News Update for February 1, 2003
Edited by Jeff Jones
Cannondale back in production soon
By Gerard Knapp
Cannondale executives have announced that its staff are expected to be back at the Bedford, Pennsylvania, factory in two weeks to resume making its bicycles and related products, following US Bankruptcy Court approval of post-petition financing.
Late last week, the US manufacturer announced that it planned to file for bankruptcy on January 28 under Chapter 11 of the US Bankruptcy Code, but this was delayed until January 30. The company filed a voluntary petition for reorganisation and it appears the wheels are in motion for production to resume, with a sale by auction expected to occur in mid-March.
It's widely known that Cannondale's bicycle business was essentially sound, but it didn't generate enough profits to continually prop up the consistent poor performance from Cannondale's adventures into motorsports, where its enduro bikes competed with established giants such as Honda.
In regard to the motorsports division, Cannondale VP Scott Montgomery told Cyclingnews "The plan for the motorsports division is that it will be sold in the coming months."
"The products have received many positive press reviews and success in the market but we were never able to get the production levels high enough to support profitability. But we hope that it will find a successful new owner to carry on the legacy of innovation and technology which we presented," he said.
"We have learned a great deal and improved our company in many ways. We took risks and that is part of the challenge of running a new business. Now we are very pleased to return to our roots and focus our energies on the cycling world entirely and we thank our many faithful supporters through this challenging period."
The US Bankruptcy Court in Connecticut approved the financing package that will come from Cannondale's lenders, The CIT Group/Business Credit, Inc, and Pegasus Partners II, L.P. ("Pegasus"). Cannondale use these funds to pay for goods and services received after the filing in the ordinary course of business. The company's foreign subsidiaries are not included in the bankruptcy petition and business done through subsidiaries in Europe, Japan and Australia accounted for approximately 42 percent of total sales in fiscal 2002.
Under the terms of an agreement still subject to court approval, Pegasus has agreed to act as the "stalking horse" in a Section 363 sale of substantially all of the company's assets on a going concern basis. That bid is subject to higher and better offers at an auction anticipated to occur in mid-March. Legg Mason Wood Walker, Incorporated has been retained as Cannondale's financial advisor and exclusive sales agent during the auction process.
A second wave of workers is slated to return to work in early March. They have been idled during a recent factory shutdown but in this period, Cannondale has continued to ship bikes and other products from inventory.
Cannondale released a statement quoting a number of US dealers voicing their support for the company, while earlier in the week, the Société du Tour de France announced that the Saeco team had received one of the four wildcard entries to this year's 100th anniversary edition of the three-week race.
Cannondales have not been ridden in the past two editions of the Tour due to a mixture of bad luck, politics and a key rider testing positive for doping. Events in 2002 tested the company's patience with the European peloton after Saeco's lead rider Gilberto Simoni tested positive for cocaine during the Giro d'Italia and was subsequently withdrawn from the race by his team management. In turn, the invitation to the Tour de France was withdrawn.
The succession of events led to company founder, Joe Montgomery, issuing a statement outlining the company's policy on doping and cycling.
Late last year the company's exposure in the MTB area also took a tumble when Volvo announced it was withdrawing from sponsoring the all-conquering Volvo/Cannondale MTB team. It certainly wasn't due to a lack of success, as the team's riders won many world cups and world championships. Rather, it was a change of direction for the car company which left Cannondale out in the cold.
However, a new team called Siemens Mobile-Cannondale was officially launched this week in Europe which should see the US fat-tyre bikes back in action with riders including Christoph Sauser (Switzerland), Roel Paulissen (Belgium), Tinker Juarez (U.S.), Hannes Pallhuber (Italy) and Franz Hofer (Italy) for cross-country, and Cedric Gracia (France) and Petra Bernhard (Austria) for downhill and four-cross. The riders come from the Rainer-Wurz.com team and the former Volvo/Cannondale squad.
(All rights reserved/Copyright Knapp Communications Pty Limited 2003)