THE REAL CANNONDALE STORYJAN28
THE REAL CANNONDALE STORYJAN28
Since months, rumors and reports have circulated about Cannondale’s imminent financial collapse. Although we could have contributed to the confusion, MBAs web team decided not to wait for Cannondale to issue an official statement. Scott Montgomery, Cannondales Vice-President of Marketing, flew out from Chicago to share the story with us.
It was obvious that the big Cs motorsports Division was losing money and was draining the lives of its highly profitable bicycle division. Cannondales attempted to launch a competitive motocross racing team failed, but the four-wheeled ATV models earned top marks. They believed the motorsports division would succeed, so in 2002 they borrowed a multi-million dollars from a venture capital firm to help it get over the hump. After Cannondale lost large amounts of money and burned through its cash, the handwriting was already on the wall.
Cannondale shut down its factories and filed for Chapter 11 bankruptcy. This gives the court the power to protect the company against its creditors and allows Cannondale create a financial plan to keep its core business viable. Cannondale can reopen its factories and resume production if the financial plan is approved by the court. Cannondale will not be open as normal if and when it reopens. The court will decide what remains and what is soldoff, and ultimately who will buy the remaining 32-year-old bike manufacturer.
WHAT’S THE FUTURE OF CANNONDALE?
Scott Montgomery was very clear about it. He stated that Cannondale’s motorsports and bicycle divisions would be divided and sold to the highest bidders by the bankruptcy court. He said that the Motorsports wing would be either scuttled or reorganized by an entity larger than what is currently established in the market.
We originally thought we could build the motorcycle for 20 million. Scott said, « But we were far off the mark. » One motorcycle company claimed that the project would cost 100 million dollars and take five years. They were correct in the end. In just as little time, we spent close to 80 million. We wouldn’t have tried it if we had known this before we went in. ?
Are Cannondale’s bicycle retailers and owners going to be left out in the cold? Scott believes that this will not happen, due to the fact that the bicycle division has been extremely successful even in the current down market. According to reports, Cannondale reported higher profits in 1997 than all its U.S. counterparts combined. Cannondale’s new owner would be financially insane to make significant changes, considering its profitable track record and strong brand recognition.
Scott informed us that while Cannondale has sacked its entire motorsport division, the company has maintained its bicycle research and development team, which is still working hard on its 2004 models. During the court proceedings, the shipping department was retained to ensure that bikes and parts were delivered on time. The new owners will decide if Joe Montgomery, the founder of Cannondales, will take over the reins of the new Cannondale or if Scott, his son, will have a leadership role.
Scott is optimistic but says that Joe’s leadership is responsible for Cannondale’s success in the bicycle category. However, that decision is out of our control now. My heart has always been in the bicycle division and I hope to be able to continue to drive Cannondale forward. I will continue to work through this transition period for our customers. ?
WHAT DO YOU THINK?
Cannondale took a huge risk when he entered the motorcycle business and lost. It is impossible to live your dreams without taking huge risks. Sometimes that means losing. Many bike companies are taking it easy these days. We may be out of Mavericks, at least temporarily, with the passing of GTs Richard Long and the demise Cannondale. The mountain bike was first introduced to the public by sports pioneers who went big. Innovation is only possible when you take risks. The message is clear: Never lose sight of your dream. Instead, keep riding your bicycles because this is what you know best.
