Yes, the economy has really clamped down, but that wasn't the final shot that put Cannondale down....it was the warranty work.
I've recieved some new info, and lets just sit and wait. I think we will know the future of Cannondale in the next couple of weeks.
2 reasons I believe Cannondale hasn't posted anything about the future of the Motorsports Division:
1: I believe their hands are tied. I do understand the focus on the bicycle division right now, the future of the entire company is on the line, and they're trying to save it. From my understanding, this was a business decision...and not all business decisions are easy, and you can not please everyone. You have to do whats right, and for a small Pennsylvania company, this meant letting the motorsports division go. I do not feel this was an easy decision personally, but business is business...simple fact.
2: They do not have any idea what is really going to happen yet, and they do not want to add any more irons to the fire. There's enough rumors out there, why add to the fire.
Allthough, I still do not agree with letting us out to dry without any public anouncement, or any heads up to the dealers. Anything would have been better than this. Hang in there guys, I got a real good feeling about the next couple of weeks...I think we're in store for some good news.
Open Letter to Motorsports??
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cdaledave89
- Posts: 0
- Joined: Wed Mar 10, 2021 10:41 pm
Scott Montgomery reply
I received a reply from Scott Montgomery yesterday. I waited a day to post the response until I got his permission to do so. Here it is:
Dear Dave -
Thanks for your e-mail, and for taking the time to tell us of your frustrations. We always appreciate frankness, and we're always grateful for the opportunity to respond.
To be honest, you make some very good points about our recent communications efforts, which do indeed appear to be geared primarily toward our bicycle customers. There are two basic reasons for this:
1.) During this very difficult time it is absolutely critical that our bicycle business maintains its positioning and momentum. A cold, analytical examination of our books shows that Cannondale's bicycle division has maintained profitability throughout our involvement with motorsports, while we were never able to generate a profit with the motorsports division. During this hectic, crazy time when the very future of the company could conceivably be at stake, economic necessity (to say nothing of our lenders and the bankruptcy judge) dictates that we pay greater attention to the profitable bike division and do our best to shore up confidence among our bike dealers and customers. We don't feel at all good about having to make this difficult choice, but our current situation (and a recently reduced workforce) requires us to make these very hard decisions.
2.) Operations of the motorsports division have been suspended, while the bicycle division continues to operate. What this logically means is that we're able to provide more updates regarding the status of the bike division, vs. the motorsports division, and that's why you've noticed more communication on the bike side of things about production staff returning to work, units shipping from the factory, etc. There simply isn't the same level of information to communicate about motorsports because those operations are suspended.
Jim, I apologize if the impression we've given is that we don't care about the motorcycle and ATV customers who have supported us. Nothing is further from the truth. You have been our staunchest supporters, and we will always, always be extremely grateful to you and our other customers.
And please don't think our lack of communication reflects a lack of action on our part. We are still answering tech questions at our 1 800 MOTO USA hotline. We are still shipping motorcycle and ATV parts to assist Cannondale owners and dealers. And finally, we are working feverishly to see that Cannondale Motorsports survives into the future under new ownership, which is probably the best way to honor the commitment and support that you and our other customers have shown us.
Thanks again for your e-mail, for your support, and for your ongoing patience. I'm optimistic that things will become clearer for us all in the coming weeks.
Sincerely,
Scott Montgomery
Dear Dave -
Thanks for your e-mail, and for taking the time to tell us of your frustrations. We always appreciate frankness, and we're always grateful for the opportunity to respond.
To be honest, you make some very good points about our recent communications efforts, which do indeed appear to be geared primarily toward our bicycle customers. There are two basic reasons for this:
1.) During this very difficult time it is absolutely critical that our bicycle business maintains its positioning and momentum. A cold, analytical examination of our books shows that Cannondale's bicycle division has maintained profitability throughout our involvement with motorsports, while we were never able to generate a profit with the motorsports division. During this hectic, crazy time when the very future of the company could conceivably be at stake, economic necessity (to say nothing of our lenders and the bankruptcy judge) dictates that we pay greater attention to the profitable bike division and do our best to shore up confidence among our bike dealers and customers. We don't feel at all good about having to make this difficult choice, but our current situation (and a recently reduced workforce) requires us to make these very hard decisions.
2.) Operations of the motorsports division have been suspended, while the bicycle division continues to operate. What this logically means is that we're able to provide more updates regarding the status of the bike division, vs. the motorsports division, and that's why you've noticed more communication on the bike side of things about production staff returning to work, units shipping from the factory, etc. There simply isn't the same level of information to communicate about motorsports because those operations are suspended.
Jim, I apologize if the impression we've given is that we don't care about the motorcycle and ATV customers who have supported us. Nothing is further from the truth. You have been our staunchest supporters, and we will always, always be extremely grateful to you and our other customers.
And please don't think our lack of communication reflects a lack of action on our part. We are still answering tech questions at our 1 800 MOTO USA hotline. We are still shipping motorcycle and ATV parts to assist Cannondale owners and dealers. And finally, we are working feverishly to see that Cannondale Motorsports survives into the future under new ownership, which is probably the best way to honor the commitment and support that you and our other customers have shown us.
Thanks again for your e-mail, for your support, and for your ongoing patience. I'm optimistic that things will become clearer for us all in the coming weeks.
Sincerely,
Scott Montgomery
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LapTraffic
- Posts: 0
- Joined: Wed Mar 10, 2021 10:41 pm
Dave,
you missed a "Jim" in the body of the text...
I found some more info on the ongoing story of Cannondale....
Coinciding with the bankruptcy filing, Cannondale accepted a $25 million bid for the assets of the company from Pegasus Partners II, L.P., a venture capital firm that was owed approximately $25 million. Pegasus loaned Cannondale $25 million last July.
The deal with Pegasus, called a stalking horse agreement, prohibits other interested buyers from bidding less than $25 million.
ATV News
"There are strategic buyers within the powersports industry and there also are buyers on the bicycle side," said Joe Montgomery, chairman, president and CEO. There also are several potential bidders from the investment community, but Montgomery declined to identify the potential buyers.
Cannondale had early struggles with its off-road motorcycle, but its high-performance ATVs were a stronger product in that market and were well received by enthusiast media and competitive owners. Retail sales of both products could not provide enough income to offset the expense Cannondale incurred for research and development and machine production.
????????????????We did a good job,??????????????? said Montgomery. ????????????????We were making money on a number of the products.??????????????? Montgomery declines to provide specific model-by-model profit margins, citing federal securities regulations governing full disclosure to all investors.
The company poured close to $80 million into the motorsports venture. It invested approximately $11 million on research and development of motorsports products during fiscal years 2000 ?????????????????? 2002, according to a securities filing it made last September.
Cannondale showed its first motorsports product, the 397cc motorcross MX400 at the 1999 Dealer Expo. It carried an MSRP of $7,950.
--------------------------------------------------------------------------------
Dealing With Difficulties
--------------------------------------------------------------------------------
"By far the most difficulties we had were with the engine," says Montgomery. "Those put us behind on deliveries. And we had some warranty problems. But we had overcome those issues. Last year, we began shipping in significant amounts. The product was well received. The supermotard and the enduro ?????????????????? a number of motorcycles were being well received here and in Europe. And the quad was well received.
ATV News
"We just couldn??????????????????t get anyone to put in anymore money. We tried to sell the division. We tried to get investors for the division, but we were unable to make it happen," he said.
Montgomery said the company never forced product on its dealers, denying reports that dealers had to take four motorcycles for every ATV they received.
The company never thought about dropping the motorcycle line and concentrating on the quads, he said. "It was a good product and a number of reviews across the board were very positive," he said. "And it wouldn??????????????????t have saved us any real money; it wouldn??????????????????t have fixed anything. In fact, the more products you ship, the more overhead you absorb. The motorcycle products were very well received, especially in Europe."
The cash crunch came to light when Cannondale reported in its September 2002 annual securities filing that it had used approximately $10.3 million of the proceeds of the Pegasus financing to pay off previous loans. It then noted that the remaining $11.7 million ????????????????have been used for working capital needs.???????????????
For the year ended June 29, the company had sales of $156.6 million, including $134.6 million from bicycles and $22 million from motorsports.
As cash became tighter, the company fell behind with all of its suppliers, even those on the bicycle side. When that happened, suppliers began demanding COD. "If they wanted $10,000 in materials," said one supplier, "I wanted $20,000 to pay down part of the debt."
--------------------------------------------------------------------------------
Why Motorsports?
--------------------------------------------------------------------------------
Joe Montgomery put it succinctly when he told Powersports Business in March 2001: ????????????????In 1996, we saw the bicycle market beginning to mature. We have a very growth-oriented group here; we??????????????????re a very energetic company. And I was looking at what was next to keep Cannondale growing.???????????????
And, he added, ????????????????We had the skills to build the product. We??????????????????re very good with aluminum; we know how to work with it. And we know suspension.???????????????
But perhaps his key comment was this one: ????????????????We didn??????????????????t know squat (about engines), and, to begin with, that??????????????????s where we fell down.??????????????? Cannondale couldn??????????????????t buy a motor and bolt it on its own aluminum frame; that wasn??????????????????t in its corporate DNA. It needed ?????????????????? wanted ?????????????????? its own proprietary engine.
--------------------------------------------------------------------------------
A Difficult Ending
--------------------------------------------------------------------------------
Why did Cannondale??????????????????s motorsports venture fail? Many reasons, say those close to the scene. But perhaps this scenario explains it best: A drive for perfection, coupled with inexperience on the engine side, led to multiple changes, late shipments and warranty problems. The premium pricing for the innovative four-stroke, fuel-injected machines with unique aluminum frames didn??????????????????t work well when powersports OEMs quickly added competitive products. And as bicycle sales slipped from $162 million in fiscal 2000 to $147 million and $157 million in the next two years, there was no cash to pump the motorsports production engine.
ATV News
????????????????Joe??????????????????s an entrepreneur,??????????????? says Francois Paranteau, a securities analyst. ????????????????The same skills needed to build a great bicycle company from scratch were the same ones needed here. But he may have received bad advice from the Street ?????????????????? bigger isn??????????????????t always better. And when they did it, they went out naked. They had a $20 stock and they could have sold one million shares and had $20 million to start (the project). One rule of thumb (for a startup) is that it takes twice as long as you think and twice as much (money) as you expect. I believe Joe didn??????????????????t have the cushion to keep innovating through the downturn.???????????????
Paranteau adds a final note: ????????????????There really wasn??????????????????t anything proprietary about the fuel injection or the aluminum frame. Joe said their strength would be the ability to implement their ideas. But they didn??????????????????t have the financial backing to do it.???????????????
Joe Montgomery, 63, has been the driving force at Cannondale since he began the company in 1971. Now, he??????????????????s not certain what the future holds for him.
????????????????We gave it our best shot, and we still have believers out there. I have no idea what I??????????????????ll do. I will help out here as long as I can and as long as they need me to fulfill our obligations to creditors, stockholders and employees .???????????????
you missed a "Jim" in the body of the text...
I found some more info on the ongoing story of Cannondale....
Coinciding with the bankruptcy filing, Cannondale accepted a $25 million bid for the assets of the company from Pegasus Partners II, L.P., a venture capital firm that was owed approximately $25 million. Pegasus loaned Cannondale $25 million last July.
The deal with Pegasus, called a stalking horse agreement, prohibits other interested buyers from bidding less than $25 million.
ATV News
"There are strategic buyers within the powersports industry and there also are buyers on the bicycle side," said Joe Montgomery, chairman, president and CEO. There also are several potential bidders from the investment community, but Montgomery declined to identify the potential buyers.
Cannondale had early struggles with its off-road motorcycle, but its high-performance ATVs were a stronger product in that market and were well received by enthusiast media and competitive owners. Retail sales of both products could not provide enough income to offset the expense Cannondale incurred for research and development and machine production.
????????????????We did a good job,??????????????? said Montgomery. ????????????????We were making money on a number of the products.??????????????? Montgomery declines to provide specific model-by-model profit margins, citing federal securities regulations governing full disclosure to all investors.
The company poured close to $80 million into the motorsports venture. It invested approximately $11 million on research and development of motorsports products during fiscal years 2000 ?????????????????? 2002, according to a securities filing it made last September.
Cannondale showed its first motorsports product, the 397cc motorcross MX400 at the 1999 Dealer Expo. It carried an MSRP of $7,950.
--------------------------------------------------------------------------------
Dealing With Difficulties
--------------------------------------------------------------------------------
"By far the most difficulties we had were with the engine," says Montgomery. "Those put us behind on deliveries. And we had some warranty problems. But we had overcome those issues. Last year, we began shipping in significant amounts. The product was well received. The supermotard and the enduro ?????????????????? a number of motorcycles were being well received here and in Europe. And the quad was well received.
ATV News
"We just couldn??????????????????t get anyone to put in anymore money. We tried to sell the division. We tried to get investors for the division, but we were unable to make it happen," he said.
Montgomery said the company never forced product on its dealers, denying reports that dealers had to take four motorcycles for every ATV they received.
The company never thought about dropping the motorcycle line and concentrating on the quads, he said. "It was a good product and a number of reviews across the board were very positive," he said. "And it wouldn??????????????????t have saved us any real money; it wouldn??????????????????t have fixed anything. In fact, the more products you ship, the more overhead you absorb. The motorcycle products were very well received, especially in Europe."
The cash crunch came to light when Cannondale reported in its September 2002 annual securities filing that it had used approximately $10.3 million of the proceeds of the Pegasus financing to pay off previous loans. It then noted that the remaining $11.7 million ????????????????have been used for working capital needs.???????????????
For the year ended June 29, the company had sales of $156.6 million, including $134.6 million from bicycles and $22 million from motorsports.
As cash became tighter, the company fell behind with all of its suppliers, even those on the bicycle side. When that happened, suppliers began demanding COD. "If they wanted $10,000 in materials," said one supplier, "I wanted $20,000 to pay down part of the debt."
--------------------------------------------------------------------------------
Why Motorsports?
--------------------------------------------------------------------------------
Joe Montgomery put it succinctly when he told Powersports Business in March 2001: ????????????????In 1996, we saw the bicycle market beginning to mature. We have a very growth-oriented group here; we??????????????????re a very energetic company. And I was looking at what was next to keep Cannondale growing.???????????????
And, he added, ????????????????We had the skills to build the product. We??????????????????re very good with aluminum; we know how to work with it. And we know suspension.???????????????
But perhaps his key comment was this one: ????????????????We didn??????????????????t know squat (about engines), and, to begin with, that??????????????????s where we fell down.??????????????? Cannondale couldn??????????????????t buy a motor and bolt it on its own aluminum frame; that wasn??????????????????t in its corporate DNA. It needed ?????????????????? wanted ?????????????????? its own proprietary engine.
--------------------------------------------------------------------------------
A Difficult Ending
--------------------------------------------------------------------------------
Why did Cannondale??????????????????s motorsports venture fail? Many reasons, say those close to the scene. But perhaps this scenario explains it best: A drive for perfection, coupled with inexperience on the engine side, led to multiple changes, late shipments and warranty problems. The premium pricing for the innovative four-stroke, fuel-injected machines with unique aluminum frames didn??????????????????t work well when powersports OEMs quickly added competitive products. And as bicycle sales slipped from $162 million in fiscal 2000 to $147 million and $157 million in the next two years, there was no cash to pump the motorsports production engine.
ATV News
????????????????Joe??????????????????s an entrepreneur,??????????????? says Francois Paranteau, a securities analyst. ????????????????The same skills needed to build a great bicycle company from scratch were the same ones needed here. But he may have received bad advice from the Street ?????????????????? bigger isn??????????????????t always better. And when they did it, they went out naked. They had a $20 stock and they could have sold one million shares and had $20 million to start (the project). One rule of thumb (for a startup) is that it takes twice as long as you think and twice as much (money) as you expect. I believe Joe didn??????????????????t have the cushion to keep innovating through the downturn.???????????????
Paranteau adds a final note: ????????????????There really wasn??????????????????t anything proprietary about the fuel injection or the aluminum frame. Joe said their strength would be the ability to implement their ideas. But they didn??????????????????t have the financial backing to do it.???????????????
Joe Montgomery, 63, has been the driving force at Cannondale since he began the company in 1971. Now, he??????????????????s not certain what the future holds for him.
????????????????We gave it our best shot, and we still have believers out there. I have no idea what I??????????????????ll do. I will help out here as long as I can and as long as they need me to fulfill our obligations to creditors, stockholders and employees .???????????????
makes me feel better about owning one. I hope an american company ends up with the quads. As much as I dislike harley.........I want them to buy the quad division. that would allow all of us to enjoy an american built quad with plenty of dealers already in place to support the product. Plus is would give harley owners an excuse to get their bikes dirty 