News of $30 million of probably unrecoverable debts racked up by Schwinn / GT could hit the whole bike industry hard say Bicycle Retailer and Industry News.
Although it might mean the world to us, the bike manufacturing, distributing and selling industry is a small fry in the grand scheme of things. So while the government nearly ‘accidentally’ blew £800 million on hosing out cooked cattle remains, $30 million could amount to a significant culling of bike businesses.
Big firms like Merida (who take the hit for over $10million of Schwinn / GT debt) have probably got enough cash and assets (including their recently acquired 49% of Specialized) to weather the storm, but smaller firms may go under. Headset specialists YST are already in trouble and other smaller component suppliers look shakey as the big players tighten their belts all round.
According to industry sources Taiwanese bike exports are already expected to drop from 6 million units to 4 million. “The entire country, not just the bike industry, is doing poorly. The stock market there is slipping and banks aren’t going to extend more credit to anyone,” Brad Hughes, president of Brad Hughes marketing told Bicyle Retailer.
This means credit will be tightened throughout the industry, right down to your friendly local bike shop. This comes on top of significant British sales losses in top end mountain bikes as a result of the foot and mouth crisis.
Despite popular belief the bike industry does not make mega profits from your hard earned cash, and that situation doesn’t look like imrpoving anytime soon. With everyone right down the chain trying to claw back money from fewer sales, it looks like the long running year on year drop in prices / increase in value that we’ve been lucky enough to see in mountain biking will probably decrease or even level out.
That’s bad news for those waiting to get a better deal on next years kit but on the bright side if you’ve just bought a bike full whack you’re less likely to see it half price in a couple of months. If the market gets thinned out it’ll create a more stable and sustainable industry which is better in the long term.