Death of A Dirtbike
DEATH OF A DIRTBIKE
ROUNDUP
IN A MOVE THAT ROCKED the bicycle industry-and to a lesser degree, motorcycling-Cannondale filed for Chapter 11 bankruptcy protection this past January.
Reportedly, the situation was brought on by financial problems within the publicly held company’s motorsports division, which began producing dirtbikes and ATVs two and a half years ago. At presstime, all activity at the factory in Bedford, Pennsylvania, had been suspended. To date, Cannondaie has sold approximately 5000 machines.
In a press release, management announced it had come to terms with lenders CIT/Business Credit, Inc. and Pegasus Partners II for interim financing to fund post-bankruptcy-petition expenses and meet employee and supplier commitments. Pegasus has taken control of all assets and will continue to operate the bicycle side of the business, possibly with involvement from current personnel. Cannondale’s foreign subsidiaries are not included in the filing.
“The bicycle company has stayed strong and successful almost since we went public in 1994,” explained Scott Montgomery, VP of marketing. “The part of our business that has really put us in a tough position is the motorsports division. Sales had actually been increasing, but we were not able to get the margins we needed on a perunit basis to get the division to profitability.”
“They just bit off more than they could chew,” said one bicycle-industry insider.
“It was mostly in the engine and fuel-injection where the costs were the biggest issue-development and per-unit costs,” explained Montgomery. “The more expensive machines had higher margins. The entry-level models-the E440, X440 and Cannibal ATV-those were the machines that were the most challenged. We knew the costs were going to be high. The margins were improving steadily, but it just didn’t come together as quickly as we had hoped.”
Montgomery’s father, Joe, started Cannondale in 1971 in Wilton, Connecticut. The Bedford factory, a refurbished truck terminal, opened in 1977, and the company’s first bicycle, the aluminum-framed ST500, debuted in 1983. Last year, the bicycle division generated more than $134 million in sales, compared to $22 million from motorcycles and ATVs. Nevertheless, Cannondale ended its fiscal year last June posting a $15.4 million loss.
What might the future hold for the 12-model line of aluminum-framed twoand fourwheelers, and their fuel-injected, liquid-cooled, 432cc singlecylinder engines?
“We’ve been talking to a lot of interested parties,” admitted Montgomery.
Harley-Davidson, for one, refused to comment. A Polaris spokesman said, “We’re aware of the situation, and we’re always looking at acquisitions, but there’s not much we can say about it right now.”
Looking back, should Cannondale have avoided competing with the deep-pocket Japanese bike-makers?
“Hindsight is always 20/20,” said Montgomery. “We recognized that as a public company we needed to increase sales and keep the company growing. We felt the off-road motorcycle and ATV markets were poised for a lot of growth. We knew it was a difficult task, but we thought we were going to be able to do it.”
-Matthew Miles
