Schwinn Bicycle Company

The Schwinn Bicycle Company was founded by Ignaz Schwinn in Chicago in 1895 and became the dominant manufacturer of American bicycles through most of the 20th century. Its rise demonstrates sound business principles, and its fall, despite burgeoning cycling in the United States in the 1970s and 1980s, demonstrates the opposite.

The founder

Ignaz Schwinn was born in Hardheim, Germany in 1860 and worked on two-wheeled ancestors of the modern bicycle that appeared in 19th century Europe. Frustrated with the unwillingness of manufacturers for whom he worked to accept his suggestions, Schwinn emigrated to the United States in 1891, where he found similar difficulties. In 1895, with the financial backing of fellow German American Adolph Arnold (a meat packer), he started the Arnold, Schwinn Bicycle Company. These were the years of a bicycle craze and Chicago was the center of the industry in America, with thirty factories turning out thousands of bikes every day. Bicycle output in the United States grew to over a million a year at the turn of the century.

This boom was short-lived, as automobiles replaced bikes on American streets. By 1905, bicycle production was one-fourth of five years earlier, and only twelve bicycle makers remained in Chicago. Competition became intense for both parts and for cooperation of the department stores that sold the bulk of bicycles. Schwinn took advantage of the situation, buying failing firms and building a factory on Chicago's west side. He purchased Excelsior Motorcycle Company in 1910, and added the Henderson Company four years later, to form Excelsior-Henderson. Both thrived while competitors failed.

Surviving the Great Depression

At the close of the 1920s, the stock market crash decimated the American motorcycle industry, taking Excelsior-Henderson with it. Schwinn, Arnold Co. (as it remained until 1936) was on the verge of bankruptcy. Ignaz' son Frank W. "F.W." Schwinn, now running the company, insisted on developing a product to distance Schwinn from competitors. After traveling to Europe to get ideas, F.W. returned to Chicago and in 1933 introduced the Schwinn "Aerocycle". He persuaded American Rubber Co. to make two-inch wide balloon tires, added streamlined fenders, an ersatz fuel tank on the frame, a chrome-plated headlight, and a push-button bell. Such "cruiser bicycles" became the industry standard, as others imitated Schwinn.

Marketing

Grandson Frank Valentine Schwinn took over following F.W.'s death in 1963. About 1952, F.W. added marketer Ray Burch, then general manager Bill Stoeffhaas and design supervisor Al Fritz. Most bicycle makers sold in bulk to department stores, which in turn sold them as a store brand. Except with B.F. Goodrich tire stores, Schwinn did away with this practice in 1950 and insisted that the Schwinn brand and guarantee appear on all products. Their distributors however retained the right to send Schwinns to whichever hardware store, toy store, or bicycle shops wanted them. In the 1950s and 1960s, Schwinn cultivated bicycle retailers selling mostly, if not only, Schwinn bicycles.

Through the 1960s, Schwinn picked up on the West Coast habit of attaching motorcycle-like "high-rider" handlebars and long banana seats to small bikes. Calling their model the "Sting-Ray", Schwinn dominated this market. Schwinn "Varsity" and "Continental" ten-speed "racing" bikes topped sales as well. During the the turn of the century bicycle boom, annual national sales had briefly topped one million. While bicycling in the 1960s was not as popular, Schwinn sales alone were topping that figure by the end of the decade.

The anti-trust suit and its results

Schwinn's distributors balked at restrictions the company put on their ability to send Schwinns to shops outside the Schwinn network. In a ten-year legal battle, many of Schwinn's practices were upheld by the courts: judges ruled they had the right to have their bicycles sold by retailers equipped to service the bikes as well as sell them. However, in a decision by the US Supreme Court in 1967, Schwinn was found guilty of restraint of trade by preventing distributors shipping bicycles to unapproved dealers. The company stopped working solely through independent local distributors and constructed four regional warehouses from which bicycles would—legally—be sent to shops. This made it difficult to keep in touch with the public.

The mini-boom of the 1960s accelerated in 1970, with U.S. bicycle sales doubling over two years. Schwinn sold 1.5 million bicycles in 1974. Schwinn was wedded to heavy, steel, electro-forged frames. Meanwhile, younger buyers were more interested in lighter alloys that could be lug-fastened and brazed together. Schwinn did offer lightweight [http://www.sheldonbrown.com/schwinn-braze.html fillet-brazed] models including the fillet-brazed Schwinn Superior (named the Sports Tourer in the early 1970s) from 1938 to 1978, and the Schwinn Paramount from 1938 to 1994, which also used lugs and Reynolds 531 tubing. Unfortunately, Paramounts were expensive, and sold in small numbers. The less expensive Superior/Sports Tourer outwardly and almost indistinguishably resembled the heavy, mass-produced models like the Varsity and Continental. Schwinn missed the the lightweight craze. In the mid-1970s, They allowed some dealers to sell imported brands, and put their own label on Japanese imports marketed as "Super LeTour 12.2" and "Traveler" models.

Schwinn missed the next craze too: BMX racing. After claiming it dangerous, management changed their tune—too late—when they introduced the "Predator", their first competitive step into the modern BMX market. It took just eight percent of the market. While their Scrambler evolved into a BMX design in the late 1970s, it was heavier than bicycles from other manufacturers.

Mountain biking passed Schwinn by in the 1980s. The company considered relocating to a single facility in Tulsa, Oklahoma. Financing would have required outside investors, perhaps even foreign ones. Frank V. Schwinn and his board balked in 1978, and everything went downhill.

Bankruptcy and demise

By the early 1980s, a fourth generation Schwinn, Edward R. Jr., was in charge. Worker dissatisfaction, seldom a problem in the early years, grew.fact|date=September 2008 The Chicago plant affiliated with the United Auto Workers in 1980. This, plus decay of the 80-year-old facility, led Schwinn to move to Greenville, Mississippi. Labor there was cheap but skilled metalworkers difficult to find,fact|date=September 2008 and parts took a long time to get from Asia.fact|date=September 2008 Profits turned to losses.fact|date=September 2008

Schwinn staved off bankruptcy for a few years. They renegotiated loans by putting up the company and the name as collateral. They ramped up production of the "Airdyne" exercise bicycle, a moneymaker even in bad times. They began to import from Taiwan and Japan. In Taiwan they dealt with Giant Bicycles, increasing imports to half a million a year. Schwinn sales flirted again with the million mark, and the company turned a profit in the late 1980s. Schwinn knew it was perilous to depend on one supplier and negotiated a deal with a Chinese firm, China Bicycle Co. In retaliation Giant pushed Giant-branded bikes to Schwinn retailers.

Companies like Trek also cut into Schwinn's market. In addition the company had to cope with component manufacturers such as Shimano. Schwinn closed the Mississippi plant. They also established company-operated shops, which alienated independent retailers. This led to inroads by domestic and foreign competitors. A spiral ensued and Schwinn went into bankruptcy in 1992. The company and name were bought by Sam Zell's corporate vulture firm Zell/Chilmark Fund in 1993. Zell moved operations to Boulder, Colorado, where Schwinn continued to be stamped on products.

In 1993 Richard Schwinn, great-grandson of Ignaz Schwinn, with business partner Marc Muller, purchased the Schwinn Paramount plant in Waterford, Wisconsin, where Paramounts were built since 1980 . They founded Waterford Precision Cycles, which is still in operation. In 2003 they employed 18 workers building lightweight bicycles. [http://www.jsonline.com/story/index.aspx?id=192439] In late 1997, Questor Partners Fund, led by Jay Alix and Dan Lufkin, purchased Schwinn Bicycles. Under Questor Partners Fund, Schwinn purchased GT Bicycles in 1998 for $8 a share in cash, roughly $80 million. Schwinn produced mountain bikes in Boulderrado, called the Homegrown models. In 2001 Schwinn/GT declared bankruptcy.

ale to Pacific

In 2001, Schwinn was purchased at a bankruptcy auction by Pacific Cycle, known for mass-market brands. The acquisition of the Schwinn/GT brand occurred on September 11, 2001.http://www.pacific-cycle.com/news/news_detail.php?id=8] In 2004 Pacific Cycle was, in turn, acquired by Dorel Industries. Schwinn branded bicycles are now sold in stores such as Wal-Mart, Target, and Costco while higher quality Schwinn-branded bicycles are also sold at bike shops.

References

External links

* [http://www.schwinnbike.com/ Official Schwinn Bicycle website]
* [http://chainedrevolution.com/CS/paramount_registry.aspx Wastyn Era Schwinn Paramount Registry]

ee also

Cruiser bicycle

Gallery