Thirty-two years ago, the late Dick Burke co-founded a company he hoped would revolutionize its industry. Ten years later, Trek Bicycles was churning out low-quality bikes and bleeding money. Here's how Burke turned Trek into an industry standard. Twice.
Richard Burke passed away on March 10 having built the second largest bicycle manufacturer in the world. By the time of his passing, he had spent nearly half of his 73 years overseeing the Trek empire, which now employs 1,600 workers, produces 300 different bicycle models, and retails in 75 countries. Burke ceded Trek's presidency to his son John in 1997, and served as company chairman until his death in Milwaukee.
Before Trek was synonymous with American cycling, it was a newly minted touring bike company operated out of a red barn in Waterloo, Wisconsin. Founded in 1976, its timing might have seemed inauspicious. The tremendous growth of the bike industry in the 60s was already on its leeward slide, and there were plenty of big players already on the scene: Schwinn was handily dominating the low-end market, and Japanese brands had comfortable claim to high-end bike sales. But Burke and his co-founder, a bike shop owner named Bevel Hogg, put the industry reality aside, endeavoring to invent a new niche that would take advantage of the social climate. He imagined a bike company that could ride the coattails of the incipient energy crisis, the fitness craze, and the nation's enthusiasm for domestic craftsmanship. "Reality went out the window, and we took a gamble," recalled Burke in a 2000 speech at the University of Colorado.
Making that gamble profitable would become largely a question of apt branding, creative craftsmanship, and price point. While Trek's first bikes were built as well as Japanese and European brands -- using the more costly and time-intensive method of silver brazing to assemble their frames -- it was their distinctively American welding style that made them high-profile in American bike shops. Their lugged steel touring frames, selling for a reasonable $275 each, quickly developed a cult following. "You could tell it was a Trek frame without the paint on it," said early Trek engineer Tim Isaac in Trek's own company history, published in 2002. Under Burke and Hogg, Isaac recalled, "Trek was dominated by free spirits, and I think it showed in our product." After three years, they were doing $1 million in sales and outgrowing the barn.
By then, Trek had a small network of retailers, but its brass knew that driving a wedge into the marketshare of the industry giants would require national distribution. At the time, many bike shops in the U.S. sold exclusively Schwinns, but some shop owners were becoming disillusioned with the company's poor high-end bikes. As the bike boom had grown, retailers looked for a solid high-end brand to sell in concert with their low-end Schwinns, and many turned to foreign brands with Schwinn's reluctant approval. Burke saw room for Trek. He had a hunch, as he said in his 2000 speech, that "Schwinn didn't want their dealers selling Japanese bikes; that was just contrary to an American bike company." And he was right -- Schwinn happily let its retailers carry Treks instead of expensive overseas brands, viewing it as consistent with an emphasis on quality American craftsmanship. With this informal alliance, Burke neutralized his largest competitor and gained his foothold. Trek's sales team pursued retailers tenaciously, recalled Burke: "It was blind enthusiasm with adult supervision." As Trek gained popularity, the Trek product line would expand vertically, capitalizing on Schwinn's missteps and eventually unseating it as the country's preeminent American bicycle maker.
By 1985, Trek had moved to a new mass-production facility and was doing $20 million in sales, but Burke's involvement in daily operations had waned and mistakes were being made. The previous year's product line had been riddled with assembly problems, and Trek's retailers were making noise. Yet even as its bread and butter was flagging, it was still plowing ahead with expensive R&D. In the course of a year, the company went from $1 million in profits to $4 million in losses. "We built the first [all-aluminum bike], took it to market, and didn't know how the hell to build a second one. We were getting back half of the bikes we shipped out. As long as demand is greater than supply, you can probably get past with marginal quality, but the moment the supply and demand curve crosses, you're going to face up to quality problems," said Burke, describing Trek's darkest days. "All entrepreneurial companies hit the wall... It's just a question of why you hit the wall. You can't bullshit yourself and put a band-aid on it. We were trying to do too damn many things."
Burke's co-founder bailed out of the company that year, and Burke took the opportunity to shake up the management and appoint himself Trek's new general manager. Taking the helm alone for the first time, he wrote a mission statement. In the following months, the company's executives would spend their days down on the production line, working with the welders to solve the problems with their new aluminum bikes.
By the late 80s, Burke had turned Trek's impending failure, the aluminum touring bike, into a solid success. And as the lighter, stiffer aluminum frames replaced steel frames as the industry standard, the company began to look elsewhere for a new game-changing technology, settling on carbon fiber as its next gamble of choice. But developing carbon fiber bike frames meant assuming more than $1 million dollars in R&D costs; no one had perfected the process of bonding composite tubes for mass bicycle production. Burke green-lit the project anyway. By the time Trek released its first all-carbon road frame in 1992, the company had developed a trademark industry-leading composite called OCLV (Optimum Compression, Low Void carbon fiber) that touted uniform strength and composition. The new composite bike blew the doors off current machines, becoming the lightest road cycle frame in the world at 2.4 pounds. "We invested heavily in R&D at the cost of profits; we were driven by market-share," Burke said of their carbon strategy. What he called the "dominate now, figure out profitability later" mantra left the rest of the industry chasing dust. "Trek really helped pioneer high-end carbon production in the U.S.," says Editor Louis Mazzante of Bike Magazine, noting that the composite material is ubiquitous in the construction of high-end road and mountain bikes today. By the time other companies boarded the carbon-fiber bandwagon, Trek was already the authority on composite bike production, having leveraged its technical edge and scaled up production to offer the lightest, fastest, and most economical high-end racing bikes on the road.
By 1996, Trek's sales had reached $375 million, much of it carried by the mountain bike craze. The company's early investment in mountain bike technology and its industry-leading work with aluminum had positioned it to become the biggest mountain bike manufacturer in the U.S., but it had threatened to hamstring Trek's nimbleness and innovation. "We only had one niche for the brand, and we had to get new places," said Burke of mid-90s Trek in his University of Colorado speech. The quest to regain small-company deftness led Burke to acquire several smaller brands and put them under the Trek umbrella. One of those brands was Gary Fisher Bicycles. "Gary Fisher is to the left of Trek. It's cooler than Trek," Burke said of the brand in 2000.
"Having the Fisher brand has really allowed Trek to follow new industry trends that other big companies really can't," says Mazzante of Bike, citing Fisher's pioneer role in popularizing dual-suspension racing bikes, 29-inch wheel bikes and women's-specific frame designs.
By the time he retired to the position of Chairman in 1997, Burke had set the company on successful rails. In 1998, Trek would assume sponsorship of a long-shot Tour de France contender named Lance Armstrong, who would become cycling's winningest athlete aboard a full carbon fiber Trek Madone outfitted with Trek-made components from another of its well-respected acquired brands, Bontrager. To cycling insiders, it seemed only appropriate that Burke's company maintain his legacy and become front-and-center in the renaissance of American cycling, all over again.