Peloton Cycles Out In-House Manufacturing

Peloton announced it will expand its relationship with Taiwanese manufacturer Rexon Industrial Corp. — and stop in-house bike production — in its latest effort to cut costs.

The fitness company will also suspend operations at its Tonic Fitness Technology, Inc. facility through the end of the year. Bloomberg reports that around 600 Tonic employees will be laid off as part of the transition. Peloton acquired the manufacturer in 2019 for $47.4 million.

“We believe that this along with other initiatives will enable us to continue reducing the cash burden on the business and increase our flexibility,” Peloton CEO Barry McCarthy said. 

Peloton lost around $757 million in its most recent earnings report.

The announcement represents a major shift from a year ago, when Peloton was fighting to meet demand.

• Last year, Peloton revealed plans for a new $400 million factory in Ohio. The company said in February that it would scrap those plans and scale back its number of delivery centers and warehouses.
• In December 2020, Peloton announced it would acquire fitness equipment maker Precor for $420 million.

Peloton’s Plans

Since McCarthy took the CEO role in February, Peloton has made a number of moves to stay afloat. After cutting 2,800 jobs, Peloton raised membership prices, announced a rowing machine, and signed an agreement with JPMorgan and Goldman Sachs to borrow $750 million in long-term debt. 

The company is also testing a rental format for its equipment.