Peloton Outsources Bike And Treadmill Production As Part Of Turnaround

Peloton Interactive Inc. announced it will suspend operations at its company-owned manufacturing plant and outsource production to Taiwanese manufacturer Rexon Industrial Corp., yet another turnaround effort to streamline costs. 

“Rexon will become the primary manufacturer of the hardware for Peloton’s iconic Bike and Tread product lines,” Peloton’s press release read. Operations at its company-owned Taiwanese Tonic Fitness Technology, Inc. plant will be suspended through the end of this year. 

“Today, we take another significant step in simplifying our supply chain and variablizing our cost structure – a key priority for us,” Peloton CEO Barry McCarthy said in a statement. 

“We believe that this, along with other initiatives, will enable us to continue reducing the cash burden on the business and increase our flexibility,” McCarty continued. 

Chief Supply Chain Officer Andrew Rendich told Bloomberg the move away from split manufacturing between in-house production and ones with partners is over:

“We are going back to nothing but partnered manufacturing,” Rendich said. “It allows us to ramp up and ramp down based on capacity and demand.”

CEO McCarthy replaced co-founder John Foley as chief executive officer earlier this year to turn around the struggling company. He’s slashed more than 3,000 jobs and continues to make moves to reduce costs. 

Peloton shares are down about 75% this year as the company misjudged bike and treadmill demand after the economy reopened following the virus pandemic boom, leaving it with a massive inventory glut. Shares this morning are down around 1%.

Plans to bring manufacturing of bikes and treadmills Stateside appear to be fading altogether, and the new arrangement with Rexon allows the company to respond faster to shifts in demand. Peloton hopes changes in manufacturing, trimming staff, and reducing costs will help it in a turnaround effort.