 2003 12:44 PM
From the financial news:

Cannondale Announces Plans to File Voluntary Chapter 11 Petition

BETHEL, Conn., Jan. 27 /PRNewswire-FirstCall/ --
Cannondale Corporation (Nasdaq: BIKE), has announced that it intends to file a
voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy
Code on January 28th.
Cannondale and its lenders, The CIT/Business Credit, Inc. and Pegasus
Partners II, L.P. have reached an agreement in principle that, subject to
Bankruptcy Court approval, will provide the Company with interim financing to
fund post-petition operating expenses and to meet supplier and employee
commitments. "The interim financing will be used to continue the operation of
our bicycle business," said Cannondale Founder and President Joe Montgomery.
Cannondale has also reached an agreement in principle with Pegasus
Partners II, L.P. to sell substantially all of its assets to Pegasus Partners
II, L.P. pursuant to Section 363 of the Bankruptcy Code, subject to better and
higher offers and court approval. Pegasus would operate the bicycle business
as a going concern with the involvement of current management and would
purchase separately the Company's motorsports assets, including the
intellectual property related to the design of Cannondale's motorsports
products. In the meantime, management continues to work with other potential
interested buyers for either or both of these businesses.
Because the Company has obtained interim post-petition financing,
Cannondale will be able to pay vendors for goods and services received after
the filing in the ordinary course of business.
Montgomery explained that difficulties with Cannondale's motorsports
business made the filing necessary, and that the Company has determined to
suspend operations of the motorsports division pending a potential sale. "The
motorsports division was threatening the bicycle division," explained
Montgomery. "Although we believe in the value of our motorsports products, we
did not have sufficient financial resources to make the additional investments
necessary. We look forward to bringing a renewed focus to our core bicycle
business and to working through this present challenge with the greatest
possible speed."
The suspension of operations of the motorsports division will mean that
production workers who had been furloughed from Cannondale's motorsports
factory in Bedford, Pennsylvania in December will not be recalled. Production
workers at Cannondale's Bedford bicycle factory, who have been idled during a
recent shutdown, are scheduled to return to work in the near future.
The Company's foreign subsidiaries are not included in the filing.
Business done through Cannondale subsidiaries in Europe, Japan and Australia
accounted for approximately 42% of the Company's total sales in fiscal 2002.

This press release contains forward-looking statements, as defined by the
Private Securities Litigation Reform Act of 1995. Actual results may differ
materially from those anticipated as a result of various risks and
uncertainties, including, but not limited to, the following: the ability of
the Company to continue as a going concern; the ability of the Company to
maintain sufficient debtor-in-possession financing to fund its operations and
the expenses of the Chapter 11 process; the outcome and timing of the
Company's efforts to restructure and/or sell certain of its assets, including
the ability of the Company to execute and close a definitive agreement with
Pegasus Partners II, L.P. or any other purchaser; the Company's ability to
obtain court approval with respect to motions in the Chapter 11 proceeding
prosecuted by it from time to time; the ability of the Company to develop,
prosecute, confirm and consummate a plan of reorganization with respect to the
Chapter 11 proceeding; risks associated with third parties
Great News!Roadrunner25
Jan 27, 2003 1:16 PM
Looks like they will dump the ill conceived motorcycle business and focus on what made them successful:

BICYCLES!

I hope they fire the moron(s) who decided on this venture.

They must continue on with their bicycles, I am saving up for a CAAD7!
Weren't they good at building motorcycles?PODIUMBOUNDdotCA
Jan 27, 2003 1:31 PM
From what I remember they had the motorbike of the year... I guess its just an impossible venture to cross the line between bicycles and motorcycles. They are 2 completely different crowds. I can understand why because its like buying a Yamaha road bike... no matter what it was made of it just wouldn't have much appeal to me.

Nick
PodiumBound.ca
the bike was goodcyclopathic
Jan 27, 2003 1:37 PM
if it didn't have problems! they didn't have money to redo mapping so they shipped bikes knowing that engines wouldn't work. Of cause it fired back.
Often the "motorcycle of ther year" gets ravesLeroy
Jan 27, 2003 3:27 PM
but cannot sell. My experience with highly rated vehicles by enthusiast mags is that a lot of time they're all flash and little dependability.
The Motorcycles where not total losers!Morgan
Jan 27, 2003 2:05 PM
From the statments you made, you obviously are not working From the statements you made, you obviously are not working for a major company or you lack general business knowledge.
Cannondale has always been a risk taker and their innovations have been praised by many. The motorcycle design and concept was very good. It just took too long to bring the motorcycles to market and it occurred right around the dot com fallout. Thus they had trouble making up lost ground. Both my wife and I own Cannondale's. For the money they are hard to beat, there are very few companies that have a better-designed aluminum frame. I am sure that Cannondale will continue in one form or another.
The Motorcycles where not total losers!Picshooter
Jan 27, 2003 2:56 PM
I can't understand how they thought they could go against Honda, Yamaha, Suzuki with established dealer networks.
Likely to be the first of 2 filings -- frequently the resultsphil the wheel
Jan 27, 2003 3:36 PM
Cannondale is probably make it thru the first Chap 11 - operate a year or so - then sell the name to Huffy, Trek, or Giant (all of whom may file an offer in this Chap 11 procedings)after a year of more losses

Sorry to say it; but even with just bicycles they will be hard pressed to ever turn a profit based on current business model. american consumers are not stupid and will not pay extra for their aluminum bikes to be made in USA vs made in Taiwan (where quality is better anyway)

if you find this hard to believe; go find a high grade american camera or TV -- and bikes are much less 'high-tech' in assembly --

Importers like Giant, Trek, Specialized, Motobecane, Fuji, Jamis, Mercier, Bianchi, etc will win this war.
So that's a thumbs down for you on Cannondale's future, phil?czardonic
Jan 27, 2003 4:02 PM
Sheesh, what is your deal?

"American consumers are not stupid and will not pay extra for their aluminum bikes to be made in USA vs made in Taiwan. . ."

That explains it, cycling being such a value oriented industry and all. . .
look at the numbers and the market - then wait and seephil the wheel
Jan 27, 2003 4:45 PM
who sells the most bikes?
who sells the most bikes in bike shops?
in sporting goods stores?
where are most bikes made that are under $300?
that are over $500?
what price points are most important to bike companies?

now which type frames are becoming most popular? what is the tend?

then consider ATB market
-- look at all the named 'bike of the year' by class in Mountain Biking -- Motobecane, Jamis, Santa Cruz,

maybe I am wrong - but the tend is away from Cannondale unless they can lower costs, make road in Carbon & Ti, come up with an ultra lite hardtail, and produce a DS bike that performs -- the same old formula will not cut it today
It seems to me that there is room for any manufacturer. . .czardonic
Jan 27, 2003 5:14 PM
. . .that can find a niche and scale itself to the demand. Cannondale probably can't compete at every single price point in every market with companies who are building their frames overseas. So what? You seem to be of the "big market share = survival" school, which I'd argue has very little relevance to the cycling industry, where custom and boutique labels seem to be hanging in there while big companies like GT, Schwinn and now Cannondale run themselves into the ground trying to dominate every niche and price point.
you are right - if they say on niche. . .phil the wheel
Jan 27, 2003 6:07 PM
small independents are great
and can stay around a long time
look at the numbers and the market - then wait and seecastrello
Jan 30, 2003 5:09 AM
"but the tend is away from Cannondale unless they can lower costs, make road in Carbon & Ti, come up with an ultra lite hardtail, and produce a DS bike that performs -- the same old formula will not cut it today"

1. Why make a road bike in carbon and/or ti? Sure, they could do it, but is there something wrong with an all-aluminum road bike?

2. "Come up with an ultra lite hardtail". Hmm, caad 5, caad 6, the new Optimo? Ok, you might have second thoughts about the head-shok (I do) and the Lefty (I don´t), but they do make good, ultra light hard tails.

3. "Produce a DS bike that works" Hmm, heard of the Jekyll or the Gemini? Hmm, I´m sure Anne-Caro, Gracia etc have. Yes - there have been some issues in the beginning with both models, but I would go as far as saying that it´s normal.

4. Lower costs. I have already mentioned this so I won´t dwell on it.
any other sage like financial advice?ctisevn
Jan 27, 2003 4:29 PM
seriously, Ive got to invest and you seem to have some swami like insight.
YES -phil the wheel
Jan 28, 2003 5:55 AM
look at the operating costs of companies
percentage of eaten by expenses
I suggest you look at DELL vs HP ~ this will give you an idea of where consumer products are headed

AND the good news for bicyclists -- High Grade Ultegra bikes are headed to $1000 and DuraAce to $1500 {and of course there will be some over priced stuff left for the show offs} But the normal weekend rider will get higher quality bikes at lower costs - it's all good
Boring...Yawn...ZZZZZZ... Move on philbiknben
Jan 27, 2003 4:32 PM
Most of the imports you mention have the same quality that C'dale had ten years ago.

Notice that the two manufacturers you are so happy to see go both had huge R&D. GT and C'dale put themselves into the ground while driving the industry forward. It's a stubborn, narrow-minded consumer like yourself that made them extinct.

Without companies like these, we would be racing on balloon-tired cruisers with mustache bars, etc. (no offense Hummah-Hah)

Get a clue!!!
who invented what?phil the wheel
Jan 27, 2003 4:55 PM
Cannondale & GT invented the mountain?
they invented dual suspension? Front suspension?

Cannondale invented ultra light aluminum race bikes?

funny - all these things existed before either of these companies did

let's see what important contributions can we say were made by both these companies that were driven into Chapter 11 by short silly and stupid consumers?? Those damn consumers - if they would just let the experts decide how they should spend these money -- industries would be so much better off (and we would all be using our Macs after driving home in our AuqaCars)

the market will decide - if your forcast is different than mine - fine - time will tell
they invented that!castrello
Jan 28, 2003 4:14 AM
"Cannondale & GT invented the mountain?
they invented dual suspension? Front suspension?

Cannondale invented ultra light aluminum race bikes?

funny - all these things existed before either of these companies did"

Hmm, ultra light alu race bikes or full suspension mtbs did not exist before cannondale did. Hmm, I dont think we had ultra light alu race bikes or FS 30 years ago - when Cannondale started up.
they invented that - check your historyphil the wheel
Jan 28, 2003 6:15 AM
Mountain bikes were invented in the early 50s

Dual suspension bikes were in production in the 60s

Vitus and Motobecane both had sub 17 lb aluminum race bikes in the early 70s - but they were not the first - there was a british aluminum light weight before that - forgot the Name

Cannondale didnt even start doing bikes until about 20 years ago - before that it was mainly bags

not that this matters much - but innovation would occur without GT & Cannondale - as you will see in the future
Ok. Whatever. I´m tired of this. I´ll drop it. nmcastrello
Jan 29, 2003 3:48 AM
Atta-boy, Ben! =) (nm)jtferraro
Jan 28, 2003 11:17 AM
Phil, you are the troll of the week. n/mfracisco
Jan 27, 2003 4:46 PM
thank you! i will wear my medal with pridephil the wheel
Jan 27, 2003 6:09 PM
Perhaps it is more intelligent to say...Uncle Tim
Jan 27, 2003 9:54 PM
...that American consumers are stupid enough to prefer buying their bicycle frames (which are very labor intensive) from Taiwan where the workers are poorly compensated (read "exploited") and where corporations need not worry about troublesome environmental regulation.

Cannondale makes a great, high-quality product while following American labor law and American environmental regs.

The Made in China/ Made in Taiwan side may win this war, but it won't be a "quality" issue. It will be a "look how much money I saved when I bought my Scattante; it's Italian" issue!

You are as correct about this, Phil, as you were about your "oh, it's too hard to build your own wheels; let me do it for you" spiel.
It´s not a war!castrello
Jan 28, 2003 4:02 AM
Well, if american consumers are not stupid and if it´s true that they will not pay extra for their bikes to be made in USA, then maybe the Europeans are. Cannondale are huge over here in Europe and thanks to the success of their racing teams they have gained a hue popularity. I think that Cannondale is the third biggest ROAD bike brand in ITALY!

And to say that quality is better in Taiwan... well, you´re not necessarily wrong, but not right either. I´m not saying that Taiwan-made bikes suck - because there are good bikes made in taiwan. But compare the CAAD 5 and CAAD 7 frames to ANY Taiwan-made bike and you´ll realise (hopefully) that they are great frames and - IMO - worth every penny.

I do not agree with you that Cannondale bikes are (that much more) expensive. In the good old US of A, where everything is so damn cheap comparing to Europe, bikes are cheap anyway. How cheap? Well, a R1000 is about 30% cheaper in the US (compared to prices in Europe). Anyway, before buying my R1000 I was shopping around for something with the same kind of componentry. I was looking at Giant (their 105-alu bike was cheaper, but the components were not in the same league), Trek (their 2300 model is waaaaay overpriced) and Avanti (Taiwan-made frame, carbon for and seat stays. Would have ended up with the same components but with a frame not even close to being as good as the Caad 7).

Don´t forget that there´s a huge market in Europe as well, a market that will have other options, a different way of thinking etc. 42% (or something like that) of all sold cannondale bikes are sold in Europe.
True butmmaggi
Jan 28, 2003 5:21 AM
I agree with Phil. But I also believe that Cannondale makes a great product, better than one made in Taiwan.

I realize that in Europe, Cannondale is in demand and it's expensive too. But that's the Europeans for you. They want something that's American mainstream that isn't easily available.

The latest CAAD7 decked out with Dura Ace or Campy Record with Mavic Ks will run about $3.5k ($3k with Dura Ace). That's the price of ANY high end, AL pro racing bike. The mindset of a high end rider in the USA is that they could spend the same and get an AL Italian bike like a Casati, Derosa, Colnago or Pinarello. At least, that's what I'm thinking.

Don't get me wrong. The CAAD7 is a great racing frame. But the price for a MADE IN USA frame doesn't justify it, IMO.

We pay alot for American workmanship.
True but - actually you can get DuraAce way under $3500phil the wheel
Jan 28, 2003 5:48 AM
Last year Bicycling reviewed the Motobecane le Champion TEAM with FULL dura-ace including hubs - which most bikes do not have - and Bicycling said it rode like any high grade AL bike - and they liked to workmanship (frame made by same builder who makes many other high end brands)
Price was $1795 -- much less than the $3500 mark
seems this year they raised the price to $1899 - still much less than $3500 and still a 2.7 lb frame --
this is the direction I think we are seeing - $1000 Ultegra bikes and $1500 DuraAce bikes
and thats a good thing - not a bad thing
I suppose that Bicycling Mag is the final authority.Uncle Tim
Jan 28, 2003 8:29 AM
And those guys certainly wouldn't tackle the politically incorrect issues of how much the Taiwanese workers were paid, what kind of benefits they received, or the lack the of real environmental regulation in Taiwan.

MBK is a shadow of the once great Motobecane. I've looked that cheapo Scattante over with a fine toothed comb. Those bikes will hold together, but their quality is second rate. And I'm considering Magna to be third rate.

The Cannondale workers who lose their jobs don't think that this embracing of blind eye cheapoism is a good thing.

And I think that Dura Ace on a MBK is a joke.

I have a feeling that Phil the" it's too hard to build a wheel" is riding his Made In Taiwan bike with pride. Please tell us, once more, about all of the money you saved and how it's good for American workers.
my guess is they know as anyone on this message board.phil the wheel
Jan 28, 2003 9:21 AM
and the frame on the Moto is made by the same factory with the same materials as many that people on this forum love

if you prefer a different bike - fine
but facts are facts

you can buy full DuraAce bikes withn good wheels and nice light warrantied frames for under $2000

most high grade bikes sold in this country are made in Asia

workers in japan now make a good living -- but 40 years ago my father thought they were under paid slaves

workers in Taiwan now make about the same as non-union USA workers - 20 years ago they worked for peanuts

China will only be converted to a free society thru trade - not thru force -- that is our mission - isnt it?

the amercian consumer is doing the right think - facting in their own interest - just as Adam Smith
Phil, Your thinking is really screwed up!!Morgan
Jan 28, 2003 10:00 AM
I am not sure of your background or where you live, maybe you are a laid off bitter worker. As far as quality is concerned, none of the bikes from Taiwan that you mention can hold a candle to the current Cannondale road bikes. Look at the frame material seat stay design, the welds and the paint and you will see that the Cannondale is a much better bike for the money.

As far as you point about the consumer purchasing bikes in the sub 300.00 range. Here is a good relate I work for a major wine company that owns several labels. In order for us to make the same profit on our value brands (wines under $7.00) we have to sell 10 to 20 times more than our premium brands ($15.00 - 30.00) range, where there is a huge profit margin. It works the same way in the bike industry or most other industries.

With that said I would gladly select the premium product over the bargain brand any day of the week.

Morgan
thats fine with your moneyphil the wheel
Jan 28, 2003 10:16 AM
but most people prefer a good deal
and Cannondale has never been one

as for frame work - Kinesis makes frames for not only Motobecane, Felt, Santa Cruz, Specialized and others - but also for many "italian" companies who take them unpainted to Italy - paint them and decal them there

quality is not your issue - it is how good you look on it
which fine too
I am not real impressed with Bicycling MagUncle Tim
Jan 28, 2003 1:08 PM
Troll said:
>and the frame on the Moto is made by the same factory with >the same materials as many that people on this forum love

MBK is made in Taiwan. Nothing French about it. If people love them, that's their problem. Some slaves cry when freed from their masters, too.

Troll said:

>you can buy full DuraAce bikes withn good wheels and nice light warrantied frames for under $2000

You mean you can buy a MBK with Dura Ace for under $2K. You get what you pay for.

Troll said:

>most high grade bikes sold in this country are made in Asia

Lots of MAGNA bikes are built and sold for $90 by exploited labor at the expense of a sullied environment.

Troll said:

>workers in japan now make a good living -- but 40 years ago my father thought they were under paid slaves

The Japanese were a great industrial power before WWII. They were innovative enough to build a progressive, modern society. Remember, they kicked a great European power's (Russia) tail at the turn of the century. They have strong labor unions and strong environmental regs. I don't criticize them.

China is still communist with all their bikes made by exploited workers. Taiwan is still a labor and environmental nightmare. Exploitation yields nasty fruit.

Troll said:

> workers in Taiwan now make about the same as non-union USA workers

It's all about labor. A Taiwanese worker makes much less than an American worker in terms of wages and benefits. And they have very weak workplace protection. None of that compares to what we expect and deserve in the US. There's nothing good about what's going on there.

Troll said:

> China will only be converted to a free society thru trade - not thru force -- that is our mission - isnt it?

So undercutting our own labor force by exploiting communist workers is good for us? Allowing communist powermongers to amass huge fortunes (strengthening the regime) at the expense of the exploited worker is the way to conquer China? Encouraging the Chinese to trash their environment is good for the world?

This mixed up approach explains why our economy is is so screwed up.

It is not in the best interest of the US - or any part of the enlightened world - to exploit labor. It's akin to slaveholders saying they are doing their slaves a favor.

Just a reminder: it's 2003, not 1803.
That's not the pointmmaggi
Jan 28, 2003 9:40 AM
The fact of the matter is that we live in America which the last time I looked is the land of free enterprise. This is capitalism at it's best, whether you like it or not.

We as consumers have the right to purchase whatever product we like on the open market. If someone wants to purchase a an AL frame from Taiwan w/Dura Ace for $1600, hey, it's America.

I always thought that the last 2 years the CAAD5 Saeco frame was the best value on the market for $600. But guess what? Not many felt that way and maybe it was because cannondale didn't advertise it well enough or just maybe many people weren't convinced. Who knows.

But to put guilt trip on someone for not buying American is foolish.
That's not the pointcdale02
Jan 28, 2003 10:16 AM
I bought that CAAD5 last year. Frame, fork and campy headset for 600 bucks. replaced my 60cm CAAD3 with it. the CAAD3 replaced (under warranty)my 2.8 that cracked.

The CAAD5 rides great, and Cannondale has treated me well for the last 8 years. I hope they pull out of this still making bikes in Bedford, PA.

BTW, Trek has too for that matter (two warranty claims on my 84 560 - they gave me a new frame/fork after 17 years!.... beat that).
Cool...jtferraro
Jan 28, 2003 12:02 PM
Nice to hear your history of C'dales and that they took care of you. Like you, I sure hope they continue on, producing bicycles in Bedford, PA. I'm also very happy to hear TREK took care of you after 17 years!

BTW...I have a C'dale mountain bike and TREK road bike! =)

-Jeff
Guess that's why they're filing for Chap 11 :-) (nm)mmaggi
Jan 29, 2003 10:00 AM
Nice post. (nm)jtferraro
Jan 28, 2003 11:46 AM
You sure it had DA hubs? NEway...jtferraro
Jan 28, 2003 11:43 AM
You might be right...we might possibly see $1K Ultegra bikes and $1500 DA bikes in years to come. Those bikes won't be of the same quality of a C'dale, though. Moreover, they'll likely come w/lousy wheels, bars, stem, posts, saddles, etc. I was close to buying a '03 R2000Si. I think it is a great value considering it cost $2400, but comes spec'd as follows:

CAAD7 frame
full Ultegra w/DA rear derailuer
Ksyrium SL's
3T Forgie bar & stem
Ti railed saddle

The only component that was from Cannondale was the post! The bike is superlight, too!

-Jeff
I think the 'dale seatposts...cdale02
Jan 28, 2003 1:33 PM
are made by Thompson. I have on on my mountain bike and it's pretty darn good.

As for the CODA cranks..... that's a different story, but it's still a great bike - I'm looking for a set of xtr cranks.
That's a Dura-Ace group screwed onto a piece of $hit frame. **Niwot
Jan 29, 2003 1:32 AM
**
Uhhh, OK....Phil! (nm)jtferraro
Jan 28, 2003 11:09 AM
re: It's official: Cannondale files Chapter 11KeeponTrekkin
Jan 28, 2003 6:16 AM
Too bad... Joe Montgomery bet the company and lost. Looks like Cannondales will become Pegasus'.
I sure hope not! (nm)jtferraro
Jan 28, 2003 12:03 PM
C'daleBill is in Denver
Jan 28, 2003 4:21 PM
For what it's worth, when I originally went out to buy the bike I now have I had every intention of buying a cannondale. The problem was, I rode them back to back with other brands at several different shops in several different price ranges. Every time I came away with that particular C'dale placing dead last on my favorites list of the day. In the end, I bought a litespeed and I wouldn't have given half of what I paid for the equivalent C'dale. They ride overly harsh, typically didn't shift all that well (ok, adjustment..but if it's a C'dale dealer handing me the bike...it's C'dale's fault) and two of the dealers called the crackendales. Maybe that's because it's rough riding a road bike in the mountains..or maybe it's because 'american workmanship' is just some bullsh!t term that used to mean something. These days it means overpaid, lazy workers whining about their inability to be competitive. Having done R&D engineering for Chrysler, I've seen the american dream at work....that's why I drive German.

If Cannondale was half as good as those complaining in here say they are....they wouldn't be going chap 11. Oh, I'm sure they make a great race bike...who doesn't these days, but then again...how many people out there really want a race specific abusive riding bike? Obviously, not that many.

Bill
a couple pointsctisevn
Jan 29, 2003 3:16 PM
adjustment..but if it's a C'dale dealer handing me the bike...it's C'dale's fault
no. its the bike shops fault. cannondale doesnt assemble bikes. bike shops do.
two of the dealers called the crackendales
perhaps further evidence of the caliber of dealer you chose to deal with. would any responsible shop stock a line and then tell you not to buy it? no.
They ride overly harsh
thats a subjective observation so all i can do is disagree. Ill do so emphatically. Ive ridden lots of different manufacturers frames and am familiar with what makes a frame compliant or harsh. by design, the frames are pretty smooth for aluminum. add a carbon fork to the s bend stays and youve got a good deal of engineering to make a smooth ride. it can be hard to tell in 20 minutes in a parking lot though.
Im sure your happy with your litespeed and its a great bike but theres no reason to falsely disparage cannondale to make yourself feel better for making the choice you did.