Taking Over Bike-Share Programs

July 13, 2016

Taking Over Bike-Share Programs

When Zak Pashak’s factory opened in 2013, bicycle manufacturing in the U.S. had all but disappeared.

 

The Detroit Bikes factory sits on the West Side of the city near scattered abandoned homes and a junkyard full of rusted car parts. Inside, workers are taking test rides through the 50,000-square-foot facility on a fleet of freshly assembled bicycles destined for New York’s Citi Bike bike-share program. On foot, founder Zak Pashak, 36, dodges the riders, navigating a path around the chaotic floor and holding forth on the virtues of American-made chromoly steel—which, in case you’re not a metallurgist, is lighter and stronger than standard steel and is what Pashak uses in his house line. He stops and points to the loading dock, where a tractor-trailer waits to haul the bikes more than 600 miles to Citi Bike headquarters in Brooklyn. “This was my dream when we got the factory—watching semis drive away at the end of the day,” Pashak says.

When his factory opened in 2013, bicycle manufacturing in the U.S. had all but disappeared. The long, downward spiral began in the 1980s, when industry-giant Schwinn shifted work to Asia, a cost-saving move that other manufacturers such as Huffy soon copied. In 2015 only 2.5 percent of the estimated 12.6 million bikes sold in the U.S. (not including those for children) were made here, according to the National Bicycle Dealers Association. “A lot of people thought it was really goofy when I first started this,” says the bearded Pashak, who describes Detroit as “a good spot for urban revitalization to take hold” and is prone to similarly grandiose talk about changing the world. If his technology weren’t 200 years old, he could pass for a startup founder.


Steven Sprankle powder-coats frames.
Photograph by Ricky Rhodes for Bloomberg Businessweek

 

It probably was really goofy, based purely on economics. But at a time when we want our kale organic and our beer microbrewed, manufacturing bicycles in the cradle of the U.S. transportation industry turns out to be just rational enough. Shinola, which also sells bikes, might have stolen Pashak’s thunder by becoming the face of Detroit’s rebound. Yet Detroit Bikes’ contract with Motivate, the company that runs bike-sharing programs in 12 metro areas, has helped put Pashak’s company on pace to churn out 10,000 bikes this year. It’s nice that in doing so he’ll employ 50 people in a city with 10 percent unemployment, about double the national rate. It’s perhaps more significant that without this Canadian transplant’s operation, options for how busy urbanites get from point A to point B might literally be fewer and farther between.

Pashak, whose former stepfather was an oilman and co-owner of the Calgary Flames, had millions to spend on risky endeavors when he relocated to Detroit from Calgary five years ago. He was used to riding without training wheels: In 2003 he opened Broken City, which became one of Calgary’s premier live-music venues, without having run a bar before. He ran for City Council in 2010, having never sought public office—and lost. It forced him to figure out what was next. He’d been fascinated with Detroit since childhood, when he watched ’80s action heroes such as Tom Selleck in Magnum, P.I., Peter Weller in RoboCop, and Eddie Murphy in Beverly Hills Cop, all of whom had ties to the Motor City. “I had this feeling that cool people came from Detroit,” Pashak says. “I felt a gut draw.” He wanted to be part of its economic rebound. Detroit didn’t need another Broken City, he decided, but a factory made sense. “It’s got a history of manufacturing; there are a lot of people who’ve got skills who haven’t been able to use them in a long, long time,” he says.

It was Pashak’s failed City Council bid that gave him a passion for two-wheelers. While running for office, he studied urban-transit public policy and came to see bikes as a solution for big-city ailments—everything from pollution to traffic congestion. “It’s a highly efficient machine, yet people have this complicated relationship with it,” he says. “A lot of people think bikes are for hippies or people who got a DUI, or for people who are poor and can’t afford a car. Or they’re for kids.” Even more complicated: price. High-end bikes with carbon-fiber frames, suspension packages, and multispeed gears are expensive to buy, let alone maintain. So Pashak thought a basic bike, meant for the nation’s urban jungles, might have marketplace potential. And that was it. He was off to Detroit.


Welder Will Walker at work. 
Photo Essay: How Detroit Bikes Builds Rides for the Nation's Urban Jungle
Photograph by Ricky Rhodes for Bloomberg Businessweek

When Pashak arrived, he bought an old house in the city’s historic Boston-Edison neighborhood, just blocks from where Henry Ford once lived. Like any good American entrepreneur, he began tinkering in his garage with a prototype inspired by a 2012 trip to Copenhagen, a city famed for its riding culture. It was a process: “Everything that could’ve gone wrong has done so at least once,” he says, explaining that equipment broke and the factory wasn’t laid out efficiently. In 2013 production began on the A-Type model. The $700 A-Type has a utilitarian, matte-black frame, three speeds, and a rear rack with the Detroit Bikes logo. A women’s version, the B-Type, comes in white and mint.

 


Shaun Lewis assembles a wheel.
Photograph by Ricky Rhodes for Bloomberg Businessweek

 

Production was slow in 2014 when Pashak cold-called New Belgium Brewing in Fort Collins, Colo. He had a simple question: Did it need a bikemaker? The brewery is best known for its Fat Tire amber ale, with a shiny, vintage, red bicycle on the label. Every year the company bestows bikes on employees to celebrate work anniversaries and other special events, and for years it had turned to manufacturers in Asia. It just so happened that New Belgium’s bike designer had started looking for an American manufacturer around the time Pashak called. “He was having trouble actually finding a company in the U.S. that could scale up and make 2,500 bikes,” says Bryan Simpson, a New Belgium spokesman. Detroit Bikes had capacity to spare; production began in earnest earlier this year. Pashak says: “It was huge—a big leap of faith for them. They made this company possible.” The contract with Motivate this spring made it a business. Currently, Motivate uses Detroit Bikes-assembled bicycles in New York, Boston, and Jersey City.

Back at the factory, Pashak heads to a corner and shows off a machine that makes wheels. “This is how we won the contract for Citi Bike,” he says. Although New Belgium’s bikes are constructed start-to-finish in Detroit, Citi Bikes technically aren’t entirely American-made. The aluminum frames come from Asia, and Pashak’s crew assembles them. Wheels, however, are more cumbersome and expensive to transport. By making those locally, says Jay Walder, Motivate’s chief executive officer, the company has reduced the number of shipping containers coming from Asia by two-thirds. Better yet, being able to say that Motivate bikes are assembled at home gives it a leg up in negotiations with city governments as the company expands. “If you’re a mayor or a transportation commissioner, it’s nice to be talking about the fact that this program, which is a big part of the community, is creating jobs at home,” Walder says.

When Walder’s tenure at Motivate started in October 2014, finding a domestic manufacturer became a priority. But he struggled to find anyone who could handle a 3,000-unit order built to Motivate’s specs. “The industry is not set up to do anything like this,” Walder says. Before Detroit Bikes, “there were no bike-share bicycles that were being made anywhere in the United States.” This year, Motivate plans to add 8,000 bikes, bringing the total to 28,000. Pashak—whose factory has gone from pumping out 20 bikes a day to 80 since signing on to make Citi Bikes—wants as much of that business as possible. He estimates that he, his mother, and an investor named Bernard Sucher, a native son who’s worked for Goldman Sachs and Merrill Lynch, have put as much as $4 million into Detroit Bikes. Pashak is on pace to break even this year, he says.


Citi Bikes ready to ship.
Photograph by Ricky Rhodes for Bloomberg Businessweek

 

With the New Belgium and Motivate contracts providing some stability, Pashak is looking to expand his retail business. Earlier this year he hired Scott Montgomery, a 30-year industry veteran whose father co-founded Cannondale, to head national sales. The move signaled to industry watchers that the quirky company is emerging from Shinola’s shadow. “If they expand their lineup, they’ll appeal to a lot more people,” says Pete Kocher, who’s sold a few Detroit Bikes at Ride Brooklyn, with shops in the borough’s cyclist-dense Park Slope and Williamsburg neighborhoods. “They’ve got a load of potential to grow.” Montgomery says he wants Detroit Bikes in 100 more stores by yearend, for a total of 400 retail outlets in 150 U.S. cities. The company plans to start selling a new design, the racing-oriented C-Type, later this summer. The A-Type and B-Type will soon get more gears and colors.

After walking through the factory, Pashak looks for a quiet moment away from the banging of metal and lingering smell of welded steel. Outside, the street is calm and empty. “Having a factory that impacts the community directly is very cool,” he says. Some of his workers even walk to work: “As an urbanist, idealist kind of guy, that’s the coolest thing.”





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