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A Rough Ride for Schwinn Bicycle

Schwinn was at its busiest in the early 1970s when a nascent environmental movement coupled with a sudden exercise craze spawned a bicycle boom. Dealers began making pilgrimages to Chicago to appeal for more bikes.

"We could only build so many," said Jack Smith, the executive in charge of distribution . "I'd tell them, 'I'd be glad to give you more. But who am I going to take bikes away from to give them to you?' "

Richard Schwinn, left, part of the last generation to run the company that bears his name, now runs a small custom bike factory in rural Wisconsin. At right is Marc Muller, co-founder. (Darren Hauck For The Washington Post)

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Imports Roll In

As tastes began to change, however, Schwinn didn't. It continued to churn out the same heavy, tough-to-maneuver bikes that had been the mainstay of the industry for decades. "Durable? Yes. Lasts forever? You bet," said Jay Townley, an industry consultant and former Schwinn executive. "What the customer wanted? No."

Competitors like Mongoose became pioneers in the burgeoning BMX market, while newcomers such as Specialized and Trek offered mountain bikes.

There were new entrants from abroad, as well. In the aftermath of the bike boom, the tariffs on foreign bikes were lowered and it became easier to import. Entrepreneurs in Korea, Japan, Taiwan and eventually China, stood ready to feed American demand for ever-cheaper goods by supplying components and whole bikes under U.S. brands, or their own.

Schwinn was among those that began to shift to foreign parts and imported bikes. But in its initial forays into globalization, it got burned badly. Its foreign suppliers, especially Taiwan-based Giant, soon became its toughest competitors, applying Schwinn technology and techniques to their own, cheaper lines. The Schwinn brand lost its cachet, its bikes indistinguishable from many of the rest.

The total cost of just the parts for a Schwinn Varsity made in the United States might have been $70, but a Taiwanese producer could deliver the whole bike for that price, Richard Schwinn said. "Once that came up, you say, 'Oh, party's over.' " Compounding the problem was that Schwinn had failed to invest in its Chicago factory. It had become a relic -- a rickety, fire-prone facility incapable of producing the quantities of lightweight bikes that consumers demanded. In 1983, Schwinn shut it down.

That decision foreshadowed a broader decline in U.S. manufacturing, with the sector supplying 5 million fewer jobs today than at its peak in 1979. Meanwhile, family income growth slowed, rising only about 15 percent over nearly a quarter-century. Americans without a college degree -- who make up about three-quarters of the adult population -- now earn lower wages in real terms than they did a generation ago.

As it became clear the Chicago plant was doomed, the Schwinn family made one last attempt to preserve its heritage as an American manufacturer. While competitors focused their strategies overseas, Schwinn opened a plant in Greenville, Miss., in 1981. The location was no accident: A century earlier, Southern farmers migrated en masse to northern cities like Chicago in search of steady factory work. Now northern factory owners were looking south to traditionally agricultural, anti-union areas where they could cheaply hire the descendants of those farmers who had stayed behind.

The plant struggled from the beginning. Costs were high and the quality uneven: The bikes coming off the assembly line in Greenville weren't necessarily any better than the ones shipped from Asia. Wages may have been low in Greenville compared with Chicago, but they were still several times higher than those paid to laborers in China or Taiwan. As the plant hemorrhaged money, Schwinn's leadership pulled the plug in 1991. The company declared bankruptcy two years later.

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