U.S. Assemblers Remain Optimistic Despite Challenges

SANTA MARIA, CA—U.S. bicycle assemblers took a major financial hit when Pacific Cycles moved most of Schwinn and GT Bicycles' assembly to Asia.

Despite the loss of business, each of the country's top three assemblers is optimistic and has developed a strategy to contend with a future without one of the country's largest specialty retail suppliers.

Class Act Coatings is looking outside cycling, Advanced Transportation Products (ATP) is taking on smaller high-end bike makers and Omnium Cycle Works shrunk its operations.

"We were building a large quantity of units for Schwinn/GT. We couldn't make that total quantity up, but we were able to downsize, get more efficient and build a lower quantity this year," said Monie Gaba, Omnium's general manager.

"We are going to be building roughly 12,000 units this year, down from about 43,000 from Schwinn/GT's time," he added.

Omnium, based in Santa Maria, cut its work force from approximately 80 workers to 35 and increased its manufacturing efficiencies, Gaba said.

"We shifted over to a different manufacturing paradigm, into a one-piece flow versus a batch manufacturing mode. We are quicker to market now. We are able to get the first bike off the line in a little less than two hours," said Gaba.

While Omnium is sticking with bicycles, Class Act Coatings is taking on work from the automotive industry to make up for losses due to changes at Schwinn/GT and Specialized's decision a couple of years ago to assemble its high-end bikes in-house.

"Those were our two major accounts, so it affected us drastically. We had to diversify and get other work," said Lee Ann Gibbons, president of the Portland, Oregon, painting and powder coating company.

"Bicycles were 100 percent of our business, but now they are about 30 percent of the total," she said.

ATP in Mountlake Terrace, Washington, lost a major client last fall when K2 Bikes moved production to China and Taiwan.

"Schwinn/GT wasn't a client, so that didn't affect us. But we had been doing assembly for K2 and they moved everything offshore, so that did affect us," said Joel Smith, ATP's president and chief executive officer.

Sandy Liman, K2's bike division manager, said wheel-pricing differentials eroded the cost savings of building in the United States.

"Mavic USA wanted distributor prices for Ksyrium wheels here. Our Taiwan factory gets OE pricing directly from France—about $120 less—so I had to move my bikes to where I can make them profitably," said Sandy Liman, K2's bike division manager.

ATP, parent company of Vision Recumbents and Winkel Wheels, made up business with an assembly contract with road racing and triathlon frame builder Cervelo Cycles of Toronto, Canada.

"The unit number is probably going to be larger with Cervelo, only because we are doing a larger percentage of their total volume compared to K2," Smith said.

Despite their troubles, executives at the assembly and coating company said they still believe in bicycles.

"We feel strongly there is going to be assembly needed by half a dozen companies. The volumes may not be huge, but they are certainly there and assembly is still needed. We feel like that is going to be a nice piece of our business for the foreseeable future," Smith said.

Omnium's Gaba agreed. "Obviously a lot of it has moved offshore, but there always is a market for assembly here, because there are a lot of smaller brands that don't necessarily have the opportunity to go offshore.

"It's easier dealing with us because we are here in the States, so if there's a question, rather than fight the 15 or 16-hour time difference, we are able to answer it in real time," Gaba said.