VERNON HILLS, IL/USA (15 January 2000)--In what will be seen by many as another nail in the coffin of US bicycle production, Brunswick Corporation announced it will cease all manufacturing of bikes in North America. The company blamed a combination of excess Asian manufacturing capacity and low US import duties as reasons for its decision.
"The availability of low-cost imports also affects retail prices, which have declined by more than 35% since 1997, with much of that decline in the last six months," said Peter N. Larson, Brunswick chairman and chief executive officer. "As a result, we are no longer able to make an adequate profit manufacturing bicycles in North America."
The company plans to phase out manufacturing of bikes in the United States and Mexico over the next five months, replacing that production with bikes sourced from Asia. Also, the company will get rid of its wagon, sled, and bicycle parts and accessories businesses. As a result, Brunswick will record approximately US$185 million of charges related to its bicycle business. Included in these charges is approximately US$134 million as a write-down for the goodwill associated with the 1996 purchase of Roadmaster. Brunswick says that continued pricing pressure has substantially reduced the projected profitability of that line.
Also included is an approximately US$276 million inventory write-down resulting from the price declines and the effect of the planned phase out of manufacturing. The remainder of the charge, Brunswick says, consists of asset write-downs, lease termination expenses and estimated severance payouts. The company's bicycle division workforce will be reduced by 80%, affecting some 750 employees at its two Mexican plants and up to 325 employees at the Olney, Illinois, facility.
Approximately US$178 million of charges will be recorded in the fourth quarter of 1999, with the balance recorded in the first quarter of 2000. In making the announcement, Brunswick added that it plans to revamp its bicycle business by simplifying it, streamlining the product offerings, improving supply chain management and focusing on building the Mongoose brand. (WJ)