Bicycling | Bicycle Manufacturers | 1972 Schwinn Paramount P-13
A collection of some early Schwinn frame badges.
From Fifty Years Of Schwinn-Built Bicycles by Frank W. Schwinn—1945
IGNAZ SCHWINN was born on the first of April, 1860, in the little town of Hardhcim in the province of Baden, Germany. His father, the owner of a prosperous small organ and piano factory, died when Ignaz Schwinn was eleven years old, leaving a family of seven children of whom Ignaz Schwinn was next to the eldest.
In bicycle factories in the North of Germany he learned about the new bicycle, the ‘Safety’, which had been invented by a man named Stadey in England. He saw some of the early experimental types and quickly recognized their advantages. By this time he had had a very considerable experience with cycle building, which, together with a great natural talent for’ mechanics started him on his career as a cycle designer and builder.
Arnold, Schwinn & Company
Original factory at Peoria and Lake Streets, Chicago
In 1891, desirous of participating in the prosperity of that great new land, America, he came to the City of Chicago, in the United States, attracted by its central location and the great World’s Fair, where he would have the opportunity of studying the technical advances of the time.
He worked for a short time for the firm of Hill & Moffat, makers of the Fowler bicycle, and later designed the bicycles and planned and installed the bicycle factory of the International Manufacturing Company.
The enterprise was not managed to his liking, and in 1894 he severed his connection with the International Company. In 1895, together with Adolf Arnold, he incorporated Arnold, Schwinn & Company. Again he designed the product and the tools to make it, selected machinery and equipment, engaged the personnel, and set up a bicycle factory.
Inside the Lake/Peoria Schwinn Factory
Ignatz Schwinn’s Office
In his partner, Adolph Arnold, he was very fortunate. Adolf Arnold was at that time president of Arnold Brothers, a meat packing establishment, and president of the Haymarket Produce Bank. He was a man of unusual business ability and of the highest integrity.
Ignaz Schwinn and his partner, Adolph Arnold in front seat of the first car designed by Ignaz Schwinn and built by Arnold, Schwinn & Company in 1896.
Ignaz Schwinn and Adolph Arnold had been busy since the fall of 1894 making plans to build bicycles. Into these bicycles was to go a wealth of experience in cycle designing and building gained in Europe and America. Space had been rented in a building on the northwest corner of Lake and Peoria Streets, Chicago; machinery had been installed, tools, jigs, dies and fixtures provided, and personnel engaged. A good product and a boom in bicycles brought immediate success. Four years later the great cycle boom collapsed. The over-expansion and over-production of the cycle industry played a very large part. The demand for bicycles dropped sharply ; cycle factories allover the country failed and closed their doors, a few that had been carefully and conservatively managed survived the crash-among them Arnold, Schwinn & Company.
Ignaz Schwinn & Family In Front Of Their Palmer Square Home in 1905.
The car Ignaz is driving is a four cylinder car he built in 1905. It sported a water cooled, four cycle engine with force-feed lubrication, cone clutch, sliding gear transmission and shaft drive, and was still a modern car in 1910.
At the turn of the century in a badly depressed market for bicycles, Arnold, Schwinn & Company bought the March-Davis Bicycle Company at a receiver’s sale, and moved Arnold, Schwinn & Company to the factory building this company had occupied. This building was located far out in the western limits of the City of Chicago. A year later, a new factory was built on an adjacent site, and there Arnold, Schwinn & Company has remained to this day. The factory has grown with the years and the present plant is built around and over the original building erected in 1900. It houses the very best in machinery, equipment and tools for the building of fine bicycles, the latest in precision laboratory instruments and a cycle engineering department second to none in the world. The character of its product, and the leadership of Arnold, Schwinn & Company in design and quality, reflect the excellence of the factory and its personnel
In 1908 Ignaz Schwinn bought the interests of his partner and became the sole owner of Arnold, Schwinn & Company.
Arnold, Schwinn & Company
NW Corner Peoria and Lake Streets
Robinson Fire Maps
Arnold, Schwinn & Company
Original building of new factory on West Side
The modern factory of Arnold, Schwinn and Company,
1718 North Kildare Avenue
From the 1940 catalog.
Arnold, Schwinn & Company
Arnold, Schwinn & Company
Advertisement announcing the introduction of the first bicycle balloon tire in America by Arnoldi Schwinn & Company. This tire was also the first tire to use the size of 26″ x 2-1/8″ which became the mountain bike standard 40 years later.
February 1933 American Bicyclist magazine
In 1911, Ignaz bought Excelsior Motor Manufacturing & Supply Company, a timely purchase since the motorcycle business exploded over the next 20 years. Excelsior quickly gained renown after the Excelsior model X clocked in with a record 100 mph speed, in 1912. Ignaz seemed to find new joy in this venture. In 1914 he built what was then the largest motorcycle factory in the world and also bought a then popular, but unprofitable Henderson Brothers Motorcycle Company. Ignaz merged these two brands and created Excelsior-Henderson. This new combined motorcycle brand soon became known for its excellent engineering as well as its luxury looks that helped launch Excelsior-Henderson to a poll position as one of the top 3 motorcycle companies behind Harley-Davidson and Indian.
Excelsior Motor Manufacturing & Supply Company.
Like the bicycle trend before it, the motorcycle boom soon began to decline in the 20s. Then with the stock market crash of 1929 Ignaz, made the decision to close down the motorcycle business and all motorcycle operations at Excelsior ended by September 1931. He and Frank refocused their efforts on the bicycle business. Ignaz was 71 years old and although he maintained his title of president of Arnold, Schwinn & Company and was an important part in many decisions, he began to give Frank the reigns to the family business.
Ignaz Schwinn died in 1948 at the age of 88 years old, leaving behind a legacy and a name that has become synonymous with bicycle.
1895 Schwinn-Built ‘World’ Racer
1945 Schwinn-Built ‘Paramount’ Racer
IN 1932, Arnold, Schwinn & Company broke away from the traditional industry policy of standardization and started its program for the improvement in quality, service and appearance of the American type of bi cycle. The pictures below illustrate the result achieved. For the sake of accuracy in comparison, the same number of equipment items, tank, lamp and horn, are shmvn in both pictures, except the chain guard which appears in [he modern bicycle and was not used on men’s bicycles in 1932. The change in appearance is striking. Incorporating much that is fine and adaptable in modern design, its sales-attractiveness is obvious. Appearance, however, is the least important of the changes which were effected-far more important were lhe installation of modern machinery and equipment, much of which was designed and built for the special purpose of manufacturing bicycles; the research work in materials and processes, and the mechanical design and engineering which involved over forty pa tents, granted and applied for; and, most of all, the knowledge born of years of experience plus the most imponant factor of all, the will and courage to do the job.
Arnold, Schwinn & Company now has several different types and styles of bicycles for its customers to choose from and over 40 varieties in parts and accessories, most of these of its own manufacture. The special need of its customers in various geographical locations are provided for.
Top: Schwinn-Built fully equipped Motorbike model qf 1932
Bottom: Schwinn-Built ‘Autocycle’ model of 1942
As the company’s effort expanded, its business grew, and it became the acknowledged leader of the industry in America. The courage of Ignaz Schwinn in making investments in engineering, machinery and equipment in the depths of the great depression, encouraged the industry, and the resultant competition in the improvement of the product during the recovery years brought prosperity to the bicycle industry and a volume no one would have believed possible in the years from 1900 to 1939. The industry produced a million eight hundred thousand bicycles in 1941, nearly five times the average for the preceding thirty-odd years.
Important as this was to the industry, Ignaz Schwinn and his organization made a still more important contribution in 1938: the re-introduction of the fine, light bicycles for the adult rider, for transportation, recreation and health. In a few short years it has opened a new market for bicycles in America- a new market for our generation. The ensuing pages tell something of the story of this effort.
In the year 1938 three new trade marks hashed across the sky of the bicycle industry: ‘Paramount,’ ‘Superior’ and ‘New World.’ Three Schwinn-Built Bicycles for the adult rider, built in the finest tradition of the ’90’s with every advance in material and manufacturing technique the years between had brought.
Frame badges of the three new trademarks introduced in 1938.
In 1939, Arnold, Schwinn & Company opened a new field of usefulness for the bicycle by the introduction of the Cycle Truck. Bicycles with baskets of limited size attached to the handlebar had been used successfully in delivery service for light loads. Heavy loads could not be carried because, suspended from the handlebar they interfered with the steering and balancing. Loaded in this manner, beyond a given point, the bicycle became unmanageable and extremely dangerous to ride when it could be ridden at all.
The Cycle Truck is so designed that the load, instead of being suspended from the handlebar, is carried by the frame of the bicycle on brackets extending forwardly over the front wheel. The steel ring of the bicycle is, therefore, in no way interfered with by the load, and loads weighing up to 150 Ibs. can be carried safely. A rack or stand attached near the front wheel was fitted so that it could, in effect, be rolled under it, permitting the bicycle to stand upright while being loaded and unloaded.
This type of delivery bicycle had instant acceptance, broadened the field of usefulness of the bicycle, and opened up a new field for the bicycle dealer.
Schwinn-Built ‘Cycle Truck’
Introduced in February 1939
Chicago Tribune. April 15, 1979
Scnwinn holds out for bicycle quality
By Natalie McKelvy
MOST OF THE bicycles sold in the U.S. are sold through mass merchandisers like Sears and K Mart, and most of the bikes are made by three firms: Murray Ohio Manufacturing, Huffy Corp., and AMF Inc.
But fourth in production is the Schwinn Bicycle Co. of Chicago. A conservatively run company, Schwinn has held strongly to its marketing tactics, even as its market share gradually has eroded from 25 per cent of bikes sold in the U.S. in 1950 to 11 per cent today.
The big three manufacturers sell to the big retailers and discount stores, engage in pricing wars, fight for market share, and contemplate diversifying into businesses more profitable than that of making bicycles.
Schwinn, on the other hand, has no intentions of diversifying. The firm continues to make only bicycles and exercisers and maintains its longstanding image as the manufacturer of high quality bikes. Schwinn sells its bikes for roughly twice the price that mass retailers charge and sells only through 1,676 special Schwinn dealers.
1974 Schwinn Paramount P-10
THE FIRM, FOUNDED 84 years ago by German bikemaker Ignaz Schwinn, is privately owned and run by the third generation of his descendants. They continue to pursue the single-minded marketing strategy their founder developed: Sell a high quality product under your own brand name in special bike shops and provide strong customer service.
But how long can this type of service-oriented business remain profitable—especially if Schwinn continues to lose market share in the bike business? The answer is unclear.
Schwinn is tight-lipped about its fi-nances and in a recent interview with The Tribune, the only figures long-time marketing director Ray Burch would reveal is that last year’s-total sales of 1 million bicycles brought in more than $100 million in revenue and the current average price of a Schwinn bike is $130.
Schwinn’s competing bikemakers in the U.S. say they can’t see how Schwinn is making any money on its bikes, although the firm makes a regular, profit every year.
“THE PART OF the market they’re in, the for bikes costing more than $100 and sold through bike shops is just not growing at all,” said a high-ranking executive at one of the big three bike manufacturers,
He also claimed Schwinn isn’t making enough money to reinvest in automated equipment to cut bike production costs. Unless it does that, the costs of making bikes will climb and customers will shy away from the higher prices. Schwinn would need to increase its market share continually just to stay even.
Birch dismisses this scenario.
“We’re making money and there will always be a market for our type of bike. Not everyone in the world wants cheap bikes. That’s like saying VW will chase Cadillac out of the car business. We have our biggest order backlog this year since 1973.’
Schwinn plans to survive and prosper without diversifying out of their particular market niche, he said.
WE’RE LIKE CADILLACS. The Cadillac division of General Motors makes 2 or 3 per cent of all U.S.-made cars, and we sell 14 per cent of all U.S.-made bikes and 11 per cent of all bikes sold here,” said Burch, who’s been with the firm for 29 years.
We’d like to increase our share of the market but we have to be realistic. Cadillacs will never outsell Chevrolets. Our strategy is to get the middle-bracket customer to upgrade his bike and buy a Schwinn.
In fact, those manufacturers of cheaper bikes have probably driven away customers. If the first bike someone buys is a cheap one that’s hard to ride and falls apart, it will just sit in the garage and they’ll never realize how much fun bicycling is.
Schwinn’s return on equity is below that of the average manufacturing firm in the Fortune 500, a condition endemic to the entire bike business, said Burch.
You get good years and bad years in this business and sance 1974 these have not been profitable years for manufacturers, wholesalers, or retailers of bicycles. Demand has been soft.
IN FACT, 1978 was a terrible year for the bicycle manufacturing business as a whole. The three major U.S. manufacturers were involved in a price war all year, depressing their skimpy profit margins even more. Sears, the major retailer of bikes in this country fdr the last 50 years, decided that bicycles were a line of goods with little growth and depressed profits where they could gain little market share.
The firm reportedly has decided to cut back on the volume of cheaper bikes it sells in an attempt to make a larger profit on each, thus putting its major supplier, Murray Ohio,in a difficult post- tion.
Early this year, the three major manu- facturers raised their prices, pulling themselves somewhat out of their profit squeeze, but the industry is projecting sales to be level or only slightly higher than last year s volume of 9.5 million bicycles.
By sticking to its Cadillac philosophy, Schwinn is at least no worse off than its other U.S. colleagues.
SCHlWINN DECIDED on Its marketing strategy back in the 1920s when Ignaz Schwinn fought with one of his chainstore retailers who wanted his firm to make a cheaper bike. He refused, charging it would hurt his reputation for quality, and he began pulling his products out of chain stores. Eventually he consolidated all his sales through a limited number of bicycle dealers, a move which cut his market share.
The other bicycle makers manufactured cheaper bikes, sold them through chain stores, and relied on the low price to sell the bike. They made their profits on volume.
By deciding to sell a more expensive bike, Schwinn found himself locked into one marketing approach. The bike had to be sold by trained staff members who had to explain to customers how the bike s high quality justified its relatively higher price. Chain store clerks simply could not do this, Schwinn found, and so the dealer system was hatched.
The commitment to a higher quality bike also shaped the type of manufacturing equipment Schwinn could use. The firm could not become a mass producer of cheaper bikes even if it wanted to because it would require a completely different plant machinery and setup, says Burch.
Schwinn Super LeTour II
Assembled and fitted, ready to ride…..$249.95
TODAY, Schwinn is trying to take away market share from imported 10-speed bikes priced from $150 to $300, which make up roughly 10 per cent of all bikes sold in the U.S. The firm has come out with a line of lightweight bikes, the LeTours, after marketing research finally convinced the company s bike engineers that Schwinn’s heavy, 38-pound, 10-speed was not what consumers wanted’, in this price range.
“We were making heavier flashweld bikes and didn’t tool up as fast as we should have to make these lightweights,” Burch said.
Schwinn anticipates it will make 1.25 million bikes this year and has sold all production at the plant through July. The company has also postponed plans to build a new plant in Tulsa, Okla., because of the high cost of money and soft demand for bicycles, Burch said.
The bike market hit its peak in 1973-. when 15 million bikes were sold. “We don’t anticipate we’ll see that kind of volume again until 1990,” Burch said.
“We don’t need that additional capacity. now.”
New York Times, January 2, 1993
Schwinn Ready to Sell Most Assets
By BARNABY J. FEDER
After 97 years of family ownership, the Schwinn Bicycle Company plans to ask a Federal bankruptcy judge here on Tuesday for permission to sell most of its assets, including its name, to the Zell-Chilmark Fund, an investment partnership that specializes in acquiring financially strapped businesses, and Scott U.S.A., a company in Sun Valley, Idaho, that makes ski equipment and bicycles.
The sale would provide Schwinn with nearly $41 million it needs to order its 1993 products from Asian suppliers in time to provide its 1,800 dealers with full inventories for the March-to-May selling season. Other terms, outlined in papers filed with the court on Thursday, could lift the total value of the deal to more than $60 million.
Family Would Lose Influence
The Schwinn family, which owns the company through a trust fund, will end up with $2.5 million and the contents of the company’s bicycle museum here. But it is expected to lose all influence over the company, and Edward R. Schwinn Jr., the company’s chief executive and great-grandson of the founder, Ignaz Schwinn, is not expected to remain in that post, people involved in the bankruptcy say.
Schwinn’s plight, like the travails last year of giants like I.B.M., General Motors and Sears, Roebuck, drives home the difference between bearing a famous corporate name and boasting a healthy business.
Schwinn has never been the nation’s largest bicycle company, and its market share during the 1960’s never topped 25 percent. Analysts say its share of the $3.2 billion industry is about 7 percent and falling. Its fame rests on its leading role in creating a network of independent dealers and trained mechanics around the nation and its longtime dominance through them of the markets for moderately priced and expensive bicycles.
Thus, when the Baby Boomers took to two wheels, a Schwinn was often the bike they dreamed of getting. A 1990 survey by Landor Associates, a market research company in San Francisco, rated the Schwinn name as the best known among American consumers in all of sporting goods and 297th among all businesses, right behind United Air Lines and ahead of Doublemint gum. Name Means Bicycles
“Schwinn still means bicycles to the average person,” said Thomas French, who founded Trek Inc., a bicycle maker in Waterloo, Wis., and is now general manager of Cycle Composites Inc., a company in Watsonville, Calif., that makes bicycles with carbon-fiber frames. Schwinn owns a 30 percent stake of Cycle Composites, which would not be included in the proposed deal.
Schwinn’s sales peaked at $212.5 million in 1988, according to records filed in the bankruptcy case. They were projected in October to be about $170 million for 1992. Although lack of cash precipitated the bankruptcy, the company was also suffering from lack of profits, with a $10 million loss projected for 1992.
Many of Schwinn’s problems, including labor woes, high overhead and dependence on Asian suppliers who became direct competitors, had been visible in the industry for years. During the 80’s, bicycle dealers say, Schwinn was often reasonably quick to recognize market trends like mountain bikes but not as deft as smaller competitors at exploiting them.
Newcomers like Trek Inc. and Specialized Bicycle Components of Morgan Hill, Calif., rode the surge in demand for mountain bikes to rapid growth. More recently, the Giant Manufacturing Company of Taiwan and the China Bicycles Company of China, manufacturers that Schwinn had turned to as it shut its domestic plants, have used the technology and distribution skills they learned from Schwinn to become major exporters of their own products to the United States.
Powerless to Stop Move
China Bicycle’s entry in the American market came with its purchase of the Diamond Back name and distribution network in 1990, a move Schwinn was powerless to stop even though it owned 33 percent of the Chinese company. That stake was reduced to 18 percent when China Bicycle sold shares on the Shanghai exchange this year.
Schwinn’s stake would be eliminated entirely under the proposal filed Thursday with the court. China Bicycle is Schwinn’s largest unsecured creditor, having shipped about $18 million worth of bicycles on credit before the bankruptcy filing. The Zell-Chilmark offer includes a provision to swap the stock for the debt.
If estimates in the court records that the stock is worth up to $40 million are correct, China Bicycle’s final coup in the joint venture will be to exploit Schwinn’s desperate need for a quick cash infusion to get full value for its unsecured debt while other creditors would be forced to settle for less. Hailed for Use of Computers
During the 1980’s, Mr. Schwinn enjoyed a reputation as an outgoing executive capable of visionary thinking. He was hailed as an early adopter of computer-aided design and Schwinn became a leader in the exercise machine wave by acquiring and developing the Airdyne line. It also pushed bicycle dealers to exploit the fitness business.
A 1986 Business Week article said Schwinn was an example of a new trend, citing the company’s withdrawal from most manufacturing to concentrate on design, distribution and merchandising, making it more of a network than a traditional corporation. A 1988 investment in a Hungarian bicycle plant, once seen as a step that put Schwinn in the vanguard of American companies positioned to exploit the opening of Eastern Europe, is now being criticized as a money-losing diversion.
The bankruptcy has also put a harsher light on the company’s continuing support for its prestigious line of Paramount bicycles, which are largely made by hand in Waterford, Wis., and cost up to $5,000.
Paramount earns Schwinn the kind of respect from bicycle enthusiasts that auto companies get from supporting racing cars, but bankers see it as an indulgence that produces little or no profit, industry experts say.
Schwinn 1992 Standard Catalog and 1992 Paramount Catalog
Precariousness Largely Hidden
The precariousness of Schwinn’s condition remained largely hidden until 1992. The first unmistakable sign that the troubles might be spinning out of control came in the spring, when word leaked of an unsuccessful attempt to sell a controlling stake to outside investors. Still, the bankruptcy filing startled Schwinn’s dealers and others.
“We have had some problem getting products over the past two years, but the bankruptcy was a surprise,” said Eugene Amagliani Jr., whose family has been selling Schwinns in Memphis, since 1917. Like most dealers, Mr. Amagliani also carries rival lines.
In November, Schwinn laid off half its work force of 320 people nationwide, including 60 of the 120 people at its Chicago headquarters. Court papers suggest that without new financing, Schwinn would have to abandon half its dealers.
Schwinn’s problems did not become overwhelming until it ran into the recession, and its banks became reluctant to let it borrow freely, a situation familiar to much of American industry in the last two years. The company’s condition worsened rapidly over the summer. According to the company’s bankruptcy filing, the bank credit squeeze reduced its secured bank debt from more than $64 million last Jan. 31 to $32.5 million.
As bank lending dried up, the company ran up its unsecured debt with its two chief suppliers, Giant and China Bicycles. Then they began to restrict their shipments.
One distressing aspect of the company’s predicament, dealers say, is that sales are strong.