burley in tough times

ilovestacy · #1 04-22.-2005

http://www.registerguard.com/news/2...urley.0402.html

should this change my bike decision. i want to get a fox hollow frame. should i be wary? and does anyone have one? -pc

Powerful Pete · #2 04-22.-2005

I cannot seem to access the article.

Could you please cut and paste the text so we can all access it?

Grazie!

cydewaze · #3 04-22.-2005

Quote:

Originally Posted by Powerful Pete

I cannot seem to access the article.

It's because the URL in the link looks exactly like the one you see (complete with the ...'s). Lemme see if I can do some detective work and find the actual URL.

cydewaze · #4 04-22.-2005

Nope. No luck. Only hit I got for "Burley" was a story about gay couples and civil unions.

ilovestacy · #5 04-22.-2005

Here it is. again does anyone have one of their roadies? i rode one and loved it. -pc

April 2, 2005

Burley co-op pedals through a low cycle
By Sherri Buri McDonald
The Register-Guard

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After 25 years of remarkable growth, Burley Design Cooperative has hit some hard times.

The Eugene-based manufacturer of bikes and bike accessories reported its first loss ever in 2003, while taking on millions of dollars in debt. Despite optimism for 2004, Burley looked likely to post another loss when the books closed, according to minutes from a Burley board of directors meeting earlier this year. And a longtime local Burley dealer said he has encountered supply problems recently with some of Burley's products.

The co-op's top manager and the chairman of the board of directors say they're working hard to turn Burley's financial situation around and are optimistic about the future.

At stake is not only the co-op's 100 jobs and as much as $2 million invested by worker-owners over the years, but also a company that has been not just a local, but a national, icon for supporters of worker-owned cooperatives.

Tom Wright-Hay, Burley Design Cooperative's chairman of the board, talks with Gov. Ted Kulongoski during the governor's recent congratulatory visit to the company.

Photo: Kevin Clark / The Register-Guard

If the business went under, the community would lose good, family-wage jobs, as well as the last major worker-owned co-op in Eugene, said Bruce Creps, a former Burley general manager, who worked at the co-op from 1982 to 1999. He moved to the San Juan Islands last year and owns a small business supplying specialty woods to luthiers, or craftspeople who make stringed instruments.

In the late 1970s, Eugene was home to about a dozen co-ops, including Solstice Bakery, Genesis Juice and the Hoedads Reforestation Coop.

"There was a small movement of sorts - maybe as a reaction to protests in the '60s and '70s," Creps said.

"Burley was an example that others around the nation looked to to see how they could introduce democratic decision-making in the workplace," Creps said. "So I think it would be a big loss not only to Eugene but to the cooperative movement in the United States.

"I certainly hope that doesn't happen."

The red flags of a business in trouble are waving, however, and one Burley worker, who asked not to be named for fear of losing employment, said: "I'm fearful that this company won't be there, and I thought it would be there until I retire."

Co-op policies prohibit members from disclosing any confidential information about Burley.

A former worker, who also requested anonymity, said it's hard to watch Burley struggle.

"I really believed in the place," the former worker said. "I loved going to work. It was a wonderful place to work. To see it crumbling is just horren- dous."

Burley's internal troubles are also starting to become more visible to the outside. Collins Cycle Shop, a longtime Burley dealer in Eugene, reported recent supply problems. The inventory of trailers is excellent as always, but rain gear is spotty and the lead time to get a Burley recumbent bike has stretched from a few days to more than a month, said Jay Loew, a co-owner of Collins.

The bike shop had been Burley's exclusive local dealership for years, but Burley ended that relationship a couple of years ago, Loew said.

But the fight to keep Burley going is far from over, said Elliott Gehr, chairman of Burley's eight-member board, and Tom Wright-Hay, a former ARCO project manager, who was named Burley's general manager in June 2003.

The loss was a wake-up call to co-op members, Gehr said.

"It took that loss in '03 for owner-members to realize business could not be conducted the way it had been," he said.

The co-op's pendulum had swung too far in favor of workers, to the detriment of the business, Gehr said.

"We were in Oregon Business Magazine year after year as among the 100 Best Places to Work," he said.

"Burley was recognized for offering great benefits - which they are - and flexibility in the workplace," Gehr said. "It had nothing to do with how well we ran the business. It had to do with how comfortable were the people in the business."

After years of steady profits, the co-op grew complacent and failed to do the long-range strategic planning necessary to keep pace in a rapidly changing and intensely competitive market, Gehr and Wright-Hay said.

Now the co-op is scrambling to correct those shortcomings.

Faced with the choice of going out of business or trying to resuscitate it, worker-owners decided to "stand and fight and make the changes," Gehr said.

In the past two years, the co-op abandoned a flat-wage structure for all workers in favor of differential wages to try to attract and retain top talent; it hired more regular employees who have no voting rights; and it trained workers in lean manufacturing methods to try to reduce waste and boost productivity.

The new training program, funded in part by a $66,500 government grant, prompted Gov. Ted Kulongoski to make a congratulatory visit to Burley's factory earlier this month.

The changes have rocked the co-op, and some members are concerned that Burley is straying from its long-held democratic principles, including the change in the wage structure and the decision to no longer review all employees for co-op membership after they have worked 1,500 hours. The co-op now has 60 worker-members and 40 employees, who are not owners of the co-op, Wright-Hay said.

But he said that those changes comply with the co-op's bylaws, articles of incorporation and Oregon state statutes.

Members have the right to challenge the co-op's governing structure, and they exercised that right in July when members decided whether to recall Wright-Hay and the board.

"The membership voted, and it was 4-to-1 in favor of what the board and Tom were doing," Gehr said. "It was a vote of confidence in moving forward in solving the crisis of 2003."

"If that's not the democratic process in action, I don't know what is," Wright-Hay said.

Gehr, a trailer assembler who joined Burley in 1988, said members have reaffirmed the importance of a viable business because without that, there is no co-op.

"I think Burley is retaining everything it had but in an accountable and responsible way," Gehr said. "I feel good about where we're going because it seems like we're operating our business the way it needs to operate, and by operating our business we can retain and strengthen the best parts of the cooperative."

Following months of research, Burley implemented market-based wages throughout the organization in May 2003, replacing the flat rate of $11.35 an hour, Gehr said.

The hope is that higher wages will attract and retain much-needed financial and management expertise.

After the 2003 loss, "the board of directors said we need more intelligence in the organization and we're going to have to bid for it," Gehr said.

The positions with the highest turnover at Burley were the most underpaid compared with the market, Wright-Hay said.

Those positions - accountants and managers, for example - are responsible for long-range planning, which suffered because of the constant churn of employees, Wright-Hay said.

Burley also wasn't receiving regular market research to stay on top of industry trends and plan accordingly, Wright-Hay and Gehr said.

Looking now at the market data, it's clear that the bike industry boomed in the mid-1990s, powered by baby boomers who had grown up cycling and were willing to spend on high-end bikes and gear when they reached their 30s and 40s, Wright-Hay said.

Now, Generation X is about half the size of the baby-boom generation and not as physically active. The next generation, Generation Y, isn't old enough yet to afford Burley products, Wright-Hay said.

Burley's revenue peaked at $9.1 million in 1998 and fell to $6.9 million in 2003, according to the co-op's application for the government training grant.

Burley's biggest run-up was from the late 1980s to the mid-1990s, and "I think everybody believed it would just go on forever," Gehr said.

But the co-op's slide actually had begun in the early '90s, he said.

"That's why bringing in outside talent was an eye-opener for us," Gehr said. "I don't think any of us realized our market was sliding."

Along with the demographic trends that were chipping away at Burley's customer base, competition was picking up and bike manufacturing was gravitating to China, where labor costs are much lower than the United States.

This isn't the co-op's first brush with adversity, Gehr said.

Burley was founded in 1969 by Alan Scholz and Bev Anderson, who originally sold bike bags. The pair sold the business to workers, who formed a cooperative in 1978 with 40 to 50 workers. Hit by the recession, the co-op dwindled to four members in 1982. Then, when the economy rebounded, the co-op gradually added members again, reaching a peak of about 100 in 1992.

Gehr said he looks at 2005 and beyond as the next rebirth of Burley. With more professional management and better training, Burley will emerge a smarter, leaner business better equipped to compete with lower-cost imports, Gehr and Wright-Hay said.

They foresee Burley retaining its line of popular bike trailers, rain wear, and single, tandem and recumbent bikes, and introducing new products in other niches too small to attract the attention of larger players such as Trek, based in Waterloo, Wis., and Specialized, based in Morgan Hill, Calif.

"Those guys are working hard and take it seriously and are doing the best they can," said Matt Purvis, a former general manager, who worked at Burley from 1991 to 2003 and now manages US Bank's main downtown Eugene branch. "I hope for the best."

To survive the recent lean years, Burley switched lenders in March 2003, borrowing $3.2 million from US Bank and, two months later, paying off a $1.7 million loan from Bank of America, according to property records filed with Lane County. The loan is secured by Burley's land and its 55,000-square-foot building at 4020 Stewart Road.

Last month, the co-op obtained an additional line of credit, secured by all of the co-op's personal property, from San Jose-based BFI Business Finance. The amount of the line of credit was not disclosed. The company specializes in providing asset-based business loans of $100,000 to $3.5 million to companies with revenue of $1 million to $60 million, according to its Web site.

Another obligation Burley faces is payment of retained dividends to co-op members, totaling as much as $2 million, members say. Each year, the co-op's profits were paid out to worker-members based on the number of hours they worked. One half of the dividend was paid out in cash, and the other half was retained as operating capital for the business.

The retained part is to be returned to workers no later than 14 years after the year in which it was earned, Gehr said.

In the past, the retained dividends were paid out early - within three to five years - members say, but recently Burley has taken longer to pay them out.

That has raised concerns among some co-op members.

"The fear is with the deep debt the current leadership has incurred that if they claim bankruptcy, they'll pay nothing, or pennies on the dollar, to the shareholders," said another former worker, who asked not to be named.

"We're fully planning to pay off retained dividends in compliance with the bylaws," Wright-Hay said. "But that depends on having a viable business. It has to come from the operational cash flow of the business."

If Burley did go out of business, retained dividends would not be paid because bankruptcy law puts higher priority on other debts, Wright-Hay said.

But bankruptcy is what the co-op is trying to avoid.

"The company is much more valuable to turn around and grow," Gehr said. "It's a valuable brand name, and the cooperative is a valuable business model. A democratic workplace - I can't think of anything better."</I>