Serotta lays off 40% of workforce, planning shutdown

[Bruce K]

That much? (@1%)

I was starting to think positively on the idea of a Pronto.

No more. Not ever.

I will keep my Meivici and Concours cross bikes forever. The Ottrott is on the block.

While I (think I) understand (and certainly don't like) all the moves that have been made, any connection(s) I might have had to Serotta, the brand, were cut with this latest series of moves.

Sad situation from bad decisions

BK

[Jeff N.]

Originally Posted by Serotta_Carbon

There's a very good reason they don't relocate the composites effort to NY. They don't own it...Never did... If you read what I said in that post it mentions that Serotta bought some production tooling. What they bought were some molds and mandrels used to produce the Serotta brand parts. They didn't buy my building full of equipment, the processes, or any IP. What they did do in addition to buying the molds was to lease a building that I set my equipment up in and made their parts. I think I may have mentioned that in another post sometime back.

For some reason or another the collective group in charge of Serotta has made the decision that they no longer need our services and have let us go. That was their choice and I'm sure they feel like they had a good reason to make it. It's not my place to question their decision. What's the point?

I'll continue to make composite products. It's what I've done my entire life and it's what I'll do in the future. The only question is will I stay in the same building that Serotta once leased or will I relocate.

Thanks for your support during my days with Serotta. I enjoyed working with Ben and the crew in Saratoga and will miss them all in the future.

Mike

Mike, there's no doubt in my mind that you'll do just fine...whatever you decide to do, wherever you decide to do it! Jeff N.

[Ahneida Ride]

Originally Posted by Bruce K

That much? (@1%)

I was starting to think positively on the idea of a Pronto.

No more. Not ever.

I will keep my Meivici and Concours cross bikes forever. The Ottrott is on the block.

While I (think I) understand (and certainly don't like) all the moves that have been made, any connection(s) I might have had to Serotta, the brand, were cut with this latest series of moves.

Sad situation from bad decisions

BK

I love my Legend .....

But would I consider another Serotta or Asianrotta? Probably not ....
There are just too many great USA domestic builders out there.

[David Kirk]

I feel bad saying this as there are old friends still in the building that no doubt hope that the current plan of doing subcontract work will keep the lights on but I think the chances of this working are very small.

Serotta has in the past built plenty of bikes for other companies on a sub-c basis and it was NEVER a money maker for the company. The work helped keep the boys busy during an otherwise slow time in a few cases (or overwhelmed them during a busy time) but the profit was never there. The simple fact of the matter is that there are VERY few companies that want/need any real number of bikes made for them. A few bikes here and there, a prototype/show bike or two, a limited run of 50 units to use as a flagship model.........all this adds up to not many units and an unreliable and inconsistent product and cash flow. I know of what I speak as I've been there and done that more than once.

As if the above wasn't enough of a deterrent.........the price that the bike company customer can afford to pay to have the bikes made can only be very low. It needs to get the bikes from the maker (Serotta?) very cheaply so that it can sell them to their dealers at wholesale so they they can then mark them up one more time to sell at retail. This puts an extra link in the chain and another step of mark-up. This is a real issue as the retail price is capped by what the consumer will pay so that means that the extra step needs to be crammed in at the bottom and that in turn means that the folks hooking the pipes together won't get much money for the work.

Last but not least - all this Serotta drama is very well known in the biz and one thing that a potential customer doesn't want is drama. So if I am the guy at Brand X that needs 100 Ti bikes made for my brand I doubt Serotta will be at the top of the list of places to go as it just doesn't feel certain that they will be able to get the order out the door and/or be there later should there need to be service after the sale. This only cuts down on the potential number of folks that want to go there.

Unfortunately it feels like a grasping at straws move to bring in any cash that they can. It's a well worn path but from what I've seen with my own two eyes it's a path to no where. making bikes is one thing - making them at a profit is another matter altogether.

dave

[BumbleBeeDave]

. . . that they are making a show of making an effort so they will have a plausible pretext to shut the whole thing down after a legally prescribed period of time and declare a tax loss.

The guys with the money make more money and the guys without the money end up out on the street.

Unless somebody needs a hell of a lot of perfectly welded titanium plumbing pipe . . .

BBD

[jpw]

So is this company gone, or is it remaining in operation and be there to service warranty claims?

I ask because my frame is at the factory under warranty and is to be replaced.

[Elefantino]

I just want to say, without sounding like too much of an ass-kisser, that we are fortunate to have people like Dave Kirk and Kelly Bedford contributing to this forum. I learn more and more from them with each post I read, and my respect for their knowledge grows apace.

I would be honored to ride a bike with either of their names on it, as I am honored to say that, at least through the interwebs, I have made their acquaintance.

[SPOKE]

Originally Posted by Elefantino

I just want to say, without sounding like too much of an ass-kisser, that we are fortunate to have people like Dave Kirk and Kelly Bedford contributing to this forum. I learn more and more from them with each post I read, and my respect for their knowledge grows apace.

I would be honored to ride a bike with either of their names on it, as I am honored to say that, at least through the interwebs, I have made their acquaintance.

+++1!!

Glad I have a couple bikes from these guys!

[1centaur]

Originally Posted by BumbleBeeDave

. . . that they are making a show of making an effort so they will have a plausible pretext to shut the whole thing down after a legally prescribed period of time and declare a tax loss.

The guys with the money make more money and the guys without the money end up out on the street.BBD

The guys with the money make more money by making money, not taking tax losses. If Bradway paid $1.5MM to play (saw that a few pages back but won't go find it) and now has a minor % of DCG and a facility in Saratoga, they've lost most of their investment and are hoping it's not a complete write-off. I've never heard of a prescribed time to wait; I think they could have shut it down pre-DCG and taken the hit, but seemingly they hope there are some scraps to soften the blow (to the wallet and to the ego). Not holding out a ton of optimism there; Dave Kirk more completely fleshed out my point about giving away margin (to a third party manufacturer) while not having the backstory to pay for that margin. But hey, maybe there's some insider tack that is well off this speculative track - Russian oligarch has Ti tubes and wants to start up his Perestroika brand of made in the US bikes to get past customs charges, thinks he can sell 800 bikes a year easily with his marketing savvy (or at least through Colorado Cyclist's close-outs)...

[David Kirk]

Originally Posted by Elefantino

I just want to say, without sounding like too much of an ass-kisser, that we are fortunate to have people like Dave Kirk and Kelly Bedford contributing to this forum. I learn more and more from them with each post I read, and my respect for their knowledge grows apace.

I would be honored to ride a bike with either of their names on it, as I am honored to say that, at least through the interwebs, I have made their acquaintance.

Thank you - that means a lot to me and at the risk of putting words in Kelly's mouth I bet he feels much the same way.

You should consider coming to Bozeman next month for the gig Carl Strong and I are hosting and we can have a non-virtual beer together.....I'm buying the beers.

Thanks again,

Dave

[Elefantino]

Originally Posted by David Kirk

Thank you - that means a lot to me and at the risk of putting words in Kelly's mouth I bet he feels much the same way.

You should consider coming to Bozeman next month for the gig Carl Strong and I are hosting and we can have a non-virtual beer together.....I'm buying the beers.

Thanks again,

Dave

We were planning on it but then I got a gig to cover the Tour of Alberta for VN, and that exhausts my days off in Sept. ...

Rain check, most definitely.

[slidey]

Well, the "Made in USA" is a very milkable selling point and that I imagine, would very easily lend itself to a premium in pricing. Moreover, I'm guessing that a part of what makes manufacturing bikes in USA uneconomical for a prospective company, is the logistics of setting up a facility. So if a certain company was being held back by just the initial costs of renting buildings, buying machines, setting up the supply chain layout, testing out the entire layout for an end-end reliable product, etc then the Serotta plant, priced right, could be the ideal solution for them. Who knows, maybe under a more pragmatic leadership the pricing of mass producing USA made bikes can be made economical enough to persuade more companies to cash in on the "Made in USA" story. Just possible, maybe!

EDIT: I should mention, that my above pondering is only out of concern for the laid-off workers of the erstwhile Serotta to have a steady job.

Originally Posted by BumbleBeeDave

For the sake of the people who still work there I hope they are going to be able to find some work for them to do. The question remaining for me is who they will find who would want their bikes made in the USA when the production cost realities are so skewed toward oveseas from what I know of them.

[slidey]

Ok, so I read your post after I replied to BBD. However, I think you can offer to help clear up a few more hypotheticals here, at least for my benefit. I agree with you that the Serotta for the most part notwithstanding Ben's continued misadventures, is finished (at least, I think that's what you say, si?). However, I'm only concerned about the workers who were laid off (due to the steadfast stupidity of the management).

If building bikes for other co's is all that the Serotta plant is used for does going forward, then don't you think that could be a money maker for DCG or whoever owns the plant now, as opposed to liquidating it all away?

Originally Posted by David Kirk

Serotta has in the past built plenty of bikes for other companies on a sub-c basis and it was NEVER a money maker for the company. The work helped keep the boys busy during an otherwise slow time in a few cases (or overwhelmed them during a busy time) but the profit was never there.

This, I disagree with. I'd argue that with Ben Serotta out of the pricing decisions there is room for smarter pricing choices to be made which would allow existing bike companies to want to capitalise on the "Made in USA" bike market.

Originally Posted by David Kirk

The simple fact of the matter is that there are VERY few companies that want/need any real number of bikes made for them.

My layman understanding is that the problem was the decisions made by the disillusioned management, and if anything this present fallout, in my reading lays the blame squarely on Ben's shoulders. Now having fired the management, it'd seem that its the most convincing way to say that the problem is solved. I'm reasonably sure you can't comment on this due to your position, so don't bother

Originally Posted by David Kirk

Last but not least - all this Serotta drama is very well known in the biz and one thing that a potential customer doesn't want is drama.

[alembical]

Originally Posted by jmoore

I predict 5+ pages on this thread.


......

[David Kirk]

Originally Posted by slidey

Ok, so I read your post after I replied to BBD. However, I think you can offer to help clear up a few more hypotheticals here, at least for my benefit. I agree with you that the Serotta for the most part notwithstanding Ben's continued misadventures, is finished (at least, I think that's what you say, si?). However, I'm only concerned about the workers who were laid off (due to the steadfast stupidity of the management).

I agree - I have friends still in the building and I want the best for them. That said I've been on both sides of this for too long to think that it can work out well for them unless DCG is willing to float the biz out of pocket for a very long time while all the damage is repaired.

If building bikes for other co's is all that the Serotta plant is used for does going forward, then don't you think that could be a money maker for DCG or whoever owns the plant now, as opposed to liquidating it all away?

No - I don't think they will find enough units at enough margin to have it generate any substantial cash flow let alone profit. The only way to get keep the lights on is with a lot of units that are made at a profit. The tooling and the building are not set up for mass production but instead are geared toward small numbers (a few thousand units a year) so they can't substantially lower cost through volume. This means, with the current tooling and set up, that they can't make bikes there at a much lower cost than they did in the past and the labor cost (by FAR the largest cost of a handbuilt bike) will mean to build for others at a profit that they will need to charge a similar cost to what they had been charging for years.


This, I disagree with. I'd argue that with Ben Serotta out of the pricing decisions there is room for smarter pricing choices to be made which would allow existing bike companies to want to capitalise on the "Made in USA" bike market.

I disagree. The 'made in the USA' sticker is important but it will mean they the seller needs to charge a large premium for this........and..........as much as I wish it were different most people vote with their dollars and they vote to part with fewer of them. So while I think the 'made in the USA' deal is a good calling card it won't be enough to make it. Look at all the other bikes that used to be made here and no longer are. They would have liked to keep production here if they could have afforded to but the consumer let them know with sales (or lack thereof) that they would buy the cheaper bike made overseas instead of the more expensive one made here.


My layman understanding is that the problem was the decisions made by the disillusioned management, and if anything this present fallout, in my reading lays the blame squarely on Ben's shoulders. Now having fired the management, it'd seem that its the most convincing way to say that the problem is solved. I'm reasonably sure you can't comment on this due to your position, so don't bother

I understand what you are saying but the reality is that the guys have worked for Ben for a long time and they are loyal to him and the long time 'Serotta way' for lack of a better term. Now there is some guy who has no history with them telling them what to do. This goes over like a lead balloon - I know because i lived through this there more than once. The potential customer will visit see for themselves what the place is like and how much is happening, or not, and base their decision on that. There are plenty of places to go that are happy and healthy, that have cash flow and stability and no stories and in most cases the purchasing manager will choose security over drama. The one exception is the guy who thinks he can leverage Serotta's position into a lower price for him and that only helps the one side.

Anyway - back to the bench for me.

Dave