Peloton to stop making its own trainers

Calling the change “natural progress” in a statement Tuesday, Peloton said Taiwanese manufacturer Rexon Industrial Corp. will become the main manufacturer of its simulators in the future. As a result, Peloton will close its factories owned by Tonic Fitness Technology, a company it bought in 2019.

“We believe this, along with other initiatives, will allow us to continue to reduce the cash burden on the business and increase our flexibility,” CEO Barry McCarthy said in a press release.

Peloton also said it would suspend production at Tonic “until the end of 2022,” signaling a sharp decline in orders. The company has been slowing down production for months as the popularity of its products wanes. Just a year ago peloton (PTON) announced it was building its own $400 million plant in Ohio to meet demand. Those plans have since been cancelled.

Other items of equipment, including touch screens and a future rowing machine, will also be outsourced.

About 600 Tonic employees will be laid off, according to Bloomberg News.

Peloton Wrestling

Tuesday’s change is the most significant under McCarthy, who has been tasked with rebuilding the bankrupt company since he took over in February.

In May, Peloton said it only had $879 million in cash in the bank at the end of the quarter, making it “undercapitalized,” McCarthy said. This forced the company to borrow $750 million in five years of Wall Street debt to keep it going.

As people return to the gyms, Peloton has been struggling to maintain its electric growth since the early days of the pandemic. Bicycle sales and subscriptions have stalled. The company has too much inventory and demand is falling. McCarthy also launched a subscription program for its equipment in an attempt to convince people that it’s not just a product for the rich.

Peloton shares rose about 1% in early trading. Shares are down about 95% from their all-time high hit at the end of 2020.

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