Huffy Corporation

225 Byers Road
Miamisburg, Ohio 45342
U.S.A.
(937) 866-6251
Fax: (937) 865-5470
Web site: http://www.huffy.com

Public Company
Incorporated: 1928 as Huffman Manufacturing Company
Employees: 3,702
Sales: $707.6 million (1998)
Stock Exchanges: New York
Ticker Symbol: HUF
NAIC: 336991 Motorcycles, Bicycle, & Parts Manufacturing; 33992 Sporting & Athletic Good Manufacturing

The largest manufacturer of bicycles in the world, Huffy Corporation is the parent company of four wholly owned subsidiaries that operate in two distinct business segments: consumer products and retail services. Touting itself as “America’s First Choice,” Huffy Bicycle Company manufactured a complete line of bicycles for adults and children, including an electric scooter that debuted in 1999. Huffy Sports Company ranked as the largest supplier of National Basketball Association (NBA) backboards in North America. On the retail services side of its business, Huffy owned two subsidiaries, Washington Inventory Service and Huffy Service First. Washington Inventory Service employed a national workforce that provided inventory service to retailers. Huffy Service First operated as the only national concern to provide in-store and in-home product assembly and repair services to retailers.

Origins

Huffy grew out of the Huffman Manufacturing Company, which was founded in 1924. Founder Horace M. Huffman, Sr., learned the manufacturing business from his father, George P. Huffman, who owned the Davis Sewing Machine Company from 1887 to 1925. Taking advantage of the growing automotive industry, Horace Huffman’s young company made equipment that could be used in service stations. Working out of a factory on Gilbert Avenue in a noisy section of Dayton, Ohio, near the Pennsylvania Railroad tracks, the first Huffman employees are credited with inventing a rigid spout that could be used to dispense motor oil from 50-gallon drums. The company grew quickly through the 1920s and 1930s and its line of service station equipment expanded. When it incorporated in 1928, the company posted earnings of $3,000.

In 1934 Horace Huffman announced plans to manufacture bicycles after sensing that they would become a popular mode of transportation during the Depression. In the beginning, production rates hovered at 12 bikes per day. Within two years, this rate increased to 200 daily. However, the company was still not producing fast enough to keep pace with its competition and Huffman suffered several setbacks in the beginning. The Firestone Tire and Rubber Company was a primary bike customer, but in 1938 Huffman lost a major portion of the account because it could not match Firestone’s demand.

But the solution was not far away. Two years earlier, Horace Huffman, Jr., who was known by the diminutive “Huff,” had joined the company on a full-time basis. After short stints as service manager and sales manager, he became works manager and converted the production process to a straight-line conveyerized assembly line. It was just the edge the company needed, and by 1940, bicycle production doubled and sales figures were nearing the $1.5 million mark. Huffman’s improved production rate caught the eye of the Western Auto Company, which became a major customer, and also brought Firestone back into the fold.

The outbreak of World War II necessitated a shift in production. The company joined the thousands of other businesses that were vying for government contracts, and was able to secure an order for primers, an artillery shell part. The increased business brought Huffman’s sales to nearly $2.8 million in 1942. The following year, the federal government placed an order for 4,000 bicycles. At this point, much of the work was being done by women who were filling the void left by the vast numbers of men who had been inducted into the armed forces. The later part of the war proved to be difficult as the production of consumer products in all industries virtually ceased and Horace, Sr., suffered a fatal heart attack in 1945.

Post-World War II Growth and Diversification

The younger Huffman was elected president and immediately had to face the challenge of sustaining production in the postwar period with limited supplies. The government’s allocation program, he knew, would not provide enough materials to allow the company to compete at its prewar levels. After attending a seminar on “Work Simplification,” Huff taught the procedure to his managers and then held a similar workshop for the company’s major suppliers. By meeting the problem head-on, Huffman was able to help suppliers increase their own output and to raise production levels. For two years, the company was able to run two shifts a day without experiencing the traditional slowdown during the winter months. Sales for each of the two years exceeded $10 million.

Then, in 1949, the company ran into the postwar recession. However, two developments allowed the company to survive. First, the Huffy convertible bicycle was introduced and was instantly popular. The bike also brought the name Huffy to the forefront of the bicycle industry. The second development occurred as a result of the company’s search for a product that could be manufactured during the winter months. The decision to produce lawnmowers was announced in December 1949.

As a result, the company quickly outgrew its physical plants, and in the early 1950s Huffman acquired a building in Delphos, Ohio, and moved the Automotive Service Equipment division to that location. New facilities were built in Celina, Ohio, to house the bicycle and lawnmower divisions. The Dayton manufacturing plant on Gilbert Avenue was closed and the general offices were moved to Davis Avenue. In 1959 Huffman opened its bicycle plant in Azusa, California.

By 1960 Huffman was the third largest bike manufacturer in the United States. In 1962 Horace Huffman, Jr., was named chairman and Frederick C. Smith became president and CEO. Smith had been materials manager during the crucial postwar period and was credited with strengthening the company’s relationship with its suppliers.

In 1964 Huffman expanded its Outdoor Power Equipment division with the acquisition of Diele & McGuire Manufacturing. It was not an entirely successful expansion, however, and the division continued to lose money over the next decade. That same year, the Huffman corporate offices were moved to their current location in Miamisburg.

Huffman went public with its listing on the American Stock Exchange in 1968 and sales reached $42 million the following year. Stuart Northrup, a former Singer Sewing Machine executive, replaced Smith as president in 1972. By 1973 Huffman employed 2,500 workers at five locations.

Throughout the 1960s and early 1970s, Huffman enjoyed continued growth as the market for adult bicycles grew. More and more adults were turning to bikes for exercise and as a means to cut energy costs. Until the end of the 1960s, nearly half of all bicycles in the United States were sold through small independent bike shops that offered personal customer service. In the 1970s, the introduction of mass merchandise retail chains that stocked large quantities of consumer goods and sold them at discount prices opened up a new market for bike sales. Because British-owned Raleigh Cycle was firmly entrenched as the leading supplier to the independent shop owner, Huffman set its sights on the retail chains and developed a ten-speed that required the bare minimum of assembly and service.

The company’s growth trend hit a snag in 1974, however, as a new recessionary period brought on an industrywide slump. From its peak in 1973, bicycle sales dropped 50 percent by 1975. Huffman was forced to close its Celina plant for two months and lay off 25 percent of its workers.

Prior to the recession, foreign competition was also putting pressure on U.S. bike makers. In 1972 foreign imports accounted for 37 percent of the U.S. market. The devalued U.S. dollar, however, cut this share to 15 percent by the end of the 1970s. New federal regulations setting safety standards for bicycles also cut into the sale of foreign models. As the industry revived itself toward the end of the 1970s, Huffman decided to take an aggressive marketing stance. Children again became the primary focus of the bike industry and Huffman introduced a new flashy, motocross-style bike called Thunder Trail. Designed to look like a motorcycle with waffle handle-grips, knobby tires, and racing-like number plates on the front, the new models also sported bright, jazzy colors and decals. Not content to settle for what they hoped might sell, Huffman held focus groups in shopping centers to determine which features were the most popular. In addition, a greater portion of advertising dollars was spent on television commercials, particularly during the hours when children’s programs aired.

The popularity of the Thunder Trail bike made Huffman the number one producer of bicycles in the United States by 1977 and all of the laid-off workers were called back. Net sales for 1977 were $130 million, a 21 percent increase from the previous year.

Company Perspectives:

Huffy Corporation will be a leading supplier of name brand consumer products and retail services designed to improve consumer lifestyles and enhance the business performance of its retail customers.

Although Huffman was still the leading producer of gasoline cans, oil can spouts, oil filters, and jack stands, the Automotive Equipment Division was only accounting for ten percent of the company’s sales. Bikes and bike accessories accounted for an overwhelming 90 percent. The Outdoor Power Equipment division, which had been struggling for years in the lawnmower market, was finally sold in 1975. The sale brought in a much needed $10 million in cash. Realizing the need to diversify, Huffman acquired Frabill Manufacturing, a maker of fishing and basketball equipment, in 1977.

Until then, half of Huffman’s bicycles were sold under private labels. By the end of the 1970s, however, the company decided to devote more energy to promoting its own brand name. Part of this effort included the decision, in 1977, to change the company name to Huffy Corporation. During this period, Huffy’s management also opted not to enter the moped manufacturing field because of doubts about the motorized bike’s potential in the United States. Instead, $5 million was spent to expand existing production facilities.

In 1980 Huffy posted its fifth straight year of record earnings and announced plans to open a third plant in Ponca City, Oklahoma. However, despite its strong financial position, Huffy was not immune to the problems that most U.S. businesses experienced in the 1980s. For one thing, production costs were rapidly increasing. In 1982 Harry A. Shaw III was named CEO and immediately embarked on the unpopular road to plant closings and layoffs. Shaw spearheaded the consolidation of all bike manufacturing operations into the Celina plant and sold the Automotive Products Division for cash. Huffy then invested more than $ 15 million in advanced robotics and new production equipment. The changes resulted in an increase in production capacity by 5,000 bikes a day and a 14 percent cut in production costs. Another $15 million was earmarked to improve computer-generated manufacturing in the bike plant by 1991.

A licensing, sales, and manufacturing agreement with Raleigh Cycle was also cemented in 1982, giving the company the opportunity to tap the high-specification bike market. However, the venture did not prove to be an asset and Huffy sold its rights in 1988.

With bike sales still accounting for 90 percent of the company’s sales, the need to diversify was as evident as ever. In 1982 Huffy acquired Gerico, a maker of infant car seats and strollers, and YLC Enterprises, a provider of product assembly services for retail consumer purchases. The former was organized as Gerry Baby Products and the latter as Huffy Service First. Washington Inventory Service, a nationwide inventory taking service, was acquired in 1988. In 1990, Huffy acquired Black & Decker’s stake in True Temper Hardware and capital stock in True Temper Ltd. in Ireland for $55 million. A manufacturer of garden and lawn tools, the company claimed approximately 30 percent of the market.

Foreign Competition: 1990s

Buoyed by the completion of its diversification campaign, Huffy entered the 1990s with renewed confidence. As the decade began, the company was collecting nearly half its earnings and sales from its disparate, non-bike businesses, which were beginning to develop their own momentum. Huffy Service First, for instance, had begun to expand its services by assembling gas grills, lawnmowers, and patio furniture for mass retailers in addition to bikes. Diversification engendered its own problems, however, particularly with the newest addition to the Huffy portfolio, True Temper. In an effort to gain market share, Huffy management reduced prices for True Temper lawn and garden equipment, which resulted in a $5 million loss for the division in 1992. Huffy experienced other difficulties during the early 1990s as well, misfiring in its attempt to take advantage of the popularity of mountain bikes. The company introduced a cross-trainer bike in 1992 that represented a hybrid of a road bike and mountain bike, but following an expensive promotion campaign, sales of the crosstrainer were lackluster. The problems with True Temper and the ill-conceived introduction of a crosstrainer paled in comparison to Huffy’s overriding problem during the 1990s, however, and that was contending with Asian competitors. Benefiting from lower production costs than their U.S. counterparts, Asian manufacturers enjoyed significant success in the U.S. market during the 1990s, causing considerable havoc for domestic bike producers. Huffy, holding a 30 percent share of the $1.5 billion U.S. market, bore the brunt of the damage stemming from the incursion of Asian producers and saw its profitability sag. The worst period for Huffy arrived in 1995, when the company recorded a crippling $10.5 million loss. For the remainder of the decade, Huffy management devoted itself to curing the ills that led to the devastating loss and implementing measures to ensure that it never happened again.

In the wake of 1995’s loss, a rebuilding process began that saw the company reduce its size in some departments and expand into new business areas. Management cut workers’ wages, considered new product lines to stimulate profits, and looked to divest underperforming businesses. In 1997, Huffy sold Gerry Baby Products Co., gaining $73 million from the divestiture, and purchased Royce Union Bicycle Co., a Hauppauge, New York-based maker of high-end bikes. The company also acquired bankrupt Sure Shot International, a manufacturer and distributor of basketball goods, organizing the $1.5 million purchase into its Huffy Sports Co. subsidiary. As these transactions were being completed, the company entered a new segment in the bike market, introducing the first Huffy bike motocross, or BMX, model in 1997. At the time of Huffy’s entry into the market segment, BMX models represented the only segment in the bike industry recording sales growth. By the end of 1997, the company’s financial results revealed the influence of the changes implemented during the previous two years. The news was encouraging. After posting a $10.5 million loss in 1995, Huffy recorded $10.4 million in net income in 1997.

Although Huffy management had directed a remarkable turnaround between 1995 and 1997, the executives still had to contend with the aftereffects of the mid-1990s crisis: their restorative work was not yet completed. One contentious issue stemming from the $10.5 million loss involved Huffy workers at the Celina, Ohio, bicycle plant. When the losses mounted back in 1995, the workers agreed to a 20 percent wage cut to keep production from moving to Huffy’s bike plant in Farmington, Missouri. In April 1998, the workers’ union met with Huffy management, demanding a 20 percent wage increase and additional raises to compensate for the benefits and wages lost since 1995. The negotiations stalled, with Huffy offering less than the workers demanded. In July, hope for a settlement disappeared entirely when Huffy announced it was closing the Celina plant and laying off all of the facility’s 1,000 employees, representing 25 percent of the company’s total workforce. Although unpopular in Celina, Huffy management was determined to make the company’s bike operations profitable in the long term.

As Huffy exited the 1990s, it continued to pursue the strategy of paring away assets, acquiring new properties, and entering new business areas. In 1998, the company’s Washington Inventory Service subsidiary (the second largest inventory counter in the nation) acquired Denver, Colorado-based Inventory Auditors, Inc., with 42 offices operating in 23 states. The acquisition greatly strengthened Washington Inventory Service’s position in its industry, since Inventory Auditors ranked third in the industry. The addition of Inventory Auditors, combined with the company’s divestitures and efforts to reduce production capacity and increase efficiency, impressed Wall Street, fueling a 25 percent increase in Huffy’s stock value during the last six months of 1998. For 1999, the company had further significant changes in store, none more dramatic than the announcement that it was selling True Temper Hardware Co. In February 1999, Huffy sold its garden tools and wheelbarrow business to U.S. Industries, Inc. for $100 million, stripping the company of $123 million in sales. With the proceeds from the divestiture, Huffy planned to reduce its short-term debt and to finance the company’s ongoing program of buying back its shares. The last year of the decade also saw Huffy introduce an electric scooter called Buzz that was rechargeable from a standard 110-volt outlet. To strengthen its foray into the electric scooter segment, Huffy reached an agreement in June 1999 with ZAPWORLD. COM to sell the company’s stand-up version of an electric scooter, called ZAPPY, through Huffy’s distribution channels.

Statistics in the 1990s pointed to a fiercely competitive global market for bike manufacturers in the 21st century, auguring a continuation of the battle between Huffy and foreign competitors in the future. Between 1994 and 1998, comparable retail bike prices dropped 25 percent in the United States largely because of the wave of foreign imports, plunging ten percent in 1997 alone. In 1997 nearly 60 percent of the bikes purchased in the United States were produced by foreign manufacturers who incurred significantly lower production costs than U.S. manufacturers. To combat eroding profit margins, Huffy planned to further reduce costs and to eliminate excess production capacity, while developing a more competitive mix of domestic and non-domestic products. For Huffy to maintain its leadership in the industry during the 21st century, much depended on the company’s success in overcoming the challenges presented by its overseas competitors.

Principal Subsidiaries

Huffy Bicycle Company; Huffy Sports Company; Huffy Service First; Washington Inventory Service.

Further Reading

“Fifty Years of Growth Took Teamwork,” Huffman Highlights, Miamisburg, Ohio: The Huffman Manufacturing Company, 1973.

Hannon, Kerry, “Easy Rider,” Forbes, November 16, 1987.

“Huffy Pedals into First Place,” Sales & Marketing Management, January 1978.

“Huffy Puts New Spin in the Bicycle Business,” Business Week, October 10, 1977.

“Huffy Starts to Shift into High Gear,” Money, October 1993, p. 74.

Jaffe, Thomas, “Huffy Toughs It Out,” Forbes, May 28, 1990, p. 416.

“Motocross, New Type Bicycle Puts Huffman Mfg. in High Gear,” Barren’s, August 23, 1976.

Troy, Mike, “Features Fill Gap in Bike Sales,” Discount Store News, March 22, 1999, p. 80.

Wagner, Mike, “Talks Break Off Between Huffy Corp. Management, Workers,” Knight-Ridder/Tribune Business News, p. OKRB98125030.

—Mary McNulty

—updated by Jeffrey L. Covell

Huffy Corporation

7701 Byers Road
Miamisburg, Ohio 45342
U.S.A.
(513) 866-6251
Fax: (513) 865-2811

Public Company
Incorporated: 1928 as Huffman Manufacturing Company
Employees: 6,300
Sales: $680 million
Stock Exchanges: New York
SICs: 3751 Motorcycles, Bicycles & Parts; 3949 Sporting & Athletic
Goods Nee; 7389 Business Services Nee

Huffy Corporation, a diversified manufacturer of bicycles, bicycle equipment, infant carriers and strollers, basketball equipment, and lawn and garden tools, grew out of the Huffman Manufacturing Company, which was founded in 1924. Founder Horace M. Huffman, Sr., learned the manufacturing business from his father, George P. Huffman, who owned the Davis Sewing Machine Company from 1887 to 1925. Taking advantage of the growing automotive industry, Horace Huffman’s young company made equipment that could be used in service stations. Working out of a factory on Gilbert Avenue in a noisy section of Dayton, Ohio, near the Pennsylvania Railroad tracks, the first Huffman employees are credited with inventing a rigid spout that could be used to dispense motor oil from 50-gallon drums. The company grew quickly through the 1920s and 1930s and its line of service station equipment expanded. When it incorporated in 1928, the company posted earnings of $3,000.

In 1934 Horace Huffman announced plans to manufacture bicycles after sensing that they would become a popular mode of transportation during the Depression. In the beginning, production rates hovered at 12 bikes per day. Within two years, this rate increased to 200 daily. However, the company was still not producing fast enough to keep up with its competition and Huffman suffered several setbacks in the beginning. The Firestone Tire and Rubber Company was a primary bike customer, but in 1938 Huffman lost a major portion of the account because it could not keep up with Firestone’s demand.

But the solution was not far away. Two years earlier, Horace Huffman, Jr., who was known by the diminutive “Huff,” had joined the company on a full-time basis. After short stints as service manager and sales manager, he became works manager and converted the production process to a straight-line convey-erized assembly line. It was just the edge the company needed, and by 1940, bicycle production doubled and sales figures were nearing the $1.5 million mark. Huffman’s improved production rate caught the eye of the Western Auto Company, which became a major customer, and also brought Firestone back into the fold.

The outbreak of World War II necessitated a shift in production. The company joined the thousands of other businesses that were vying for government contracts, and was able to secure an order for primers, an artillery shell part. The increased business brought Huffman’s sales to nearly $2.8 million in 1942. The following year, the federal government placed an order for 4,000 bicycles. At this point, much of the work was being done by women who were filling the void left by the vast numbers of men who had been inducted into the armed forces. The later part of the war period proved to be difficult as the production of consumer products in all industries virtually ceased and Horace, Sr., suffered a fatal heart attack in 1945.

The younger Huffman was elected president and immediately had to face the challenge of sustaining production in the postwar period with limited supplies. The government’s allocation program, he knew, would not provide enough materials to allow the company to compete at its pre-war levels. After attending a seminar on “Work Simplification,” Huff taught the procedure to his managers and then held a similar workshop for the company’s major suppliers. By meeting the problem head-on, Huffman was able to help suppliers increase their own output and to raise its production levels. For two years, the company was able to run two shifts a day without experiencing the traditional slowdown during the winter months. Sales for each of the two years exceeded $10 million.

Then, in 1949, the company ran into the postwar recession. However, two developments allowed the company to survive. First, the Huffy convertible bicycle was introduced and was instantly popular. The bike also brought the name Huffy to the forefront of the bicycle industry. The second development occurred as a result of the company’s search for a product that could be manufactured during the winter months. The decision to produce lawnmowers was announced in December of 1949.

As a result, the company quickly outgrew its physical plants, and in the early 1950s Huffman acquired a building in Delphos, Ohio, and moved the Automotive Service Equipment division to that location. New facilities were built in Celina, Ohio, to house the bicycle and lawnmower divisions. The Dayton manufacturing plant on Gilbert Avenue was closed and the general offices were moved to Davis Avenue. In 1959 Huffman opened its bicycle plant in Azusa, California.

By 1960 Huffman was the third largest bike manufacturer in the United States. In 1962 Horace Huffman, Jr., was named chairman and Frederick C. Smith became president and CEO. Smith had been materials manager during the crucial postwar period and was credited with strengthening the company’s relationship with its suppliers.

In 1964 Huffman expanded its Outdoor Power Equipment division with the acquisition of Diele & McGuire Manufacturing. It was not an entirely successful expansion, however, and the division continued to lose money over the next decade. That same year, the Huffman corporate offices were moved to their current location in Miamisburg.

Huffman went public with its listing on the American Stock Exchange in 1968 and sales reached $42 million the following year. Stuart Northrup, a former Singer Sewing Machine executive, replaced Smith as president in 1972. By 1973 Huffman employed 2,500 workers at five locations.

Throughout the 1960s and early 1970s, Huffman enjoyed continued growth as the market for adult bicycles grew. More and more adults were turning to bikes for exercise and as a means to cut energy costs. Until the end of the 1960s, nearly half of all bicycles in the United States were sold through small independent bike shops that offered personal customer service. In the 1970s, the introduction of mass merchandise retail chains that stocked large quantities of consumer goods and sold them at discount prices opened up a new market for bike sales. Because British-owned Raleigh Cycle was firmly entrenched as the leading supplier to the independent shop owner, Huffman set its sights on the retail chains and developed a 10-speed that required the bare minimum of assembly and service.

The company’s growth trend hit a snag in 1974, however, as a new recessionary period brought on an industry-wide slump. From its peak in 1973, bicycle sales dropped 50 percent by 1975. Huffman was forced to close its Celina plant for two months and lay off 25 percent of its workers.

Prior to the recession, foreign competition was also putting pressure on American bike makers. In 1972 foreign imports accounted for 37 percent of the U.S. market. The devalued U.S. dollar, however, cut this share to 15 percent by the end of the 1970s. New federal regulations setting safety standards for bicycles also cut into the sale of foreign models. As the industry revived itself toward the end of the 1970s, Huffman decided to take an aggressive marketing stance. Children again became the primary focus of the bike industry and Huffman introduced a new flashy, motocross-style bike called Thunder Trail. Designed to look like a motorcycle with waffle handle-grips, knobby tires, and racing-like number plates on the front, the new models also sported bright, jazzy colors and decals. Not content to settle for what they hoped might sell, Huffman held focus groups in shopping centers to determine which features were the most popular. In addition, a greater portion of advertising dollars was spent on television commercials, particularly during the hours when children’s programs aired.

The popularity of the Thunder Trail bike made Huffman was the number one producer of bicycles in the United States by 1977 and all of the laid-off workers were called back. Net sales for 1977 were $130 million, a 21 percent increase from the previous year.

Although Huffman was still the leading producer of gasoline cans, oil can spouts, oil filters, and jack stands, the Automotive Equipment Division was only accounting for 10 percent of the company’s sales. Bikes and bike accessories accounted for an overwhelming 90 percent. The Outdoor Power Equipment division, which had been struggling for years in the lawnmower market, was finally sold in 1975. The sale brought in a much-needed $10 million in cash. Realizing the need to diversify, Huffman acquired Frabill Manufacturing, a maker of fishing and basketball equipment, in 1977.

Until now, half of Huffman’s bicycles were sold under private labels. By the end of the 1970s, however, the company decided to devote more energy to promoting its own brand name. Part of this effort included the decision, in 1977, to change the company name to Huffy Corporation. During this period, Huffy’s management also opted not to enter the moped-manufacturing field because of doubts about the motorized bike’s potential in the United States. Instead, $5 million was spent to expand existing production facilities.

In 1980 Huffy posted its fifth straight year of record earnings and announced plans to open a third plant in Ponca City, Oklahoma. However, despite its strong financial position, Huffy was not immune to the problems that most American businesses experienced in the 1980s. For one thing, production costs were rapidly increasing. In 1982 Harry A. Shaw III was named CEO and immediately embarked on the unpopular road to plant closings and layoffs. Shaw spearheaded the consolidation of all bike manufacturing operations into the Celina plant and sold the Automotive Products Division for cash. Huffy then invested more than $15 million in advanced robotics and new production equipment. The changes resulted in an increase in production capacity by 5,000 bikes a day and a 14 percent cut in production costs. Another $15 million was earmarked to improve computer-generated manufacturing in the bike plant by 1991.

A licensing, sales, and manufacturing agreement with Raleigh Cycle was also cemented in 1982, giving the company the opportunity to tap the high-specification bike market. However, the venture did not prove to be an asset and Huffy sold its rights in 1988.

With bike sales still accounting for 90 percent of the company’s sales, the need to diversify was as evident as ever. In 1982 Huffy acquired Gerico, a maker of infant car seats and strollers, and YLC Enterprises, a provider of product assembly services for retail consumer purchases. The former now operates as Gerry Baby Products and the latter as Huffy Service First. Washington Inventory Service, a nationwide inventory-taking service, was acquired in 1988. By the end of the 1980s, bike sales dropped to 66 percent of the company’s total sales revenues.

Throughout the 1980s, Huffy’s engineers in the company’s U.S. Cycling Federation Technical Development Center continued to develop innovations that would keep Huffy on the cutting edge of the racing industry. One development was to use composites to make disc wheels for racing bikes. Disc wheels are often preferred by racers because they eliminate the air turbulence caused by spoke wheels and can cut drag by 30 percent. The use of composite materials resulted in an even lighter-weight wheel. Refinements made by Huffy engineers allowed them to reduce the wheel weight from 5.5 Ibs. to 2.5 Ibs.

In 1990 Huffy acquired Black & Decker’s stake in True Temper Hardware and capital stock in True Temper Ltd. in Ireland for $55 million. A manufacturer of garden and lawn tools, the company claims approximately 30 percent of the market.

Huffy plans to achieve $1 billion in annual net sales by the mid-1990s by devoting approximately 50 percent of its efforts to recreation and leisure time products, 20 percent to juvenile products, 20 percent in services to the retail industry, and 10 percent to other new consumer products. A commitment to diversification is evident in its pledge that no single business should contribute more than 50 percent of total operating profit.

Principal Subsidiaries

Huffy Bicycles; Huffy Sports; Huffy Service First; Gerry Baby Products Company; Snugli; Washington Inventory Service; True Temper Hardware.

Further Reading

“Fifty Years of Growth Took Teamwork,” Huffman Highlights, Miamisburg, The Huffman Manufacturing Company, 1973; “Motocross, New Type Bicycle Puts Huffman Mfg. in High Gear,” Barren’s, August 23, 1976; “Huffy Pedals Into First Place,” Sales & Marketing Management, January 1978; “Huffy Puts New Spin in the Bicycle Business,” Business Week, October 10, 1977; Hannon, Kerry. “Easy Rider,” Forbes, November 16, 1987.

—Mary McNulty

Huffy Corporation

Contact Information:

headquarters: 225 byers rd.
miamisburg, oh 45342 phone: (937)866-6251 fax: (937)865-5470 url: http://www.huffy.com

OVERVIEW

Huffy Corporation is involved in both the manufacturing and marketing of consumer products, ranging from bicycles to lawn and garden tools, and the sales of services to the retail sector. On the consumer products side of its operations, Huffy is divided into five core companies: Huffy Bicycle, Huffy Sports, True Temper Hardware, Washington Inventory Service, and Huffy Service First.

Huffy Bicycle Co., the world's largest seller of bicycles, markets bicycles made in the company's U.S. factories as well as some lower-priced models made for Huffy in Asia. To maintain its position as the world's largest seller of bikes, Huffy has had to take steps to better compete with lower-priced models produced in Asia. Huffy Sports Co. is North America's leading supplier of NBA-licensed basketball backboards, as well as other basketball equipment. True Temper Hardware manufactures and markets a wide range of lawn and garden tools for use at home, on the farm, or by contractors. Washington Inventory Service provides a variety of inventory services to the retail industry through its nationwide workforce equipped with state-of-the-art technology. Huffy Service First is the country's only nationwide supplier of retail services that range from in-home and in-store product assembly and repair services to merchandising services.

COMPANY FINANCES

In 1997 Huffy Corp. posted net earnings of $10.1 million on revenue of $694.5 million, compared with 1996's net of $6.5 million on revenue of $701.9 million. For 1995, the company reported a net loss of $10.5 million on revenue of $684.8 million, compared with net income of $17.4 million on revenue of $719.5 million in 1994. Sales of consumer products accounted for 74 percent of the company's total revenue in 1997, while the remaining 24 percent was derived from sales of retail services.

HISTORY

Founded by Horace Huffman in 1924, Huffman Manufacturing Company produced and marketed equipment for service stations, including one of its own inventions, a rigid spout to dispense oil from large drums. During the Great Depression, Horace decided he could make money by providing a more inexpensive means of transportation and, in 1934, Huffman began producing bicycles.

When Horace brought his son into the business a few years later, Horace Jr. was able to double production and increase sales to more than $1 million by 1940. Horace continued to guide the company through World War II and the post-war recession by implementing modern management and manufacturing policies.

The introduction of the company's Huffy convertible bicycle in 1949 proved a big hit with the public. The bike was equipped with training wheels that could be removed once its young users had learned to ride. Huffman's business continued to grow through the 1950s and 1960s. In 1968 the company went public.

The 1970s gave the company's bicycle sales a shot in the arm with the rapid expansion of retail chains opening up a promising new market. In 1977 Huffman Manufacturing changed its name to Huffy Corporation, and the company acquired Frabill Manufacturing, a manufacturer of fishing and basketball equipment. Other acquisitions designed to diversify Huffy's product line followed. In 1982 the company bought YLC Enterprises, a company specializing in product assembly, and Gerico, the producer of Gerry and Snugli baby products. Six years later, Huffy purchased Washington Inventory Service. In 1990, the company bought True Temper, a manufacturer of lawn and garden tools. In 1997 the company acquired Royce Union Bicycle Company, a manufacturer of high-end bicycles.

Mounting competition from foreign bicycle manufacturers, particularly Asian, and a generally sluggish retail market combined to cause a hefty loss for Huffy in 1995. The company answered the competition aggressively with the 1997 introduction of 16 new BMX models.

To tighten the focus of its portfolio, in 1997 Huffy divested Gerry Baby Products Co. Gerry had failed to meet Huffy's criterion of ranking number one or two in its industry, and the company felt that it would need to make a very substantial investment in order to move Gerry into the desired position. Huffy determined the money could better be spent to fund "the internal growth and acquisition strategies to further enhance the number one or number two position held by each of our five core businesses."

STRATEGY

In late May 1998, Huffy Bicycle Co. announced a major restructuring plan to better position itself to compete with Asian manufacturers in the global bicycle marketplace. Under the plan Huffy would reconfigure its manufacturing operations, resulting in a sharp increase in finished goods production at its Farmington, Missouri, plant.

Huffy's goal in restructuring was to maximize operating efficiency by eliminating excess production capacity and reducing annual bicycle operating expenses. An 18-month-long analysis of the international bicycle market by the company revealed a sharp drop in comparable bike prices in the United States in the four years between 1993 and 1997; this decline in prices was blamed on fierce global competition, for which the company said there was no end in sight. This left Huffy with no choice but to fight back aggressively by cutting excess capacity and costs. The long-term goals for its new strategy were to "satisfy consumer demand for value-priced bicycles and to solidify Huffy as a viable U.S. bicycle supplier." Huffy hopes these actions will help it achieve its overall objective of maintaining its leadership in the bicycle industry despite competitors that have successfully driven down retail prices and eroded Huffy's profit margins."

One unfortunate consequence of its restructuring plan, Huffy said, was the need to close the company's 40-year-old bicycle factory in Celina, Ohio, in order to reduce production capacity. Other elements of the plan called for the leasing of a 100,000-square foot U.S. facility to make parts to support its Farmington, Missouri, factory and the continuation of its Asian import program to bring in opening price point bikes.

Huffy said the restructuring reflected some very basic changes in U.S. consumers' buying patterns. It pointed out that in 1997 nearly 60 percent of the bikes sold in the United States were produced by foreign manufacturers. The company said bicycles produced in Asia typically cost 10 to 20 percent less than comparable U.S.-produced models. This leaves companies like Huffy with no alternative but to adopt a competitive mix of domestic and non-domestic products. Huffy said it also planned to develop Mexican sources as alternatives for opening price point bikes currently imported from Asia.

Huffy has outlined five goals to help the company achieve its mission of being "the leading supplier of name brand consumer products and retail services designed to improve consumer lifestyles and enhance the business performance of its retail customers." According to company literature, Huffy "will achieve its vision by attaining prominence in every category of business in which it participates; by directing assets to value-adding activities to become the low-cost supplier of products and services to ensure the highest value to its retail customers and to consumers; by building strong relationships with customers and suppliers to be as efficient as possible; [by having] no single business unit [account] for more than 33 percent of total operating profits; [and by] achieving profitability that ensures consistent returns of at least 15 percent on beginning shareholder equity."

INFLUENCES

One of the forces that has helped shape Huffy's corporate strategy in the 1990s has been the continuing demand from consumers for "new and improved" products. Huffy has tried to answer that call and credits the positive consumer response to many of it product innovations with fueling its turnaround since 1995, when the company suffered a net loss of $10.5 million. During 1997, new products and services—including BMX bikes; the Hercules basketball system, marketed by Huffy Sports in Wisconsin; and expanded in-home assembly services—delivered additional sales in higher margin markets.

FAST FACTS: About Huffy Corporation

Ownership: Huffy Corporation is a publicly owned company traded on the New York Stock Exchange.

Ticker symbol: HUF

Officers: Don Graber, Chmn., Pres., & CEO; Paul D'Aloia, Pres., Huffy Sports; Carol A. Gebhart, Pres., Washington Inventory Service; Christopher Snyder, Pres., Huffy Bicycle

Employees: 6,700

Principal Subsidiary Companies: Huffy operates a number of subsidiaries, including Huffy Bicycle Co. and Huffy Service First Inc., both headquartered in Miamisburg, Ohio; Huffy Sports Co., based in Sussex, Wisconsin; Royce Union Bicycle Co.; True Temper Hardware, based in Camp Hill, Pennsylvania; and Washington Inventory Service of San Diego, California.

Chief Competitors: Huffy's competitors include: Bell Sports; Bridgestone; Brunswick; Cannondale; Fre-mont; GT Bicycles; K2; Lifetime Products; TriStar Aerospace; RGIS Inventory; Specialized Bicycle Components; Trek; and U.S. Industries.

CURRENT TRENDS

In early 1998, Huffy expressed optimism that the momentum achieved in 1997, the second consecutive year of increased earnings, would help fuel the continuing financial turnaround that began in 1996. Leaving nothing to chance, in May 1998 the company announced a major restructuring program designed to help the company better compete against Asian bicycle manufacturers. The restructuring plan was designed to eliminate excess manufacturing capacity and trim operating costs.

Introducing the restructuring program, Huffy CEO Don Graber said, "When the restructuring and reconfiguration are complete, Huffy Bicycle Company will be a viable, long-term competitor. We expect performance for 1999 and beyond to be enhanced as a result of this restructuring."

PRODUCTS

Huffy operates in two distinct businesses: consumer products and retail services. Among its consumer product operations, Huffy Bicycle manufactures and markets bicycles and cycling equipment, while Huffy Sports is the leading North American supplier of NBA-licensed basketball backboards, as well as other basketball equipment. True Temper Hardware manufactures lawn and garden tools for use at home or on the farm. Among its retail service companies, Washington Inventory Service, based in San Diego, uses state-of-the-art technology to provide high quality inventory services to retailers. Huffy Service First offers a variety of services, including in-store and in-home product assembly and repair.

CHRONOLOGY: Key Dates for Huffy Corporation

1924:

Huffman Manufacturing Company is founded by Horace Huffman

1934:

Huffman begins producing bicycles

1940:

Sales reach over $1 million

1949:

Company introduces the Huffy Convertible Bicycle

1968:

Company goes public

1977:

Huffman Manufacturing changes its name to the Huffy Corporation

1982:

Company acquires YLC Enterprises and Gerico

1997:

Huffy introduces 16 new BMX model bicycles and sells off Gerico

1998:

Company announces a major restructuring plan to better compete with Asian manufacturers

GLOBAL PRESENCE

Huffy is engaged in a battle to preserve its leadership in the worldwide bicycle market, challenged by fierce competition from foreign manufacturers, particularly those in Asia. In order to maintain the proper price mix in its bicycle product line, Huffy imports some lower-priced models from Asia, but it hopes to explore the possibility of developing Mexican sources as an alternative supplier of bicycles.

SOURCES OF INFORMATION

Bibliography

"huffy corporation." hoover's online, 18 may 1998. available at http://www.hoovers.com/premium/profiles/10754.html.

"huffy corporation announces new bicycle manufacturing plan to confront fierce asian competition." pr newswire, 28 may 1998.

"huffy plant to lay off workers." associated press, 5 june 1998.

"identity." huffy corporation, 1998. available at http://www.huffy.com/identity/index.html.

For an annual report:

on the internet at: http://www.huffy.com/balance_sheet.html

For additional industry research:

investigate companies by their standard industrial classification codes, also known as sics. huffy corporation's primary sics are:

3423 garden hand tools

3568 drive chains, bicycle and motorcycle

3751 bicycles and parts

3949 basketballs and basketball equipment and supplies

5261 garden supplies and tools