January 31, 2014 (Montreal, QC) – Cannondale’s parent company, Montreal-based Dorel Industries, has announced that production and assembly of Cannondale bikes will be shifted from Bedford, Pennsylvania to Asia, according to a company release. Dorel justified its move as reducing “supply chain complexity and increasing flexibility to deliver competitive advantages to customers and consumers.”
Dorel is the owner of such bike brands as Schwinn, GT, Mongoose, Caloi, IronHorse and Cannondale. Dorel also has its Pacific Cycle division, which works with the mass merchant and sporting goods channel, selling to large box stores. Collectively, all this makes Dorel one of the world’s top bike manufacturers. Also grouped under Dorel’s Recreational/Leisure segment are the Sugoi, Cannondale, GT, Schwinn, IronHorse, and Mongoose apparel lines. The company’s annual sales are $2.6 billion.
Some Cannondale parts are presently assembled in Bedford, shipped to the Far East, and then shipped back to Bedford for assembly, Jeffrey Schwartz, Dorel’s Chief Financial Officer, told The Globe and Mail. Dorel acquired Cannondale for $202-million in 2008 and has promoted a strong marketing strategy for the brand. Part of this strategy involves sponsoring the WorldTour team Cannondale Pro Cycling, featuring Canadian rider, Guillaume Boivin.
Concurrent with outsourcing all production to Asia, Dorel’s Recreational/Leisure will relocate its research and development facility in Bethel, CT to the segment’s new headquarters in Wilton, CT., and will convert its former retail lab in Bethel to accommodate GURU Academy activities. The value of the former Bethel headquarters will be written down to reflect the market value of the property.
As such, the segment will incur approximately US$14-US$16 million pre-tax in restructuring charges associated with its plan, of which 70% are non-cash and expects to realize annualized cost savings of at least US$6 million, once the restructuring is completed in late 2014. Approximately 100 employees will be affected globally once all changes are implemented.
“The objective is to accelerate operational excellence at our Recreational/Leisure segment by strengthening its working relationships with its global partners,” said Peter Woods, Global CFO & Interim Recreational/Leisure President. “In particular, we want to significantly reduce development and supply chain lead times, improve cost structures and operating margins, and enhance quality while lowering warranty costs.”
“Today marks the beginning of the next phase in Dorel’s evolution as a global bicycle and apparel company. This plan will result in higher quality products and services for our customers and consumers,” stated Schwartz.