The other shoe: Mad Fiber layoffs

[djg21]

BOULDER, CO (BRAIN) — Carbon wheel maker Mad Fiber is planning to set up wheel production in Taiwan to serve the OEM market. The company has laid off seven employees at its Seattle, Washington, facility, but is continuing to manufacture wheels there for aftermarket sales, spokesman Jasen Thorpe said.

The layoffs affected about a third of the workforce in Seattle, he said.

http://www.bicycleretailer.com/international/2013/08/20/mad-fiber-plans-taiwan-oe-production-continuing-seattle#.UhQ7Jiy9KSN

[Louis]

So how long until Serottas are also made there?

[MattTuck]

Well, in the words of borat, "this comes as a complete shock NOT!"

sigh.

[jlwdm]

Mad Fiber does not seem like an OEM wheel manufacturer.

Jeff

[BumbleBeeDave]

. . . and looks pretty much what you might expect. Do what's needed to maximize the bottom line. People don't matter. If I was Mad Fiber spokesman Jasen Thorpe I would be spewing resumes like a fire hose. Same for everybody else at any of these companies.

BBD

[R2D2]

I'll NEVER buy one.

[MattTuck]

. . . and looks pretty much what you might expect. Do what's needed to maximize the bottom line. People don't matter. If I was Mad Fiber spokesman Jasen Thorpe I would be spewing resumes like a fire hose. Same for everybody else at any of these companies.

BBD


Dave, don't be so hard on them, these guys are 'job creators'.

[R2D2]

I suspect Blue will be next.

But this always happens when you have to resort to venture capital groups.

[soulspinner]

i suspect blue will be next.

But this always happens when you have to resort to venture capital groups.

+1

[BumbleBeeDave]

Dave, don't be so hard on them, these guys are 'job creators'.

Only if you speak Mandarin.

BBD

[oldpotatoe]

I suspect Blue will be next.

But this always happens when you have to resort to venture capital groups.

'Resort', well often it means the company is in trouble, and it needs a solution.

So business people that have money come in and try to see if the company is viable, and can be profitable.

People get fired, people get hired, the company changes but I disagree that in business, if a company is 'restructured', as it happens everyday, the ones doing the restructuring are evil, nasty, uncaring butt-heads. They are business people trying to make money.

Ask RedRider if he is going to continue with serotta? I'm not saying one way or another since I don't know but a bike shop, who sells 2 brands, one being serotta, and the frames are being made and sold today...I wouldn't automatically can them because of the slice of info seen on this forum.

Same builder's of serotta today as before ben's and bill's departure.

[yngpunk]

'Resort', well often it means the company is in trouble, and it needs a solution.

So business people that have money come in and try to see if the company is viable, and can be profitable.

People get fired, people get hired, the company changes but I disagree that in business, if a company is 'restructured', as it happens everyday, the ones doing the restructuring are evil, nasty, uncaring butt-heads. They are business people trying to make money.

Ask RedRider if he is going to continue with serotta? I'm not saying one way or another since I don't know but a bike shop, who sells 2 brands, one being serotta, and the frames are being made and sold today...I wouldn't automatically can them because of the slice of info seen on this forum.

Same builder's of serotta today as before ben's and bill's departure.

And let's look at the alternative...Mad Fiber goes bankrupt, which leads to all (vs. 1/2 the employees) being laid off, creditors not being paid, and potentially any retirement benefits being loss.

So, maybe if we all bought more Serotta bicycles with Mad Fiber wheelsets, everything would be dandy.

[oldpotatoe]

And let's look at the alternative...Mad Fiber goes bankrupt, which leads to all (vs. 1/2 the employees) being laid off, creditors not being paid, and potentially any retirement benefits being loss.

So, maybe if we all bought more Serotta bicycles with Mad Fiber wheelsets, everything would be dandy.

It may be closed but it isn't going to go 'bankrupt'. It may very well have gone 'bankrupt' before the other company bought them..same for serotta.

You make it sound like a business' in trouble should be propped up, lots of $ infused because it's some sort of community benefit.

It's business, making $, profits..more black ink in the check book than red ink.

Successful business' hire people, grow, pay their creditors, their employees, offer benefits. Sick companies do not.

[FlashUNC]

It may be closed but it isn't going to go 'bankrupt'. It may very well have gone 'bankrupt' before the other company bought them..same for serotta.

You make it sound like a business' in trouble should be propped up, lots of $ infused because it's some sort of community benefit.

It's business, making $, profits..more black ink in the check book than red ink.

Successful business' hire people, grow, pay their creditors, their employees, offer benefits. Sick companies do not.

+1. The path they were on wasn't working. Doing the same thing and expecting different results -- definition of insanity -- yadda yadda.

[yngpunk]

It may be closed but it isn't going to go 'bankrupt'. It may very well have gone 'bankrupt' before the other company bought them..same for serotta.

You make it sound like a business' in trouble should be propped up, lots of $ infused because it's some sort of community benefit.

It's business, making $, profits..more black ink in the check book than red ink.

Successful business' hire people, grow, pay their creditors, their employees, offer benefits. Sick companies do not.

P,

We actually agree...too early for sarcasm. Just trying to point out the alternative to the VC investment that so many seem to think is some kind of evil.

Cheers.

[djg21]

I suspect Blue will be next.

But this always happens when you have to resort to venture capital groups.

I suspect we will see what now are being sold as Blue bicycles bearing Serotta down tube decals.

[54ny77]

Sheer poetry:

"This [the layoffs] should be viewed not as a downsizing of Mad Fiber but as a transferring of resources to another continent."

[FlashUNC]

Sheer poetry:

"This [the layoffs] should be viewed not as a downsizing of Mad Fiber but as a transferring of resources to another continent."

That's what rubs me the wrong way more than anything. You're already laying people off here in the U.S. for what may be legitimate expense concerns. Don't kick 'em on their way out the door with corporate garbage statements like that.

[bigreen505]

I suspect we will see what now are being sold as Blue bicycles bearing Serotta down tube decals.

I think that was the plan all along. At least that was how I read that first news release.

[R2D2]

'Resort', well often it means the company is in trouble, and it needs a solution.

So business people that have money come in and try to see if the company is viable, and can be profitable.

People get fired, people get hired, the company changes but I disagree that in business, if a company is 'restructured', as it happens everyday, the ones doing the restructuring are evil, nasty, uncaring butt-heads. They are business people trying to make money.

Ask RedRider if he is going to continue with serotta? I'm not saying one way or another since I don't know but a bike shop, who sells 2 brands, one being serotta, and the frames are being made and sold today...I wouldn't automatically can them because of the slice of info seen on this forum.

Same builder's of serotta today as before ben's and bill's departure.
I wasn't trying to imply anything/anybody was evil.
But if a company is that desperate for cash they are headed for the rocks.
Then there is usually a dramatic change in course and the previous captain is relieved and sometimes thrown overboard.
Anyway there should be some cheap Mad Fiber knock offs shortly.

[avalonracing]

The current corporate structure that every CEO seems to be shooting for is ONE MAN at the top, making all the money, and zero full-time, American employees taking any of the hard earned CEO dollars that he and he alone has earned through his hard work, innovation, creativity and overall brilliance.

[spacemen3]

The current corporate structure that every CEO seems to be shooting for is ONE MAN at the top, making all the money, and zero full-time, American employees taking any of the hard earned CEO dollars that he and he alone has earned through his hard work, innovation, creativity and overall brilliance.
Well put.

[jpw]

I'll NEVER buy one.

this is about wheels.

[norcalbiker]

I suspect Blue will be next.

But this always happens when you have to resort to venture capital groups.

Oh gee isn't that the truth.

[Vientomas]

The current corporate structure that every CEO seems to be shooting for is ONE MAN at the top, making all the money, and zero full-time, American employees taking any of the hard earned CEO dollars that he and he alone has earned through his hard work, innovation, creativity and overall brilliance.

A friend recently told me about this book: "Les Schwab Pride in Performance: Keep It Going".

I have not read it yet, but from what I understand, it offers a different, and successful, business philosophy than what appears to be the corporate norm as described by avalon.

[rice rocket]

this is about wheels.

Maybe that's what he's saying...that he'll buy two. ;)

[R2D2]

Maybe that's what he's saying...that he'll buy two. ;)

Then again maybe I meant wheelset.

[54ny77]

Every time I see the name Mad Fiber I think of this:

http://video.nbcuni.com/mezzthumb/NBCdotCOM/f075eb12039c2087301abf8770e778fd_8d454d72ca1808e60 ea2ee0352e341c3.jpg

http://www.hulu.com/watch/10304

[Pete Mckeon]

Are they business/company builders in mind or are they hedge fund (capital) managers that are looking for the quarterly return on their capital and then paying themselves a NICE dividend. The hedge fund folks are not known for building longterm growth businesses

BUT for growing the return on their investments short term.:confused: (AND IT WORKS for them) Solution is do not let your business get in that shape (and that is sometime better said than done):help:

Buy cheap/distressed businesses and sell company name, patents, assets, (machines, land, structures), good will etc.... THat is my understanding of that type of business buyer

[Ahneida Ride]

I suspect Blue will be next.

But this always happens when you have to resort to venture capital groups.

Vulture Capitalists, can't unfortunately :eek::, create $ outa thin air using
fractional (non) reserve.

[jlwdm]

The current corporate structure that every CEO seems to be shooting for is ONE MAN at the top, making all the money, and zero full-time, American employees taking any of the hard earned CEO dollars that he and he alone has earned through his hard work, innovation, creativity and overall brilliance.

Really???

Jeff

[1centaur]

Are they business/company builders in mind or are they hedge fund (capital) managers that are looking for the quarterly return on their capital and then paying themselves a NICE dividend. The hedge fund folks are not known for building longterm growth businesses

BUT for growing the return on their investments short term.:confused: (AND IT WORKS for them) Solution is do not let your business get in that shape (and that is sometime better said than done):help:

Buy cheap/distressed businesses and sell company name, patents, assets, (machines, land, structures), good will etc.... THat is my understanding of that type of business buyer

Before I answer that, I would like a list of 3 companies of any size with a US CEO and every employee outside the US.

Otherwise, I'd like to use this answer to define some terms with facts rather than bile.

Venture Capital is money invested in start-ups - huge risk that demands huge return because losing 100% of the investment is going to happen quite often, so they need some 1,000% returns to average something good. Nothing to do with the DCG situation.

Vulture Capital is money aimed at profiting from companies in financial distress that would likely file for bankruptcy without such investment (or did file and is figuring out if they need to liquidate). Often the money comes from buying the existing debt at low prices and converting it to ownership. With ownership comes control so that costs can be cut and/or management changed, etc. (Note that buying cheap and liquidating is not the point of most vulture capital - it's always more profitable to build then liquidate, assuming it's possible.) Nobody wants to keep doing the things that brought the company into distress in the first place. This is a sharp-elbowed business, but without it we'd see more liquidations of companies with all employment lost. DCG's role here may feel like that, but I think that's only partially true.

Private Equity is money that usually goes to buy companies in decent shape and then make them some combination of more cost efficient and with higher sales. More cost efficient often involves firing people and moving production offshore. PE firms make money mostly by not being sentimental about the potential levers of profitability. Debate about whether making these companies more profitable is better for part or all of society than letting them be inefficient is beyond this thread. I think Bradway may have fit this description when it first bought into Serotta. It is unclear if DCG thought they were in this role when they started rolling up cycling companies. For example, getting a contract to provide Mad Fiber wheels at OEM volumes requiring Asian production rather than US artisan volumes feels more PE than vulture capital.

Hedge Funds are generally buyers and sellers of securities rather than companies. The big and successful ones having a lot of money means they can dabble in venture and vulture capital and maybe co-invest with PE firms, but their mission, the "hedge" in their title, is meant to imply positive returns in good times and bad, and tying money up in multi-year bets like venture, vulture and PE firms does not really fit that mandate.

There are muddy edges in the investment world, but those are close enough descriptions. Having read DCG's website, DCG seems like a very minor private equity player with some history in fairly small companies. They don't have the heft to be vulture players in any meaningful way. I believe they think they are in the adding value business through cost cuts and revenue initiatives. It may be that things they bought are in worse shape than they expected. Or they had a multi-month plan from day one. That's the missing piece in this whole soap opera.

[jds108]

The current corporate structure that every CEO seems to be shooting for is ONE MAN at the top, making all the money, and zero full-time, American employees taking any of the hard earned CEO dollars that he and he alone has earned through his hard work, innovation, creativity and overall brilliance.

Really???

Jeff

In my opinion, yes. Perhaps not to the extreme of one solitary U.S. CEO, but things are headed in that general direction. I work for a small company that only employs people in the U.S. We compete against companies that employ some people in the U.S, and other employees are overseas in places like India and China. We can't compete on price, so we offer better service. But... the difference in pricing isn't nearly as great as the difference in compensation between domestic and international employees. Experienced folks doing my job in India are paid about 25% of what I get paid.

I have some idea where the rest of that revenue is going...

This 'outsourcing' didn't exist in my industry 15 years ago. It's all happened in about the last 10 years. These competitors used to have a workforce that was U.S. based, that's no longer the case.

I figure this stuff is all fairly obvious, but it stinks to find that your work specialty is going overseas and that when the current job has run its course that it gets progressively more difficult to find the next one...

[pbarry]

I believe they think they are in the adding value business through cost cuts and revenue initiatives. It may be that things they bought are in worse shape than they expected. Or they had a multi-month plan from day one. That's the missing piece in this whole soap opera.

1Centaur, your primer is much appreciated. I understand a little bit more of a world that exists way above my head. :)

DCG's press releases reek of amateurism. Serotta: Contract work will only pay the bills and keep the lights on, maybe. No profit there, and no security unless they find someone like Trek who wants to put Ti back in the lineup; doubtful. MadFiber: Selling OEM wheels will generate more $$ than contract frame building, but units shipped will have to be in the 10's of thousands for that plan to work.

From afar, it appears the DCG folks made these decisions based on projected figures from a non-cycling industry adviser. Why would you give up a high end market percentage and reputation/brand by announcing that you are seeking to build in volume for others? The S brand was instantly devalued with that statement. Cancelling custom orders for the high end models is further damage. There went another significant percentage, and many retail dealers catering to aficionados.

At this juncture, it all looks like badly written copy for a straight-to-DVD movie.

[Pete Mckeon]

Many companies have been bought and dissolved thru sell offs, loading with debt to pay initial investors, and then the company can not grow and might even flop. This does not happen 100% of the time but there cases of this activity. There are cases with fresh capital and focus on business results in a healthier company also. On the Serotta topic it is very similar to what I mentioned and not much bile. I hope I have misread but will bet a good bottle of red.


Before I answer that, I would like a list of 3 companies of any size with a US CEO and every employee outside the US.

Otherwise, I'd like to use this answer to define some terms with facts rather than bile.

Venture Capital is money invested in start-ups - huge risk that demands huge return because losing 100% of the investment is going to happen quite often, so they need some 1,000% returns to average something good. Nothing to do with the DCG situation.

Vulture Capital is money aimed at profiting from companies in financial distress that would likely file for bankruptcy without such investment (or did file and is figuring out if they need to liquidate). Often the money comes from buying the existing debt at low prices and converting it to ownership. With ownership comes control so that costs can be cut and/or management changed, etc. (Note that buying cheap and liquidating is not the point of most vulture capital - it's always more profitable to build then liquidate, assuming it's possible.) Nobody wants to keep doing the things that brought the company into distress in the first place. This is a sharp-elbowed business, but without it we'd see more liquidations of companies with all employment lost. DCG's role here may feel like that, but I think that's only partially true.

Private Equity is money that usually goes to buy companies in decent shape and then make them some combination of more cost efficient and with higher sales. More cost efficient often involves firing people and moving production offshore. PE firms make money mostly by not being sentimental about the potential levers of profitability. Debate about whether making these companies more profitable is better for part or all of society than letting them be inefficient is beyond this thread. I think Bradway may have fit this description when it first bought into Serotta. It is unclear if DCG thought they were in this role when they started rolling up cycling companies. For example, getting a contract to provide Mad Fiber wheels at OEM volumes requiring Asian production rather than US artisan volumes feels more PE than vulture capital.

Hedge Funds are generally buyers and sellers of securities rather than companies. The big and successful ones having a lot of money means they can dabble in venture and vulture capital and maybe co-invest with PE firms, but their mission, the "hedge" in their title, is meant to imply positive returns in good times and bad, and tying money up in multi-year bets like venture, vulture and PE firms does not really fit that mandate.

There are muddy edges in the investment world, but those are close enough descriptions. Having read DCG's website, DCG seems like a very minor private equity player with some history in fairly small companies. They don't have the heft to be vulture players in any meaningful way. I believe they think they are in the adding value business through cost cuts and revenue initiatives. It may be that things they bought are in worse shape than they expected. Or they had a multi-month plan from day one. That's the missing piece in this whole soap opera.

[MattTuck]

Otherwise, I'd like to use this answer to define some terms with facts rather than bile.


I'll add two comments. Generally, PE firms use leverage to magnify their returns. By borrowing substantial amounts to fund the original purchase, they get a bigger return on their equity. I do not think PE as an asset class could survive without this characteristic.

Second, a key criteria that most PE firms look for in potential deals is the existence of or potential for strong free cash flow. This helps to service the high levels of debt they typically take on.

I have no insight to Serotta's finances, but I did not get the idea they were throwing off lots of free cash flow...

[R2D2]

Vulture Capitalists, can't unfortunately :eek::, create $ outa thin air using
fractional (non) reserve.

I guess I'm an enabler as the Fed runs software I've authored.

[buddybikes]

http://www.bryangira.com/wp-content/uploads/2012/09/money-down-the-drain.jpg

[BumbleBeeDave]

From afar, it appears the DCG folks made these decisions based on projected figures from a non-cycling industry adviser. Why would you give up a high end market percentage and reputation/brand by announcing that you are seeking to build in volume for others? The S brand was instantly devalued with that statement. Cancelling custom orders for the high end models is further damage. There went another significant percentage, and many retail dealers catering to aficionados.

First I've heard of it. If you mean anything carbon I wouldn't be surprised. with no more Poway their supply of carbon bits and tubing is probably gone.

BBD

[pbarry]

First I've heard of it. If you mean anything carbon I wouldn't be surprised. with no more Poway their supply of carbon bits and tubing is probably gone.BBD

Poor choice of words on my part above.They are no long offering the custom option on the Meivici.

From the sale page, "The fully custom MeiVici SE is not available at any price."

[rice rocket]

1Centaur, your primer is much appreciated. I understand a little bit more of a world that exists way above my head. :)

DCG's press releases reek of amateurism. Serotta: Contract work will only pay the bills and keep the lights on, maybe. No profit there, and no security unless they find someone like Trek who wants to put Ti back in the lineup; doubtful. MadFiber: Selling OEM wheels will generate more $$ than contract frame building, but units shipped will have to be in the 10's of thousands for that plan to work.

From afar, it appears the DCG folks made these decisions based on projected figures from a non-cycling industry adviser. Why would you give up a high end market percentage and reputation/brand by announcing that you are seeking to build in volume for others? The S brand was instantly devalued with that statement. Cancelling custom orders for the high end models is further damage. There went another significant percentage, and many retail dealers catering to aficionados.

At this juncture, it all looks like badly written copy for a straight-to-DVD movie.

There's a lot of nostalgia and history that goes into the brand, but it's pretty clear the model was broken. I'm sure everyone would've wanted things to continue the way they were, but their consumerbase dried up and were no longer profitable. You'd have to be the most foolish investor in the world to bail out a failing brand, and then let everything continue as it was. Damned if they do, damned if they don't.

IMHO.

[yngpunk]

Poor choice of words on my part above.They are no long offering the custom option on the Meivici.

From the sale page, "The fully custom MeiVici SE is not available at any price."

Probably a wise choice. I suspect the margin on a custom model is much less than a stock model, despiite the price difference.

[irideslow8401]

There's a lot of nostalgia and history that goes into the brand, but it's pretty clear the model was broken. I'm sure everyone would've wanted things to continue the way they were, but their consumerbase dried up and were no longer profitable. You'd have to be the most foolish investor in the world to bail out a failing brand, and then let everything continue as it was. Damned if they do, damned if they don't.

IMHO.

+1. We are the consumer here. Believe it or not we are the people who decide to keep one brand and not the other by continue to buying their products.
IMHO, despite the facts that i'm a die-hard fan of these brands, i can't justify the reason of the quality they offered and spend thousand of $$$ every year on these unless i'm having few hundreds $$$K sitting in my bank account. On the other hand, i wonder if there are any better suggestions/recommendation for these companies to survive the downfall.

[happycampyer]

Probably a wise choice. I suspect the margin on a custom model is much less than a stock model, despiite the price difference.
If anything, I think it's the other way around. Pretty sure BBD is right—the break with Poway means the factory is working with an existing inventory of carbon tubes and other bits. Not sure why they couldn't mix and match them for an SE, but maybe that would cut down on the number of bikes they can make until they find a replacement supplier (Enve, other?).

[SPOKE]

If anything, I think it's the other way around. Pretty sure BBD is right—the break with Poway means the factory is working with an existing inventory of carbon tubes and other bits. Not sure why they couldn't mix and match them for an SE, but maybe that would cut down on the number of bikes they can make until they find a replacement supplier (Enve, other?).

Most likely the custom angle lugs are no longer available. Could be tubes too but my bet is the lug geometries for the "abnormal" frame geometries is the reason the custom MeiVici is no longer offered.

[echelon_john]

At the time I last visited the factory, the lugs & bb shell for the Meivicis were machined in Saratoga from near-net blanks that came from Poway. In other words, the blanks had enough material in them to allow machining to accommodate a range of assembly angles. So it may be the case that they're just trying to minimize machining variances, and reduce any waste that might have occurred with 'edge of the bell curve' machining of the lugs/bbs.




Most likely the custom angle lugs are no longer available. Could be tubes too but my bet is the lug geometries for the "abnormal" frame geometries is the reason the custom MeiVici is no longer offered.

[1centaur]

Many companies have been bought and dissolved thru sell offs, loading with debt to pay initial investors, and then the company can not grow and might even flop. This does not happen 100% of the time but there cases of this activity. There are cases with fresh capital and focus on business results in a healthier company also. On the Serotta topic it is very similar to what I mentioned and not much bile. I hope I have misread but will bet a good bottle of red.

I used your question to comment on many before; no bile from you Pete.

There are plenty of cases of PE firms buying companies with debt then not being able to service the debt and the company is sold, restructured with less debt or folded (and the PE firm loses its equity investment). Debt is how to generate 18% returns rather than 5% returns; at 5% the company goes out of business because investors don't care (which is why some companies are available to be bought by PE at a given price); at 18% the company thrives and employs people. There are also cases of PE firms using debt to dividend themselves enough money to pay for their equity investment many times over and then it folds. Both sides of every transaction consist of people trying to make return commensurate with risk, and risk is not just a word.

In your original question you referenced buying to liquidate, and I was trying to distinguish liquidation as an original goal from liquidation as a consequence of a business that could not service its debt. In order to raise that debt, the lenders have to believe the company will succeed. Sometimes companies fail.

Matt is right that DCG presumably did not lever up to buy Serotta et. al. The smaller the company the less debt is available and PE at this micro level may raise its funds in different ways, all the way down to personal money. Without leverage to boost returns, investors need top line growth and cost cuts a lot more to compensate them for the risk, and I think we have a sense of the type of risk we're talking about with Serotta. Would anyone here with $20 million in the bank buy Serotta for $1 million and keep Ben and take all the risks of the business for what an Excel spreadsheet says could be a 5% return annually, before taxes? 10%? I'll tell you right now that 30-40% is the least I can imagine a buyer modeling out on a tiny turnaround with a fading brand, and they'd do that thinking they had a great plan to achieve it, not just crossed fingers.

BTW, the smaller the PE firm, the more likely a failure in judgment in buying a business.

[SPOKE]

At the time I last visited the factory, the lugs & bb shell for the Meivicis were machined in Saratoga from near-net blanks that came from Poway. In other words, the blanks had enough material in them to allow machining to accommodate a range of assembly angles. So it may be the case that they're just trying to minimize machining variances, and reduce any waste that might have occurred with 'edge of the bell curve' machining of the lugs/bbs.

That is correct...but each "base angle" lug can be machined within a pretty narrow deviation from the "base angle" in order to maintain proper wall thickness. Because of this there is/was a few different lugs for each individual position on the frame.

[KidWok]

Speaking as someone who lives in Seattle and spent a couple years working peripherally around the bike industry, I was scratching my head about Mad Fiber as to how they planned on staying in business. They bought a nice piece of property in the heart Seattle (very expensive place to live) and were trying to break into the market with a uber high end product. Moving production to Taiwan makes a bit more sense...they should be able to maintain the same quality of product and bump up production volume to service OEM partners. I'd like to think that they could lower the price of the wheels a bit, but that probably wouldn't be the case. Hopefully Taiwan is less of an IP problem than China. I can't imagine that staying a small boutique wheel builder making products in one of the more expensive cities to live in was the long-term plan.

Tai

[pbarry]

There's a lot of nostalgia and history that goes into the brand, but it's pretty clear the model was broken. I'm sure everyone would've wanted things to continue the way they were, but their consumerbase dried up and were no longer profitable. You'd have to be the most foolish investor in the world to bail out a failing brand, and then let everything continue as it was. Damned if they do, damned if they don't.

IMHO.

I agree that the business model was broken. However, going from a high price point manufacturer to a "job shop" is not necessarily a winning model either. That's why I wonder where the new business plan came from: a bean counter, or someone within the bike industry?

You or I can do a CAAD drawing of a widget, send the file to Taiwan, and get a product in 3-4 weeks. Why would any established manufacturer with contracts with Far Eastern factories go to Saratoga? Poway is shuttered, so they cannot even make custom carbon lugs..

Creating a leaner running ship is one thing. Ditching the biggest pluses the manufacturer had going for them is another.

[pbarry]

Probably a wise choice. I suspect the margin on a custom model is much less than a stock model, despiite the price difference.

The Saratoga factory was built to produce a number of one-offs per day; 10-15, (iirc from DK's post in another thread). Doing production runs of 100+ units per size takes a whole other shop/production stream set-up. And then there's the demand issue.

[rice rocket]

I agree that the business model was broken. However, going from a high price point manufacturer to a "job shop" is not necessarily a winning model either. That's why I wonder where the new business plan came from: a bean counter, or someone within the bike industry?

You or I can do a CAAD drawing of a widget, send the file to Taiwan, and get a product in 3-4 weeks. Why would any established manufacturer with contracts with Far Eastern factories go to Saratoga? Poway is shuttered, so they cannot even make custom carbon lugs..

Creating a leaner running ship is one thing. Ditching the biggest pluses the manufacturer had going for them is another.

You're not seeing the big picture.

The offer to take on contract work is an attempt to fill the idle time of the resources (people and machines). The alternative is to fire more people and liquidate some of the fixed assets. Sitting on your ass to try and reformulate your marketing message while you pay workers to play poker and surf the net isn't keeping the lights on.

If and when more work comes in, the company is free to choose the workload balance that's profitable for them. Making nothing is not profitable.

[54ny77]

No wonder the government runs such a big deficit!

;)

Making nothing is not profitable.