Schwinn Bicycle Co., whose Phantom, Sting-Ray, Varsity and other gleaming two-wheelers taught the sensation of freedom to generations of American youngsters, filed Thursday for federal bankruptcy court protection.
The venerable Chicago company, founded in 1895, owns just 7% of the U.S. bicycle market compared to 25% during its 1950s heyday. The company said it needs to restructure its heavy debt and might need to seek a merger.
The family-owned company vowed to remain in business, and its bicycles retain a solid, if stuffy, reputation. But Schwinn's woes were lamented across an industry that it still personifies for many Americans.
"It's a sad day for the bike world," said Mike Sinyard, owner and founder of Specialized Bicycle Components in Morgan Hill, Calif., whose 1981 Stumpjumper launched the mountain bike craze that has revolutionized the industry.
Edward Schwinn Jr., president and chief executive, blamed Schwinn's problems on $75 million of debt the company took on in the 1980s and said the firm could no longer afford the burden in today's weak economy.
But cycling enthusiasts say Schwinn missed the turn in the market to lighter, more sophisticated machines that helped triggered a cycling and fitness boom in the 1970s. While the market continued to expand in the 1980s, Schwinn's sales remained stuck in the 900,000-a-year range.
Meanwhile, new U.S. firms such as Specialized, Trek USA and Cannondale were developing lightweight materials for bike frames and pushing innovation--and prices--to new levels while luring baby boomers to their products.
"Schwinn has always been very cautious with what they put on the market," said Darryl Levesque, owner of John's Cyclesport in Pasadena. "We dealers, especially in Southern California, have often asked why we can't get on the market like some of the smaller companies. But, of course, the smaller companies have less to lose."
Schwinn filed a petition for relief under Chapter 11 of the U.S. Bankruptcy Code. The step protects the company from action by impatient creditors while it tries to get its operations and finances in order.
Schwinn said its alternatives include finding an individual or another company to invest in the bike maker or merging with another firm. The company said it is not engaged in merger talks but is holding "a couple of discussions" with potential investors.
Edward Schwinn, whose great-grandfather, Ignaz Schwinn, co-founded the Arnold, Schwinn & Co. in 1895, said talks with potential investor Acadia Partners L.P. broke off this week.
About two of every three bicycles sold in this country are lower-priced models made by Huffy and Murray and sold by such mass merchandisers as Toys 'R' Us, Sears Roebuck & Co. and Wal-Mart. But the other third, sold in specialty shops, garner 60% of the money.
The company claims dozens of bicycle firsts over the decades, including the coaster brake, balloon tires, shoe-braking units, handlebar-mounted gear changer and knee-action spring fork. Its more notable models include the Aerocycle, Cycleplane and Autocycle in 1934; the Paramount touring bicycles in 1938, and the later Phantom, Varsity, Collegiate and Sting-Ray.
The sturdy Sting-Ray was the popular choice of California youths for modification as motorcross bikes in the 1970s, which later evolved into homemade mountain bikes. After Specialized began marketing the first factory-made mountain bike in 1981, many others firms followed.
"Schwinn could have jumped in and built one of their own, but they waited a long time to do that," said dealer Levesque.
Yet the Schwinn name continues to rank No. 1 in familiarity and "intent to buy" surveys conducted by Bicycling magazine, said Chuck McCullagh, editor and publisher.
"Schwinn's greatest contribution is more sociological," McCullagh said. "They manufacture a bike for a cross-section of the American public and family. They kept cycling alive and well in the 1950s and 1960s at a time when bicycles were getting pushed aside as transportation."
Edward Schwinn, taking over from his father, Frank, in 1979, is credited with modernizing the company's marketing programs. Schwinn also took a cue from competitors and began buying more parts from Japanese suppliers and improving its technology through such moves as the 1988 purchase of Cycle Composites Inc. of Watsonville, Calif., maker of advanced carbon-fiber bicycles.
Schwinn said it is a "cheap, easy shot" to say the company was not paying attention in the 1970s. He attributes Schwinn's crisis to the heavy debt it took on in the 1980s, including the cost of closing its ancient Chicago factory to escape high labor and other costs.
Last year, Schwinn closed its only remaining high-volume U.S. plant in Greenville, Miss. It makes expensive, hand-built Paramount bicycles in Wisconsin, but most of its bikes are made in China and Hungary. Most bike production has moved to the Far East.
Schwinn has redesigned its 1993 product line, which has received good reviews from the cycling trade press. The company got 25% of its $190 million sales last year from fitness equipment, such as stationary bikes, and says it hopes to expand that part of its business.