12/30/96 UNHAPPY TRAILS

UNHAPPY TRAILS

NO HANDS
The Rise and Fall of the Schwinn Bicycle Company, an American Institution
By Judith Crown and Glenn Coleman
Holt 350pp $25

The year was 1963. A West Coast sales manager for Schwinn Bicycle Co. noticed that California kids were equipping bikes with Texas longhorn handlebars and elongated seats. Al Fritz, the product-design manager back at Schwinn's Chicago factory, responded with a prototype made from spare parts, which he called the ''Sting-Ray.'' The odd-looking bike with its ''banana'' seat soon became the company's No.1 seller.
Schwinn never showed such marketing agility again, and the family-owned company went into a slow decline, going bankrupt in 1992. The fascinating tale is well told by Judith Crown and Glenn Coleman, who covered Schwinn for Crain's Chicago Business.
Lesson No.1: Don't rest on your laurels. After becoming the top bicycle manufacturer in the U.S., Schwinn grew complacent. It failed to jump on the 1970s' dirt-bike trend or the mountain-bike craze of the 1980s, letting small rivals build themselves into powerhouses.
Lesson No.2: Don't underestimate the value of new equipment and human capital. Schwinn put off modernizing its Chicago plant. In 1980, Edward Schwinn closed it and spent millions on a new factory in Greenville, Miss., a town without a skilled workforce. The plant, a costly disaster, was closed in 1991. All production was moved to Asia.
Underlying almost all of these problems was Schwinn family hubris. Their fortunes secure, few Schwinn heirs prepared for careers. And as the company neared collapse, Ed Schwinn refused to merge or sell. Schwinn failed, the authors conclude, because it lacked a mechanism to change leadership.
The venerable Schwinn name now belongs to investor Sam Zell's vulture fund, Zell/Chilmark, and little of the old company remains. With a less nepotistic and complacent management, Schwinn might have had a less calamitous ride.
By SUSAN CHANDLER