Roadmaster Industries, Inc.
Roadmaster Industries, Inc.
Incorporated: 1925 as Anderson and Vail Stamping Company
Sales: $730.9 million (1995)
Stock Exchanges: New York
SICs: 3751 Motorcycles, Bicycles & Parts; 6719 Holding Companies Not Elsewhere Classified
Roadmaster Industries Inc. is one of the largest manufacturers of bicycles and a leading producer of fitness equipment and toy products in the United States. The company’s major product lines, some of which date back to the 19th century, include bicycles for the adult, teen, and juvenile markets; fitness equipment, including stationary aerobic equipment, multi-station weight systems, and benches; toy products, such as tricycles, wagons, toy horses, bulk plastic toys, sleds, and swings sets; and team sports equipment. The winner of several Vendor of the Year awards in the 1990s, the company sells its products to leading mass merchandisers, such as Toys “R” Us, Wal-Mart, and Target. Some of its better known brand names include Roadmaster, Vitamaster, Flexible Flyer, DP, Hutch, Mac-Gregor, and American Playworld.
The origins of the Roadmaster product family can be traced to a small metal factory located in Harvey, Illinois, where its proprietor, Brett Anderson, began making four-inch wheel disks for toy manufacturers in 1925. The following year, he moved his business, now known as the Anderson and Vail Stamping Company to Hammond, Indiana. As the decade progressed, the fledgling company, which changed its name to Junior Toy in 1929, began manufacturing the metal tricycles and little red wagons that would become a familiar part of the American childhood experience. Noted for their dependability, these toys were often passed down from one generation to the next.
Just as the company was starting to establish itself as a reputable toy manufacturer, it found itself in the midst of the Great Depression. While the stock market crash of 1929 and the precipitous decline of the American economy may have spelled the end for many businesses—especially those engaged in the production of such nonessential items as toys—Anderson’s company managed to survive. In fact, during the 1930s, the company actually managed to double sales each year as it was able to turn out a line of toys that fell within the budget of average Depression-era wage earner. Its most popular item during the period, a sidewalk bicycle with a stamped metal frame, carried an affordable one-dollar price tag. In 1935, the Junior Toy company began marketing this line of metal framed bicycles and tricycles under the Roadmaster label. The increasing popularity of the products suggested that the name was quickly gaining a reputation for high quality and value.
Peaks and Valleys: 1950s-1960s
After more than a decade of strong growth, Junior Toy and its Roadmaster line, now under the control of the privately held Cleveland Welding Company, were acquired by AMF Wheel Goods. The 1951 purchase began an era of peaks and valleys for the Roadmaster line. The booming economy of the 1950s and the explosion in the number of births during the postwar era provided a favorable environment for the bike maker. Taking advantage of the increase in its target markets, the company was able to diversify its product line, adding exercise equipment under the brand name Vitamaster in 1950. As the “baby boom” population continued to expand, the company found the need for a new manufacturing facility to keep up with demand. In 1962, the company moved its operations to Olney, Illinois, where it built a new factory on the 122-acre site in southern Illinois that would remain the company’s principal bicycle manufacturing location into the 1990s.
After two decades of consistent growth, however, the AMF Wheel Goods Division stalled under the long-distance management of a parent company bogged down in layer after layer of bureaucracy. By the late 1970s, the bicycle division had fallen on hard times. The absence of stable management—the company had seven presidents between 1972 and 1982—and the inability of AMF to run the division efficiently from its headquarters in White Plains, New York, contributed to a steady decline in sales and profits. In the late 1970s and early 1980s, for instance, the company lost an average of $8 million a year. Moreover, the quality of the Roadmaster line—once its hallmark—had fallen to an all-time low. Bicycles made at the Olney plant, according to Judith Vandewater’s article in the St. Louis Post-Dispatch, were manufactured so poorly that some bike shops in the area refused to repair them, claiming that the bikes would not stay fixed no matter how much labor and effort was put into them.
The 1980s: Birth of the Roadmaster Corporation
In February 1982, AMF hired a new division president, George C. Nebel, a 47-year-old former Naval officer and vice-president of Milton Bradley Electronics, who was given the challenge of resuscitating the dying bike maker. The deteriorating performance of the Olney plant, however, proved to be too much for AMF executives, who announced their decision to sell the Wheel Goods Division six months later.
During his short tenure as an AMF executive, Nebel had discovered enough potential in the layers of corporate inefficiency to take a chance on the struggling company. He called in Robert O. Zinnen, a 56-year-old lawyer and certified public accountant with whom he had worked at Milton Bradley, to help him survey the company. Six months later, the two, convinced that the labor force in the impoverished agricultural Richland County area would not let them down, completed a leveraged buyout of the company, relying heavily on the assets of the company to finance the deal.
After renaming their new company the Roadmaster Corporation, the two men implemented an aggressive plan for recovery. “We did all the things that were necessary to turn a big ship around,” Zinnen told Vandewater. Not only did they cut out waste and reduce inventory to a manageable level, but they launched a more aggressive sales campaign and added new product lines to offset the losses resulting from increasingly strong foreign competition. They expanded the children’s product division with a new toddler line, while adding three new divisions: Healthmaster home fitness equipment; Arrow bicycles, a higher-end line designed to boost Roadmaster’s reputation with bicycle shops; and a contract manufacturing business that would bid on Defense Department contracts.
To improve sales on their core bicycle business, the newly-formed Roadmaster began more aggressively courting such major retailers as Sears, Penney’s, Kmart, and Venture stores, attempting to carve a profitable niche in the popularly-priced segment of the market. While boosting sales 40 percent in its first two years, the company also managed to make large cuts in overhead, reducing the number of administrative employees from 260 to 130, eliminating a variety of corporate perks, and hiring an auditing firm to improve inventory counts. Other improvements included the conversion to “cell manufacturing”—a system under which only one group of employees was responsible for processing raw materials into finished components instead of several throughout the plant, cutting down significantly on the number of times parts had to be moved— and an incentive wage system based on workmanship rather than total output.
While such measures succeeded in making the company profitable within a few years, the gains were only temporary. During the first half of the 1980s, lower-priced imports swallowed up more than one-third of the six U.S. bicycle manufacturers market share. By 1985, domestic companies controlled only half of the $9-$10 million U.S. bicycle market. Such competition forced low-end producers such as Roadmaster to sacrifice profit margins to stay in business.
Competition also forced Roadmaster, the largest employer in southern Illinois at the time, to cut its work force by more than 50 percent in less than four years and to cut the wages of the 460 hourly workers who remained in 1986. That same year, the company imposed a wage agreement on employees that stripped them of their health insurance and lowered wages to below $4 per hour. These draconian measures, while viewed by management as essential to the company’s continued existence, precipitated a bitter labor dispute that saw hundreds of employees quit, claiming they could make more from unemployment than from Roadmaster.
Adding to this list of difficulties were a series of lawsuits and Federal Trade Commission investigations concerning the questionable use of the American flag stickers on Roadmaster bikes. According to some employee charges, the company imported bicycles manufactured in Taiwan, fixed the flaws in the bicycles, and then replaced “Made in Taiwan” stickers with American flag stickers.
Roadmaster Industries, Inc. is committed to making the most of a tradition of consumer trust through design innovation, low-cost manufacturing and controlled expansion. These are the values that have created record growth for the Company. They are the building blocks for another century of success.
The Late 1980s and Early 1990s: New Ownership and Expansion
In spite of such difficulties, Roadmaster managed to sell $55 million worth of bicycles, tricycles, and exercise equipment in 1987. The company’s heavy debt load and nagging labor problems prevented it from earning more than $457,000, however. In June of that same year, a new group of owners took on the challenge of making the company profitable over the long run. Henry Fong, head of Denver investment firm Equitex Inc., engineered a $27 million leveraged buyout of the company, which he renamed Roadmaster Industries and took public in January 1988. Headquarters for the new holding company were established in Colorado.
With Fong at the helm, Roadmaster now had the entrepreneurial drive and, perhaps more important, the financial backing needed to expand the company and turn a sizable profit. The first step in Fong’s aggressive growth strategy was the August 1988 acquisition of Ajay Enterprises Corporation, a manufacturer of fitness equipment and sports accessories, with a sports division in Delavan, Wisconsin, and plants in Mexicali, Mexico; Sun Valley, California; Tyler, Texas; and Reading, Pennsylvania. This purchase doubled the size of the company and helped to boost 1988 sales to $109 million, nearly triple that of the previous year, largely as a result of the addition of Ajay’s line of treadmills, exercise benches, and free weights. The following year, which saw the company further diversify its product line with the acquisition of Hamilton Lamp, Roadmaster achieved another sales record of $189 million.
This purchase and the series of acquisitions that would follow during the early 1990s helped the company to take advantage of the growing emphasis placed on physical fitness by the American public. As the “baby boom” generation moved into their 30s and 40s, the number of adults conscious about their health and physical appearance reached an all-time high. Bicycling, long one of the most popular leisure and exercise activities in the United States, benefitted from this trend. Roadmaster, while continuing to offer a diverse line for children and teens, did not fail to capitalize on this development in the adult market, quadrupling its sales of bicycles between 1989 and 1993.
By 1990, Roadmaster Corporation, the Illinois-based sporting goods arm of Roadmaster Industries, had grown to become the 44th largest sporting goods company in the nation, on sales of $72 million, 42 percent of the company’s total revenues. That figure would quickly expand as Roadmaster Industries acquired Diversified Products, a $215 million sporting-goods manufacturer based in Opelika, Alabama, known for its “DP/Fit for Life” brand name of fitness equipment. The consolidation created a $400 million, 4,500-em-ployee conglomerate that quickly became one of the nation’s largest sporting goods companies. Later that year, Roadmaster added size—and prestige—to its bicycle line by acquiring the 113-year-old Columbia Manufacturing Company, a Westfield, Massachusetts, bicycle company.
Having dramatically increased the size and the scope of company operations since his arrival, Fong, along with his co-president and chief executive officer, Edward Shake, had the clout to expand contracts with several of the nation’s largest and fastest growing retail chains. While in 1990 one retailer accounted for a large percentage of total sales, by 1992 three retailers—Wal-Mart, Toys “R” Us, and Sears—contributed approximately 50 percent of sales. That same year, Roadmaster launched an aggressive marketing strategy emphasizing what the company believed a unique combination of quality and value. Pointing to products such as mountain bikes that featured racing-quality components at a mass merchandiser price, the company attempted to win retailers and customers over with upscale features at a “best value” price.
As the decade progressed, Roadmaster, along with other U.S. bicycle manufacturers, benefitted from the strengthening of Asian currency and the modest decline in foreign competition that followed. Doing its best to increase market share while trade conditions were favorable, the company engineered one of its most successful product launches in its history, introducing in 1992 the Motocycle, a bicycle made to look like a motorcycle for ten- to 14-year-olds. A concentrated marketing effort that included print advertisements in Good Housekeeping, Parenting, and Family Circle, as well as television spots on the youth-oriented cable channel “Nickelodeon,” enabled the company to sell out its inventory in just five months, on the way to totaling $226.2 million in sales, another record performance.
The Mid-1990s and Beyond
Roadmaster added to the momentum brought on by its success in the early 1990s with several key acquisitions that helped to diversify the company’s interests and significantly boost its sales potential. In September 1993, the company purchased the century-old Flexible Flyer company, maker of the legendary steerable wooden snow sled. The acquisition not only complemented Roadmaster’s line of classic toys but helped to moderate the seasonal fluctuations that had previously hurt the company. Flexible Flyer’s line of swing sets, for instance, traditionally performed well in the first six months of the year, in contrast to many traditional Roadmaster products, which enjoyed greater sales volume during the Christmas season.
In 1994, the same year that the company began trading on the New York Stock Exchange and moved its corporate headquarters to Atlanta, Georgia, Roadmaster made one of its largest acquisitions to date, as it purchased the Actava Group’s four sports subsidiaries: Diversified Products; Nelson/Weather-Rite, a leading supplier of outdoor and camping equipment to mass merchandisers; Hutch Sports U.S.A, a national marketer and distributor of products for team sports with the official license for The National Football League, The National Basketball Association, The National Hockey League, Major League Baseball, and several colleges; and Willow Hosiery Company, a national distributor of socks for the NFL and several collegiate teams. Added sales from the $120 million deal, as Fong told Don Knox of The Rocky Mountain News, helped to “accelerate” the company’s plans to become the “leading producer” in several segments of the sporting goods industry.
As Roadmaster entered the second half of the 1990s, having increased it sales 377 percent to $730.9 million in the past five years, it expected to continue its strategy of steady growth by improving and expanding its existing product lines. With the foreign market share in the bicycle industry down to 45 percent, the company expected to take advantage of its added size and economies of scale to strengthen its position as a leading bicycle manufacturer for mass merchandisers. As Roadmaster maneuvered to position itself as a low-cost producer in several segments of its business, however, it had to face the pressures resulting from higher than expected increases in the cost of materials such as plastics, cardboard, and steel. Just how well the company would respond to such challenges would play a significant role in its ability to market “best value” products in the future.
Roadmaster Corporation; Roadmaster Limited; Diversified Products Corporation; Hutch Sports, U.S.A. Inc.; Willow Hosiery Company; Nelson/Weather-Rite, Inc.
American Playworld; Flexible Flyer.
Block, Toddi Gutner, “CEO of the Year,” Forbes, November 7, 1994, pp. 57–58.
Dubroff, Henry, “Blinder Reaps Profits from New Underwriting,” Denver Post, January 24, 1988.
——, “Denver Firm Buys No. 1 Tricycle Maker,” Denver Post, August 15, 1987.
Graham, Judith, “Roadmaster, Diversified Products Merging in $60 Million Deal,” Denver Post, August 8, 1991, p. C2.
Knox, Don, “Roadmaster to Buy Four Actava Companies,” Rocky Mountain News, June 1, 1994, Bus. Sec., p. 51A.
Marcial, Gene G. “Roadmaster Goes Freewheeling,” Business Week, November 28, 1994, p. 108.
McKenna, Jon, “Actava Spin-off to Move Here,” Atlanta Business Chronicle, June 3, 1994.
Rossi, Cathy, “Columbia’s Uphill Climb Ends with Purchase by Road-master,” Metalworking News, April 23, 1990, pp. 5–6.
Scaggs, Jim, “U.S., Illinois Officials Probe Roadmaster,” Evansville (Indiana) Courier and Press, September 21, 1986.
Vandewater, Judith, “Bike Maker Is on the Road Again,” St. Louis Post-Dispatch, July 7, 1985.
"Roadmaster Industries, Inc.." International Directory of Company Histories. . Encyclopedia.com. (September 14, 2018). http://www.encyclopedia.com/books/politics-and-business-magazines/roadmaster-industries-inc
"Roadmaster Industries, Inc.." International Directory of Company Histories. . Retrieved September 14, 2018 from Encyclopedia.com: http://www.encyclopedia.com/books/politics-and-business-magazines/roadmaster-industries-inc
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