W17165 DETROIT BIKES: BECOMING THE BIGGEST BICYCLE MANUFACTURER IN NORTH AMERICA

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W17165
DETROIT BIKES: BECOMING THE BIGGEST BICYCLE MANUFACTURER
IN NORTH AMERICA
Kent Walker and Neda Demiri wrote this case solely to provide material for class discussion. The authors do not intend to illustrate
either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying
information to protect confidentiality.
This publication may not be transmitted, photocopied, digitized, or otherwise reproduced in any form or by any means without the
permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights
organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western
University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) cases@ivey.ca; www.iveycases.com.
Copyright © 2017, Richard Ivey School of Business Foundation Version: 2017-03-13
In 2016, Mike Gentile walked out of a strategy meeting with Zak Pashak, the founder and president of
Detroit Bikes, with a new opportunity. As the company’s communications director, Gentile was tasked with
the ambitious goal of increasing annual sales from the current projected 8,000 bikes, to 50,000 bikes. While
excited about the possibility for such a substantial increase and inspired by Pashak’s passion, Gentile knew
that this aspiring goal would require a lot of work grounded in an effective advertising campaign that
showcased the company’s history, innovation, and ethicality.
Pondering his task, Gentile walked around the impressive Detroit Bikes factory, the first large bicycle
producer in North America in the 21st century. He recalled the first time he heard about the company and
how he immediately thought that he had to be a part of it. He loved the idea of bringing bicycle
manufacturing back to North America. Everything about the company—the history, the brand, the culture,
and what it was trying to achieve—resonated with him.
Gentile also believed in Detroit and admired its rich history in manufacturing and the perseverance of its
people. He, like many entrepreneurs in Detroit, was a strong believer in opportunity arising from crises: a
downturn provided a number of incentives for businesses to move in. It was no secret that Detroit had
struggled for decades, culminating in a bankruptcy in 2013. Yet throughout, the people of Detroit had
maintained hope that the city would once again rise. As one such Detroiter, Gentile considered the growth
and success of Detroit Bikes to be paramount to the progression of the city. Similarly, the company’s
struggles mirrored the city’s struggles. He needed to consider the challenges with sales, financial
investment, and brand recognition in a city fighting to survive.
Fifty thousand bikes per year would make Detroit Bikes North America’s largest bicycle manufacturer. As
he walked around the facility, Gentile wondered whether this sales goal would be possible in a city like
Detroit. What would he need to do to get the company there? To prosper in Detroit, an entrepreneur needed
to know the city’s history, from its rise to the third largest city in America, to its downfall into bankruptcy,
to its slow re-emergence today. Only then would Gentile have a full understanding of how to grow the
business in such an unusual external environment.
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DETROIT: PHOENIX RISING
In July 2013, the city of Detroit declared Chapter 9 bankruptcy, becoming the largest city in American
history to do so.1
Reasons for the filing included a steep decline in population (in 2010, the city had
approximately 702,000 residents, a decline of 60 per cent in 60 years); high pension costs with more than
12,000 public workers (more than any other similarly sized city in the United States); and a lack of funds
to cover even basic city services such as police and ambulance services and the replacement of street lights
(at one point, nearly 50 per cent of street lights were burnt out).2
The city also had a history of corrupt public employees, the most well-known being Kwame Kilpatrick, the
city’s former mayor, who pocketed more than US$1 million3
from illegal activities. Often blamed by
prosecutors for having accelerated Detroit’s bankruptcy, Kilpatrick was convicted in March 2013 with “two
dozen counts that included charges of racketeering and extortion, adding his name to a list of at least 18 city
officials who [were] convicted of corruption during his tenure.” Kilpatrick was sentenced to 28 years in
prison—one of the harshest punishments in the history of major state and local public corruption cases.4
With such extensive corruption, it was not surprising that Detroit’s public systems increasingly worsened.
For instance, Detroit’s school system remained the worst in the country, largely as a result of corrupt
administrators. Additionally, after an audit revealed high levels of systemic errors, the state shut down the
city’s police department crime lab in the fall of 2008. That same year, the city reported 90,000 fires, double
that of New York, which had eleven times the population of Detroit.5
Residents described the city as a “war
zone,” which came from its long-standing history of arson, tracing back to as early as 1967. Due to budget
cuts, authorities were limited to the staff, funding, and equipment sufficient to investigate only one of every
five cases of arson. With 80,000 abandoned buildings across 139 square miles (360 square kilometres),
arsonists had many opportunities to cause fires, and a slim chance of being caught.6
Detroit experienced the biggest downfall of any major U.S. city. Once the third-largest city in the United
States, Detroit was identified in 2015 as having the highest unemployment and murder rates in the country.7
In the same year, Detroit was ranked by Forbes as also the most dangerous U.S. city overall, “with a violent
crime rate of 2,137 per 100,000 residents.”8
Despite such ominous struggles, the city of Detroit and many of its citizens had persevered, and in the
following year, the city experienced a bit of a comeback. Coined the “Detroit Renaissance,” the city’s
improving situation started in 2007, when Dan Gilbert announced his intention to move Quicken Loans
Inc., the second largest mortgage lender in the United States, to downtown Detroit. Quicken Loans was
credited with setting Detroit on the right path. Gilbert helped revitalize downtown Detroit with new offices
and the addition of 11,000 new jobs.9
He also invested money in Detroit’s economy by purchasing more
than 60 properties for $1.3 billion.10
The city’s violent crime and homicide rates had significantly dropped by 2014, with homicide rates at their
lowest since 1967. Similarly, robbery and carjacking dropped by 34 per cent in the same year. Further,
“when General Motors filed for bankruptcy in 2009, there were 48 unoccupied large buildings in the heart
of the city. [In 2015], . . . more than 31 of those buildings [were] once again occupied, with many others
undergoing renovation in preparation to be put to use.”11
By 2016, an estimated 100,000 people were set to be working in downtown Detroit; many were from the
growing millennial generation. Many new start-ups and renovations were also underway. The Detroit
International Riverfront became more vibrant with pedestrians and weekly events. Located in the Detroit
River, Belle Isle Park featured “a zoo, an aquarium, a maritime museum, golf facilities, and 150 acres of
forest.” The Greening of Detroit, a non-profit city project, was slated to plant 4,000 trees along the streets.
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With vacant land and the demolition of buildings, locally grown produce became more popular and was
sold at popular farmers’ markets.12
The city’s professional ice hockey team, the Detroit Red Wings, also contributed to the renaissance, with a
new arena set to open in 2017. The $450 million project was to be accompanied by many surrounding
businesses such as bars, restaurants, and shops. Construction of the arena would create over 8,300 jobs,
with more than half of the work to be completed by Detroit residents.13
Over the same few years, the city experienced an upsurge in entrepreneurial activity, including start-up
accelerators, social enterprises, and innovative businesses. Many entrepreneurs viewed Detroit as the
perfect manufacturing hub, given its long-standing history with the auto industry. The city fostered an
entrepreneurial community where business owners had access to affordable real estate—particularly old
manufacturing plants—talented and experienced workers, engineers, former auto assembly-line workers,
and supportive people who wanted to see the city succeed.14
THE AMERICAN BICYCLE INDUSTRY
The bicycle manufacturing industry in the United States was over 100 years old. It began to prosper in the
1890s when the industry had 300 established firms producing bicycles. Production grew from 30,000
bicycles in 1890 to 1,200,000 in 1899.15
Despite such rapid growth, innovation in the industry and in the types of bicycles produced remained
minimal, even to the present. In the 1870s, the “high-wheeler” model of bicycles was produced; it had a
large front wheel and a small back wheel. Only a short time later, John Starlet introduced the “safety
bicycle” in 1885, which resembled bicycles that were commonly produced well into the 2010s. The bicycle
featured two wheels of the same size, and for safety, “allowed the rider to start and stop with both feet on
the ground.” This new model also allowed riders to pedal at their own desired rate of speed. The safety
bicycle created the idea of a personal vehicle, with low cost and maintenance.16
The development and mass production of the bicycle affected the economy and people’s lifestyles. Bicycles
enabled people from rural areas to travel longer distances. But when the use of bicycles first became
popular, there was a lack of paved roads. Several petitions from hundreds of thousands of citizens in the
United States resulted in the Good Roads Movement, a push for paved roads (particularly between cities
and rural areas), bicycle paths along the side of public roads, and cyclist safety.17
More recently, the U.S. bicycle market was taken over and dominated by imports from China and Taiwan,
which produced 99 per cent of U.S. bicycles—17.8 million—in 2014. Several companies were in the massmerchant channel, including Dorel Industries Inc., a Canadian company with subsidiaries producing
Schwinn, Mongoose, and Roadmaster brands; Dynacraft BSC, Inc., an American distributor of Magna
brand bicycles; Huffy Corporation, with its Royce Union brand; Rand/Ross Bicycle Co.; and Kent
International (Kent). All of these companies sold bicycles imported from China or Taiwan.18
In October 2014, Kent announced the opening of its new U.S. bicycle assembly factory in South Carolina.
Previously, Kent’s bicycles had been produced in Asia. Kent intended to maintain its overseas production
and with its new facility, double its previously projected output, producing over a million bikes over the
course of the next four years, or an average of 250,000 bikes per year.19 In July 2016, Kent’s chief executive
officer, Arnold Kamler, stated that the company would produce “just under 300,000 bikes” that year.20 The
This document is authorized for use only by Yi-Cheng Pan in Entrepreneurial Marketing – Section 2 – ENT-6006 – BOS1 at Hult International Business School, 2018.
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company would become the largest bicycle producer in the United States, supplying major retailers such as
Walmart and Toys “R” Us.21
This new plant may have signified a shift toward more U.S. manufacturing, but for the time being, the vast
majority of production remained outside of the United States.22 In 2015, significantly fewer bicycles,
approximately 200,000, were manufactured, not just assembled, in the United States. Bicycle parts such as
wheels and tires were still imported from Asian manufacturers such as Shimano, Inc. and SRAM.23 At the
time, Kent, too, was only assembling and producing bicycles in South Carolina, using parts imported from
China and Taiwan, although the company had plans to source 60–70 per cent of these parts in the United
States by 2018.24
Small U.S. bicycle producers still existed, with over 100 domestic brands available at the time. Bicycles
had also become more comfortable with more options in design, size, durability, and price points. They
provided a cost-effective, environmentally friendly way to travel. However, not surprisingly, the bicycle
industry was heavily affected by weather and economic conditions. Bicycle sales relied on discretionary
spending, which fluctuated with economic conditions. When conditions were unfavourable, discretionary
spending dropped. Still, in the United States, approximately 15 million–20 million bicycle units, which
included parts, accessories, and service, were sold per year.
In more recent years, bicycles were gaining popularity in response to the societal issues of environmental
sustainability, higher gas prices and efforts to reduce overall dependence on fossil fuels, and the need to
address health problems related to inactivity. According to the National Bicycle Dealers Association:
NBDA [National Bicycle Dealers Association] research conducted by the Bicycle Market Research
Institute in 2006 reported that 73 per cent of adult cyclists rode for recreation, 53 per cent for fitness,
10 per cent for commuting, 8 per cent racing, and 6 per cent sport. The figures add up to more than
100 per cent because some ride in multiple ways. The number of people commuting by bicycle has
grown significantly since that year, though this can be difficult to measure because many commuters
may not consider themselves as “cyclists.”25
The increasing use of bicycles was matched with increasing government investments, demonstrating the
growing popularity of bicycles as a feasible, widespread form of transportation. In particular, the U.S.
federal government budgeted for significant investments in bicycle paths and road developments to make
roads more accessible to bicycles. Governments at every level sustained their investments for cyclists and
pedestrians despite tough economic conditions. This support was tied to the government’s aims to improve
livability in cities, making the cities attractive to prospective employers and employees who could
strengthen the economy. Additionally, several cities and companies administered bike-sharing programs,
allowing individuals to rent bikes for transportation within the city.26
DETROIT’S BICYCLE INDUSTRY
Several factors contributed to the revitalization of the bike industry and biking culture in Detroit. Inexpensive
space was abundant with deserted factories from car-related manufacturing. Skilled workers and machinery
left over from the plants were also abundant, allowing for a smooth transition to other manufacturing projects.
The city’s population decline resulted in a surprising benefit for the bicycle industry, as cyclists found
themselves with more empty space and safer roads to travel on.27 And new bike-related infrastructure helped
further; from 2010 to 2015, the number of bike lanes had quadrupled, growing from approximately 50 miles
(80 kilometres) to 200 (322 kilometres). In addition, according to Todd Scott, the executive director of the
This document is authorized for use only by Yi-Cheng Pan in Entrepreneurial Marketing – Section 2 – ENT-6006 – BOS1 at Hult International Business School, 2018.
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Detroit Freeways Coalition, the city had installed four stationary bike repair stations with plans to install
more.28
There had also been an explosion of interest in bicycle-related events, helping to grow the bicycle
movement. For example, more than 7,000 cyclists participated in an annual bike ride through historic areas
of the city, hosted by the Detroit-based Tour de Troit. When the event began in 2002, about 25 people
participated. Similarly, Slow Roll, a group of cyclists in partnership with the city of Detroit and the Detroit
Police Department, organized a weekly bicycle ride through the neighbourhoods of Detroit, taking a
different route each time. The weekly ride had grown to over 3,000 cyclists participating every week.
Further, the weekly ride had a different starting point each time, drawing attention to local businesses,
which in turn supported and encouraged the event.29
Individual businesses were benefiting and thriving from the massive growth of the bicycle industry.
Wheelhouse Detroit, a bike retail and rental business on the riverfront, opened its second location in Campus
Martius Park in the summer of 2015. In its first year of operation in 2008, Wheelhouse Detroit had about
1,000 rentals. According to co-owner Kelli Kavanagh, in 2014, the business had 7,500 rentals and the
numbers continued to grow.30 Another local company, Shinola, was created with the belief that “products
should be built to last, and they should be built in America.”31 The company chose Detroit as its
headquarters because the city fit best with the company’s “built in America” manufacturing goal. In
addition to watches and leather goods, the company produced high-end bicycles. The company hired local
citizens and featured their stories on the Shinola website. In 2014, employees started at a salary of $11 per
hour plus health care benefits and paid holidays.32
DETROIT BIKES
Detroit Bikes was another local company that had seen sales surge from approximately 1,000 bikes in 2011
to a projected 8,000 in 2016. Pashak founded Detroit Bikes out of his longstanding interest in alternative
transportation. He also wanted a “practical, sturdy bike to get around on,” created exclusively from local
labour.33 The 36-year-old serial entrepreneur consistently focused his businesses on fostering communities
and improving the city where the businesses were located.34
Pashak grew up with a curiosity about Detroit and felt he had more to contribute. He believed that his main
contribution would be to help generate employment. He wanted to build Detroit Bikes so it could grow and
create more jobs, “while making a profit and inspiring further investment from other people and
companies.” Admitting he was not a “bike guy,” Pashak stated that “more and more bike people are
interested in getting on a bike for shorter trips and I feel we are building the perfect option for that.”35
In July 2012, Pashak purchased a 50,000-square-foot (4,645-square-metre) factory on Detroit’s west side
for an impressively low price of $500,000. He then invested an additional $2 million in the company and
factory.36 The factory had the capacity to produce 100 bikes per day, each of them “cut, coped, bent, welded,
painted, assembled, and packaged” in-house.37 However, it was still difficult to manufacture a bike with
all-American components at a reasonable price. Accordingly, the company received some components,
such as brakes, hubs, and spokes, from Taiwan.38 However, a large portion of the bicycles, including the
frames, were made in the United States.
Targeting ethically minded consumers, Detroit Bikes relied on the popularity of the “made in Detroit” brand
and its efforts to manufacture its products in high volume in North America.39 The factory’s production
This document is authorized for use only by Yi-Cheng Pan in Entrepreneurial Marketing – Section 2 – ENT-6006 – BOS1 at Hult International Business School, 2018.
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capacity allowed Detroit Bikes to become the largest-scale bicycle manufacturer in North America,
provided it achieved the needed sales.40
Detroit Bikes manufactured two models: the A-Type and the B-Type (see Exhibit 1). Since its introduction, the
A-Type was often compared to Henry Ford’s Model T: “You can have a Detroit Bike in any color you want, as
long as the color is black.”41 Pashak himself was also often compared to Henry Ford: “two motivated
businessmen working the same town, for the same reason.”42 The A-Type and B-Type models were designed for
individuals between five foot three (160 centimetres) and six foot three inches (190 centimetres) tall. The
bicycles had wheels slightly larger than average to ensure a smooth ride. The bikes had three speeds, foot and
hand brakes to allow for full control and safe braking, and ample “braze-ons”—items that were attached to the
bike frame, such as water bottle cage mounts—for customization.
In 2014, Detroit Bikes was working on lowering its production cost from $150 to $100 per bike (see Exhibit 2).
Seeing a niche where other bike manufacturers focused mainly on the look of the bike, Detroit Bikes sought a
balance between affordability and quality.43 The A-Type and B-Type models both retailed for $699.99.
According to the National Bicycle Dealers Association:
The approximately 4,000 specialty bicycle retailers commanded approximately 13 per cent of the
bicycle market in terms of unit sales in 2015, but 49 per cent of the dollars, a dominant dollar share.
Dealer price points generally start[ed] at around $200, with the average at $753, though prices
[could] range into the thousands.44
Detroit Bikes retailed its bikes at higher-than-average prices to cover the costs of using chromoly steel—a
higher-quality, durable material used to build bike frames, described as light, strong, and long-lasting—and to
provide a living wage and health care benefits to employees. According to Pashak, “I think [customers] want
to know the people who made their bikes are getting a fair wage and are treated well.”45
Seeking to expand the products it offered, Detroit Bikes built and tested 60 prototypes in 2013 alone.46 In
November 2015, the company held a successful Kickstarter campaign for a collector’s edition bike called
the C-Type. Contributors could purchase the C-Type in limited-edition colours by donating a minimum of
$599 to the campaign. After the campaign, the C-Type would be available only in dark red and black, and
retail for $599.47 The company surpassed its $100,000 fundraising goal by $6,035. The majority of backers,
perhaps not surprisingly, came from Pashak’s hometown, Calgary, Alberta, which was great news for
branding purposes: more Canadians would be seen riding a Detroit Bike, and Canada remained a relatively
untapped market for Detroit Bikes.48
Detroit Bikes found its biggest inspiration in the talented people of Detroit who seemed to immediately
understand what the company wanted to do.49 The majority of employees had worked for at least one of the
three major U.S. automotive companies at some point in their lives. They, just like Detroit Bikes, valued
U.S.-made, quality products.50 The company also wanted to recruit and hire residents from the
neighbourhood surrounding the factory, specifically students from local high schools, giving them a decent
wage and experience.51
“Detroit Bikes was a very exciting and dynamic company that was growing very quickly,” said Gentile.
Jake L’Ecuyer, special projects manager, commented on the corporate culture: “There is no
micromanagement at Detroit Bikes; everyone’s ideas are considered. It is a matter of ‘can you make your
ideas happen?’” Cameron Bobruk, the human resources manager, added, “The atmosphere at Detroit Bikes
is very family-oriented; everyone knows each other.”
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COMPETITOR ANALYSIS AND MANUFACTURING TRENDS
The company faced small levels of local competition from two other bike producers, Detroit Bicycle Company
and Shinola. Similar to Detroit Bikes, both companies emphasized the Detroit brand: “by buying their
products you [were] participating in the resurrection of a great American manufacturing city.”52 The difference
was that Detroit Bicycle Company and Shinola only assembled their bikes in Detroit—the parts were
imported—and their price points were difficult to attain for most Detroiters.53 A bike from Detroit Bicycle
Company cost approximately $3,200, and a bike from Shinola ranged from $1,000 to $2,950.54 A bike from
Detroit Bikes retailed for $700 and was assembled and manufactured in the city of Detroit.55 Further, Detroit
Bikes had production capacity superior to its competitors. If Detroit Bikes reached its goal of producing
50,000 bikes per year, the company would approximately double the number of bikes produced in the United
States, making Detroit the largest bicycle manufacturer in the country.56
Although there were 32 other U.S.-based bicycle manufacturers, most of them were not comparable to
Detroit Bikes. Detroit Bikes focused on large-volume production, while the others targeted a different
market with high-end, custom frames. For example, Parlee Cycles had road bikes starting at $4,000; Bilenky
Cycle Works sold fully built bikes starting at $2,995; and Firefly Bicycles sold custom bikes that retailed
for $8,000 and up.57 The U.S. bicycle manufacturing industry did not address the gap for affordable, goodquality bikes made domestically.
The companies most comparable to the Detroit Bikes price point and style were Bike Friday, Masi Bikes
(Masi), Trek Bicycle Corporation (Trek), and Worksman Cycles (Worksman). Aside from proximity in
price point, the look and functionality of Bike Friday’s bicycles did not pose a large threat to Detroit Bikes.
Bike Friday specialized in folding bikes built for a person’s measurements; for example, one bike model—
called the Bantam— was made for people of “short stature.”58
Masi offered some bikes at prices comparable to Detroit Bikes. Masi bicycles also had an overall look that
was similar to Detroit Bikes, with a black finish and minimalist design. The “Strada Vita Uno” and “Strada
Vita Uno Bellissima” bikes retailed for $709.99 each.59 However, in 2016, Masi was producing only one
frame advertised as made in the United States—a limited-edition frame called the Gran Criterium. Because
the Gran Criterium was the only model that Masi specified as American-made, the remaining models were
likely sourced outside of the United States.
Trek’s bicycles posed the largest competition for Detroit Bikes. Trek had large brand recognition and was
commonly known to be a U.S. manufacturer.60 However, while Trek did manufacture bikes at its factory in
Wisconsin, many Trek bikes were manufactured overseas.61 Trek had facilities in Japan, Brazil, and the
United Kingdom, making it difficult to trace where each bike was manufactured.62 In addition, the
company’s owners had made public statements about choosing cheaper labour in China to stay
competitive.63 This approach to overseas employees differed from Detroit Bikes’s insistence on providing
its employees with a living wage and health care benefits. Trek’s selection of urban and commuter bikes
ranged from $799.99 to $3,749.99.64 Trek’s “Zektor 2” and “Zektor 2 Stagger” models were most
comparable to Detroit Bikes in price point. They were also finished in a minimalist black design, which
was similar to Detroit Bikes’s A-Type.65
Worksman produced a line of urban commuter bikes in New York City, which were competitively priced
in comparison to Detroit Bikes.66 Worksman had been manufacturing bikes since 1898 in a 100,000-squarefoot (9,290-square-metre) factory, but the company had not revealed how many bikes it had made in that
facility.67 It was difficult, therefore, to compare Worksman’s production levels with production at Detroit
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Bikes.68 Considering factory size alone, Worksman had double the capacity of Detroit Bikes, which posed
a threat to Detroit Bikes’s claim to be the largest U.S. manufacturer.69
The Worksman model most similar to Detroit Bikes’s A-Type was the “Worksman Dutchie Brooklyn” for
men, available in single- and three-speed versions, and selling for $559 and $655, respectively.70 Of the
two versions, the Dutchie three-speed offered features similar to those of the A-Type: three-speed gear hub,
saddle with extra support and padding, minimalist look, and black finish.71 The women’s version of the
Dutchie was very similar to Detroit Bikes’s B-Type, especially in look, finish, and frame shape.72
In addition to these competitors, some manufacturers were commonly believed to produce “U.S.-made”
bicycles, but, in practice, they used overseas production facilities. The common theme among these
manufacturers was they did not specify they were no longer producing bikes in the United States. Instead,
they kept their website wording vague to avoid diminishing their “Made in USA” brand recognition.73 In
addition to Trek, these manufacturers included Santa Cruz Bicycles, Marin Bikes California (which named
many of its models after locations in and around Marin County, California), Wilderness Trail Bikes
(commonly known as WTB), Yeti Cycles, Ellsworth Handcrafted Bicycles, Brooklyn Bicycle Co., Priority
Bicycles, and Pure Cycles.74
The bicycle brands with the largest market share in the United States were Trek (made by Trek Bicycle
Corporation), Giant Bicycles (made by Giant Manufacturing Co. Ltd.), Specialized (made by Specialized
Bicycle Components, Inc.), Redline Bicycles, Haro Bikes, Electra Bicycles, Cannondale Bicycles, Sun
Bicycles, and Schwinn (produced by Dorel Industries Inc.).75 Trek offered its U.S. employees “tuition
reimbursement, company-matched 401k [a pension plan], and an [employee stock ownership] plan.”76 The
company also promoted a strong culture for its employees and had a wellness program that promoted
healthy lifestyles.77 Trek offered a variety of bicycles, ranging from mountain to road to city bikes. Its price
points captured mass-, middle-, and high-market consumers.78
Giant, similar to Trek, offered attractive benefits to its employees: “competitive wages, health/dental/vision
insurance, a retirement plan, paid vacation, and opportunities for advancement.”79 Giant’s products included
road, mountain/trail, and hybrid bicycles, electric bicycles (e-bikes), and youth bikes. The company offered
price points at every market level, ensuring a large market share by capturing each type of consumer.80
Specialized Bicycle Components provided its employees with health care and vision packages, as well as
life insurance, disability insurance, and 401k matches.81 Specialized also manufactured road,
mountain/trail, and hybrid bicycles, e-bikes, and youth bikes.82 It, too, captured low- to high-end bicycle
consumers by offering a wide range of price points.83
Detroit Bikes was ahead of the manufacturing trend and distinguished itself from the large, mass-market
bicycle companies by manufacturing its products in the United States. In 2016, global manufacturing was
moving back to the United States, and factory jobs were on the rise again. From 2010 to 2016, almost one
million new factory jobs had been created, many of which were located in North Carolina, South Carolina,
and Tennessee. These manufacturing jobs paid well. Wages had increased by over 10 per cent from 2010
to 2016, amounting to more than $20 per hour.84
According to business editor Jeffrey Rothfeder, Chinese manufacturing jobs had consistently decreased
since 2012. In January 2016, China’s Ministry of Commerce declared that its factory activity had been
trending downward for six months, resulting in a three-year low. Rothfeder reported, “Foreign direct
investment in Chinese manufacturing was flat for all of 2015, while China’s balance of trade with the
[United States] barely budged, despite the strong dollar. Moreover, China’s exports tumbled in February
by 25 per cent, after falling 11 per cent in January.” These trends suggested an industrial renaissance in the
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United States and a shift away from offshore production. General Electric was a prominent example of this
shift when it announced in 2012 “plans to invest a billion dollars in an appliance plant in Louisville,
Kentucky, reshoring four thousand jobs that had been in China and Mexico, and adding, over time, nearly
twenty thousand factory positions at the plant’s regional suppliers.” Walmart also participated in the
resurgence of U.S. manufacturing by launching an initiative in 2013 to invest an additional $250 billion in
the purchase of U.S.-made products. The company estimated the initiative would create approximately
300,000 new jobs.85
From 2010 to 2016, approximately 100,000 manufacturing jobs returned to the United States, 60 per cent
of which had returned from China. In addition, foreign companies investing in the United States created
about another 150,000 U.S. manufacturing jobs. From 2000 to 2013, manufacturing wages in China rose
by 12 per cent per year, weakening the financial incentive for U.S. companies to manufacture goods there.
Lead time was another important factor. It could take as long as six months to receive products
manufactured in China, whereas domestic manufactured products could be available within weeks.86 In a
2016 interview, Arnold Kamler, Kent’s chief executive officer, noted that manufacturing costs in South
Carolina were still about 5 per cent higher than in China, but not higher than in Taiwan. Kamler added,
“It’s no secret that labour costs in China are going up 10 or 15 per cent a year, and people in China don’t
want to work for factories anymore.”87
REACHING 50,000 BIKES PER YEAR
The company’s marketing department consisted of Pashak (the founder) and Gentile. Pashak managed the
social media accounts, while Gentile handled the press releases and media inquiries. Detroit Bikes was
active on Facebook, Twitter, and Instagram and in 2016, had 13,668, 3,905, and 9,491 followers on each
platform, respectively. Detroit Bikes received an average of 200 likes on each Instagram post, which
appeared to be its most popularly followed social media account. There was user interaction in its Twitter
and Facebook accounts, but not as much as on its Instagram account.
According to Gentile, “Despite competitors, Detroit Bikes is unique because it is following the current
trends. There are only two models, but they appeal to a wide range of people.” The company’s target market
included consumers who were attracted to the “Made in USA” brand. Gentile used the term “new urbanite”
to describe the Detroit Bikes consumer: “someone who has moved downtown and wants an efficient,
dependable, low-maintenance bike.”
Detroit Bikes had some high-profile clients, including Michael Duggan, then mayor of Detroit. Duggan
insisted that he would be the first person to purchase a bike from Detroit Bikes, and he was.88 The
company’s profile also benefited in 2015 when a like-minded U.S. company, New Belgium Brewing
Company (NBB), placed an order for 2,415 custom bikes. The order doubled Detroit Bikes’s production
over the previous year. NBB had embraced biking from the company’s inception and had a tradition of
giving employees a bike on their first-year anniversary of employment with NBB. The company chose
Detroit Bikes to make the anniversary bicycles because it wanted a U.S. manufacturer, and liked the story
behind Detroit Bikes. Bryan Simpson, a spokesman for NBB, commented, “The idea of bringing back
American manufacturing jobs resonated with us.”89 NBB engaged Detroit Bikes in a multi-year contract to
exclusively manufacture the “Fat Tire Cruiser,” named after NBB’s hallmark beer, Fat Tire Amber Ale,
which, in turn, had been named by the brewer’s co-founder to mark his bicycle trip through Europe, which
had led to the creation of NBB. Detroit Bikes needed to add at least 10 employees to its staff of 20 to meet
the increased demand.90 The company was also looking to hire more welders, wheel builders, powder
coaters, and bike assemblers to handle the increase in production.
This document is authorized for use only by Yi-Cheng Pan in Entrepreneurial Marketing – Section 2 – ENT-6006 – BOS1 at Hult International Business School, 2018.
Page 10 9B17A012
Detroit Bikes had one retail location, in the Capitol Park Historic District. The bikes, however, were sold
in numerous retail locations. Scott Montgomery, hired early in 2016 to lead national sales, believed that
bicycles represented a particular area for growth. He wanted Detroit Bikes in 100 more stores within a year,
for a total of 400 retail outlets in 150 U.S. cities.91
Despite the generous size of the existing factory, Detroit Bikes was looking for a second location. According to
Pashak, “The second location would be used to produce bikes, but also as a tourist destination. I want to show
people what manufacturing is, how it works, and why it is important. I want the second destination to be
inclusive, interactive, and educational in order to show people what Detroit is so well known for.”92
Canada, in particular, was a largely untapped market. The City Cyclery Bicycle Shop in Windsor, Ontario,
(just minutes from downtown Detroit) was Detroit Bikes’s only Canadian retailer. There was opportunity
to expand to other large Canadian cities, such as Toronto, Vancouver, and Calgary, Pashak’s hometown,
where he had yet to leverage his connections.
Despite the large order from NBB and the company’s new retail location, the company was still far from
its production goal of 50,000 bikes per year. However, sales were growing with projected sales of $5 million
in 2016, and $15 million annually within five years (see Exhibit 2).
According to Gentile, “We are currently assessing efficiencies in terms of purchasing, staffing, shipping,
packaging, etc., in order to minimize costs.” He also added that “the look of the bikes, quality, and
production process” set the Detroit Bikes’s bicycles apart. L’Ecuyer identified future plans, which included
“scaling—building more facilities, batch production, and building a good assembly line.”
Despite the company’s name, Detroit Bikes was not focusing solely on bikes. In late 2015, the company
shifted its strategy to manufacturing something more than just bicycle parts. Virtue Cider, a craft cider
brewer in Fennville, Michigan, had ordered 1,000 tap handles for use in bars and restaurants. According to
Detroit Bikes: “The tap handles [were] made from the same steel tubing that [was] used to make bike
handles.”93 Detroit Bikes was also preparing to manufacture various bike parts for Motivate, a company
that operated “the largest bike share system in the country.” This new deal included “wheel building,
powder coating, assembly, and shipping for more than 3,000 bikes.”
CONCLUSION
Detroit Bikes had ambitious goals. It wanted to increase its sales from the projected 8,000 bikes in 2016 to 50,000
bikes per year. It was also expanding by producing specialty items such as the tap handles being produced for
Virtue Cider. And the company intended to open a second, interactive, and educational location.
In his role as communications director, Gentile was responsible for marketing Detroit Bikes; thus, he played
a central role in the company’s growth. Now, Gentile was tasked with developing a new marketing strategy
outlining how Detroit Bikes could become the largest bike manufacturer in North America. Gentile thought
the central message for the marketing strategy would be built around two points: the bikes were made in
Detroit, and employees were paid well and given benefits. How best to spin these points, and to whom and
where to target the message were yet to be determined.
Gentile was given one week to develop the marketing strategy, at which point he would need to present it
to the executive team and several employees. Gentile felt a mix of excitement and fear about this
presentation. But his strong belief in Detroit Bikes and what it wanted to achieve infused Gentile with
passion. He felt confident that his passion combined with his experience would help him succeed.
This document is authorized for use only by Yi-Cheng Pan in Entrepreneurial Marketing – Section 2 – ENT-6006 – BOS1 at Hult International Business School, 2018.
Page 11 9B17A012
EXHIBIT 1: DETROIT BIKES’S SALES PER MODEL
Model 2014 2015 (estimated) 2016 (estimated) 2015 + 2016
(projected)
A-Type 500 * 585 1,000 ** 1,585
B-Type 500 * 500 500 1,000
New Belgium 2,415 *** 2,415
Bike Share 3,000 3,000
TOTAL 1,000 3,500 4,500 8,000
Note: * Combined sales of both models represented 1,000 bicycles in total sales for 2011–2014; ** Sales of the A-Type model
were estimated to be greater than B-Type model because the A-type model was featured at Nordstrom, a major U.S. retailer;
*** Numbers were expected to grow as a result of multi-year contract with New Belgium Brewing Company.
Source: Company documents.
EXHIBIT 2: DETROIT BIKES’S ESTIMATED AND PROJECTED INCOME STATEMENTS, 2014–2016
(IN US$)
Single Bike 2014 2015 2016
Revenue
Bikes Sold/Year 1,000 3,500 4,500
Bike Sales * $ 699.99 699,990 2,449,965 3,149,955
Expenses
Costs of goods sold (current) $ 150 150,000 525,000 675,000
Costs of goods sold (projected) $ 100 100,000 350,000 450,000
Wages (including benefits) $ 531 531,400 1,859,900 2,391,300
General and Administrative
Fixed salaries ** $ 562,801 562,801 562,801 562,801
Utilities (per month × 12) $ 185,652 185,652 185,652 185,652
Insurance $ 722 722 722 722
Total Expenses: Current $ 1,430,575 3,134,075 3,815,475
Total Expenses: Projected $ 1,380,575 2,959,075 3,590,475
Net Income: Current $ (730,585) (684,110) (665,520)
Note: * Estimates do not include the C Type model, as the authors did not have sufficient information on its costs; ** The fixed
salaries represented the salaries for the marketing department, the human resources manager, and the chief operating officer.
Source: Employee interviews and public documents.
This document is authorized for use only by Yi-Cheng Pan in Entrepreneurial Marketing – Section 2 – ENT-6006 – BOS1 at Hult International Business School, 2018.
Page 12 9B17A012
ENDNOTES
1 Chapter 9 bankruptcy was a specific type of bankruptcy available to financially distressed municipalities in the United States.
The process protected the municipality from its creditors while they resolved the municipality’s outstanding debt. 2 Eric Boehm, “Top 10 Reasons Detroit Went Bankrupt,” Washington Examiner, July 20, 2013, accessed October 13, 2016,
www.washingtonexaminer.com/top-10-reasons-detroit-went-bankrupt/article/2533299.
3 All currency amounts are in US$.
4 Steven Yaccino, “Kwame M. Kilpatrick, Former Detroit Mayor, Sentenced to 28 Years in Corruption Case,” New York Times,
October 10, 2013, accessed October 13, 2016, www.nytimes.com/2013/10/11/us/former-detroit-mayor-kwame-kilpatricksentencing.html.
5 Mark Binelli, Detroit City Is the Place to Be: The Afterlife of an American Metropolis (New York: Picador, 2012), 8. 6 Steve Neavling, “Detroit Arson a Persistent Problem as City Services Decline,” Huffington Post, July 13, 2013, accessed
October 17, 2016, www.huffingtonpost.com/2013/07/15/detroit-arson_n_3591149.html. 7 Kate Abbey-Lambertz, “Detroit’s Staggering Murder and Violent Crime Rate Are ‘A Public Health Issue,’” Huffington Post,
November 14, 2014, accessed October 17, 2016, www.huffingtonpost.com/2014/11/14/detroit-highest-murder-rate-violentcrime_n_6144460.html; Bureau of Labor Statistics, “Unemployment Rates for the 50 Largest Cities (Based on 2010 Census
Population),” United States Department of Labor, last modified April 15, 2016, accessed February 10, 2017,
www.bls.gov/lau/lacilg10.htm.
8 “Detroit Ranked Most Dangerous City in the Country Fourth Year in a Row as Economic Devastation Continues to Take Its
Toll,” Daily Mail, October 20, 2012, accessed October 17, 2016, www.dailymail.co.uk/news/article-2220603/Detroit-rankeddangerous-city-country-fourth-year-row.html.
9 Kirk Pinho, “How Detroit Riverfront Lost Out on Gilbert’s Quicken Headquarters,” Crain’s Detroit Business, December 21,
2015, accessed February 14, 2017, www.crainsdetroit.com/article/20151221/BLOG016/151219775/how-detroit-riverfrontlost-out-on-gilberts-quicken-headquarters.
10 Maria Tomlinson, “A Millennial Paradise: How Once-Bankrupt Detroit Is Making a Comeback,” Elite Daily, August 3, 2015,
accessed October 17, 2016, http://elitedaily.com/life/detroit-next-american-success/1145067. 11 Ibid.
12 Ibid.
13 Ibid.
14 Joe Nocera, “Is Motown Getting Its Groove Back?,” New York Times, June 2, 2015, accessed October 17, 2016,
www.nytimes.com/2015/06/02/opinion/joe-nocera-is-motown-getting-its-groove-back.html. 15 Thomas E. Kraft, “From High-Wheelers to High-Tech: Bicycle Manufacturing Past and Present,” Tech Directions 66, no. 4
(November 2006): 24–26.
16 Frank Wicks, “Credit to the Bicycle,” Mechanical Engineering 132, no. 7 (July 2010): 40–44. 17 Kraft, op. cit.
18 National Bicycle Dealers Association (NBDA), “Industry Overview 2015,” report, accessed October 18, 2016,
http://nbda.com/articles/industry-overview-2013-pg34.htm. 19 Kent International, “Kent International Opens First. U.S. Manufacturing Facility in South Carolina,” press release, October 15,
2014, accessed February 9, 2017, www.kent.bike/info/kent-international-opens-first-us-manufacturing-facility-in-south-carolina. 20 Amy Feldman, “A Third-Generation Bike Maker Tries to Bring Manufacturing Back to the U.S.,” Forbes, July 28, 2016,
accessed December 13, 2016, www.forbes.com/sites/forbestreptalks/2016/07/28/a-third-generation-bike-business-is-tryingto-bring-manufacturing-back-to-the-u-s/#1d340fb41969.
21 Kent International, op. cit.
22 National Bicycle Dealers Association, op. cit.
23 “Locations,” Shimano Inc., accessed October 18, 2016, www.shimano.com/content/Corporate/english/index/portalsite/location.html; Dave Everett, “Behind the Scenes at SRAM—A Company Tour,” CyclingTips, January 2015, accessed
October 18, 2016, http://cyclingtips.com/2015/01/behind-the-scenes-at-sram. 24 Kent International, op. cit.
25 National Bicycle Dealers Association, op. cit.
26 Ibid.
27 Jen Wieczner, “Motor-Less City? Bankrupt Detroit’s Booming Bike Industry,” Fortune, October 9, 2014, accessed October
13, 2016, https://fortune.com/2014/10/09/detroit-bicycle-manufacturing. 28 Cassandra Spratling, “Motor City Is Fast Becoming Detroit Bike City,” Detroit Free Press, July 27, 2015, accessed October
13, 2016, www.freep.com/story/life/2015/07/27/detroits-bike-culture-booming/30464307. 29 Ibid.; “What Is Slow Roll?” Slow Roll, accessed October 13, 2016, www.slowroll.bike.
30 Spratling, op. cit.
31 “There’s a Funny Thing That Happens When You Build Factories in This Country. It’s Called Jobs,” Shinola, accessed
October 18, 2016, www.shinola.com/jobs.
32 Karen Heller, “The Luxury-Goods Company Shinola Is Capitalizing on Detroit,” Washington Post, November 17, 2014,
accessed October 13, 2016, www.washingtonpost.com/lifestyle/style/the-luxury-goods-company-shinola-is-capitalizing-ondetroit/2014/11/17/638f88a4-6a8f-11e4-b053-65cea7903f2e_story.html. 33 Jasmine Budak, “Zak Pashak Opened a Bar, Started a Music Festival and Ran for City Council in Calgary,” Alberta Venture,
November 12, 2012, accessed October 18, 2016, http://albertaventure.com/2012/11/zak-pashak-opened-a-bar-started-a-music-
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Page 13 9B17A012
festival-and-ran-for-city-council-in-calgary; Jason McBride, “Cycling in Motor City,” Canadian Business, February 19, 2014,
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www.boemagazine.com/2013/06/serial-entrepreneur-zak-pashak.
35 Ibid.
36 David Sands, “Zak Pashak, Detroit Bikes Entrepreneur, Buys 50,000 Square Foot Factory on City’s West Side,” Huffington
Post, July 13, 2012, accessed October 19, 2016, www.huffingtonpost.com/2012/07/12/detroit-bikes-factory-zakpashak_n_1666227.html; Lee DeVito, “The Industrialist: Zak Pashak,” Detroit Metro Times, June 10, 2015, accessed October
19, 2016, www.metrotimes.com/detroit/the-industrialist-zak-pashak/Content?oid=2349264. 37 “The Factory,” Detroit Bikes, accessed October 13, 2016, http://detroitbikes.com/factory. 38 Pashak, op. cit.
39 Bill Bradley, “How to Revive the Motor City: Build Bikes,” Pacific Standard, June 4, 2013, accessed October 13, 2016,
https://psmag.com/how-to-revive-the-motor-city-build-bikes-7e67c73bb8f7#.ggbdb4jla.
40 “Serial Entrepreneur,” op. cit.
41 “The Wish List: Detroit Bikes,” BrainstemBob’s Guide to Better Living (blog), May 6, 2014, accessed October 19, 2016,
http://brainstembob.com/2014/05/06/the-wish-list-detroit-bikes. 42 Michael Platt, “Calgary’s Zak Pashak Becomes Bike Baron in Detroit,” Calgary Sun, March 9, 2013, accessed October 19,
2016, www.calgarysun.com/2013/03/09/calgarys-zak-pashak-becomes-bike-baron-in-detroit. 43 McBride, op. cit.
44 National Bicycle Dealers Association, op. cit.
45 Sands, op. cit.
46 Jon Zemke, “Detroit Bikes Ramps Up Production in West Side Factory,” Model D, April 16, 2013, accessed October 19,
2016, www.modeldmedia.com/startupnews/detroitbikes041613.aspx.
47 Frank Witsil, “Detroit Bikes Gears Up for New Line, Shifts Strategy,” Detroit Free Press, November 1, 2015, accessed
October 19, 2016, www.freep.com/story/money/business/michigan/2015/11/01/detroit-bikes-c-type/74816666. 48 “The Detroit Bikes C-Type: The American Single Speed,” Kickstarter, accessed October 13, 2016,
www.kickstarter.com/projects/1202301321/the-detroit-bikes-c-type-the-american-single-speed/description. 49 “Serial Entrepreneur,” op. cit.
50 Bradley, op. cit.
51 Sands, op. cit.
52 McBride, op. cit.
53 Ibid.
54 Eric Yang, “Detroit Bicycle Company,” Gear Patrol, November 2, 2011, accessed October 19, 2016,
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55 Ian Thibodeau, “Detroit Bikes Partners with New Belgium Brewing to Produce ‘Fat Tire’ Rides,” MLive, April 1, 2015,
accessed October 19, 2016, www.mlive.com/business/detroit/index.ssf/2015/04/detroit_bikes_partners_with_ne.html. 56 Shane Ferro, “There’s a Bicycle Boom Quietly Occurring in America’s Motor City,” Business Insider, October 10, 2014,
accessed October 19, 2016, www.businessinsider.com/detroit-bicycle-business-booming-2014-10. 57 “Parlee,” Wrench Science (retailer), accessed December 7, 2016, www.wrenchscience.com/road/frames/Parlee;
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63 Craver, op. cit.
64 “Urban & Commuter Bikes,” Trek Bicycle Corporation, accessed December 5, 2016, www.trekbikes.com/ca/en_CA/bikes
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65 Ibid.
66 “Cruisers, Classic, Pre-Configured,” Worksman Cycles, accessed December 5, 2016, www.worksmancycles.com/cruiserspreconfig.html. 67 “A Visit to The Worksman Cycles Factory,” Worksman Cycles, accessed December 6, 2016,
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68 Peter Breslow, “Nation’s Oldest Existing Bike Maker Keeps On Rolling,” National Public Radio (NPR), November 15, 2008,
accessed December 6, 2016, www.npr.org/templates/story/story.php?storyId=97024808.
69 Sands, op. cit.
70 “Cruisers, Classic, Pre-Configured,” op. cit. 71 “A-Type,” Detroit Bikes, accessed December 6, 2016, http://detroitbikes.com/a-type; “Worksman Dutchie Brooklyn—
Men’s—Three Speed,” Worksman Cycles, accessed December 6, 2016, www.worksmancycles.com/df-bklyn-m-3cb.html.
This document is authorized for use only by Yi-Cheng Pan in Entrepreneurial Marketing – Section 2 – ENT-6006 – BOS1 at Hult International Business School, 2018.
Page 14 9B17A012
72 “Worksman Dutchie Brooklyn—Women’s—Three Speed,” Worksman Cycles, accessed December 7, 2016,
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73 The “Made in USA” brand was awarded by Made in USA, LLC, to indicate a product was made or grown in the United States. 74 “Santa Cruz Bicycles—About Us,” Santa Cruz Bicycles, accessed December 5, 2016, www.santacruzbicycles.com/enCA/company; “The Soul of Marin,” Marin Bikes, accessed December 5, 2016, www.marinbikes.com/us/about-marin; “About
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76 “Benefits,” Trek Bicycle Corporation, accessed December 12, 2016, www.trekbikes.com/ca/en_CA/company/work_at_trek/benefits. 77 “People,” Trek Bicycle Corporation, accessed December 12, 2016, www.trekbikes.com/ca/en_CA/company/work_at_trek/people;
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83 “Specialized,” Bike America (retailer), accessed December 13, 2016, http://bikeam.com/sitesearch.cfm?goSiteSearch.x
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84 Jeffrey Rothfeder, “Why Donald Trump Is Wrong About Manufacturing Jobs and China,” New Yorker, March 14, 2016,
accessed November 18, 2016, www.newyorker.com/business/currency/why-donald-trump-is-wrong-about-manufacturingjobs-and-china.
85 Ibid.
86 Ibid.
87 Amy Feldman, “A Third-Generation Bike Maker Tries to Bring Manufacturing Back to the U.S.,” Forbes, July 28, 2016,
accessed December 13, 2016, www.forbes.com/sites/forbestreptalks/2016/07/28/a-third-generation-bike-business-is-tryingto-bring-manufacturing-back-to-the-u-s/#1d340fb41969.
88 Jeff Waraniak, “Detroit Bikes Owner Wants to Get American-Made Bike Manufacturing Back on a Roll,” Hour Detroit, March
23, 2015, accessed October 19, 2016, www.hourdetroit.com/Hour-Detroit/April-2015/Gearing-Up. 89 Lauren Abdel-Razzaq, “Deal Brewing Between Detroit Bikes, Fat Tire Ale,” Detroit News, April 1, 2015, accessed October
19, 2016, www.detroitnews.com/story/business/2015/04/01/detroit-bikes-fat-tire-beer/70790042. 90 Abdel-Razzaq, op. cit.
91 Tim Higgins, “Detroit-Made Bicycles Are Taking Over Bike-Share Programs,” Bloomberg Businessweek, July 13, 2016,
accessed October 19, 2016, www.bloomberg.com/features/2016-detroit-bikes. 92 Pashak, in telephone discussion with the author, November 6, 2015.
93 Witsil, op. cit.
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