This morning Peloton put out a press release stating they had made the decision to outsource all of their manufacturing moving forward.
This means that their third-party partner Rexon will make all Bikes & Treads now for Peloton.
What does this mean for Tonic, who Peloton acquired in 2019? According to Peloton, they “will be suspending operations at its Tonic Fitness Technology, Inc. facility through the remainder of 2022”
Peloton is making these changes “simplify its supply chain and focus on technology and best-in-class content to continue driving the business forward as the leading global Connected Fitness company.”
Peloton CEO Barry McCarthy said the following:
Today we take another significant step in simplifying our supply chain and variablizing our cost structure – a key priority for us. We believe that this along with other initiatives will enable us to continue reducing the cash burden on the business and increase our flexibility. Partnering with market-leading third party suppliers, Peloton will be able to focus on what we do best – using technology and content to help our 7 million Members become the best versions of themselves
In an interview with Bloomberg, Chief Supply Chain Officer Andrew Rendich had this to say about the changes:
“We are going back to nothing but partnered manufacturing,” he said. “It allows us to ramp up and ramp down based on capacity and demand.”
This will result in layoffs at the Tonic facilities:
The company declined to say how much shutting down its operations would cost, but said that it will cut about 570 employees in Taiwan who work at the Tonic facilities. It will retain 100 existing staffers in Taiwan to work with its outside partners.
Beyond expanding their partnership with Rexon as a result of this, Peloton will also work with additional third party manufacturing partners. For example, Peloton said that they will begin working with a new partner Pegatron Corp who will build the upcoming Peloton Rower for the company.
This is one of many steps Peloton has taken to change their manufacturing strategy this year. In February, Peloton announced they would be closing and selling their still-in-construction US-based factory as the demand wasn’t there for that much production capacity.
Last month, it was also reported that Peloton was looking to sublease part of their NYC headquarters.
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