Schwinn Bicycle Company

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A classic cruiser: the Schwinn Phantom. Note fenderlight, springer fork, chrome fenders, tank, rack, chainguard, balloon tires, and large saddle--all hallmarks of cruiser bikes.

The Schwinn Bicycle Company was founded by Ignaz Schwinn in Chicago in 1895 and became the dominant manufacturer of American bicycles through most of the 20th century. The company's rise and fall in fortunes over its lifetime has been widely used to illustrate the issues faced by entrenched companies in a dynamic and changing marketing environment.^{[citation needed]}

[edit] History

[edit] Founding of Schwinn

Ignaz Schwinn was born in Hardheim, Germany in 1860 and worked on two-wheeled ancestors of the modern bicycle that appeared in 19th century Europe. Frustrated with the unwillingness of manufacturers for whom he worked to accept his suggestions, Schwinn emigrated to the United States in 1891, where he found similar difficulties. In 1895, with the financial backing of fellow German American Adolph Arnold (a meat packer), he started the Arnold, Schwinn & Company. Schwinn's new company coincided with a sudden bicycle craze in America. Chicago became the center of the American bicycle industry, with thirty factories turning out thousands of bikes every day. Bicycle output in the United States grew to over a million units per year by the turn of the century.

The bicycle boom was short-lived, as automobiles and motorcycles quickly replaced bikes on American streets. By 1905, bicycle annual sales had fallen to only 25% of that reached in 1900. Many smaller companies were absorbed by larger firms or went bankrupt; in Chicago, only twelve bicycle makers remained in business. Competition became intense, both for parts suppliers and for contracts from the major department stores, which retailed the majority of bicycles produced in those days. Realizing he needed to grow the company, Ignaz Schwinn purchased several smaller bicycle firms, building a modern factory on Chicago's west side to mass-produce bicycles at lower cost. He finalized a purchase of Excelsior Motorcycle Company in 1912, and in 1917 added the Henderson Company to form Excelsior-Henderson. In an atmosphere of general decline elsewhere in the industry, Schwinn's new motorcycle division thrived, and by 1928 was in third place behind Indian and Harley-Davidson.^[1]

[edit] Depression years

At the close of the 1920s, the stock market crash decimated the American motorcycle industry, taking Excelsior-Henderson with it. Arnold, Schwinn, & Co. (as it remained until 1967) was on the verge of bankruptcy. With no buyers, Excelsior-Henderson motorcycles were discontinued in 1931.^[2] Ignaz' son, Frank W. "F.W." Schwinn, took over day-to-day operations at the Schwinn. Putting all company efforts towards bicycles, he succeeded in developing a low-cost model that brought Schwinn recognition as an innovative company, as well as a product that would continue to sell during the inevitable downturns in business cycles. After traveling to Europe to get ideas, F.W. Schwinn returned to Chicago and in 1933 introduced the Schwinn B-10E Motorbike, actually a youth's bicycle designed to imitate a motorcycle. The company revised the model the next year and renamed it the Aerocycle.^[3][4] For the Aerocycle, F.W. Schwinn persuaded American Rubber Co. to make 2.125-inch wide balloon tires, while adding streamlined fenders, an imitation 'gas tank', a streamlined, chrome-plated headlight, and a push-button bell.^[5][6] The bicycle would eventually come to be known as a paperboy bike or cruiser, and soon became an industry standard as other makers rushed to produce imitations.

Schwinn was soon sponsoring a bicycle racing team headed by Emil Wastyn, who designed the team bikes, and the company competed in 6-day races across the United States with riders such as Jerry Rodman. In 1938, Frank W. Schwinn officially introduced the Paramount series. Developed from experienced gained in racing, Schwinn established Paramount as their answer to high-end, professional competitive bicycles. The Paramount used high-strength steel chromoly alloy tubing and expensive brass lug-brazed construction. During the next twenty years, most of the Paramount bikes would be built in limited numbers at a small frame shop headed by Wastyn, in spite of Schwinn's continued efforts to bring all frame production into the factory.

[edit] Industry dominance

By 1950, Schwinn had decided the time was right to grow the brand. At the time, most bicycle manufacturers in the United States sold in bulk to department stores, which in turn sold them as store brand models. Schwinn decided to try something different. With the exception of B.F. Goodrich bicycles, sold in tire stores, Schwinn eliminated the practice of rebranding in 1950, insisting that the Schwinn brand and guarantee appear on all products. In exchange for ensuring the presence of the Schwinn name, distributors retained the right to distribute Schwinn bikes to any hardware store, toy store, or bicycle shop that ordered them. In 1952, F.W. Schwinn tasked a new team to plan future business strategy, consisting of marketing supervisor Ray Burch, general manager Bill Stoeffhaas, and design supervisor Al Fritz.

In the 1950s, Schwinn began to aggressively cultivate bicycle retailers, persuading them to sell Schwinns as their predominant, if not exclusive brand. During this period, bicycle sales enjoyed relatively slow growth, with the bulk of sales going to youth models. In 1900, during the height of the first bicycle boom, annual U.S. sales by all bicycle manufacturers had briefly topped one million. By 1960, annual sales had reached just 4.4 million.^[7] Nevertheless, Schwinn's share of the market was increasing, and would reach in excess of 1 million bicycles per year by the end of the decade.

In 1946, imports of foreign-made bicycles had increased tenfold over the previous year, to 46,840 bicycles; of that total, 95 per cent were from Great Britain.^[8] The postwar appearance of imported 'English racers' (actually three-speed 'sport' roadsters from Great Britain and West Germany) found a ready market among U.S. buyers seeking bicycles for exercise and recreation in the suburbs.^[9] Though substantially heavier than later European-style 'racer' or sport/touring bikes, Americans found them a revelation, as they were still much lighter than existing models produced by Schwinn and other American bicycle manufacturers. Imports of foreign-made 'English racers', sports roadsters, and recreational bicycles steadily increased through the early 1950s. Schwinn first responded to the new challenge by producing its own middleweight version of the 'English racer'. The middleweight incorporated most of the features of the English racer, but had wider tires and wheels.^[10]

The company also joined with other U.S. bicycle manufacturers in a campaign to raise tariffs across the board on all imported bicycles.^[11] In August 1955, President Eisenhower's administration implemented a 22.5% tariff rate for three out of four categories of bicycles. However, the most popular adult category, lightweight or 'racer' bicycles, were only raised to 11.25%.^[12] The administration noted that the U.S. industry offered no direct competition in this category, and that lightweight bikes competed only indirectly with balloon-tire or cruiser bicycles. The share of the U.S. market taken by foreign-made bicycles dropped to 28.5% of the market, and remained under 30% through 1964.^[13] Despite the increased tariff, the only structural change in foreign imports during this period was a temporary decline in bicycles imported from Great Britain in favor of lower-priced models from Holland and Germany. In 1961, after a successful appeal by bicycle importers, the Eisenhower tariffs were declared invalid by the Court of U.S. Customs Appeals, and President Kennedy imposed new a new tariff rate at 50% on foreign-made bicycles, a rate which remained in place until 1964.^[14]

While every large bicycle manufacturer in the world sponsored or participated in bicycle racing competition of some sort in order to keep up with the newest trends in technology, Schwinn had restricted its racing activities to events inside the United States, where Schwinn bicycles largely predominated. As a result, Schwinns became increasingly dated in both styling and technology. By 1957, the Paramount series, once a premier racing bike, had atrophied from a lack of attention and modernization. Aside from some new frame lug designs, the designs, methods and tooling were the same as had been used in the 1930s. After a crash-course in new frame-building techniques and derailleur technology, Schwinn introduced an updated Paramount with Reynolds 531 double-butted tubing, Nervex lugsets and bottom bracket shells as well as Campagnolo derailleur dropouts. The Paramount continued as a limited production model, built in small numbers in a small apportioned area of the old Chicago assembly factory. The new frame and component technology incorporated in the Paramount largely failed to reach Schwinn's mass-market bicycle lines. Another change occurred in 1963 following the death of F.W. Schwinn, when grandson Frank Valentine Schwinn took over management of the company.

[edit] Marketing and anti-trust issues

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By the mid-1960s, Schwinn's exclusive marketing practices were well-entrenched in the United States, practices that had ensured a dominant position in the U.S. bicycle market. However, Schwinn's distributors continually balked at restrictions the company put on their ability to market Schwinn bicycles to shops outside the Schwinn network. In a ten-year legal battle, many of Schwinn's practices were upheld by the courts: judges ruled they had the right to have their bicycles sold by retailers equipped to service the bikes as well as sell them. However, in a decision by the US Supreme Court in 1967, Schwinn was found guilty of restraint of trade by preventing distributors shipping bicycles to unapproved dealers. The company stopped working solely through independent local distributors and constructed four regional warehouses from which bicycles would—legally—be sent to shops. While this solved the problem of unfair trade practice with the courts, the new distribution system made it more difficult for the company to stay informed of customer complaints regarding manufacturing or assembly problems.

[edit] Children and youth markets

During the 1960s, Schwinn aggressively campaigned to retain and expand its dominance of the child and youth bicycle markets. The company advertised heavily on television, and was an early sponsor (from 1958) of the children's television program, Captain Kangaroo. The Captain himself was enlisted to regularly hawk Schwinn-brand bicycles to the show's audience, typically six years old and under.^[15] As these children matured, it was believed they would ask for Schwinn bicycles from their parents. By 1971, U.S. government councils had objected to Schwinn's marketing practices. In response, Schwinn had Captain Kangaroo alter its format. The Captain no longer insisted that viewers buy a Schwinn, but instead made regular on-air consultations of a new character, 'Mr. Schwinn Dealer'.^[16]

In 1962, Schwinn's designer Al Fritz heard about a new youth trend centered in California for retrofitting bicycles with drag-racing motorcycle accoutrements, including high-rise, ape hanger handlebars and low-rider banana seats. Inspired, he designed the first such mass-production bike for the youth market as Project J-38. The result was introduced to the public as the Schwinn Stingray in 1963. For a mass-production bike, the new model was a revelation, with its requisite high-rise handlebars, banana seat, and 20" tires. Sales were initially slow, as many parents desiring a bicycle for their children did not find the Stingray appealing in the least. However, after a few appeared on America's streets and neighborhoods, many youth riders would accept nothing else, and sales took off. By 1965, a host of American and foreign manufacturers were offering their own version of the Stingray.

[edit] The 10 Speed

An increasing number of teens and young adults were purchasing imported European sport racing or sport touring bicycles, many fitted with multiple derailleur-shifted gears. Schwinn decided to meet the challenge by developing two lines of sport or road 'racer' bicycles. One was already in the catalog - the limited production Paramount series. As always, the Paramount spared no expense; the bicycles were given high-quality lightweight lugged steel frames and were fitted with quality European components including derailleurs, hubs, and gears. The Paramount series had limited production numbers, making vintage examples quite rare today. Starting in 1960, for the rest of the market, Schwinn offered the Schwinn Varsity and Continental, now equipped as multi-geared sport bikes (10-speeds), and designed to imitate the style of the new narrow-tired 'racing' and sport bikes from Europe, though not their performance.^{[citation needed]} The 1960 Varsity was introduced as an 8 speed bike, but in mid 1961 was upgraded to 10 speeds. Other road bikes were introduced by Schwinn in the early and mid 1960s, such as the Superior, Sierra, and Super Continental, but these were only produced for a few years. The Varsity and Continental sold in large numbers through the 1960s and early 1970s. By the mid-1970s Schwinn's heavy Varsity and Continental lines were falling out of public favor, although they would still be produced in large numbers into the 1980s.

[edit] The bicycle boom

The Sting-Ray sales boom of the 1960s accelerated in 1970, with U.S. bicycle sales doubling over a period of two years. However, there were clear warning signs on the horizon.

Despite a huge increase in popularity of lightweight European sport or road racing bicycles in the United States, Schwinn adhered to its existing strategy in the lightweight adult road bike market. For those unable to afford the Paramount, this meant a Schwinn 'sports' bike with a heavy steel electro-forged frame along with steel components such as wheels, stems, cranks, and handlebars from the company's established U.S. suppliers. Though weighing slightly less, the mid-priced Schwinn Superior or Sports Tourer was almost indistinguishable from Schwinn's other heavy, mass-produced models, such as the Varsity and Continental. While competitive in the 1960s, by 1972 these bicycles were much heavier and less responsive in comparison to the new sport and racing bicycles arriving from England, France, Italy, and increasingly, Japan.^[17]

Another problem was Schwinn's failure to design and market its bicycles to specific, identifiable buyers, especially the growing number of cyclists interested in road racing or touring. Instead, most Schwinn derailleur bikes were marketed to the general leisure market, equipped with heavy "old timer" accessories such as kickstands that cycling aficionados had long since abandoned. More and more cyclists, especially younger buyers, began to insist on lighter steel alloys, responsive frame geometry, aluminum components, advanced derailleur shifting, and multiple gears.^[18][19] When they failed to find what they wanted at Schwinn, they went elsewhere. While the Paramount still sold in limited numbers to this market, the model's customer base began to age, changing from primarily bike racers to older, wealthier riders looking for the ultimate bicycle. Schwinn sold an impressive 1.5 million bicycles in 1974, but would pay the price for failing to keep up with new developments in bicycle technology and buying trends.

With their aging product line, Schwinn failed to dominate the huge sport bike boom of 1971-1975, which saw millions of 10-speed bicycles sold to new cyclists.^[20] Schwinn did allow some dealers to sell imported road racing bikes, and eventually put their own label on high-quality Japanese-made sport and touring bicycles from National/Panasonic. Though these met initial dealer resistance as 'imports' and were not included in the Schwinn consumer catalog, it was soon realized that the Panasonic Schwinn sport and touring bikes were fully the equal of the American-made versions in quality and performance. Schwinn's standard road bike model from Panasonic was the World Traveller, which had a high-quality lugged steel frame and Shimano components. Schwinn also marketed a top shelf touring model from Panasonic, the World Voyager, lugged with butted Tange chromoly tubing, Shimano derailleurs, and SunTour bar-end shifters, a serious challenge to the Paramount series at half the price.^[21]

By 1975, bicycle customers interested in medium-priced road and touring bicycles had largely gravitated towards Japanese or European brands. Unlike Schwinn, many of these brands were perennial participants in professional bicycle racing, and their production road bicycles at least possessed the cachet and visual lineage of their racing heritage, if not always their componentry.^[22] While not as prominent at the winner's podium, Japanese brands such as Fuji and Panasonic offered consistently high quality, reasonable prices, and state-of-the-art-derailleur, crankset, and gearing design.^[23] Unlike Schwinn, most Japanese bicycle manufacturers were quick to adopt the latest European road racing geometries, new steel alloys, and modern manufacturing techniques.^[24] As a result, their moderately-priced bicycles, equipped with the same Japanese-made components, usually weighed less and performed better than competitive models made by Schwinn. Schwinn brand loyalty began to suffer as huge numbers of buyers came to retailers asking for the latest sport and racing road bikes from European or Japanese manufacturers. By 1979, even the Paramount had been passed, technologically speaking, by a new generation of American as well as foreign custom bicycle manufacturers.

[edit] BMX bicycles

Schwinn also largely failed to capitalize on a new trend: BMX racing. After first claiming it to be a dangerous sport, management changed their tune—too late—when they introduced the Predator, their first competitive step into the modern BMX market. A latecomer, the Predator took just eight percent of the BMX market. While their Scrambler evolved into a BMX design in the late 1970s, it was heavier than BMX designs from other manufacturers.

[edit] Mountain bikes

In the early 1980s, a new bicycle sport begun by enthusiasts in California appeared using a new type of all-terrain bicycle, the mountain bike. When the sport's original inventors demonstrated their new design, Schwinn marketing personnel derided the mountain bike, concluding that it would become a short-lived fad. This proved to be a major miscalculation, as several new U.S. startup companies began producing high-quality frames sourced from new, modern plants in Japan and Taiwan using new mass-production technologies such as TiG welding. The new light chromoly frames and advanced welding/joining techniques were a far cry from the bad old days of cheap Asian 10-speeds, and customer reports were uniformly positive. Schwinn's new competitors such as Specialized and Fisher MountainBikes were soon selling hundreds of thousands of mountain bikes to eager customers, setting sales records in a market niche that soon grew to enormous proportions.^[25]

[edit] Factory and retooling issues

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By this time, Schwinn's bicycle factory was completely outmoded in comparison to modern bicycle manufacturing centers in Japan and Taiwan, who had continually invested in new and up-to-date manufacturing techniques and materials, including new joinery techniques and the latest lightweight chromoly steel (later, aluminum) alloys. The company considered relocating to a single facility in Tulsa, Oklahoma, but financing the project would have required outside investors, perhaps even foreign ones. Schwinn's board of directors rejected the new plant in 1978.

[edit] Labor troubles, bankruptcy and demise

Worker dissatisfaction, seldom a problem in the early years, grew with steep increases in inflation. During the late 1970s, the Schwinn Chicago factory workers voted to affiliate with the United Auto Workers. Plant assembly workers began a campaign for higher pay, and the company suffered a series of labor troubles.^{[citation needed]} However, stiff competition from lower-cost competition in Asia resulted instead in declining sales and layoffs. These problems were exacerbated by the inefficiency of producing modern bicycles in the 80-year-old Chicago factory. By 1980, Edward R. Schwinn Jr., a fourth-generation Schwinn, had joined the ranks of Schwinn management. After numerous meetings, the board of directors voted to source most Schwinn bicycle production from their established bicycle supplier in Japan, Panasonic Bicycle. As Schwinn's first outsourced bicycles, Panasonic had been the only vendor to meet Schwinn's production requirements. Later, Schwinn would sign a production supply agreement with Giant Bicycles of Taiwan.

Schwinn later moved remaining U.S. bicycle production to a new plant in Greenville, Mississippi, where bicycles could be assembled at lower cost using parts sourced from Asia.^{[citation needed]} The Greenville plant was not a success, as Asian manufacturers could still produce and assemble high-quality bicycles at a far lower per-unit cost than Schwinn at its plant in Mississippi, which had to source component parts from Asia, then assemble them using higher-priced U.S. labor.

After a series of production cuts and labor force reductions, Schwinn was able to restructure its operations. The company renegotiated loans by putting up the company and the name as collateral, and increased production of the Airdyne exercise bicycle, a moneymaker even in bad times. The company took advantage of the continued demand for mountain bikes, and sourced parts and high-quality Schwinn-designed chromoly steel frames from manufacturers in Japan and Taiwan. The new arrangement enabled Schwinn to reduce costs and stay competitive with Asian bicycle companies. In Taiwan, Schwinn was able to conclude a new production agreement with Giant Bicycles, increasing bicycle sales to 500,000 per year by 1985. Schwinn annual sales soon neared the million mark, and the company turned a profit in the late 1980s. Realizing the risk of dependence on a single supplier, Schwinn negotiated a deal with the China Bicycle Co.. In retaliation, Giant introduced its own line of Giant-branded bikes for sale to retailers carrying Schwinn bikes.

By 1990, other U.S. bicycle companies with reputations for excellence in design such as Trek, Specialized, and Cannondale had cut further into Schwinn's market. Unable to produce bicycles in the U.S. at a competitive cost, Schwinn closed its plant in Greenville, Mississippi. Seeking to increase its brand recognition, Schwinn established additional company-operated shops, a move that alienated existing independent bike retailers in cities where the company stores had opened. This in turn led to further inroads by domestic and foreign competitors. Faced with a downward sales spiral, Schwinn went into bankruptcy in 1992. The company and name were bought by the Zell/Chilmark Fund, an investment group, in 1993. Zell moved Schwinn's corporate headquarters to Boulder, Colorado.

In 1993 Richard Schwinn, great-grandson of Ignaz Schwinn, with business partner Marc Muller, purchased the Schwinn Paramount plant in Waterford, Wisconsin, where Paramounts were built since 1980 . They founded Waterford Precision Cycles, which is still in operation. In 2003 they employed 18 workers building lightweight bicycles.[1]

A Schwinn bicycle sold after the company was bought by Pacific Cycle.

In late 1997, Questor Partners Fund, led by Jay Alix and Dan Lufkin, purchased Schwinn Bicycles. Questor/Schwinn later purchased GT Bicycles in 1998 for $8 a share in cash, roughly $80 million. The new company produced a series of well-regarded mountain bikes bearing the Schwinn name called the Homegrown series. However, it was not enough, and in 2001 Schwinn/GT declared bankruptcy.

[edit] Sale to Pacific

On September 11, 2001, Schwinn Company, its assets, and the rights to the brand, together with that of the GT Bicycle, was purchased at a bankruptcy auction by Pacific Cycle, a company previously known for mass-market brands owned by Wind Point Partners.^[26] In 2004 Pacific Cycle was, in turn, acquired by Dorel Industries. Pacific and Dorel produced a series of low-cost bicycles built in Taiwan and the People's Republic of China, which were badged with the Schwinn nameplate and sold in large retail stores such as Wal-Mart, Target, and Costco. A second line of higher-level Schwinn-branded bicycles was also introduced for specialty bicycle shop retailers.

[edit] Products

[edit] 2008 Bike Models

Road Bikes: Circuit, Fastback, Fastback Comp, Fastback CX, Fastback Sport, Le Tour, Le Tour GS, Le Tour GSW, Le Tour GSX, Madison, Peloton, Peloton LTD, Peloton Pro, Prologue, Super Sport, Super Sport GSM, Super Sport GSW, Super Sport Ultra 1, Super Sport Ultra 2

Mountain Bikes: Frontier, Frontier GS, Frontier GSD, Mesa, Mesa Disc, Rocket Disc

Hybrid Bikes: World Adventure, World GS, World GSD, World Street

Comfort Bikes: 24in Sprite, Collegiate Coasting, Sierra 7, Sierra GS, Sierra GSD, Voyageur 7, Voyageur GS, Voyageur GSD, Voyageur GSX

Cruiser Bikes: 24in Corvette, Alloy 7, Alloy DX, Alloy SS, Coffee, Cream, Cruiser 3, Cruiser SS, Debutante, Deluxe Seven, DX Sport, Heavy Duti, Nancy, Sid, Slik Chik, SS Sport, SS-X

BMX Bikes: Flowmaster, Predator Pro, Predator Pro .5

Kids Bikes: 20in Mini Mesa, 20in Mini Mesa Girls, 24in Midi Mesa, 24in Midi Mesa Girls, Aerostar, Aerostar AL, Gremlin, Gremlin AL, Lil Stardust, Lil Stardust AL, Roadster, Roadster Girls, Stardust, Stardust AL, Tiger AL, Tigress AL

[edit] See also

• Cruiser bicycle

[edit] References

[edit] External links

• Official Schwinn Bicycle website
• Wastyn Era Schwinn Paramount Registry
• "Classic and Antique Bicycle Exchange"