The Storm Before the Calm

race-ti-build

Think about the last time you were watching the weather and the weatherman was talking about a hurricane about to pummel some coastline. Be it Louisiana, Texas, Florida, New Jersey or North Carolina, your reaction was very likely, “Those poor SOBs.”

This is the reaction I’ve been having for nearly everyone involved in what was briefly known as Divine Cycling Group. If there’s been an uglier yard sale of emotions, unpaid invoices and lawyer paper in cycling, I haven’t seen it. I’ve been digging around for all the information I can. And while I don’t typically use the term “digging” to describe the work I do, several people have used that term in asking me about what I’ve been up to, what I’ve learned. Some have used the term with excitement and curiosity. Others have used it cautiously, nervously.

What I’ve learned is that the number of people in financial hardship as a result of the failed merger of Divine Cycling Group can’t easily be totaled. What I’ve learned is that absolutely everyone I’ve talked to have something in common: they all wonder what the future holds. They are all scared that their careers or bank accounts may take a significant hit. For some, that hit has already arrived. They also share a fear of the lawyers involved in these transactions.

I’ve talked to vendors and former contractors for Serotta. Everyone I talked to has an outstanding, unpaid balance. So far as I’ve been able to find out, these amounts range from the low four figures to the high five figures. In aggregate, it appears to be an ugly, crippling sum. And no one owed this money will go on the record to say they haven’t been paid. To a person, they are afraid that any public declaration that they have an unpaid invoice could result in punitive action from the lawyers working on behalf of Bradway Capital and others.

I contacted Brian Case, CEO of Bradway Capital. He wasn’t willing to say much for the record due to “lots of legalities,” but he did say there was likely to be some news forthcoming in 10 days to two weeks. He cautioned me that only one side of the story was circulating, indirectly alluding to Ben Serotta’s open letter to the industry. He admitted he’d been frustrated to be on the sidelines unable to tell his side of the story and was eager to do so once all the paperwork was complete.

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I’ve had a couple of people who have been close to these events suggest that the morass of legal wranglings is far deeper and murkier than most would suspect. For them the smoking gun is the fact that what was Serotta is now operating as Saratoga Frameworks. They each independently noted that not only was Serotta’s intellectual property split from the real estate and the labor force, but that in Case lost control of the Serotta intellectual property in his dealings with Bill Overbay, hence the need for the Saratoga Frameworks brand, complete with logo and website. Case even told Bicycle Retailer and Industry news that Divine Cycling Group owned the Serotta brand and that while there was a chance that brand would be commercialized again at some point in the future, for now it needed to “cool off.”

It’s worth noting that Bradway Capital retains the tooling and the labor force while another company Case controls owns the real estate in which the operation is based. When I asked Case about the disposition of the Serotta name and intellectual property he cited confidentiality due to the legal proceedings and was hopeful that he’d be able to say something on the record about it in a couple of weeks, the point at which he is hopeful that the paperwork will be finalized.

Case is clearly bullish on Saratoga Frameworks. He aims to have as many as 40 employees in 2014 and to be producing as many as 2500 frames over the course of the year. However, when I asked about the people who told me had gone unpaid he began saying, “A lot of promises were made by Ben and the previous management.”

I then told him that the people I had spoken with all asserted that they had signed agreements with Bradway, not verbal agreements with Ben Serotta. Worse, each of them told me that Case had used exactly that excuse for not paying them. When pressed, he said, “We have every intention of paying our legal obligations.” Moments later he added, “Once we have a sustainable business in Saratoga we can meet those obligations.”

The questions I didn’t ask were, “What if you don’t have a viable business going forward? Does that mean you won’t pay?”

My final questions to Case regarded Mad Fiber and what would happen with that company. Currently, the web site has a single page asking visitors to check back later and the phone isn’t being answered. He admitted that production had been shut down and operations had been suspended in the short term. Again, he asked me to wait a couple of weeks when he said paperwork should be finalized and he was hopeful Mad Fiber would be up and running once again.

The assets of Blue Competition Cycles are on the block. The entire workforce has been laid off. To give you some idea of how far suspended operations can inflict pain, there’s $1 million in bicycles for which the factory that produced them hasn’t been paid. There’s a team that placed deposits on bikes to race on this year that has been stiffed. No bikes.

I respect that everyone wants a bottom line; this is very much a work in progress. The challenge here is that emotions are running high and I can’t find anyone willing to take Case at his word. It would be easy to go after Case and harp on all those unpaid bills. It would be easy to look at the firing of Ben Serotta and draw parallels to Fat City and the awful turn of events that ultimately saw Chris Chance leave the bike industry. But the bright side of that chapter of the New England bike industry includes the almost necessary rise of Independent Fabrication.

While no one will say it publicly, there are plenty of people who are whispering that Case and Overbay haven’t treated people ethically or honorably. It’s easy to point to the guy at the top and label him the villain. The challenge here is that Case believes in the workforce behind Serotta/Saratoga and under the right circumstances he may have the ability to keep those craftsmen employed. Should Saratoga go under there’s a very high likelihood that not only will the bike industry lose the opportunity to revive a great brand, the industry will lose a number of talented individuals for the simple reason that most of them won’t be able to find jobs elsewhere.

There’s an additional challenge Case and Saratoga face. They need dealers. While some dealers will likely take Saratoga as a placeholder for Serotta, I’ve spoken with several dealers who want nothing more to do with Serotta, let alone Saratoga. It’s one thing to make 2500 frames in a year; it’s another to sell them.

What happens next really rides on Brian Case. If he pulls this out and revives the Serotta brand, he’ll be a hero. If Serotta goes away but he makes a going concern of Saratoga, he’ll still be a kind of hero, just smaller scale. However, if he is unable to secure the Serotta intellectual property and both it and Saratoga Frameworks go Pan Am, then Case will be served up for all and sundry to be remembered as the black-hat-wearing evil-doer; he’ll be such an obvious a target for blame that any other storyline about Serotta’s years of questionable management will be obliterated by his inability to pull the operation out of the dive.

Stay tuned.

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12 comments

  1. Butzi

    I questioned one local shop who carried Serotta (store name & location withheld), whether they were sticking with Saratoga Frameworks; they said yes. I cannot, as a consumer, support their decision with the knowledge of these events. Perhaps it was the only way for the shop to get unpaid invoices paid… Perhaps it’s my nostalgia.

    I think the shop owners are doing their clientele a disservice by suggesting they purchase a Saratoga frame, knowing the recent history and potential demise. This is a shop that carries other well-established frame-builders (Guru, Seven, Parlee, etc); Saratoga/Serotta is not the only game in town anymore… I would rather spend my $$$ on an independent frame builder with a [potentially] clean[er] track record, one whose existence I can rely on (and warranty–another piece of the messy M&A history of Serotta! http://serotta.com/warranty/ ).

    As an aside, if it is known that Serotta was less-than-well-managed, how does that reflect on the frames that were produced (not the craftspeople)? Where will Saratoga be when the next bump in the road occurs, and a customer needs warranty work? Will yet another investment group come, void the warranties, rebadge, and claim some progeny to the original Serotta brand?

    Too many questions to make a diligent purchase in my mind.

  2. Gary

    My question is what did Divine actually buy and where’s the business logic for all this?

    Blue is out of business and evidently was never “bought” by Divine.

    Mad Fiber has stopped all work, pending finding a factory overseas to hopefully produce wheels again. A forum post on slowtwitch from a user named bike4life said:

    “They are done in the states. They do not want the news released because they are trying to save face. They do not have a location set up in Asia yet, and are very deep in trying to figure out what the hell they are doing. Case/ Devine has been lying (big surprise!) about keeping production going in the States. They are not helping in warranties or building new wheels currently.”

    Who this is exactly is unknown but seems “reliable”.

    Serotta/Saratoga is a head scratcher unless they’ve already got companies lined up to buy in volume.

    Particularily in Mad Fiber’s case, it would seem that having a strategy for a smooth transition would have been paramount.

    Time to get a new batch of popcorn and watch the festivities.

  3. tim

    “We have every intention of paying our legal obligations.” Moments later he added, “Once we have a sustainable business in Saratoga we can meet those obligations.

    That’s all very well but what about all the other people who might lose their already sustainable business due to this. I agree its easy to paint Case as the villain, but I’m not sure he doesn’t deserve it…

  4. Derek

    As far as voiding warranties. I would rather have a good part than a good warranty. The rider has to take responsibility for what they are on,knowing where it came from is part of that function. Otherwise I agree with Butzi. I feel for the people building them but I can’t buy from the people over them.


    1. Author
      Padraig

      All: Thanks for joining the conversation.

      Butzi: In the short term, any shop that carries Saratoga Frameworks isn’t doing their customers a disservice. Remember, these are made by the same craftsmen responsible for Serotta. The Saratoga product will be nothing but stellar, which goes to Derek’s point. However, shops have a duty to their customers to consider the likely survival of the brands they bring on and if there seems reason to be concerned about just how long a brand is likely to be around, then they owe it to their customers to consider that aspect of the product’s serviceability. In Saratoga’s defense, I’ve never known anyone personally who had a warranty issue with a Serotta frame. Contrast that with the situation of every person I know who bought a steel Colnago made in the 1990s. At some point they all broke. Every single bike I knew about.

      The larger issue I think many of these comments is circling is a fundamental distrust of the leadership of a financially strapped company that many people feel undervalued the importance of the founder as a signifier of the brand as well as the brand’s intellectual property. Simply put, if Serotta were still at Serotta, the criticism would like be the same as it’s been for years: “Guys, get your shit together and make our bikes on time.” Instead, the world is left saying, “What the what?”

      Tim: While there are contractors who have been hurt by nonpayment, I haven’t encountered anyone with whom Serotta was doing so much business that being stiffed by Bradway would be ruinous. No one will go under other than Saratoga Frameworks should Case decided it’s not a “sustainable business.”

  5. kurti_sc

    Great reporting. Thanks. A few other mainstream sites interested in Velo- and Cycling- related stuff have been served!
    what’s up with the 1990′s Colnagos? I wasn’t aware of that issue, but apparently should have been. I started falling in love with the Master Light in the late 90′s and got to ride one once through the Alps (Germany / Austria). It’s been a dream bike ever since, but maybe my affections fell on a Floozy instead of a flyer. Hmmm…would that be the first time??

  6. Geoff

    From what I have seen over the years, Colnago quality was always an oxymoron. I’ve seen C-40 frames where the FD tab was so crooked that you couldn’t properly set up the FD. They had flashy paint and good geo, but they always seemed over-rated in my book. Sure the allure is great, but you can’t beat a well made frame from a reputable builder near to you that can handle customer service issues and warranty issues in an easy and timely manner, something I never got from the many italian frames I bought in the 20th Century. They may be better now, but I’ll put my money into NA builders whom I can form relationships with where I am not just a customer in some far-flung land buying a widget!

  7. Bob Kerner

    Sometimes things break and they should remain broken and be put at the trash heap. This happens all the time in other industries but, for some reason, the Serotta story churns up emotions like no other. Emotions don’t make for good business. The bike company is gone and we should move on and support some of the other builders out there making excellent products. At the end of the day does it matter who screwed whom at the bargaining table? No. The company has been in trouble for more than 10 years. It needed to die. Hopefully the craftspeople will find jobs elsewhere but I think at this point most people don’t give a hoot about the business people who drove it into the ground. Given the legal environment and a recent post on the website saying they wouldn’t honor Serotta warranty claims, who in their right mind would buy a product from anyone involved in this three-ringed circus?

  8. Steve Webb

    “who in their right mind would buy a product from anyone involved in this three-ringed circus”?

    I did

    My Mad Fibers that in 2 words are BROKEN CRAP and now I am left with two pieces of art and the snickers of my “I told you so” friends.


    1. Author
      Padraig

      Steve: Man, I’m sorry to hear that you have broken wheels and you can’t get them dealt with. That really sucks. I hate hearing stories like yours, especially as the best that I can offer is my condolence.

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