Cannondale execs were reported to have evaluated a number of Taiwanese vendors during the recent Taipei trade show. Indeed, there was much speculation at the show that sheer economics would soon force Cannondale’s hand.
However, Cannondale execs remain tight-lipped, refusing to either deny or confirm whether the meetings with Taiwanese vendors were for the existing line of road forks or whole frames. Attractive though frame outsourcing may be, it could be politically insensitive right now.
The outsourcing of US jobs is being used as a political football by would-be US president John Kerry and the present incumbent.
"This is an election year where outsourcing jobs has become a high visibility issue," industry consultant Jay Townley told BikeBiz.com.
"However, such a transition to outsourcing in whole or part is still very manageable, particularly in our bicycle dealer channel of trade where the overwhelming majority of bicycles are, and have been off-shore sourced for several decades. If Cannondale waits until after the US elections [in November], it gets even easier to manage."
The US market is dominated by imported bicyles.
"An estimated 99.1 percent of all the bicycles consumed in our market in 2003 were imported, and imports have captured over 90 percent of our market consumption for the last five years," said Townley.
"Cannondale does stand out, along with Trek, as our only domestically manufactured top tier bicycle brands. Cannondale has also been able to market its brand in Europe and Asia as a US manufactured product.
"I don’t think Cannondale [would] have a problem switching to Asian manufactured frames or complete bicycles."
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[Cannondale] wasn’t in Chapter 11 long. Cannondale emerged in May 2003, with a new owner, the Greenwich-based private equity firm Pegasus Partners II.
Pegasus pumped millions back into the company and replaced top management – including the chief executive, chief financial officer and several vice presidents. Gone were Cannondale founder John [sic] Montgomery and his son, Scott, who had been the vice president of marketing. Former Bell Sports executive John Doerr was brought in as president of operations and chief operating officer. [Matt] Mannelly came in as president of the Cannondale brand, in charge of product development, marketing and sales. Mannelly said he was immediately impressed with the staff and their commitment to rebuilding the company. "The passion of the people in Cannondale was incredible," he said. "It’s what helped get the company through bankruptcy. I have not been disappointed by the people here." "Pegasus was very attentive to what made Cannondale tick," he said. "And that was passion. They wanted to make sure they brought in people who got it, not corporate suits." Pegasus quickly moved to cut costs by moving apparel manufacturing overseas and laying off 50 apparel workers at the Pennsylvania factory. But it pumped $1 million into the plant for upgrades and more efficiency. The 350 remaining employees will continue to handcraft frames for global distribution and assemble bikes for sale in the United States – maintaining its "Handmade In USA" logo. "We are trying to increase our shares in everything shown within the four walls of the bicycle shop," Mannelly said. "There is opportunity for us in accessories and apparel." While the company has some hard work ahead, Mannelly said he relishes the job. "Cannondale is like a diamond that just needs to be polished," he said. "The challenge is invigorating." What Pegasus will do with the company in the future remains uncertain.
"There are all sorts of options. They could go public. They could sell to a strategic buyer," said Mannelly. "But you can’t worry about that now. You have to focus on the task at hand."