Cannondale bicycle parent company faces penalties for $3M Connecticut loan noncompliance
Cycling Sports Group, the parent company of Cannondale Sports Unlimited, is facing a $280,000 prepayment penalty for not complying with the terms of a $3 million state loan.
The 10-year loan was issued in 2013, to Dorel Industries, the parent company of CSG, to assist with Cannondale’s move from Bethel to a 51,000-square-foot global headquarters at iPark in South Wilton.
Cannondale is a leader in the cycling industry, selling a variety of road and mountain bikes, as well as accessories. The Wilton facility houses the bicycle company’s research and development, engineering and marketing departments.
Under an amended agreement of the terms of the loan under Gov. Dannel P. Malloy’s administration, Dorel was to retain 140 full-time positions and create 41 part-time positions. It was to maintain an average of 181 jobs for a year prior to Aug. 14, 2019.
For every job the company fell short, a penalty of $16,574.59 per job would be assessed.
If the company complied with the job requirements, $1 million of the loan could have been forgiven.
In June 2013, Dorel laid off 50 workers in its leisure division.
On July 25, 2019, Cannondale issued a recall for more than 11,000 of its CAADX cyclocross bicycles, after several reports of injuries — including one death — stemming from incidents in which the bicycle’s fork fractured.
A job audit review in early November by the state Department of Economic and Community Development, shows CSG fell short of its job goal, according to DECD spokesman Jim Watson.
“The average number of full-time jobs CSG retained/created was 164, 17 short of the 181 required under the contract,” Watson said.
As a result, CSG has a total penalty of $281,768.03, due in the form of prepayment of principal. The 10-year loan has four years to go.
“CSG is no longer eligible for the $1 million loan forgiveness because it didn’t comply with the job requirements,” Watson said.
Under the original terms of the $3 million loan over 10 years at 2 percent annual interest, the company was to retain its original 143 jobs and create 75 more for a total of 218 jobs — an average it was to maintain for 12 months.
Cannondale began as an outdoor gear company in the Cannondale section of Wilton. Eventually it moved to Bethel, but was persuaded to stay in Connecticut and return Wilton when it received the $3 million state loan in 2013.
Dorel lost nearly $10 million in the first nine months of this year, with the Montreal-based company citing the effect of U.S. tariffs as a contributing factor. The company compensated by raising prices on some of its bikes, helping boost revenue 2 percent between January and September to nearly $2 billion. Uncertainty over the tariffs prompted some major U.S. distributors to delay orders they typically make in the summer to fill out holiday inventories, according to Dorel CEO Martin Schwartz who spoke to investment analysts last week on a conference call.
Schwartz singled out Cannondale sales as a bright spot in the company’s array of bike brands, however, including new electric bike models it is introducing designed to help cyclists power their way up hills.
“Excitement surrounding Cannondale’s model year 2020 product innovation has translated into strong sales, with five new platforms introduced … including two new e-mountain bikes,” Schwartz told analysts. “It’s finally all clicking, and there’s a lot of stuff that hasn’t hit the market yet. … We really haven’t delivered our new e-bikes, and obviously in Europe, that’s a big deal; and even in the U.S. today (and) in Canada, e-bikes are moving.”
Staff writer Soule contributed to this story. email@example.com