A Third-Generation Bike Business Is Trying To…

A Third-Generation Bike Business Is Trying To…

Aug 1, 2016

“A Third-Generation Bike Business Is Trying To Bring Manufacturing Back To The U.S.”

By Amy Feldman, Forbes

Nearly two years ago, Kent International CEO Arnold Kamler opened a bicycle factory in Manning, S.C., the first major bike plant built in the U.S. in decades. Bike makers, including Kent, one of the nation’s largest with revenues of more than $200 million, fled this country for Asia in the 1980s and 1990s.

Kent makes mass-market bikes, most of which sell for $69 to $199, at Walmart, Target, Toys R Us and Amazon. Kamler, 66, says that when he left the U.S. in 1991, he thought he’d never come back. But times changed as Walmart – which accounts for roughly half the more than 15 million bikes sold in this country – pushed its “buy American” campaign and the costs of manufacturing in China kept rising. For now, Kent’s Bicycle Corporation of America division is assembling the bikes in South Carolina, but Kamler hopes long-term to manufacture the frames, forks and handlebars in the U.S. as well. In a conversation that’s been edited and condensed, I spoke with Kamler about his hopes for the South Carolina factory, his struggle to get parts made in the U.S. and why he bought out Mark Cuban’s stake in a balance bike startup that had appeared on “Shark Tank.”

Amy Feldman: How did your family get into the bike business?

Arnold Kamler: My grandfather immigrated from Russia, now Poland, around 1905, 1906 to escape anti-Semitism. He opened a bicycle shop on the Lower East Side of Manhattan, which he sold to a cousin, then opened a shop in Newark, N.J. My father grew up living on the second floor of the bike shop. He hated the retail business and became an accountant but came back when his father got sick. Business was rough. It survived because my father was the buyer, the seller and the inventory manager.

Feldman: It’s rare to see a business survive three generations.

Kamler: We had some financial difficulties in the late-80s, as many companies did. I had a bank tell me they would never lend money to a third-generation business. They still approach me for business and I just chuckle now.

Feldman: At what point did you take over?

Kamler: I graduated college in 1972 and I had no intention of working for my father. We had a difficult relationship. He came down to American University in Washington and asked me to try it for two years – and I’m still here. I started traveling, and I loved it.

Feldman: How did you get the bikes into Walmart?

Kamler: It took until 1997. We had been trying to sell Walmart for years, but we were unsuccessful. We finally had something cool. It was dual-suspension mountain bike. It was fairly lightweight, but the tubing was gigantic. You’d see it on the floor, and it was like, whoa, it was just so different. It interested them, and they gave us a chance.

Feldman: And now you’re one of Walmart’s largest bicycle suppliers?

Kamler: We supply more than 25% of all the bicycles Walmart sells. We do approximately 2 million bicycles each year to Walmart, 1 million to other U.S. customers and 400,000 to other countries including Canada. It’s a lot of bicycles.

Feldman: How did the decision to open a U.S. factory come about?

Kamler: Walmart has a conference every year, and in 2013 it was in Orlando. The theme was their big announcement to increase their support of U.S. manufacturing. They had governors from about 15 states to meet with people. I was a little going through the motions.

Feldman: You didn’t think it would happen?

Kamler: I didn’t really think it would, but I’m always willing to consider new possibilities. Then I got an email from the bicycle buyer, and he said, “Arnold would you like to meet the governor of South Carolina, Nikki Haley?” So I had a meeting with Governor Haley, and she’s very dynamic, a salesman’s salesman. We were talking for a few minutes, and she looks at me and says, “Arnold, we have an airplane factory in South Carolina and a couple of car factories and truck tire factories. I want to tell the kids we have a bike factory in South Carolina.” And then she wrote down her cellphone number.

Feldman: And now you’re one of Walmart’s largest bicycle suppliers?

Kamler: We supply more than 25% of all the bicycles Walmart sells. We do approximately 2 million bicycles each year to Walmart, 1 million to other U.S. customers and 400,000 to other countries including Canada. It’s a lot of bicycles.

Feldman: How did the decision to open a U.S. factory come about?

Kamler: Walmart has a conference every year, and in 2013 it was in Orlando. The theme was their big announcement to increase their support of U.S. manufacturing. They had governors from about 15 states to meet with people. I was a little going through the motions.

Feldman: You didn’t think it would happen?

Kamler: I didn’t really think it would, but I’m always willing to consider new possibilities. Then I got an email from the bicycle buyer, and he said, “Arnold would you like to meet the governor of South Carolina, Nikki Haley?” So I had a meeting with Governor Haley, and she’s very dynamic, a salesman’s salesman. We were talking for a few minutes, and she looks at me and says, “Arnold, we have an airplane factory in South Carolina and a couple of car factories and truck tire factories. I want to tell the kids we have a bike factory in South Carolina.” And then she wrote down her cellphone number.

Feldman: It’s a bargain then.

Kamler: Yeah, and it’s a beautiful factory. There’s another part of the story that’s interesting. My father had given me 51% and my sister 49% of the business. Around 2009, my sister asked if I would buy her out. At the same time, our main supplier in China,Shanghai General Sports, had expressed interest in buying shares. I asked them if they’d be interested in 49% and they said yes. So when I made the decision to do the factory, I wanted to get their blessing.

Feldman: What did they think?

Kamler: At first, they were hoping this was like a teenager with a whim who would get over it. They didn’t know if it made sense economically. I took them down to South Carolina to show them what I had seen and to show them how hard people work there. They were shocked.

Feldman: How does Governor Haley feel about a company in Shanghai owning 49%?

Kamler: Loves it, loves it. As I told you, all the parts are imported. I’m struggling to make the parts in the United States. I came up with the idea to host a summit at our factory, and we invited over 30 companies in China and Taiwan with the idea of opening additional factories down here, and Governor Haley gave a speech to them. So far it has not clicked.

Feldman: Do you think it will?

Kamler: I’m not sure, I’m hopeful but not optimistic. I am looking in a different direction right now. It’s my intention to make the frames, forks and handlebars. We’re looking at a joint venture to make bicycle rims, and discussing this with a company in South America that does a lot of work in aluminum. People are very hungry to source domestically.

Feldman: How do manufacturing costs compare to China or Taiwan?

Kamler: The cost is still less in China, not in Taiwan but in China, than the United States. But there are import savings by bringing in parts, and the savings on ocean freight is substantial. My costs are still about 5% higher. But I see that diminishing over the years. It’s no secret that labor costs in China are going up 10% or 15% a year, and people in China don’t want to work for factories anymore.

Feldman: What are labor costs in South Carolina?

Kamler: Minimum wage in South Carolina is $7.25, which many people say is too low. We start at $11 an hour, and our wage scale depends on skill levels earned.

Feldman: How many people do you employ there?

Kamler: 115 workers. The commitment we gave South Carolina for their incentives to kick in was 175 workers plus $4.3 million in terms of machinery. We got some incentives already with the gas line, which was between $500,000 and $700,000. I did a campaign ad for Governor Haley. There’s business politics and real politics. I don’t consider myself Democrat or Republican anymore. But Nikki Haley is pro-business and I’m pro-business.

Feldman: What will the total incentives be?

Kamler: They will refund for a period of five years, going back to day one, 4% of our payroll once we reach 175 workers. This covers salaried workers only, and not part-time workers.

 

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