Serotta, Beheaded

Serotta

A couple of years ago a friend forwarded a video of a NorCal road race, one of those early-season shindigs where everyone hopes to blow the cobwebs out of the legs and get the first indications of how the season might shake out. The video in question was shot from the finish line and showed the bunch screaming into the finish over rollers when suddenly—as you guessed—there was a crash. This wasn’t one of those one guy goes down and takes two others with him. No, this was one of those body shrapnel explosions wherein the crash gets bigger and bigger, taking down ever more bicycles and guys escape one bit of carnage by running off the road only to go over the bar when their front wheel augers into a gopher hole. The crash lasted more than 30 seconds.

You’ll pardon me if I summon that image as a means of comparison for what’s been happening with Serotta over the last year. Or depending on your outlook, for the last 24 years. If you’re wondering just what I’m talking about (and I respect that not everyone reads Bicycle Retailer and Industry News or spends all their waking hours on the Serotta forum), Ben Serotta has been fired from Serotta.

No, that wasn’t a massive, gravity-generating typo.

Ben Serotta, the man with one of the most admired names in bicycle construction, has been fired from the company he has led for 41 years. It’s probably fair to say that things aren’t so heavenly at Divine Cycling Group, the latest owners of Serotta. It’s also worth noting that while Serotta says he and CEO Bill Watkins were fired, Brian Case, the chairman of Serotta and one of the directors of Divine, says the pair left the company.

The way I keep score is that any time there are competing narratives I award the point to ugly back-room dialog. This one ain’t pretty.

By “this one” I mean this version of Serotta. Serotta was sold back in ’89 to Archibald Cox, Jr. who went on to purchase Fat City Cycles in ’94. He consolidated the whole thing in Serotta’s factory in South Glens Falls, New York, only to learn that there were going to be few, if any, economies of scale. The Serotta/Fat City, LLC, merger became a classic money pit and management flail-fest. The company went through five CEOs in six years. Ben Serotta was able to buy the company back in ’97, while Fat City would survive on life support for three more years. The experience so demoralized Chris Chance, he left the industry.

Things seemed to be going well for Serotta post buy-back. He seemed to have climbed out of the problem that consumes so many businesses: the founder’s trap. Simply put, founder’s trap is where the entrepreneurial zeal of a founder cannot match the necessary management skills needed to grow a company. The Pon Holdings purchase of Cervelo suggests that they might have suffered a dollop of that as well. But Serotta had been running well for nearly 15 years when word began filtering through the industry that delivery on bikes was getting slow and erratic. Events escalated quickly.

I think it’s worth going over the timeline of what’s taken place:

  • June 2012, Serotta sells building tooling and brand to Bradway Capital
  • Mar. 28, 2013, Serotta lowered prices
  • June 2013, consolidated under Divine Cycling Group with Mad Fiber and Blue Competition Cycles
  • July 31, 2013, Serotta lays of 40 percent of workforce
  • August 6, 2013, Serotta fired

As I mentioned, there was some disagreement between Divine’s announcement and Ben Serotta’s version of events. Bicycle Retailer and Industry News ran a letter he penned in the wake of his departure. While the entire letter is fascinating, I think his version of events is worth reprinting:

“Early last Sunday evening while stopped at the side of the road looking at a paper map with Marcie, thinking about where we should head to enjoy the remaining hours of a beautiful sunny, mid-summer evening, my cell phone rang and I instinctively answered it.   One of the current company owners was on the other end and he coldly started, ‘I am terminating you. Your email password has been changed and your building access code has been deleted.  You can arrange to get your personal things on Tuesday.’ And with that (no cause was given, aka terminated without cause) my life at Serotta the company, came to an abrupt end.”

Serotta’s letter revealed that Bill Watkins, Serotta’s CEO, had received the same treatment. Of Watkins Serotta wrote, “I’ve viewed as the company’s long missing link—someone who had the skills to lead the business end of the business, while I focused on brand and product.” It was a telling comment less for Watkins treatment than for Serotta’s explicit acknowledgement of where his strengths are and the company’s recurring issues with management.

CEOs get replaced in company purchases the way people put gas in cars. That Watkins might be tossed aside, despite having the confidence of the founder, is more surprising than it ought to be. However, tossing Ben Serotta aside strikes me as being as silly as the Dave Matthews Band touring … without Dave Matthews.

Divine’s Case says that Serotta should be back in full production shortly. The press release did contain a second bombshell, though. Case revealed plans to open Serotta to contract work.

Come again?

Here’s where it’s useful to go back over the facts at hand. Serotta has had trouble delivering bicycles on time. Before waiting to get the company back on a firm foundation in capital and production, they announce they are going to … make even more bikes. That alone was pretty silly, but when you really consider his statement, it seems a bit ludicrous. How many companies are out there that need American-made frames produced on contract? The only name that comes to mind currently is Rivendell, and I think Grant Peterson has his thing running pretty well. Likely candidates aside, just which bikes are we talking about? Well, it would seem that we’re talking about steel, titanium and hybrid ti/carbon bikes. I don’t think anyone would want to stick another company’s decal on a Meivici, due to its distinctive look.

Case may have had what he believes are good reasons to jettison Serotta. A portion of his statement, which was obtained like the previous quotes from Bicycle Retailer and Industry News, suggests that he has some awareness of the importance of Ben Serotta to Serotta.

“In a nutshell, recent events have reminded us that we have two distinct assets in Saratoga Springs. One, of course, is Serotta and its 41-year history. The second, our priority asset, is the entire team in Saratoga. They have been one of the things that have made Serotta’s bikes so great for so long. It’s also a team that has both the skills and capacity needed to offer unparalleled craftsmanship to other brands.We aim to keep our team together and have no plan to close the Saratoga Springs factory. In fact, contract manufacturing may represent a significant profit opportunity for the company, which in turn supports the future of the Serotta brand,” wrote Case.
What his statement implicitly shows is how there would be no 41-year history of Serotta the bicycle maker without Ben Serotta. However, as not just an owner of Serotta, but a long-time owner of multiple Serottas, I would have thought that he’d see the implicit problem of recording a group called The Jimi Hendrix Experience without any Jimi Hendrix to experience.

Who wants a Serotta with which Ben was not affiliated?

It would be different if he were dead and the staff was carrying on his legacy. That’s not the case. It would also be different if Serotta had been a serial entrepreneur and his departure was just him moving on to his next thing. But the name Serotta conjures high-quality bicycle frames, and his departure comes at the end of some ugly dealings, the PR battle over which Serotta has taken a decisive lead. The trouble for Divine is that Serotta’s personal DNA and the company’s are nearly impossible to tell apart. That’s part of what has given the company its caché. This isn’t Pete Best being dumped for Ringo Starr, this is Apple firing Steve Jobs.

So what of Divine Cycling Group’s other properties, Mad Fiber and Blue Competition Cycles? Well, Mad Fiber reports that all is well, nothing to see here. Maybe things are fine, but it’s hard to take that statement on face value once you read what Steven Harad, CEO of Blue, wrote in the comments following Serotta’s letter to the cycling community.

“Here’s hoping we aren’t next but it looks like we are. Lets catch up Ben Serotta.”

Word in the industry is that Blue has a shipping container full of bikes that they can’t pay for, which brings us back to one of the initial reports about just how bad things were at Serotta. Serotta said he had no operating capital for the company. An injection of capital which was to have materialized, did not.

My money says that customer interest will track in line with Ben Serotta’s location. If he extricates the name, people will be happy to continue buying Serottas, but if not, I suspect there will be far more interest in a line called “BEN” than one we all used to lust after. I’ll go a step further and say that I think Divine has badly miscalculated Ben Serotta’s value and the likelihood of this ugly breakdown to go public and not just tarnish, but ruin Serotta’s reputation. I’m aware that several of Serotta’s competitors have received a number of new orders because dealers lost faith that they will receive the custom bikes currently on order.

In almost any other circumstance, I’d be arguing for all life-support measures for Serotta, but this time I say leave the paddles in the crash cart.

 

Image: pilfered from Ben Serotta’s Facebook page.

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36 comments

  1. SWells

    Wow. Just, wow. Business dealings like this surpass my level of understanding. Thanks for sharing this, Padraig. I’m a proud Serotta rider and appreciate you boiling this down for me. I was aware of the Fat City/Chris Chance demise but I missed the Devine Cycling Group thing.

    Guys who spend/shop like me, that is, those who do lots of research, opinion gathering and even getting into company visions and philosophies…before making a single purchase, are saddened by this kind of news. I’m not in a position to own several bikes or kit. I’m the guy who strives to take care of what I have so it’ll last.

    19 years ago, when I decided to “get serious about this racing thing”, I underwent a Serotta FitKit session and ended up with a sweet little semi-custom Colorado TG that I raced to mediocre, pack-filling bliss here in the Mid-Atlantic. I had pleasant dealings with the company (sent it back to have a damaged derailleur hanger/dropout replaced in ’96) and when I excitedly met Ben at the NAHBS ’10, I expressed my appreciation for his bikes, company and, of course, MY bike (which I ride every Saturday…still silky smoov).

    Dang. I hope he bounces back.

  2. Gary

    Watching/reading all the bantering on the Serotta forum on this has been entertaining, albeit painful. The stories on both sides seem to be lacking some details but that’s conjecture on my part.

    At face value, it seems absurb that Divine would purchase Serotta (terms and amount not reported I believe) only to say they wouldn’t put any money into it. The firing of the previous leadership, as mentioned, is extremely common in a takeover. Ben carries more weight, at least from a public impression, as the face of Serotta. Many of those that still fly the flag for Serotta have clearly stated they wouldn’t buy a Serotta that wasn’t under Ben’s wing. How many would actually buy a new frame going forward may be rather small however.

    The subcontracting notion seems equally silly but I’d have to think that they (Divine) have something in the wings already or this would truly be stupid.

    One other misnomer is that the Poway facility is “closed”. Mike posted on the Serotta forum that while they were doing the carbon work for Serotta, they aren’t owned by Serotta and have other work ongoing. It did make for dramatic fireworks at the start of the announcement however:-)

    This one looks like popcorn will be required, possibly in large volume, to watch the show as it continues.

  3. Doug M.

    Regarding contract work and potential clients, the real question is who needs American-made contract frames that isn’t already using Zen, Waterford, or Lynskey?

  4. David

    Ben Serotta has been “managing” his company into the ground for years. His decisions gradually marginalized Serotta, and ultimately made it irrelevant.

    I don’t understand why Devine Cycling Group thought buying the company was a good financial move, or good business decision. But I can definitely understand why they’d fire someone who is entirely superfluous to the operation. Ben was a poor manager, doesn’t actively build frames and abdicated his role (and, hey, his company’s role!) in designing frames many years ago.

  5. Rusty Lion

    You have done some good writing based on qualified forensic analysis….so, as you already know, there is surely another side to the public story being told. Stay tuned.

  6. Ciclista

    >I think Divine has badly miscalculated Ben Serotta’s value

    I don’t think they care. Serotta will be the next motobecane.

  7. Jason

    Thanks for the breakdown… I’m not sure about the business dealings but it sounds crappy enough that I will avoid purchasing any product that is under the Divine name. (My wife was looking into getting a Blue) I’m also glad to have a Serotta that was produced under Ben.

  8. Souleur

    i’m with cyclista above:

    leave it to the corporate scavengers who buy a company, seeing it only as a fruitful venture, with profits as the main goal..to screw up a good gig.

    I hope Ben took the change, and ran, because all those who buy that I know of buy because a master craftsman is making the frame, and frankly, time isn’t an issue to them

    Bean counters should have learned, (but my life lesson is never give them credit for knowing what they should KNOW) that quality trumphs production any and every time its tested, relationships are superior to materialism and a good mans name is not buyable

  9. MCH

    I’ve been an admierer of Serotta bikes for many years. I’m also very simpathetic to the challenges of running a small business, particularly when your core competency is as a craftsman rather than businessman. However, before we paint Ben and Bill as victims of some faceless, brainless corporation, let’s not forget that Ben willingly sold the company. No one forced him to do it – he chose to, and he benefitted from it. The fact that he no longer has control of the company that bears his name was part of that choice as well. So, personally, I won’t shed any tears for his plight.

    What next happens to the Serotta brand has the potential to be dissapointing. If the worst does come to pass, it will be as much Ben’s fault as it will be the fault of Devine’s leadership.

  10. cash

    Back in the earlyish 90s, Serotta was the bike to have. Those Legend Tis were amazing. And the CSIs were the best steel bike going. I slummed around on a British racing green TG, that to this day remains one of the best riding bikes I’ve ever had the pleasure of racing (wish I hadn’t sold it).

    But … Serotta seriously lost their way. The bikes got ugly, and not in a good way. And absurdly expensive, especially when compared to bikes that were clearly their equal.

    I loved my Serottas (also had a mountain bike, although I can’t remember what it was called). But there is no way I would even consider buying one now, and that’s been true for a decade. Serotta lost something, about the time they stopped building the Coors Light bikes.

  11. lastofthem

    The truth is that this company was in a bad way for most of its 41 year history and Ben has been the one constant for that 41 years. It has used the resourses of investors since before Archi Cox bought it in 1989 to keep it alive. Without his millions the advent of the Serotta titanium colorado tubing never would have happened and he company would have certainly died in ’89. After his multi million dollar investment and 7 or 8 years of ownership proved to be a futile effort Ben bought the company back for peanuts. Ben did ok for a while but his lack of business scense, greed and poor management brought it to its knees once again requiring investor resources to bail him out. The pricing is a reflection of bloated and unnecessary overhead. Ben has a clear inability to delegate responsibilty to capable people. The company has traditionally been structured like an inverted triangle. Alot of high salaies (including his own)for inept management and office personel with little trickle down to improve efficiency or compensate the people who put their hearts and souls into a wonderful product. Not to mention creating an elite image. Inability to deliver product in a timely fasion could often be attributed to lack of capital to buy materials and pay vendors.
    While Ben has his place in history as a builder and innovator he hasnt built a single frame in many, many years and could rarely be seen on the production floor. The quality of the frames going out the door was more a result of the pride of skilled craftsmens than the doing of Ben himself. I do believe that the quality can still be as good or better without Ben if the ownership allows the craftsmen to do their best work and provides quality materials. If you love your Serotta patronize the people who built it and not the man who ran the company into the ground.

  12. Matt

    While I can see both sides of the story, DCG could have handled this quite differently. I’m afraid that given the history of Serotta the company would have been better served coming to some form of agreement allowing Ben to remain on-board in some form rather than take the risk of damaging their already injured bottom line even further. The backlash from this action could prove to be more costly than a more well thought out alternative and to me, seems like very, very poor execution.

  13. Full Monte

    Reminds me of the Fender sale to CBS, which proceeded to de-content the product line in a cost-cutting move. Leo, who couldn’t use “Fender” as a brand name any longer, went on to design some great instruments for MusicMan, and co-found G & L. Fender, the company bearing his name, had its ups and downs (and anyone who remembers the CBS era knows there were a good many downs), but it stayed alive (thanks mostly to the employee buy-back in the mid 80s). Today, while offshoring their budget offerings, now build great instruments again in their US custom shop.

    So, does Serotta, the brand, minus Ben, have the staying power of Fender, the brand, minus Leo? Likely not, as the high-end bicycle consumer base is far smaller, and probably even more fickle than musicians. In the end, a Serotta is a hand-built, custom-order, made-to-measure item, while a Stratocaster or Precision bass each are one of many. Some are better, some are worse, and every once in awhile, you find an instrument that’s The One. But still, they’re mass produced and not quite as personal as a custom-ordered Serotta. One that has been breathed upon perhaps by Ben himself.

    Add to that the present management of Serotta is already planning to dilute the Serotta brand by house-branding bikes, presumably as mass-produced products for other companies. So riddle me this: Why would I, the bike consumer, buy a Serotta for $7000 when I can buy one built for, say REI, for half? Sure, the factory picks up volume and cash flow, but it kills the brand that built it, making them…what exactly?

    In the end, they did Ben a favor, for he certainly would not have had the stomach for what current management is going to do to Serotta – the brand and the company. So long live Serotta, Serotta is dead.

  14. Richard S

    lastofthem Get’s it. Ben (and John) for that matter) got lucky and hit the racing scene at the right time. Long gone or the glory days. It is now about building perfection.

  15. industryPRO

    this is a pattern in the bike industry that will continue to repeat itself. small companies, whether artisans or innovators in product/marketing/selling can only get so far before they need cash to either further innovate or grow. Cash infusion means growth expectations and that’s where the trouble begins. The industry is littered with this very example, look at the 9 lives of Cannondale and Schwinn and the failures of dozens of great brands that no longer exist. The reality is that this is a $5-6 Billion industry with low margins on complete bikes. The mass market accounts for half of that, Specialized, Trek, Giant, Dorel, ASI and now PON account for the remaining 90% leaving 300 plus bike brands to fight out the remaining 10% or $300 million. Hopefully someone comes along and changes this dynamic. In the meantime, look for further consolidation of small brands to go up against the big boys.

  16. Larry T.

    “lastofthem” brings up some good points. My memory is hazy but I seem to remember (don’t get me wrong I think Ben’s a nice fellow, I still remember a phone call back to NY where we spoke about the bike Andy Hampsten rode to victory at the ’88 Giro, not being Serotta’s work) Ben having similar issues way back when production was moved to Japan. It seemed the entire thing went belly-up then, but Ben got it back and resumed production in the USA. This must have been around the mid-80’s? The shop I managed in SoCal sold a lot of ‘em and I owned one myself. If you’re going to pursue this in an investigative-journalist type manner – dig up ALL the facts and the history, then make your case.

  17. Shawn

    “Who wants a Serotta with which Ben was not affiliated?”

    As David said, way up the comment chain, Serotta really isn’t a relevant player now and hasn’t been for a while. Sure, there’s the nostalgic, lycra-stretching, early-50s, ex-cat4-racers-who-finally-have-disposable-income cohort, but maybe the problem with the company is identifying the right question: “Who wants a Serotta?”

  18. Patrick O'Brien

    If I was buying a bike from a guitar company, I would much rather have a Godin than a Fender. What Fender did to Ovation, is what Devine will do to Serotta. The Clif Bar business model sure as hell isn’t at work here.

  19. lastofthem

    @ Larry T. – There was a model called the Serotta Titan that had sub assemblies made offshore in the 80’s. If I remember correctly they were constructed from Tange tubing. The front triangle was built in Greenfield Center in Bens barn while the rear dropouts were brazed into subassemblies with capped seatstays and chainstays (left and rightside sub assemblies)by the offshore supplier. Not a real time saver nor does this method make much scense in terms of ease of assembly as the sub assemblies require “tweeking” to fit them to the front end.It was probably the companies first attempt to offer an entry level Serotta. The experiment wasnt terribly sucessful. Other models were still built soley in the U.S. at the time. There was also a guy named Leo Checco or something like that in the early 80’s that was subcontracted to build Columbus SL frames and forks. While they looked every bit like a Serotta they were plagued with a poorly brazed seat tube/bottom bracket socket that was prone to failure. The seat tubes would litteraly pull out of the bottom brackets.

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  21. onePro

    I need to clarify my comment above apparently. From where I sit it looks like the management teem is executing on decisions that are not approved by the owners of the brand. It looks manipulative. It looks like it could get the management team in trouble. The management team refers to “other side of the public story” where the brand owners haven’t really said nearly as much as management has.

    I believe time will tell the other side of the story. I think the brand has tremendous value but I think it is well demonstrated over the last 20 years that the management team has little value. Just look at the trail of dead.

    If robot feels my comments are not contributing to the conversation in a meaningful way then please feel free to delete them.

    1. Robot

      @onePro – Your previous comment, unpublished, was needlessly inflammatory and expressed anonymously. We do like to keep the comments section as open as possible and encourage people to express opinions, but those opinions should be expressed in context, as with your follow up comment, so they can be part of a discussion. More ideally, we’d like to know who you are, as we don’t have a good way of knowing whether you have a stake in the outcome of the topic at hand. Former Serotta CEO Bill Watkins has had the decency to identify himself, so we can place his comments in context. It is probably fair for anyone else who might express either support or skepticism to also say whether they are stakeholders, past or present, in the running of the company.

      Anonymity is fine, and for those who are mere bystanders, commenting on a current story, it is completely appropriate. That is all.

  22. onePro

    Thanks Robot. I have nothing at stake with exception of my employer, unrelated to any of the entities mentioned in the article, would have my head for speaking my mind publicly.

  23. tinytim

    Just out of interest, which rr had the crash? Me thinks itwas 2010 or the 2011 bariani aka zam ora cat 4 field. I was in the p123 field, which was delayed for about an hour while the local fire department was scrapping the injured off the tarmac. Seeing the carnage reinforced my loathing of flat road races.hopefully all the owners of exploded carbon frames (as a result of high speed endos ) went out and purchased some steel steeds.

  24. danny

    Seems to me that Mad FIber out of business? Is there anyone that can clarify this? They are not responding to any calls or emails as of about 3 weeks ago. Can you research and tell us what is going on?

  25. lastofthem

    @danny

    I would be interested to know as well. Hopefully they have been able to restructure and preserve thier employment. I know that the guys at Saratoga Frameworks have been reinvigorated by the events that unfolded and are entusiastic about countinuing their craft. I imagine it makes a signifigant improvement in morale when you know the company will make payroll every week and the management values your effort, opinions and considers you to be a valuable asset. Best of luck to them as they have suffered the consequences of a poor management for way too long.

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