Schwinn - From World Leader To Bankruptcy

The Schwinn Empire came about as the result of one man's dream to introduce to the world a quality product created under a well planned strategy that would knock the socks off their competitors. Ignaz Schwinn, a German immigrant who came to America in 1891, had the desire to be the best and would not accept anything less.

Four years later in 1895, Ignaz Schwinn teamed up with Adolf Arnold, a member of a successfull meatpacking and banking family. Together, they formed the "Arnold, Schwinn & Company." Their focus was to produce a bicycle that was safe, dependable and easier to operate than the current bikes on the road.

In 1896 there were some 300 bicycle companies in the United States. The bicycles of that day had a way to go to be seriously accepted by the overall population. Early bicycles up to the late 1800's were riding on hard rubber tires and were hard to operate. And with prices ranging from $100 to $125, they were not easily affordable to the average Joe.

As the turn of the 20th century was approaching, there was a growing market for dependable and affordable transportation. The world was changing and new inventions were popping up everywhere. Some were hot and others were flops.

Ford's Assembly Line-Model T
The biggest contender in the early 1900's was Henry Ford, the father of the assembly line. His success in the automobile industry was an example and an inspiration to Schwinn. Schwinn sought endlessly to produce bicycles that were innovative, dependable, and affordable.  

In the years ahead, the success of the "Arnold, Schwinn & Company" became evident as the balloon tire, introduced in 1933, soon became the industry standard. With great new innovations and an emphasis on quality, Schwinn was leading the way and clearly moving in the right direction.

Schwinn's focus on safety, people friendly ideas and smart innovations, continued through the years keeping them on top side. A few of Schwinn's new innovations were the built-in kickstand in 1946, the famous Black Phantom in 1949 and the popular Schwinn Sting-Ray's, which made their day view in 1963.
 Schwinn Airdyne

Schwinn's accomplishments didn't stop with the best bikes in the world. They also built quality in-home exercise machines. The Schwinn Airdyne Exercise Bike, still being made today, is one of the most dependable exercise bikes ever built.

The team at Schwinn knew the industry and stayed in tune with trends and interest of its customers. Schwinn became the most trusted name in bicycles and in 1979 boasted a 12% share of the American market. But that was about to change in just a few short years.

 Chicago Made Schwinn - True Quality 
A new trend was coming on the horizon. Young people were turning to mountain bikes and motorcross-inspired BMX bikes drastically reducing sales of Schwinn's profitable Sting-Rays. Schwinn was unprepared and all efforts by Schwinn to accommodate for the new trend were too late to cash in. 

Ed Schwinn, the 30 year old nephew of Frank V. Schwinn, took over the presidency of the Schwinn Bicycle Company in October, 1979. The changes Ed made started the company on a downward spiral eventually leading to bankruptcy in 1993. 

Seasoned long-time executives were removed and replaced with younger inexperienced family members. And habitually free spending by the new executives became a common occurrence which played a significant role in Schwinn's downfall.

 Chicago Factory Closed in 1980
The Chicago factory workers voted to unionize. But rather than keep the experienced workers, Ed chose to close the plant and open a new one in Greenville, Mississippi. That was a fatal mistake. Greenville was soon branded as making poor quality products.

The company's now poor production standards resulted in parts that did not fit, mismatched colors, and wheels that were not true. Relationships with their resellers disintegrated leading to irreparable damage. Schwinn's net worth went from $43.8 million in 1980 to just $2.7 million in 1983.

While manufacturing problems continued, Schwinn sought to resolve the issues by transferring most of its production to Giant Manufacturing Corporation in Taiwan. Eventually, Ed decided to expand in Asia by doing business in mainland China and Hungary reducing their dependency on Giant.

Giant Manufacturing didn't like the decision and retaliated with higher prices, cutting into Schwinn's profit margin. When customers saw Schwinn bikes priced $10 to $20 higher than competitors, out the door they went to shop elsewhere. But Schwinn's hold on the exercise business kept them afloat a little longer.

Schwinn earned $3 million from sales of $134 million in 1984 mainly due to the rise in the exercise business. It was their first profit in 4 years. Schwinn's earnings peaked in 1986 to $7 million on sales of $174 million, it's best in a decade.

As a result, Schwinn decided to open fancy new offices. Ed Schwinn's poor people relations, arrogance and wasteful spending deemed to be destructive to say the least. Ed was not a team player.

The success of the new Airdyne Exercise Bike was evident to Al Fritz as sales had doubled. His optimistic focus on exercise equipment was not shadowed by Ed and the company fell short of demand.

As sales plummeted Schwinn lost $2.9 million by 1990 and was back in the red. A year later they lost another $23 million and shut down the Greenville plant. The Air-Dyne sales dropped due to competitors low prices. It was bad for Schwinn.

The pressure was on from Schwinn's lenders and their revolving line of credit was wiped out to pay overdue loans. Their was little money left to pay Giant and China Bicycles and their debt ballooned to $30 million. Schwinn's net worth was wiped out.

Schwinn filed for bankruptcy in October of 1992. The most successful name in the bicycle business, The Schwinn Bicycle Company, was sold to a group of investors for a mere $2.5 million.

Schwinn, now owned by Dorrel Industries, continues to produce bikes and exercise equipment being sold in today's market. But, the damage inflicted on the world leader's name will be a snare to their credibility in the years ahead. Who knows when and if "The Schwinn Bicycle Company" will be on topside again?

Read story in the Chicago Tribune.

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