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A Rough Ride for Schwinn Bicycle

Tommy Hart, who ran the area's economic development office, managed to acquire the last bike that rolled off the assembly line in Greenville. He had coveted a Schwinn as a kid. But as his own son prepared to leave for college, the pleading began: The bike would be perfect for getting around campus. Couldn't he take it with him, if he promised to take good care of it?

"I let him talk me into it," Hart said, sighing deeply.

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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Transcript: Staff writer Griff Witte was online to discuss this article.
Post writer Griff Witte discussed this story on MSNBC.
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It wasn't long before the bike was stolen.

"That was the last U.S.-made Schwinn bicycle," Hart said. "And the crook doesn't have a clue. To him, it's just another bicycle."

The Road Not Taken

As Schwinn declined, another U.S. manufacturer moved into the breach . Unlike nearly every other major bike company, the three-decade-old Trek Bicycle Corp. still makes a considerable share of its bikes in the United States -- any bike that costs more than $800, about 30 percent of its production. At its Waterloo, Wis., headquarters, about half of its 785 employees work in manufacturing, and the plant is expanding. An additional 440 Trek employees work elsewhere in the United States.

Still, to make its expansion pay off, Trek will have to sail against the trade winds; it makes a higher profit on its lower-end, foreign-made products. "It's definitely getting tougher to compete. You can get a complete bike offshore for what it costs us to weld one," said Zapata Espinoza, Trek's brand manager. "But being made in America is not just about the warm feeling of giving jobs to people. We control the process. We invented it. And we're doing it the best way we can by keeping control of it."

For Schwinn, this is the road not taken, a model for how a company can simultaneously retain at least some U.S. manufacturing and stay competitive. Even though Trek's share of the total bike market is small, it dominates among customers at the high end. Industry insiders say a slimmer Schwinn with quality domestic manufacturing could have joined Trek at the top. Instead, Schwinn got caught in the middle: unwilling to move down to the mass-merchant level where most customers now shop; unable to compete for serious riders willing to shell out top dollar.

"Schwinn was in such a dominant position. It's shame on them," said Chris Hornung, chief executive of Pacific Cycle. "They should have had my business and Trek's business."

Instead, Hornung has Schwinn's business. He bought it out of bankruptcy in 2001, the second time Schwinn had gone belly-up in less than 10 years.

Hornung's strategy has been simple: Import quality bikes from Asia. Get them to mass merchants such as Wal-Mart. Keep payrolls to an absolute minimum.

Since applying that strategy to Schwinn, the brand has lost the support of most independent dealers, whose ranks are in decline. But it's been a hit among mass merchants, with the Sting Ray expected to top many kids' Christmas lists this season. "The bikes that we're putting the Schwinn brand on and selling to Wal-Mart are absolutely the best bikes that Wal-Mart has ever sold," Hornung said.

Grudgingly, Richard Schwinn has to agree. Reviving the Sting Ray, he said, "is probably the coolest thing they've done."

Schwinn is fatalistic about the fall of his family's company. The cause wasn't his family's mistakes, he insists, so much as the worldwide pressure on prices to keep sinking lower, a phenomenon to which he sees no end.

To many economists, this is how things should work, with efficiencies making products cheaper and creating new opportunities at the high end -- in building satellites, if not in bicycles. Schwinn is less sure the trade-off is always worth it. What happens to a worker who has mastered the art of welding a bike frame, but whose command of advanced physics is shaky? "I know I have the right to life, liberty and the pursuit of happiness," he said, smiling wryly. "I didn't realize I had the right to the lowest possible price."

And consumers do pay less for the new Sting Ray under Pacific's ownership. It may not be the engineering marvel that was the old Schwinn, but it retails at Wal-Mart for $180, about a third of the original's price in today's dollars.

"People complain that a Schwinn is not what it was. True," said Greg Blake, an engineer at Pacific.

"But," he said, "it doesn't cost what it did, either."

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