Raleigh chairman blames outsourcing move on mistakes by former corporate management

Phillip Darnton has penned an explosive piece for the Nottingham Evening Post. He called the sale of Raleigh and Sturmey Archer’s factory sites a “smash-and-grab for cash”, which mirrors part of the Bikebiz.co.uk coverage of Derby Cycle Corporation’s actions in 1999 and 2000. This site said Derby had created a mess it would take years to clean up, that the careless sale of Sturmey Archer was a big mistake and that certain US-based Derby execs were guilty of managerial incompetence and gross negligence. Darnton doesn't go that far but his outspoken comments are certainly illuminating.
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To get a full flavour of the criticism this site made at the time of the sale of Sturmey Archer, and the time-bomb that was waiting to explode by also selling off the Raleigh factory plot, start at http://www.bikebiz.co.uk/.../sturmey_list.php

Here you’ll find 100+ articles delving into the actions of certain Derby Cycle Corporation execs.

Compare the withering Bikebiz.co.uk critiques with the polemic delivered by Raleigh chairman Phillip Darnton in a piece he wrote for the Nottingham Evening Post. Here are some short extracts:

“When I joined Raleigh as managing director early in 2000, I certainly wanted to believe that we had a future as a local, on-shore designer and assembler of high-quality bikes for the family market….Everyone said that Raleigh stood for quality, reliability, 15-year warranty and a great paint finish….[However] rather a lot of this generalised goodwill lies uncomfortably in the past, not in the disposable and fashion-conscious world of 2002.

”Who wants a 15-year warranty now? What does a good paint finish matter in a market that more and more cares only about a fashion statement bike at a rock-bottom price? And who on earth would want to be seen dead on a bike that their dad rode a quarter of a century ago? If Noah had a bicycle, it was probably a Raleigh!”

The brand could be reinvented, wrote Darnton, but historical problems would soon stymie progress.

”What was…damaging was the heritage of the years from 1997 when Raleigh fell into the hands of American venture capitalists.

”They knew nothing of the cycle industry and applied their standard philosophy - triple the profits in three years - without a thought about its feasibility or its consequences.

”The smash-and-grab for cash began in earnest - the closure of frame-making in Nottingham (far more significant than was realised at the time); the sale of the sites of Sturmey-Archer and Raleigh itself; and the flight of management, especially front line sales and marketing people.

”In the end, losses since 1998 culminated in the failure of the whole international group last year.

”[Gazelle] was sold to pay all the bank debts and in October, under the global banner of Raleigh Cycle Company, we set out - restructured and refinanced - once more.

”But however skilful the new investors, there have been some fundamental shifts in the world market for cycles in the last two years. Plentiful supply has become 'over-capacity' with far more bicycles produced than anyone wants to buy.

”It's a text book classic with the end of the story being a spiral downwards of prices and, in an effort to be competitive, an ever-increasing sophistication of the product.

”The result: no profit margin left for the men in the middle, the assembly plants.

”We have the best brand name in the world. But we can't make money building bikes. Others far away do it cheaper and every bit as well.”

However, Darnton is confident Raleigh can come out fighting:

“If the reaction to this year's bikes is anything to go by, then it won't be long before we're back to one in four cycles sold carrying Raleigh's name.”

But what about this year’s ‘Best of Britain’ marketing campaign? Will the Union Jacks have to go in 2003 once Raleigh bikes are no longer assembled in the UK? Darnton’s piece in the Nottingham Evening Post doesn’t say.

Darnton has told Bikebiz.co.uk he is to leave Raleigh by late 2002 or early 2003: "There's no place for a top heavy management structure, myself very much included.”

For the full article in the Nottingham Evening Post, go to:

http://www.thisisnottingham.co.uk/displayNode.jsp?nodeId=66030&command=displayContent&sourceNode=65582&contentPK=1300879

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