Saturday, April 23, 2022

A Short History of Schwinn: In 2022 Pon Holdings Purchases Schwinn

Schwinn Mountain Bicycle from the Schwinn Website, 2021
(Photo: Schwinn Website Modified by Doug Barnes)

Schwinn Bicycles now has a new owner. In early 2022, the ownership of the Schwinn brand transitioned from Canada to the Netherlands.

In October 2021, Pon Holdings of the Netherlands approved the purchase of the brands Schwinn, Cannondale, GT, and Mongoose from Dorel Industries for $810 million. The sale was completed on January 4, 2022. The Schwinn brand joins other brands already owned by Pon Holdings that include Gazelle, Cervélo, FOCUS, Santa Cruz, Kalkhoff, and Faraday.

Pon currently is one of the top 5 players in the bicycle industry. About 75% of people in the Netherlands have a bicycle made by Pons. The combined worth of the new bicycle business is valued at $2.9 billion. The fit of Schwinn and the other purchased brands is that Pon’s high-end bicycles will be complemented by more affordable mass-market bikes.

In the Twentieth Century, Schwinn Bicycles had come full circle from its beginnings. Starting in the 1890s, Arnold, Schwinn and Company were a bicycle manufacturer with none of its own retail sales outlets. Their bicycles were sold in Sears and Roebucks and other department stores. This changed in the 1930s as Schwinn began to withdraw from selling bicycles through mass-market retailers. Schwinn developed high-cost, high-quality bicycles and started focusing on the sale of its bicycles through local bicycle retailers. In the 1950s, Schwinn was selling their bicycles almost exclusively through their own “Schwinn Approved” stores.During the bicycle boom in the early 1970s, Schwinn was selling over 1 million bicycles annually.

After a series of 1980s missteps in part caused by the globalization of the bicycle industry, the Schwinn Family Business filed for bankruptcy in 1992. The company was purchased by a venture capitalist firm named Zinn-Chilmark in 1992. The venture capitalists knew nothing about running a bicycle business and in 1997 sold Schwinn to Questor Partners Fund. This financial firm proved equally incompetent in running Schwinn and Schwinn again declared for bankruptcy in 2001.

The Schwinn brand finally found a good home. In 2001, Schwinn was purchased out of bankruptcy by a more bicycle-savvy company called Pacific Cycles. Dorel focused on reviving the Schwinn name in 2010. Under Durel Sports, the iconic Schwinn brand was transformed into a bicycle company that sells low-cost models in big-box stores such as Walmart, Target, and Kohl's. This strategy was quite successful despite Schwinn's history of antipathy towards such large retailers.

Schwinn Bellwood Comfort Hybrid Bicycle Advertisement, 2021
(Photo: Walmart website add, 2021)

The old Schwinn emphasis on high-quality bicycles sold at premium prices yielded to selling lower-end mass-market bicycles. Along with other bicycle producers and retailers, the Durel subdivision Pacific Cycles responded to the high demand during the Coronavirus pandemic by increasing its emphasis on online sales

CNBC recently summarized the current state of bicycle sales in the USA and has the following observation on Schwinn. CNBC quotes Ray Keener, an industry veteran and editor of Bicycle Retailer as saying the following.

Schwinn has been No. 1 in all the brand surveys I’ve seen going back 40 years. While their bikes are lower in quality and price than when they were selling through bike shops [in their heyday], Schwinn’s mass-retail models have slowly gotten better over the years. So if consumers want bikes for under $300 or so, the demand is there.

Now a new chapter begins with the sale of the Schwinn brand to Pon Holdings, a manufacturer of high-quality bicycles. The press release from Pon Holdings emphasizes that Schwinn is one of the major known brands of bicycles in the USA. The fate of the Schwinn brand is still unknown but being part of a larger company with deep pockets may lead to innovation and perhaps even to upgrading their offered bicycles.

The Netherlands is one of the leading bicycling countries in the world. The Schwinn name might have found a good home in the Netherlands. Only time will tell whether or not that the iconic Swhinn brand is now in good hands. The fate of Schwinn is now entrusted to a Dutch company.

Pon Bicycle Brands Before Purchase of Dorel Sports, 2021
(Image: Pon Website, 2021)

The combination of Pon Bike and Dorel Sports creates a bicycle company with the strongest portfolio of iconic and quality brands. Dorel Sports (1.2 billion US dollar revenue) owns the worldwide renowned brand Cannondale, with a complete range of premium bike models for all types of riders, including a strong e-portfolio.

The American Original brand Schwinn is the number 1 in awareness in the United States, with a heritage of 125 years… With the acquisition of Dorel Sports, Pon Bike not only reaches a worldwide leading position but also further improves its broad portfolio of bicycle brands. Moreover, it means a breakthrough in the United States, with millions of consumers and a rich offer of bikes in all categories (Urban, Trekking, MTB, Road). Already 20% of Dorel Sports revenues are generated online.

This rich knowledge and innovation contribute to all bike lovers in the world, especially in a time when cycling, dealers, and bicycle companies can provide tangible solutions for mobility, health and sustainability challenges that consumers, governments, and companies face.

Dorel Industries Inc. (TSX: DII.B, DII.A) today announced that it has entered into a definitive agreement to sell Dorel Sports, its bicycle segment, to Pon Holdings B.V., a Dutch mobility group, for US $810 million in cash, representing approximately CAD $1 billion, payable to Dorel at closing. The sale of Dorel Sports is expected to close before the end of the first quarter of 2022.

Dorel intends to announce specific details regarding the use of the net proceeds from the sale at the time of closing. Martin Schwartz, Dorel's President and CEO, made the following observations about the sale of its bicycle division.

Acting on feedback from our shareholders, Dorel embarked on a thorough review of strategic alternatives earlier this year. Our objective has consistently been to create value for our shareholders. The divestiture of Dorel Sports represents a unique opportunity to unlock value by capitalizing on strong demand for scaled assets in the bicycle segment,” “While making the decision to sell Dorel Sports has been difficult, we are confident that this transaction represents full value for Dorel shareholders.

The agreement to sell Dorel Sports marks an exciting new chapter for Dorel. Dorel believes that the sale of Dorel Sports will strengthen Dorel’s balance sheet, allow Dorel to focus on generating profits from its remaining businesses, substantially accelerate Dorel’s ability to deleverage the business, and position Dorel to grow its Home and Juvenile businesses both organically and through value-accretive tuck-in acquisitions. (Slightly revised and shortened from the original press release.)

A Short History of Schwinn: 1990s Bankruptcy though 2021

Schwinn Cross/Fitness Image from 1992 Catalog
(Photo: 1992 Schwinn Catalog Image Modified by Doug Barnes)
Note: The catalog in 1992 was the last one published by the Schwinn family business.

The Schwinn family business was teetering on a financial precipice at the beginning of the 1990s. The company still had many popular bicycle models, but its business was faltering. At the corporate headquarters in Chicago, the managers of Schwinn were still in disbelief that their company could no longer sustain itself as a viable business. Afterall, this was Schwinn, the biggest bicycle name in the USA. How could the company fail?

Decline of the Air-Dyne and Exercise Bikes Increases Financial Pressure

In the late 1980s, Schwinn’s profits from its traditional bicycles had evaporated. A sign of trouble was that the exercise bicycles were keeping the company financially afloat. Schwinn had a virtual monopoly on stationary exercises and the Air-Dyne in particular had very high profit margins.

Unfortunately for Schwinn, in the early 1990s Sears, Roebuck and Co. came out with a comparable model at a lower price. The result was that sales of Air-Dyne plummeted by 35%. Schwinn said goodbye to 8 million in profit. Without the Air-Dyne and exercise bicycle sales, Schwinn was in trouble.

Schwinn 1985 XR-8 Weighted Wheel Exercise Bicycle
(Photo: 1985 Schwinn Catalog)

The decline of the Air-Dyne and other exercise bicycles was a symptom of Schwinn’s larger financial problems. In the early 1990s, the company lost $2.9 million with outstanding debt $80 million. The caused Schwinn to violate one of its bank covenants. Schwinn’s bankers called a meeting to see if something could be worked out.

Despite being deeply in debt, Schwinn took a hardline position against its creditors. Edward Schwinn figured that the bankers wouldn’t want to lose their equity in Schwinn if the company declared bankruptcy. Unfortunately, for Schwinn this was a miscalculation. Frustrated with Schwinn’s excuses, the Banker’s increasingly began playing financial hardball.

Schwinn Family Pride Didn't Help

The confrontation with the bankers in the early 1990s had been set up by an earlier decision not to raise money in the private capital markets. The Schwinn family did not want to have outsiders controlling the fate of Schwinn. This decision to rely on bank loans had the opposite of the desired effect. Instead of being dependent on outside investors, Schwinn became overdependent on the banks.

In the early 1980s when Schwinn had struggled financially. The decision ws made to take out bank loans. The wary banks put in place strict covenants on the loans. The covenants were still in place during the early 1990s. The violation of the financial covenants meant that the banks were in the driver’s seat. They insisted that Schwinn prepare a financial recovery plan.

Some of the bankers began to send the loans to the workout department to see how much money they could recover from Schwinn. This was not only meant to put pressure on Schwinn to come up with a reasonable financial workout plan, but also was to hedge their bets on a company financial failure. The pride of the Schwinn family in its outright ownership of the company had come back to bite them.

The Family Trust

The Schwinn family Trust indirectly played a role in the demise of Schwinn. The Trust was originally set up to share a modest amount of Schwinn’s profits among a small group of heirs. Most heirs either were discouraged or had no interest in working for Schwinn.

Still, the fourteen beneficiaries of the trust gladly accepted dividends from Schwinn. They also played a role in not wanting Schwinn to take on public investors.

To be fair, the payments to the Trust stopped after Schwinn experienced financial difficulties in the 1980. When the good times started rolling again, the dividends were reinstated in 1987.

With growing financial pressures, the final payments to the family trust were made up until 1990. The family knew that a Schwinn bankruptcy could wipe out their payment for good. They were prepared to received nothing unless Schwinn survived the new crisis.

Predictably, the family members were hopping mad at the demise of the Schwinn business. They expressed themselves in no uncertain terms and the focus of their fury was Edward Schwinn.

The Schwinn family also was partly to blame. The company had passed up several offers for private investors to bail out Schwinn. On the insistence of Schwinn family--including Edward Schwinn--the company declined all offers. This was a mistake that would haunt the company until its very end.

Schwinn Competitors Smell Blood

Meanwhile, Schwinn’s competitors were not sitting by idly. The Schwinn problems came at a fortuitous time for Trek. They were in the process of trying to strengthen their balance sheet and began to take sales away from Schwinn.

Some of Schwinn’s dealers saw the writing on the wall and they began to carry Trek and other bicycle brands. For Trek, this strategy began to work and during 1990 and 1991. During that period, Trek moved from fourth to second rank in the bicycle industry.

With all the financial constraints, Schwinn finally pulled the plug on the money losing Greenville plant in 1991. The early 1980s decision to not modernize the Chicago factory came back to haunt Schwinn.

The closing of the Greenville factory combined with the globalization of the bicycle industry meant that Schwinn would never again be making bicycles in the USA.

The fabled Schwinn was beginning to teeter. Schwinn had taken a hit on its balance sheet in the early 1980s with the closing of the Chicago factory. The Greenville closing virtually wiped out its balance sheet.

Suppliers Turn into Competitors

The main producers of Schwinn bicycles in China and Taiwan were not being compensated for shipping their products. The banks were swooping in and taking any cash from the business to hedge their possible losses. In essence, the Bank loans were taking away any possible way for Schwinn to pay its suppliers.

Making matters worse, these were not just ordinary suppliers. They were producers of strong competitive bicycle brands such as Giant. The Asian suppliers even talked about taking over Schwinn and assuming its debt, but the deals did not pan out.

The suppliers saw the writing on the wall and quit sending bikes to Schwinn. This caused a death spiral for Schwinn. The banks were calling in their loans. The dealers were screaming for inventory. The family was carping about Schwinn leadership. The Schwinn Family Trust recipients were irate over a cessation of payments.

Ed Schwinn is often blamed for the Schwinn family business failure. Despite his calm demeanor during difficult times, he was in the unenviable position of being hit from all sides.

Things Get Messy

Edward Schwinn also knew that his company was running out of options. He decided in October 1992 that the company had to file for bankruptcy to keep creditors at bay. Consequently, the storied family bicycle business filed for relief from paying its debt under Chapter 11.

In the US, Chapter 11 allows for a company to stay in business while restructuring its debt obligations. Edward Schwinn’s hope was that he would be allowed to make changes necessary to emerge from bankruptcy as a stronger company. However, he was rolling the dice by putting Schwinn in the hands of a bankruptcy judge.

Things didn’t go well for Schwinn. Trying to reduce costs, the company laid off many employees, including a handful of Schwinn relatives. Key employees also were jumping ship if they found another job. The mood within the company was bleak.

The Schwinn bankruptcy also froze payments to many small businesses which were owed money by Schwinn. The small companies knew they would be at the end of a long line of creditors asking for compensation. They had to move on to other brands and would not wait for a new Schwinn to emerge from its financial difficulties.

China Bicycle which was one of Schwinn’s bicycle suppliers made a bid to acquire the company. Schwinn had previously purchased large amounts of China Bicycle stock. The Chinese company was wary that a competitor such as the Taiwanese company Giant might purchase Schwinn. They had no desire for their competitor to own any of their stock.

Another wild card was the Schwinn Family Trust. The Trust was the legal holder of the family business name. The main value for a company wishing to purchase Schwinn would be the Schwinn name. The lawyer for the Trust played hardball and stated that the family wanted compensation for the name.

The request for compensation for the Schwinn name caused a great deal of turmoil in bankruptcy court. Other companies would not want to acquire Schwinn without having legal right to use the family name. The right of the Schwinn Family Trust to the name could be challenged in court, but this would lead to significant delays. Without the family name as part of the deal, acquiring Schwinn could become a messy affair.

The 1992 Schwinn Cross-Series

In 1992 I bought my tall 12-year-old daughter a Schwinn Crosscut. It was a bit pricey for a pre-teen, but the bike was well-built. I knew it would last for many years. The Schwinn catalog description of entry for Crosscut revealed that it was a well-designed bike.

“Crosscut is Purebred performance featuring double-butted True Temper frame, quick handling geometry, and fast tracking 38 Special tires. It also has a new Shimano 500CX/400LX 21 speed Cross package and user-friendly Grip-Shift indexed shifting.” (slightly reworded from 1992 Schwinn Consumer Catalog)

My daughter was in middle of a growth spirt and she outgrew the bike in one short season. However, this mistake was fortuitous. My wife was riding a 1970s 10-speed. Now with two kids, the drop handlebars did not suit here. I asked her to take the bike for a ride to see if it fit here.

She came back with a smile on her face. She liked the idea of moving from drop handlebars to riding a performance “cross” or “mountain style” bicycle with straight handlebars. After 30 years she is still riding this bike. This is a testament to the durability of Schwinn bicycles made overseas.

1992 Schwinn CrossCut that was Made in Taiwan
(Photo: 1992 Schwinn Catalog)
Note: This was among the last bicycles sold by the Schwinn family business.

Attesting to the quality of the bicycle design, I have made very few modifications to this Schwinn. As expected, it was necessary to keep the bike in good working order by replacing its tires, chains and rear cogs. The original Grip-Shifters were a bit awkward to use, so I replaced them with the modern thumb shifters.

In all likelihood, the bike probably was manufactured for Schwinn by Giant in Taiwan. This 1992 Crossfit was one of the last bicycle models produced for Schwinn family bicycle company.

The quality of these cross series bikes indicated that if Schwinn had played its cards right, they could have been a viable company. Schwinn clearly had the ability to produce quality of bicycles in Asia.

The Vulture Capitalist Makes a Move

The vulture capitalist Zell -Chilmark ventured into the fray. The fund was worth $1 billion and was well known for purchasing troubled companies. Sam Zell, one of the funds owners, was often called the grave dancer. Zell-Chilmark was quite attracted to the economic potential of acquiring the Schwinn name at a fire sale price.

Zell-Chilmark made its move in December 1992 and gave a hard deadline for the completion of the deal to purchase Schwinn out of bankruptcy. The firm did not want the transaction to drag out because this would mean the company would miss the Spring bicycle selling season.

Zell-Chilmark first tried to buy Schwinn’s $30 million debt from the banks. They thought that this would put them in good stead to succeed in acquiring Schwinn during the bankruptcy hearings. They were wrong. The banks were first in line of about 1200 creditors to get payments from Schwinn and they wanted to get the full value of their investments back.

In the smoke filled rooms, deals for Schwinn were churning. China Bicycles asked to join the Schwinn bid by Zell-Chilmark. The logic of working with a supplier did not fit well with Zell-Chilmark’s plan so they declined the offer. As the number two creditor, Giant also wanted to cut a deal. But Zell-Chilmark was not thrilled with working with a Schwinn supplier and brand competitor.

With deals flying in all different directions, China Bicycle Company finally hit on a solution. They would waive their 18 million debt claim on Schwinn in exchange for stock in the new company. Further, they would sell a limited amount of that stock and provide the proceeds to the Schwinn Family Trust.

China bicycles offered $2.5 million to the Family Trust and it was grudgingly accepted. After nearly 100 years of sweat, tears, and bicycle innovations, the family received a paltry sum. The bright side was that the deal would mean that the Schwinn family name would be kept alive adorning bicycles for many years to come.

The deal was virtually complete for a Zell-Chilmark takeover of Schwinn. A deal that included the elimination of the China Bicycle Company debt was attractive to the other creditors because this raised the value of the remaining company assets. This increased the chances that they would receive higher payments for their debt. The total Zell-Chilmark deal including the debt waiver by China Bicycles was valued at $61 million.

The last catalog produced by the Schwinn family company also was in 1992. Bicycles coming after that date have the Schwinn nameplate but had no other relationship to the original family company.

Zell-Chilmark firm knew nothing about running a bicycle company. Consequently, they decided partner with Scott USA, a burgeoning sports company with strong ties in Europe. Another youth movement was about to begin at Schwinn bicycles.

The first act of Scott USA was to move the corporate headquarters to Boulder, Colorado. Scott had a diverse product line but their main brands were sold in Europe.

For Scott USA, Schwinn was a good fit for them to be able to sell bicycle in the USA without making the substantial investments necessary to start a new company. The company revamped the bicycle line and ended the long tradition of building bicycles in the USA.

None of the Schwinn Chicago employees were seen as a good fit for the new company. This was the end of the road for the Schwinn family bicycle company. The Schwinn name would live on adorning the tubes of bicycles made in Asia.

The Fate of the Schwinn Paramount

In 1993, Richard Schwinn, the great-grandson of the company founder Ignaz, and Marc Muller made a deal with Zell-Chilmark. They were able to purchase the Schwinn Paramount design group and production facility in Waterford, Wisconsin from Zell-Chilmark.

Zell-Chilmark had no use for the Waterford plant which specialized in high-end bicycles. The investment group had decided to focus on the wider markers of less expensive bicycles.

Zell-Chilmark did contract to purchase Paramounts from the new company created by Richard Schwinn. Sales turned out to be disappointing and after a few years the new owners of Schwinn discontinued the arrangement.

First Schwinn Paramount Made by Waterford, 1993
(Photo: 1993 Schwinn Catalog)
Note: The first Schwinn Paramount Contracted by Zell-Chilmark and produced by Waterford.

Waterford Precision Cycles continues to build high quality bicycle under the direction of Richard Schwinn. Due to the bankruptcy agreement, Richard Schwinn is not allowed to use his last name or the Paramount brand.

The new bicycles Richard Schwinn produces in the iconic Waterford bicycle facility are mostly called Waterford bicycles. Today, his company still makes top-of-the-line bicycles in the old Paramount factory under the name of Waterford Precision Cycles and some other selected brands.

The Honeymoon for the New Schwinn Didn’t Last Long

Zell-Chilmark got off the line quickly. Along with Scott USA, the company developed new models and created a retro brand to cash in on Schwinn nostalgia. The company also was fast to adapt to new trends in both cycling and technology. However, the Scott USA and Schwinn combination was never a comfortable fit.

1995 Schwinn Retro Reproduction by Zell-Chilmark
(Photo: 1995 Schwinn Catalog)

Just four years after purchasing Schwinn, in 1997 Scott Sports Group and Zell-Chilmark sold Schwinn to Questor Partners Fund for $80,000. Questor tried to breath new life into Schwinn again developing an updated line of historic models.

Questor also purchased GT Bicycles and merged it with Schwinn. This resulted in the production of the Schwinn homegrown series and mountain style bikes. The Schwinn bikes were among the best quality sold in the big box stores.

This new strategy by Questor was not enough. In 2001, Schwinn/GT was once again in bankruptcy court staving off creditors. During the court proceedings, Pacific Cycle outbid Huffy Corporation to purchase the Schwinn/GT bicycle brand from Questor. The amount of the purchase was $86 million.

In Pacific Cycles, Schwinn was finally owned by a stable partner. Pacific Cycles moved the Schwinn headquarters to Madison, Wisconsin. They focused on selling Schwinn branded bicycles at low prices in companies like Sears, Kmart and Target. The Pacific approach for selling Schwinn bicycle combined with several other major brands worked quite well.

The corporate maneuvering saga wasn’t quite yet t over for Schwinn. In 2004, Dorel Industries of Canada sensed an opportunity to strengthen its bicycle business. The company purchased Pacific Cycles and this meant that in 11 years Schwinn had changed hands four times.

Finally, Schwinn was in a corporate partnership that would last for many years. Pacific remain as a subsidiary of Dorel for more 15 years. During the period from 2004 to 2021, Pacific would accumulate many brands of bicycles by 2021 that include Cannondale, GT (included in Schwinn purchase), Iron Horse, Mongoose, Murray, and Roadmaster.

The 1990s and the Globalization of the Bicycle Market

The story of Schwinn can be seen as a reflection the new business climate of the 1990s. Gordon Gekko famously said in the movie Wall Street, “Greed is good.” The vulnerability of Schwinn was on clear display in this new age of financial wheeling and dealing accompanied by outsourcing of bicycle production to Asia.

Schwinn went from a family-owned bicycle company in 1992 to being purchased for $67 million by vulture capitalist Zell-Chilmark in 1993. In 1997, Schwinn was sold to the investment group Questor Partners Fund for $86 million making a nice profit for the vulture capitalist Zell-Chilmark. This purchase by Questor did not work out well and the Schwinn/GT brand was sold for $86 million to Pacific Cycle during a bankruptcy hearing in 2001.

The identity conferred upon Schwinn by Pacific Cycle was the antithesis of the vision of its founders during the early part of the 20th Century. The purveyor of high-quality American made bicycles sold through dedicated retailers was replaced by Asia-produced Schwinns marketed by Walmart, Kmart and Target.

Schwinn was not alone in this fate. The company was joined iconic brands such as the English Raleigh and the French Motobecane. The high-quality American and European bicycle makers from the 1970s and 1980s all were impacted by the globalization of the bicycle market. The three major bicycles companies that would prove their mettle in adapting to the new business climate were Trek, Giant and Specialized.

Wednesday, November 17, 2021

A Short History of Schwinn: The Tumultuous 1980s

Two adults astride a bicycle
Schwinn World is Still a Model Brand in 1987
(Image: Schwinn Catalog, 1987 modified by Doug Barnes)

Edward Schwinn, Jr. has been roundly criticized for the demise of Schwinn Bicycles as a family company. Although not all of his decisions were stellar, the blame was somewhat unfair.

Family businesses rarely last longer than the three generations, so the surprise is that the Schwinn family-owned bicycle company lasted so long.  Jonathan Ward (1987) in his work on family business succession indicated that 30 percent of businesses last through the second generation. This figure is reduced to 13 percent by the third generation. Only 3 percent of family businesses are still alive and kicking by the fourth generation (Zellweger, Nason, and Nordvist 2012).  Edward Schwinn, Jr. was a fourth-generation president of a family business.

Although these figures are a bit dated, the odds of family business survival are generally accepted to be low for several reasons. The charisma of the early founder fades and business conditions change. The next generations often have other interests. Successors may not be qualified for the job. Finally, nepotism and family feuds are inevitable. 

The Fourth Generation of Schwinn Managers

Schwinn was not the exception to this rule. The Schwinn family bicycle company was very strong for two generations.  The third generation Schwinn manager Frank W. Schwinn did not have the drive of his father.  

Second and Third Schwinn Generations: Father Frank W. Schwinn (Center)
with Sons Frank V. (Right) Edward, Sr. (Left), Late 1940s

(Image: Made in Chicago Museum ND)

The fourth-generation manager Ed Schwinn, Jr. placed too much emphasis on financial models and was not interested enough in modernizing the family factory.  He also had to deal with a bicycle industry that was in the throes of manufacturing globalization. These conditions would challenge even the most nimble companies.

Friday, September 17, 2021

A Short History of Schwinn: The Booming 1970s

 

Woman in front of vintage bicycle
Schwinn Varsity Sport, 1974
(Image: Schwinn Catalog, 1974)

Schwinn was founded by Ignaz Schwinn during the safety bicycle boom of the 1890s.  Around 1910 that boom turned to a bicycle bust and Ignaz Schwinn turned his attention towards motorcycles. He founded Excelsior motorcycles to counter the decline in bicycle sales. During this era of the early automobile, it seemed only normal to move from human-powered to motor-powered cycles. Despite the high quality of the motorcycles produced by Schwinn, in the late 1920s, the Great Depression put an end to this business. Schwinn returned to its roots in the 1930s and once again began to focus on high-quality bicycles. After 1930, Schwinn was very innovative and initiated models including the children's Autocycle and the adult Paramount. 

During the 1950s, Schwinn continued to concentrate on children's bicycles and through clever advertising established itself as a cultural icon. The 1960s were good times for Schwinn as the bicycle market began to expand to include adults. With expanding sales during the 1970s bicycle boom, it appeared Schwinn could do nothing wrong. The death of its long-time president Frank W. Schwinn combined with new trends in both bicycle design and production laid the foundation for a series of missteps that would later culminate in critical challenges for the family business.

The full 1895-1992 history of the Schwinn family bicycle business can be found in a separate but much longer article called "A Short History of Vintage Schwinn Bicycles." 

Booming Sales Clouded by Loss of Long Time President

Schwinn was riding high. The bicycle sales boom in the early 1970s meant that they could do no wrong. Bicycle sales for children continued to be strong. Schwinn had a slow start in producing the new popular 10-speeds but picked up steam by successfully selling the new Varsity line of bicycles to young adults. In 1971 Schwinn hit a new high in bicycle sales of 1.2 million bicycles and this included 326 thousand 10-speed bicycles (Pridmore, 2001). This amounted to a whopping 25% market share in 1970.

Woman in front of Schwinn Continental Bicycle
Schwinn Continental Sport, 1972
(Image: Schwinn Catalog, 1972)
The increasing sales were in one small part due to the popularity of the Schwinn Varsity and Continental (Shaddox 2000). Both of these bicycles were built to last. They were heavy but were among the first to provide riders in the USA with an affordable derailleur bike. The founders of Shimano convinced some of the managers in Schwinn that external derailleur bicycles would be attractive to both teenagers and young adults. 

Wednesday, September 1, 2021

A Short History of Schwinn: Domination in 1950-1970s

Illustration of boy with 1950s bike
Schwinn Panther Advertisement, 1950
(Image: Schwinn Catalog,  1950)
Schwinn was founded by Ignaz Schwinn during the safety bicycle boom of the 1890s.  Around 1910 that boom turned to a bicycle bust and Ignaz Schwinn turned his attention towards motorcycles. He founded Excelsior motorcycles to counter the decline in bicycle sales. During this era of the early automobile, it seemed only normal to move from human-powered to motor-powered cycles. Despite the high quality of the motorcycles produced by Schwinn, in the late 1920s, the Great Depression put an end to this business. Schwinn returned to its roots in the 1930s and once again began to focus on high-quality bicycles. After 1930, Schwinn was very innovative and initiated models including the children's Autocycle and the adult Paramount. During the 1950s, Schwinn continued to concentrate on children's bicycles and through clever advertising established itself as a cultural icon. The 1960s were good times for Schwinn as the bicycle market began to expand to include adults. 

Sunday, August 22, 2021

A Short History of Schwinn: Innovation in the 1930-1950s

Early Schwinn Bicycle Illustration
The Popular 1949 Schwinn Autocycle
(Image: Schwinn Catalog 1949)
Schwinn was founded by Ignaz Schwinn during the safety bicycle boom of the 1890s.  Around 1910 that boom turned to a bicycle bust and Ignaz Schwinn turned his attention towards motorcycles. He founded Excelsior motorcycles to counter the decline in bicycle sales. During this era of the early automobile, it seemed only normal to move from human-powered to motor-powered cycles. Despite the high quality of the motorcycles produced by Schwinn, in the late 1920s, the Great Depression put an end to this business.  People quit buying high-priced motorcycles.  Schwinn returned to its roots in the 1930s and once again began to focus on high-quality bicycles. After 1930, Schwinn was very innovative and initiated models including the children's Autocycle and the adult Paramount.

The full history of Schwinn bicycles as a family business can be found in a separate, much longer article called "A Short History of Vintage Schwinn Bicycles." 

This article is about Schwinn's history in the 1930s and 1940s and it is also is part of the full history. 

Schwinn Catalogs provide an interesting source of Schwinn history and can be found at Vintage Schwinn Bicycle PDF Catalogs.

Gamble on Promoting Style and Quality in the 1930s

Frank W. Schwinn, who was the son of the founder, returned from a research trip to Germany in the early 1930s.  On the trip, he saw sturdy balloon-tired bicycles surviving Germany's rough cobblestone roads. In the US, most bicycles at the time were made from poorly welded low-quality steel and had thin tires that hadn't changed since the early 1900s. They were produced for quick sales by mass retailers who could care less about durability. The trip set off what some may call a bicycle design revolution in the US, spurring Schwinn to develop a wide-tired bicycle that looked like a mini-motorcycle.  

Illustration of Schwinn Bicycle
Schwinn Introduces New Balloon Tire Bicycles, 1933
(Image: Schwinn Catalog 1933)
After the early 1930s tour of Germany, Frank W. Schwinn developed a new line of high-quality bicycles for kids and marketed them through retail bicycle shops rather than mass retailers. The new bikes were called autocycles or motorbikes. These new bicycles were a radical departure from others produced during the same period. Just to be clear, these bikes are not motorized. They were distinguished by motorcycle-inspired features such as the front "knee action spring fork" and coaster brakes. Schwinn was so confident about the durability of these bicycles, the company offered an--unheard of for the times--lifetime guarantee. This line of durable, high-quality bicycles became very popular and reinforced the reputation of Schwinn as being a force in the business. Sales increased 20-fold during the 1930s.  

1940s Bicycle Displayed in Museum
Schwinn Autocycle, Circa 1940.
(Photo: Doug Barnes at Bicycle Heaven, Pittsburgh)
As a testimonial to their durability, in the 1970s these long-forgotten 1930s bicycles were rediscovered by the inventors of the mountain bike in Marin County, California. Looking for a sturdy bike to race down a mountainside trail, they modified these old classics to deal with mountain terrain. As a precursor to the mountain bike, the 1930s Schwinns fit the bill. The autocycles and motorbicycles had sturdy frames, front suspension, and internal coaster brakes. The inventors rode and raced these bikes down a dirt mountain fire road that now is known as the famous Repack Course on Pine Mountain. The course got its name because of the necessity to repack the overheated coaster brake grease after each race. 

Toward the end of the 1930s, Frank W. Schwinn had shaken up the bicycle industry and firmly established his company as a dominant manufacturer.  The trifecta of producing high-quality bikes, designing them to look like motorcycles or airplanes, and selling them through independent dealers rather than department stores had catapulted Schwinn from subservient to large retailers to an independent leader in the bicycle industry. Many of the innovations in the children's line of bicycles originated with the experience of selling motorcycles in the 1920s. With the Schwinn motorcycle business now becoming a distant memory, many of the same Excelsior and Henderson engineers were recruited to design bicycles with an attitude.

Frank W. Schwinn was not satisfied that he had changed the children’s bicycle market.  He wanted to make an even larger mark on the bike industry.  After another trip to Europe in 1935, he was delighted to see adults riding bicycles. He was especially enamored with the sturdy internal 3-speed roadsters he had seen gliding over the streets of England. He decided that Schwinn should enter the adult bicycle market with a unique twist.

Frank W. Schwinn and his engineers got to work after his trip to Europe. The team began to develop a new line of adult lightweight Schwinn bicycles. Determined to once again reshape the bicycle industry as he had in the early 1930s, Frank W Schwinn hired one of the USA's best-known bicycle race mechanics name Emil Wastyn. With this collaboration in place, he learned that the manufacturing process had to be radically realigned to produce bicycles for adults. Under the supervision of Frank and his new lightweight bicycle engineers, Schwinn began to produce light chrome-moly lugged frames along with finely machine bicycle components that such as sprockets, hubs, cranks, and headsets.

Schwinn Paramount Racer, 1939
(Image: 1939 Schwinn Lightweight Bicycle Catalog)

As chronicled in the 1939 Schwinn catalog, Schwinn made the bold claim that, 

With the production of these super-fine lightweight touring and racing bicycles, the United States of America takes its rightful place among the leaders of the fine bicycle manufacturing nations of the world.

 In 1938, Schwinn christened the top-of-the-line lightweight bicycle the Paramount. The Paramount was destined to be an iconic product but the line was never very profitable. Frank W. Schwinn understood that the Paramount was a market leader that would set a high standard for all Schwinn adult bikes. To market these bicycles, the company sponsored a successful Schwinn Race team to participate in the popular 6-day races of the day. They also financed an attempt at breaking the world speed record and succeeded.  On a Schwinn Paramount in 1941, Alfred Letourneur rode close behind a specially designed motor vehicle and he set the world speed record at an incredible 108 miles per hour.

Schwinn Paramount World Speed Record, 1941
(Schwinn Catalog, 1949) 

The Paramount was never the most profitable product for the company but it firmly engraved the Schwinn name into the annals of bicycle history. One goal of the Paramount line was to market the Schwinn brand as producing bicycles of the highest quality. This strategy would succeed and the Schwinn Paramount would become part of Schwinn's enduring legacy for quality and innovation until the company’s bankruptcy in 1993. 

The 1930s was a period in which Frank W. Schwinn established himself as a creative force in both his company and the bicycle industry.  The decade started with an emphasis on motorcycles and ended with Schwinn firmly established as the highest quality bicycle maker for both adults and children. The innovations of the 1930s, such as the balloon-tired children's bikes, front suspension, front drum-style brakes, and the Paramount Racer set the direction for  Schwinn to next several decades. 

WWII Pause and Pivot to Marketing in the 1940s

The war years hit Schwinn hard. The company was not under financial duress because new government contracts to support the war replaced bicycle sales. The problem was that at a time when Schwinn was gaining momentum producing new models and its own parts, the company was required to hit the pause button. Most manufactures in the USA were required to shift their focus from consumer goods to assist the war effort and Schwinn was no exception. To erase any doubt about its patriotism, Schwinn as a company founded by a German-born immigrant gladly embraced this role. The company became an early recruit by the US government for the war effort. In 1942 Schwinn pivoted completely from bicycles to war materials. 

Schwinn Manufactures Own Crankset, 1941
(Image: Schwinn 1941 Catalog)
Schwinn did retain some marginal government contracts to produce plain bicycles without Schwinn’s high-quality chrome for use by the military.  Schwinn also produced some prototype bicycle products for the war effort but none ever gained favor among the military brass. A folding bicycle was developed that could be dropped behind enemy lines to provide mobility for paratroopers.  The 30-pound folding bicycles were impractical to parachute into a war zone and they never were deployed. So the Schwinn factory that previously built bicycles was kept busy producing artillery shells, frames for radar, tripods for machine guns, and parts for airplane cockpits. 

In the era of Rosie the Riveter, the composition of Schwinn’s workforce also changed. Male and some female Schwinn employees were reporting for overseas duty in large numbers. Schwinn adopted a policy to encourage the family members of those leaving for military service to fill their vacant jobs.  Many mothers, wives, and sisters began working on the Schwinn’s factory floor as their loved ones headed for the military conflicts in Europe and Japan. During the war years, women became the main workforce for Schwinn.

The end of the war brought with it better times both for Schwinn and the country. The post-war years were an era in which new families were being started. Soldiers returning from the front lines wanted nothing more than to pick up the pieces of the time they had lost while they were in the military. The resulting baby boom was followed by a surge of new spending on houses, radios, refrigerators, washers, and consumer items.

During this fresh start, Schwinn turned its energy towards marketing during this period of growth of consumerism. At Schwinn, the engineering culture established in the 1930s had laid the groundwork for producing a variety of new high-quality bicycles. Now in the latter part of the 1940s, the company with its stable of high-quality products was poised for the coming increase in demand generated by the return of war veterans. The question was how to sell them.  

The seeds for how to market Schwinn products were spread during the 1930s. Frank W. Schwinn was eager to reduce the company’s reliance on large retailers and had begun investing resources in developing direct relationships with small bicycle dealers across the nation. The consequence of this shift was that Schwinn had a pipeline of information about consumer preferences from those on the front line of bicycle sales. By the end of the 1940s, Schwinn had reduced its relations with large retailers and focused on its relationships with bike shops.  In 1939, Schwinn even produced a Hollywood bicycle model, one of the first to be specifically designed for and marketed to women.

Schwinn Woman's Bicycle 1949
Schwinn Hollywood Model Kicks Off Film Star Marketing Campaign in 1939
(Image: Schwinn Illustrated Catalog, 1949)

Selling bicycles through smaller shops meant that that Schwinn had to develop its own marketing strategy. Schwinn boldly stepped out of its engineering comfort zone and recruited many of Hollywood's top stars to promote their innovative bicycle lines. The luminaries featured in the 1946 poster catalog included Dorothy Lamour, Roy Rogers, Ronald Reagan, Jane Wyman, Janis Paige, Barbara Stanwyck, Joan Crawford, and Bing Crosby. 

1940s movie star with bicycle
Dorothy Lamour Promotes Schwinn, 1941
(Image: Schwinn Catalog 1941)

With a line of quality bicycles and a marketing strategy fine-tuned to consumer demand in place, during the late 1940s Schwinn was off and running. With the Hollywood stars endorsing Schwinn products combined with its reputation for quality, their bicycles began flying out of stores.  Schwinn increased sales to 400,000 bikes by the late 1940s and by 1950 had a 25% market share of bicycles sold in the USA.

With the manufacturing capacities in Europe and Asia decimated, the company became one of the dominant bicycle manufacturers in the USA. Within two decades that included a pause for World War II, Schwinn did not miss a beat. Frank W. Schwinn had changed a failed motorcycle business and a floundering bicycle company into a powerhouse that was on its way to becoming an American cultural icon.

Saturday, August 21, 2021

A Short History of Schwinn: The Beginnings 1895 to 1930

vintage 1890s bicycle
Possible Schwinn First Bicycle, 1895
(Photo: Famous Schwinn-Built Bicycle Brochure, 1895)

Schwinn was founded during the safety bicycle boom of the 1890s.  Around 1910 that boom turned to a bicycle bust and Ignaz Schwinn turned his attention towards motorcycles. He founded Excelsior motorcycles to counter the decline in bicycle sales. It seemed to be a natural evolution to move from human-powered to motor-powered cycles. Despite the high quality of the motorcycles produced by Schwinn, in the late 1920s, the Great Depression put an end to this business.  People quite buying high-priced motorcycles.  Schwinn returned to its roots in the 1930s and once again began to focus on high-quality bicycles. 

At present, the full history of Schwinn Bicycles can be found in a separate much longer article called A Short History of Vintage Schwinn Bicycles. 

Schwinn Catalogs provide an interesting source of Schwinn history and can be found at Vintage Schwinn Bicycle PDF Catalogs.

Company Founded during the 1890s Safety Bicycle Boom

In 1861, Ignaz Schwinn had a decision to make. He was managing a bicycle factory in Germany that he had helped build with Henrick Kleyer. He had landed the job with Kleyer because of some of his tinkerings with new safety bicycle designs. Things did not go smoothly in his new job and he had a dispute with Kleyer supposedly over a coaster brake design. He realized that in his current job he would never have control over the creative process for building a bicycle. This meant he probably could never advance beyond the position of factory manager. He made the bold decision to immigrate to the United States to pursue his creative passion for building innovative, quality bicycles. He packed up all his worldly possessions and along with his wife, sailed for the USA.

Once he arrived in Chicago he worked for a series of bicycle companies. He still felt that he was being held back. In 1894 he had a chance meeting with a fellow German immigrant named Adolph Frederick William Arnold. Arnold had an inkling that bicycles would have a bright future.  Having first made his money in the meatpacking business and later as a successful investor and banker, Arnold could see the promise of collaborating with an innovative bicycle factory manager like Ignaz Schwinn.  The consequence was the Arnold Schwinn and Company was formed in 1895. With a strong investor and an experienced manager, Arnold Schwinn & Company was off and running. 

The publication in 1895 coincides with the same year Schwinn was founded by Adolph Arnold and Ignaz Schwinn. This publication with the name Famous Schwinn Built-Bicycles very likely was marketing the original bicycles sold by the new bicycle company founded by the two founders. The brochure contains four interesting safety bicycles, including two for racing and two for everyday use.  The racing bicycle is stated to be just 19 pounds. Because of the development of the safety bicycle, women had become avid bicyclists in the 1890s. The Schwinn women's everyday model has a rear fender and webbing seemingly designed to prevent skirts from getting caught in the wheel or the chain.  

First Ladies Bicycle Produced by Schwinn, 1895
(Image: Schwinn Bicycle Advertisement, 1895)
The 1890s was the period of time when bicycles began to look like, well, bicycles. This catalog highlights Schwinn's version of safety bicycles that were all the rage in the late 1900s. Safety bicycles were quite popular with women. In many circles, they were even credited for securing women's right to vote. Sure enough, Schwinn has a model called the World Ladies' Standard Model No. 34. The catalog also contains cycles they call doubles, triples, and quadruples.  Yes. Schwinn made a four-seat bicycle in 1899. 


Four seat bicycle 1890s
Schwinn 1899 Four Seat Bicycle
Image: Schwinn 1889 Bicycle Catalog

During the 1890s, the bicycle boom was in full swing. As opposed to the awkward big wheelers, the new safety bikes with chains, adequate brakes, and easy steering were simple to ride. No requiring special skills to operate, the "mechanical horse" was seen as the way of the future. Many of the nation's roads were actually improved during this decade because of the desire to have more friendly places to ride a bicycle.  Manufacturers of bicycles, including the Wright Brothers, flourished in an age when the bicycle was considered a liberating invention that would change the world.  At the turn of the century and the advent of more reliable motorcars, the bloom started to come off the bicycle rose. The wild and wooly days of fast-paced innovations and booming sales were about to come to an end. Schwinn would have to adjust to a changing world or join the ranks of struggling bicycle manufacturers.

A Turn towards Motorcycles from 1900 to 1930

The bicycle industry entered the doldrums at the turn of the 20th Century. Adult ridership of bicycles plummeted as people’s attention turned to motorized transportation. The Wright Brothers started ignoring their bike shop in favor of flying machines. Henry Ford rode a bicycle to a factory where he manufactured his first motorcar that looked like two bicycles joined together. He and others like him working on the first cars would sound the death knell for the 1890s adult bicycle boom.

At the time, A. G. Spalding and Alexander Pope, both major bicycling manufacturers, realized that adults were quickly moving away from riding bicycles. With the slide in adult sales, Spalding and Pope joined hands with some others from the bicycle business to form the American Bicycle Company, a consolidated trust of manufacturers. In the spirit of industrial capitalism at the turn of the century, the goal was to monopolize the market and to put small independent bicycle companies out of business.  The venture almost worked. In 1899, the bicycle trust claimed to control 75 percent of bicycle sales. Over time, the major players in the trust began to bicker and fight with one another. This combined with declining bicycle sales caused the trust to burn through $80 million in startup capital. The well-financed trust was a spectacular failure and by 1903, it went into bankruptcy.

Ignaz Schwinn wisely stayed away from the ill-fated trust because he wasn’t one to surrender his independence. In the context of declining sales, he knew that to stay in business, his company would have to change its focus. He took advantage of the bicycle slump to purchase troubled manufactures. His partner Adolph Arnold could see that bicycles were no longer a growth industry. In 1908, he agreed to sell all his shares in the company to Ignaz Schwinn. On his part, Schwinn never gave up on the bicycle side of his company but he recognized that to survive his company would have to diversify.  

Ignaz Schwinn knew his company had a problem.  In the first decade of the 1900s, the sales of bicycles to adults had eviscerated. The remaining bicycle sales that remained during the slump were to children. Making matters worse, Schwinn had to sell its bikes through department stores such as Sears and Montgomery Ward. These retailers competed based on price and didn’t care much about quality because there was no appetite for parents to purchase long-lasting bicycles. Bikes did not have to last very long because children quickly outgrew them. Also, young kids are rough on bicycles and they were ready for the scrap heap once they were ready to move on to a larger size.  

Ignaz Schwinn saw the writing on the wall.  He would have to diversify to keep his company alive. He made a bet on a new type of cycle—the motorcycle. Most of Schwinn’s creative energy from 1910 through 1930 went into producing a well-respected brand of motorcycle called the Excelsior. In 1917, Schwinn purchased Henderson Motorcycle Company from its owners.  Their motorcycles were popular and in the late 1920s, Schwinn became the third largest motorcycle company in the country.

Vintage bicycle on grey background
Schwinn Excelsior Bicycle 1917
(Image: 1917 Schwinn Catalog)

A nice side benefit of purchasing Henderson was they also produced a line of bicycles that could be integrated into the Schwinn portfolio. In a sense, entering into the motorcycle business saved Schwinn as a bicycle company by getting through a very rough patch of declining sales. The motorcycle division of Schwinn took up all the creative energies of the company, and the bicycle division limped along barely surviving its plight.  But by purchasing new bicycle companies during industry consolidation, intentional or not, Schwinn was positioning itself for the next phase of its bicycle business.

The good times of the roaring twenties led to the Great Recession. The bubble burst and all companies, including the motorcycle industry, came under great financial strain. Ignaz Schwinn was heavily invested in the stock market and the plunge in the value of stocks left him with few financial resources.  Thus, in 1931, he called together a group of his closest associates. He realized the time of Schwinn competing in the motorcycle business had come to an end.  He could not find a buyer for the motorcycle business, so at the meeting of his senior staff, he said, “Gentlemen, today we stop.” Schwinn abandoned the motorcycle industry and in an unlikely gamble turned its focus to bicycles. 

At the age of over 70 years old, Ignaz Schwinn decided it was time to wind down his active management of the company. He turned over business operations to his son Frank. With the motorcycles in the rearview mirror, Frank Schwinn took on the difficult task of reinventing what remained of the bicycle business. The company would eventually be renamed the Schwinn Bicycle Company. With his background as an innovative motorcycle engineer, he set his eyes on developing futuristic new bicycle products geared towards children. The stage was set for an era of Schwinn creativity and innovation that would catapult the company into a dominant position in the bicycle industry.