Peloton to outsource bike manufacturing and will cut 570 jobs
The fitness company aims to simplify its operations and reduce costs
12 July 2022 - 22:30
byKannaki Deka
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Peloton exercise bikes. Picture: ADAM GLANZMAN/BLOOMBERG
Exercise equipment maker Peloton Interactive said on Tuesday it will cease all in-house production of its bikes and treadmills and move manufacturing to partners in an effort to simplify its operations and reduce costs.
The New York-based firm will cut about 570 jobs at its Tonic Fitness Technology unit, a Taiwan-based firm bought by Peloton in 2019, according to a source familiar with the matter.
Peloton did not immediately respond to a request for comment. The company will also be suspending operations at the facility through the remainder of 2022, it said in a statement earlier on Tuesday.
Shares of Peloton, which have lost about three-fourths of their value in 2022, were up 2.8% at $9.17 in afternoon trade.
The company, under new CEO Barry McCarthy, has moved to cut costs and shore up capital this year after demand for its popular home equipment dropped as people went back to working out at gyms.
He has also brought in former Amazon.com executive, Liz Coddington, as Peloton’s new CFO.
McCarthy, a former Netflix executive, has now moved to broaden Peloton’s alliance with Taiwan-based Rexon Industrial, which will now become the primary manufacturer of the hardware for Peloton’s product lines.
“We believe that this along with other initiatives will enable us to continue reducing the cash burden on the business and increase our flexibility,” McCarthy said.
Once a pandemic darling, Peloton has seen its fortunes plummet following easing Covid-19 restrictions and soaring costs that have led to bloated inventories and subscription cancellations.
McCarthy warned in May the company was “thinly capitalised” and that unsold inventory coupled with mounting costs pushed it into a big quarterly loss.
However, a five-year $750m debt agreement with JPMorgan and Goldman Sachs soothed some investor concerns.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Peloton to outsource bike manufacturing and will cut 570 jobs
The fitness company aims to simplify its operations and reduce costs
Exercise equipment maker Peloton Interactive said on Tuesday it will cease all in-house production of its bikes and treadmills and move manufacturing to partners in an effort to simplify its operations and reduce costs.
The New York-based firm will cut about 570 jobs at its Tonic Fitness Technology unit, a Taiwan-based firm bought by Peloton in 2019, according to a source familiar with the matter.
Peloton did not immediately respond to a request for comment. The company will also be suspending operations at the facility through the remainder of 2022, it said in a statement earlier on Tuesday.
Shares of Peloton, which have lost about three-fourths of their value in 2022, were up 2.8% at $9.17 in afternoon trade.
The company, under new CEO Barry McCarthy, has moved to cut costs and shore up capital this year after demand for its popular home equipment dropped as people went back to working out at gyms.
He has also brought in former Amazon.com executive, Liz Coddington, as Peloton’s new CFO.
McCarthy, a former Netflix executive, has now moved to broaden Peloton’s alliance with Taiwan-based Rexon Industrial, which will now become the primary manufacturer of the hardware for Peloton’s product lines.
“We believe that this along with other initiatives will enable us to continue reducing the cash burden on the business and increase our flexibility,” McCarthy said.
Once a pandemic darling, Peloton has seen its fortunes plummet following easing Covid-19 restrictions and soaring costs that have led to bloated inventories and subscription cancellations.
McCarthy warned in May the company was “thinly capitalised” and that unsold inventory coupled with mounting costs pushed it into a big quarterly loss.
However, a five-year $750m debt agreement with JPMorgan and Goldman Sachs soothed some investor concerns.
Reuters
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