Trade War Sends Giant Back To Its Roots

When Trumplethinskin announced tariffs on goods from China, one thing was clear to anyone with an IQ of room temperature or higher:  Jobs would not suddenly re-appear in Ohio and Michigan and Pennsylvania.  Of course, El Cheeto Grande, not being a member of that exclusive club, went ahead with his move.  

Maybe I am not giving him enough credit for his intelligence:  After all, sold the promise of jobs returning, as if they'd simply migrated for a season, to large numbers of people.  Then again, at least some of those people are as desperate as he is avaricious or delusional, depending on what you believe.

So what are the results of those tariffs, so far?  Well, for one thing farmers--many of whose livelihoods are tied to exporting what they grow--are losing sales.  And it doesn't look like jobs are coming back to the US, at least not in the bicycle industry.

Prices are already increasing for many bikes and related goods.  But the world's largest bicycle producer found another way to deal with those new import taxes:  going back to its roots.

I am talking about Giant.  Chairwoman Bonnie Tu said, "we took it seriously," when Trump announced a 25 percent surcharge on almost everything coming from China.  "We started moving before he shut his mouth."

Giant's factory in Taichung City, Taiwan

That meant, of course, she had a very short window of time in which to act.  But act she did:  She shifted production of the company's US-bound bikes from its Chinese factories to the company's headquarters in Taichung City, Taiwan.

The first Giant bikes sold in North America during the 1980s were made in Taiwan.  So were all of the products the company exported to the America, and most to the rest of the world, during the 1990s and early 2000s.  

Bonnie Tu

Ms. Tu says, though, that the company's long-term plan involves moving as much production as possible as close to the markets as is feasible.  Right now, in addition to its Taiwanese facility and the five factories it operates in China, Giant also has a plant in the Netherlands and has announced they are building another in Hungary.

Will Giant start making bikes in the US?  Ms. Tu hasn't said as much, but it wouldn't surprise me if they set up shop in some low-wage "right to work" state in the South.  If they do, I just hope the bikes are better than some of the stuff that came out of Schwinn's since-shuttered Greenville, Mississippi plant.

Are Bike Share Programs Cutting Giant Down?

For most Americans, a "traffic jam" consists of throngs of cars and other motorized vehicles crawling or standing still on major streets or highways.  In many places, they are a regular feature of what is called--without irony--"rush hour": the times of day when most people are going to, or coming from, work or school.

Until two decades ago, Chinese cities also had traffic jams.  Instead of cars, though, their streets were lined with bicycles.  About the only way an American cyclist could experience anything like it without going to China was to participate in a large organized ride like the Five Borough Bike Tours, where there are sometimes "bottlenecks".

Then, as China became more prosperous, people who used to ride their bikes to work started to drive--to work, and just about everywhere else they could.  Now China was experiencing American-style traffic jams its their cities.

So, a few years ago, some Chinese went back to commuting and getting around by bicycle, as it is faster, especially in the central areas of many cities, than driving.  Once again, there are bikes all over Chinese streets.

It sounds like things should be really good for bicycle manufacturers, doesn't it?  I mean, can't you see Giant, which now makes most of its bicycles in China, just raking in the dough?  

Believe it or not, Giant's stock has more or less flatlined this year.  Its price is now just about the same as it was in December.  Two other major manufacturers, Zhonglou and Shanghai Phoenix, both experienced surges in late 2016 but are now worth less than they were at the beginning of this year.

Giant's listlessness, and the tumble the other two companies have taken, can be blamed to some extent on the China's economic slowdown, which is part of the reason why the Chinese are buying fewer bikes than they did in 2015 or 2014.  More to the point, though, is something that is causing bike sales to shrink in other parts of the world.

In China, as in much of the West, more and more people are riding bikes.  Yet fewer and fewer are buying them.  That doesn't make sense (I am really, really trying not to use the word "counterintutitve"!) until you realize that many new bike commuters and even recreational riders in Shanghai and Hangzhou, like their peers in Paris and London and New York, are riding bikes from share programs.  

Is this cutting Giant down to size?

According to industry analysts, one of the reasons manufacturers like Giant aren't benefiting from the growth of bike share programs is that their production and marketing have been oriented toward bike shop sales, which have been falling--in part because of share programs, and because the ones who have traditionally spent the most money in shops, namely bike enthusiasts, are doing much of their shopping on-line.  

What that means is that companies like Giant didn't, until recently, produce bikes with the apps and other accessories demanded by bike share programs.  Other, smaller manufacturers--including a few start-up companies--have stepped in to fill the gap.  For example, the bikes in New York's, Toronto's and Montreal's share programs are made by Quebec-based Devinci.  While the brand has a following, mainly for its mountain bikes, it is not nearly as well-known as Giant, whose website lists 25 dealers in the five boroughs of New York City, and as many in the surrounding metropolitan area.  Devinci's website, on the other hand, shows only one dealer in New York City (Brooklyn) and one other across the Hudson, in Bergen County, New Jersey.

One of the reasons why smaller companies can fill those voids is that they don't have as much invested in manufacturing facilities as the big companies.  As a result, they don't have to spend as much time or money re-tooling in order to meet changing demands.  As I have mentioned in earlier posts, one of the reasons Schwinn is now a shadow of its former self is that it was slow to adapt to the changing demands of cyclists.  One of the reasons for that was that Schwinn had so much invested in an aging factory and equipment that couldn't produce the lighter bikes adult cyclists wanted.  Paramounts were nice, but most people who took up cycling during the '70's Bike Boom were looking for something that was agile and functional, but wouldn't break the bank:  In other words, something like the Fuji S-10S or Nishiki International.

Could it be that bike-share programs will turn Giant, Specialized and other "giants" (pun intended) of the bike industry into dinosaurs--or Schwinns of the future?

In-Your-Face Gray

It's been a gray, rainy day.  You know the kind of day I mean: one in which you just can't escape the gray. It's not about my mood; I've actually been feeling good these past few days.


Here's another example of gray that you can't escape--or, more precisely, something gray that somehow manages to be in-your-face:

Now, of course, the bike seems even more in-your-face with an orange bike behind it.  Of course.

Just having the name "Giant" on a bike is pretty audacious.  Now, I've never owned one and have only test-ridden two.  I don't mean to disparage the bikes:  One of the Giants I tried was actually a nice ride.  I don't remember which model it was; I recall only that it was a mountain bike.


Anyway...I never realized a gray bike with black trim could be such an eclat to the senses!