Friday, June 22, 2007


How bad management destroyed an American icon.

Our personal accountant was (and, may be, still) married to one of the manufacturing executives of Schwinn Bicycle Co. She was our accountant from 1989 until they moved to Colorado in 1994. She was our accountant for both our business (printing) and personal affairs. We had several good discussions about Schwinn’s decision to outsource practically all of its manufacturing to China.

It began with the decision of two generations of Schwinn family descendant. The first descendant inherited a bureaucratic and complacent company. He decided to stay the course and that must have contributed to Schwinn’s failure to recognize the BMX craze that began in the 70s. This was followed by hybrids (road and off-road models). Schwinn missed that too. Then, the market started looking for more exotic metals (like titanium and much later, carbon fiber) to use for bicycle frames. Schwinn also missed that.

Schwinn lost market share and, worse, visibility among the younger generation. Management decided to look overseas for a solution. They decided to downsize and outsource manufacturing. (Of course, terms like “downsize” and “outsource” did not exist at that time but they accurately describe their activities.) Along the way, they antagonized their suppliers and dealers. Their suppliers entered the U.S. market themselves. Their dealers defected. Good grief, what a mess!

Their moves were all band-aid solutions. Schwinn’s decline continued. At about this time, the second (and final, as it turns out) generation took over.

(FYI: New tabs or windows will open for each hyperlink.)

As this Wikipedia article states, this descendant was a great believer in MBAs. (This degree was in its ascendancy at that point. I recall reading an article questioning whether the management of business could really be taught in schools.)

At any rate, the vicious cycle continued. In addition to quality and supplier problems, engineering and marketing were slow to catch up with trends. I suspect that the centralized decision-making had a lot to do with their lack of nimbleness.

As the Wikipedia article states, the firm declared bankruptcy in 1992 and Zell (the Chicago billionaire who now owns The Tribune Co.) bought it. Zell moved corporate to Colorado and that’s when our accountant relocated with her husband to Colorado.

In 2004, another Schwinn descendant, was featured in an article by the Washington Post.

This last one is a beauty. It features a timeline. Read the entries from 1975 on.

This story has many business management-related lessons. Most of them, in my opinion, stem from
fossilized management.

Just in case, those links no longer work, I saved archive copies:
  1. The Washington Post article
  2. The Wikipedia entry

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