Wednesday, July 20, 2016

Designed in America: Part Three

The Fall of Schwinn

In parts One and Two of the Designed in America series, I began looking into the factors that led to the shift of the American bicycle industry from "Made in America" to "Designed in America - Built in Asia." I mentioned that the various factors are so intertwined that it's almost impossible to talk about one without mentioning the others. In fact, one name that keeps coming up again and again in the discussion is the Schwinn Bicycle Company, as the fate of Schwinn in so many ways helped shape the fate of the American industry overall.

The friendly neighborhood Schwinn dealer was a major
part of the company image, and part of the brand's quality
reputation. (from the 1971 catalog)
For generations in America, the name Schwinn was synonymous with bicycles. The family business, founded in Chicago by German immigrant Ignaz Schwinn in 1895, grew to become the dominant manufacturer of bikes for the better part of a century. The company's share of the American market was so large that Schwinn had the power to influence the whole U.S. industry. For example, if Schwinn demanded higher quality components from its suppliers, they got them. And that improvement in quality parts and bikes led to improvements from Schwinn's competition as well. By the 1960s, Schwinn was also the preeminent "bike shop" bicycle. Whereas most other American manufacturers sold their bikes through large retailers, auto-parts stores, hardware stores, toy stores and the like, Schwinn began focusing on exclusive dealer contracts to keep better control over bicycle sales, assembly, service, and ultimately their image. As a result, Schwinn bikes had a well-earned reputation for quality.

That Schwinn no longer exists.

Exactly how Schwinn as a bicycle manufacturing giant collapsed is such a long, detailed yarn that one could write a book about it. In fact, there IS a book about it: No Hands: The Rise and Fall of the Schwinn Bicycle Company, An American Institution (1996) by Crown and Coleman. Unfortunately, that book is now out of print, but it is still recommended reading for anyone who can locate a copy.

Given the limits of a blog post, let me touch on some of the main points that keep within the context of this Designed in America series.

As already discussed in Part One, on the American Bike Boom, Schwinn was unable to keep up with the massive demand for bicycles in the early 1970s, which had essentially doubled in just a year or two. In order to meet that demand, the company quietly turned to Japanese manufacturers National Bicycle (Panasonic) and Bridgestone -- an action that helped give a major boost not only to those particular companies, but to the Japanese bicycle industry as a whole. The high demand for bicycles, combined with the credibility of the Schwinn name meant that bicycle buyers in America's heartland, who previously might have been skeptical of a Japanese bicycle, ended up buying them without question. The problem with the strategy was that it helped to sow the seeds of Schwinn's demise as a major manufacturer.

The Japanese-built 10-speeds were in many ways superior to Schwinn's own Chicago-built bikes. Yes, Schwinn had their top-of-the-line Paramount and the middle range Superior and Super Sport models -- all hand-built with chrome-moly tubing. But these only accounted for a small slice of the company's production. The mainstay Varsity and Continental models, flash-welded from thick-walled steel, were tanks - durable, but heavy, and equipped with components that were outclassed by the Shimano parts bolted onto the Japanese models.

Here is one of several times the word "complacency" is going to come into play. Schwinn dealers and probably even some in management had to have recognized that the Japanese-built models were more desirable than bikes like the venerable Varsity. So, did the company do anything to improve the American-built models to make them more competitive? Of course not. It was cheaper and easier to simply contract with their Japanese suppliers to make more bikes, and to offer models that moved higher and higher on the Schwinn lineup. In the mid-'70s, the Chicago-built Super Sport was dropped in favor of the Japanese-built LeTour. A Super LeTour was later added, and along with the imported Voyageur models eclipsed the Chicago-built Superior/Sports Tourer. Later, the Panasonic-built Volare notched in just below the top-tier Paramount, with a beautifully made lugged frame, Reynolds 531 tubing (just like the Paramount) and Shimano DuraAce components instead of Campagnolo. From top to bottom of the lineup, the imported bikes were outshining Schwinn's home-built models.

The Schwinn factory in the '40s (from the 1940 catalog)
The failure to invest in the Chicago factory was another problem. By the 1970s, Schwinn had a massive industrial complex that also happened to be on the verge of obsolescence. The company had not made a significant investment in new machinery in decades, and the plant was almost entirely set up to weld durable but heavy bicycles out of thick-walled seamed steel tubing, while the major market growth during and after the bike boom was in lightweight 10-speeds. Despite what Schwinn called them, "light weight" did not describe most of the company's 10-speed bikes. There were a number of calls within the company to update the factory -- and given the amount of money that had to be pouring in with the bike boom, there was an excellent opportunity to do it. But apart from the addition of a warehouse and some new rim making equipment, no such investment was made in Chicago.

A task force was convened in the mid-'70s to explore the idea for a new factory in Tulsa, Oklahoma. It was expected that the price tag would have run up to about $50 million. In order to get the money, the company could have easily acquired financing, or sold public stock shares, or some combination of these things, but the family-owned company refused to consider such options. They didn't want to cede even a small amount of control to outsiders. Not only that, but according to No Hands, there was always pressure from members of the Schwinn family, descendants and relatives of founder Ignaz, to increase dividends to the Ignaz Schwinn Trust Fund. Given the choice between updating the factory and equipment, or satisfying the family's demands, the family won out.

Labor difficulties became another issue. Even as the Chicago factory fell farther and farther behind the times, worker dissatisfaction started to increase. In 1980, the plant workers organized with the United Auto Workers, and near the end of that year, went on strike. That strike lasted about a 13 weeks and hastened the end of the line for the Chicago factory, which would close for good in 1983. Although it would be easy (for some) to blame the plant closing on the UAW or the labor strike, the fate of the Chicago plant was already written on the walls long before. The strike may have been the "straw that broke the camel's back" but that doesn't make all those other straws blameless. Bad decisions at the corporate level, management problems, and the long-term neglect of the factory all have to be considered.

When the labor difficulties first started brewing in Chicago, Schwinn got serious about opening a new factory, and in 1981 they opened a plant in Greenville, Mississippi. The prime attraction for the location was that it was far beyond the reach of organized labor unions, in a state that had no love for such things. Unfortunately, however, locating far from labor unions also meant being far from a trained industrial labor workforce. It also meant locating far from industrial centers, with their supporting industries, infrastructure, and supply lines. I mean, there's a reason that most of the American auto industry, along with the supporting steel, glass, and rubber industries, all centered around the Great Lakes region. And that much of the bicycle industry was located in and around the same region.

From the 1984 catalog. The Super LeTour was a mid-priced
bike built in the Greenville factory. 
The Greenville factory was set up to produce modern lightweight lugged steel frames, and in fact, production of some of the brand's mid-range bikes that had once been built in Japan, like the Super LeTour was moved to Greenville. Still, the new factory was plagued with problems almost from the beginning. It was far from airports and major highways. Getting materials and components to the plant was difficult. Few Chicago managers or engineers wanted to spend any more time in Mississippi than absolutely necessary. Worker turnover was high. Quality control suffered. I've read from several sources that the Greenville factory lost money every single year it operated, and it was closed after 10 years in 1991.

Another factor in the fall of Schwinn was a failure to keep up with trends. Here's another area where that word "complacency" comes into play. Whereas the company was setting the trends in earlier decades - with bikes like their balloon-tired, streamlined Aero Cycle of the '30s, the Black Phantom in the '50s, or the Sting-Ray in the '60s. By the 1970s, they were slow to even follow the trends.

The Scrambler (left) was no BMX bike. The Competition
Scrambler, released a couple years later, was closer to the
mark, but still far behind the competition. (1977)
When California kids started stripping down old Sting-Rays, cutting off anything unnecessary, adding gussets and reinforcements, and knobby dirt tires, the new sport of BMX was born. Companies like Redline and Diamond Back were quick to pounce with light and tough race-ready machines. Schwinn's lawyers were afraid the sport was too dangerous and the company waited on the sidelines. By the time they finally decided to launch their own BMX bike (the Scrambler, which was really just a Sting-Ray with knobby tires) they had already given up much of the market share and had to play catch-up. Fun fact: the weight of the original Scrambler was listed in the catalog at 38 pounds! The chrome-moly tubed Competition Scrambler, introduced in 1977 was a slightly less porky 32 lbs.

The Sidewinder, from the '82 catalog, was more
Varsity than mountain bike.
At the end of the '70s, when a bunch of Northern California hippies were bombing down Mt. Tamalpais on modified Schwinn Excelsiors, which they dubbed "klunkers," West Coast Schwinn dealers were clambering for the company to take notice. Schwinn sent some executives (many of whom probably didn't even ride bikes if they could avoid it) to check out the scene. They scoffed at the contraptions and flew back to Chicago. It would be several years before the company would offer something to compete, and just as with BMX, Schwinn's first attempts at the mountain bike, like the Sidewinder and the King Sting, really weren't in the same league (picture a Varsity with knobby tires and BMX handlebars). Their hesitance gave companies like Specialized and Diamondback a head start at grabbing a big part of the market, and once again, Schwinn was having to play catch-up. In both BMX and in mountain bikes, Schwinn did eventually offer some products that were truly top-notch, but those typically came too late. It's really an awful irony that both of these major industry trends actually got started by people tinkering with old Schwinn bikes, yet Schwinn was left behind on both of them.

Finally, Schwinn had developed an unhealthy practice of building up small suppliers into major competitors that would later crush them. First it was the Japanese. Then in the '80s, as the rising Yen was making Japanese imports less cost-efficient, the company turned to Taiwan to cut costs. There, Schwinn chose Giant, which at the time was a pretty small company - a giant in name only. Schwinn helped the small manufacturer by lending them a tremendous amount of engineering, development, and manufacturing expertise. More and more of Schwinn's lower-priced bikes were being manufactured by Giant, while the quality of the Taiwanese products continually improved. By the later part of the decade, Giant had truly become a giant, and the relationship with Schwinn began to sour. Schwinn tried to buy a share of the company, which it probably should have done before they built it up. By this time, the Taiwanese company was so big that they could more realistically have bought Schwinn. Giant started selling bikes under their own name -- bikes that sold for less, but were basically identical to the Schwinn-branded bikes that were also built by Giant. Did Giant start selling their own brand because the relationship was souring, or was it the other way around? That probably depends on who's telling the story.

It didn't help matters when Schwinn started up a new business relationship in mainland China. With a failed bid to buy a share of Giant, Schwinn turned to another small supplier, China Bicycle Company. Schwinn bought a minority share in CBC, and just like they had done with Giant, gave the company an infusion of engineering and manufacturing expertise, and helped to grow it into a powerhouse. Later, CBC began building bikes under contract for a number of other brands, acquired shareholder stakes in others, and helped undercut Schwinn in the bike shops, just as Giant had done a few years earlier.

Schwinn lost money and lost market share, and much of it at the hands of companies that they themselves had built up. The closing of their remaining factory in Greenville in 1991 meant that America's biggest bicycle manufacturer had truly become just an importer, sticking their name on somebody else's bikes.

Through a 4th generation combination of poor management, complacency, hubris, inflexibility, and more complacency, the well-known iconic brand filed for bankruptcy in 1992, just a couple of years before their centennial. Purchased by investment bankers and reorganized, the company got a second lease on life in the '90s, following the kind of "design it here and import it from there" business model perfected by companies like Specialized a decade earlier. During the '90s, Schwinn was sold and merged and re-sold, and in 2001 filed for bankruptcy again. Today, the brand is owned by a huge multinational conglomerate, along with a lot of other brands that really exist as nothing more than names on decals to be affixed to rather generic bikes made in China (probably by CBC) and mostly sold through big box merchandisers.

It's really a sad fate, not only for the iconic Schwinn brand, but for American bike manufacturing as a whole.

23 comments:

  1. Fantastic posts (this whole series)! It's great reads like these that keep me coming back for more.

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  2. Never saw a Schwinn in real life...reading you, it seems like they could not have competed with anyone really. And all my american friends who were radies at the time prefered Italian or french brands, who were better.

    Sure, i understand how you find it sad that schwinn do not realy exist anymore, but when you propose inferior quality, thats bound to happen. And i don't think the cyclist lost much with the demise of Schwinn...

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    1. Oh my, to believe there were never Schwinns that were the very best requires that one be completely unaware of Schwinns role in mid 20th century racing, especially professional track and 6 day racing.

      It was a long time ago and the company worked pretty hard to destroy itself, but when Professional Bike Racing was the biggest, highest paying professional sport in North America, Schwinn's best were second to none. If you've never seen one, find an opportunity to compare a Paramount(Road or Track) to all but the most exclusive European bike and you'll understand why they're thought so highly of. I prefer my fancy Brit bikes and Geurciotti's and Masi's etc. but my paramount doesn't have to be bashful around any of them...

      Spindizzy

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    2. It's probably hard for a non-North American to understand how desirable Schwinn bikes were, right up to the 1970s. I grew up in Canada watching TV ads for unattainable Schwinn bikes. (We had our own comparable brand, CCM, which ultimately suffered a similar fate to Schwinn.) When my family moved to the US in 1970, it meant I could finally get a Schwinn bike. I was over the moon. I studied the catalog for days and days before I finally picked a model that fit my family's budget -- a Deluxe Typhoon. It was a "middleweight", i.e. pretty heavy, but I loved it. There was nothing like having a Schwinn.

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    3. Respectfully, I'd submit that "better" is a relative term. If all you wanted to do was ride around your neighborhood with your family, then what type of bike do you want?
      When I was a boy, a Schwinn was a great choice, unless one decided to gamble with the unknown and send a princely sum of money to some mail-order outfit found at the back of a magazine. Otherwise, it was second-hand cruisers picked up from a garage sale. Aside from the Paramount, Schwinn never really made any pretense towards being actually meant for "racing", and the Paramount was a very nice bike considering it was a production bike meant for the masses.

      I (kind of) collect older Schwinns, and find them to be delightful "riders" that are easy and cheap to obtain/ maintain.

      "i don't think the cyclist lost much with the demise of Schwinn"- On one hand, I don't think that there was anything to lose at the end of Schwinn's life, they weren't filling any special role. Their bikes were OK, some were even really good, but nothing you couldn't easily get with Trek or Specialized or anybody else at the time. On the other hand, (and even though it was an agent of their demise) what would the cycling landscape look like without Schwinn pushing development of the Asian brands? I wonder if that had never happened, would we all still be riding French and Italian racing bikes with the Campy gear hung on 'em, and nothing new under the sun? I think the larger point isn't that the bikes weren't good, but that Schwinn became a poor decision-maker in a business sense.



      This is veering off-topic with Brook's post, sorry. Just can't help but to jump into a discussion of Schwinn...



      Wolf.





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    4. I should have thought that criticizing a brand that was often the first bike of many americans would result in a few replys...my goal was not to troll, i assure you. And thinking about it afterward i did see a Schwinn, a stingray. And i want to make a point clear: when i speak of inferior quality and not losing much, i speak of the last years of the brand, not all of its existence. Nor of the stickers put on Asian bikes. (and before someone take that badly, nothing against asian people or country either)

      @Fair enough, but i was talking about the 80's and 90's. This is when the people that i know used them. Most of us here are retrogrouches, we don't want the fastest, lightest thing on the market. Most buyers of race bikes do. And Schwinn did not offer that for years before its demise,nor it offered the best price on other type of bikes, and it did not offer the type of bike wanted by new riders, hence my sentence about its demise.

      Looking at the paramount more closely, a 531 tubed bike with Nervex lugs seems indeed a good start for a great bike. If one day i see one at reasonable price i will absolutely buy it. But here in Belgium this is not something i expect will happen.

      @Admin: But you did not have access to European brands...its easy to be very desirable when you are the only big dog in the market.
      On the other hand in Europe we had bikes from all over Europe, with distinct styles. Some were only interested in the iconic Italians brands, others by the French, others lusted after Dutch Gazelles etc...so your first sentence do ring true.

      @Wolf: A nice Reynolds or Columbus tubed bike with Campagnolo or Shimano parts on it? :D While what i just written is true, i understand your point, but for a "normal" family i would say: a safe, reliable, easy to handle bike at a competitive price point. At the point of their demise, they did not offer that if i am not mistaken.

      " I wonder if that had never happened, would we all still be riding French and Italian racing bikes with the Campy gear hung on 'em, and nothing new under the sun?"

      I could live with that to be honest. In fact, if you add dutch on the list( i just love my Gazelle), its a very appealing "what if" in my book. :D

      @All: I get it. Schwinn was part of your childhood. But from my point of view, they are nothing special. I didn't see them under my favorites pro riders, i didn't lust after them at the bikeshop or in magazines...that brand do not have the same appeal to me. Hence the harsher opinion on it probably.

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  3. I have a Greenville era Schwinn, A 1985 Traveler made on the 354 day of 1984, according to the stamping. Converted to a fixed gear, it's actually on of my favorite frames to ride. Simple lugged construction with 4130 butted tubing.

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  4. Perhaps "the cyclist" didn't lose much with the demise of Schwinn, but the real losers were hundreds of Schwinn dealers -many if not most were smaller family-operated franchises- their employees and families, not to even mention the factory labourers and their families.
    "Complacency""Hubris""Incompetence" are just a few adjectives that describe the Schwinn family's management style... it almost qualifies as malfeasance. (i had family members and friends who either were dealers or worked at Schwinn HQ.)

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    1. I understand you point of view, since their closure hit people that are close to you. Trust me, i am not completely cold to the individual hardship that an event like that cause to the families of the people working there.

      Bad management from third and fourth generation of family owned company is common. Hell, the "third generation curse" is a thing in economy.

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  5. This is a great post. Thanks for this, and for this series.

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  6. western manufacturers' hubris is not confined to the bicycle industry.

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  7. In addition to their failure--which you have described very well--to take the lead on trends, Schwinn's catalogues and advertising seemed to say, "Buy a Schwinn because your grandmother rode one." That is not the message teenagers, college students and twenty-somethings---who comprised most of the market for quality road, mountain and BMX bikes--wanted to hear.

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  8. Le Belge--Prior to the Bike Boom of the 1970s, Schwinn was really the only high-quality bike brand in the US. The only imported bikes available were the English (or English-style) three-speeds. I think Retrogrouch's point is that Schwinn could have capitalized on their reputation, so that people like your American friends would have bought Schwinns instead of European bikes.

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    1. I understand Brooks point, and i agree with it. Its an error made by a lot of industries who had near monopoly on their local market. When the trade between countries expanded, they often fell.

      I should know, my own region produced huge quantity of steel and textiles, and was hit very hard economically by their demise.

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  9. My first derailleur bike was a Schwinn Continental ($103.95 a very expensive bike for someone just out of the USMC) that I got in May of 1971 after a six week wait because of the "Bike Boom". While waiting for it I came across the 1st ed. of Eugene Sloane's "Complete Book of Bicycling". In the book I found that I could have purchased for the same ~$100 a Raleigh Record DL-73, Peugeot UO-8, or an Italian enter level bike that weight ~10 pounds less. I rode & enjoyed the Schwinn Continental until the autumn of 1971, did complete overhaul on it & got ~$80 trade-in) when I stepped up to a Raleigh International (a second from the top in the Raleigh line i.e.531 D.B. tubes Nervex lugged frame with all Campy except Weinmann center pull brakes) for $328 total because it was available and a Schwinn Paramount cost $350 and you would have to wait several months to get it. Still have the International (mostly original except stem/handlebar upgrade to TTT) but my age/health don't allow me to push that gearing anymore. Cycling has been a very memorable part of my life the last 45 years.

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    1. Ahh - the Raleigh International- such a pretty bike. You can always change gearing.

      Though this article primarily focused on Schwinn, and the series mostly deals with American mfg , the fate of Raleigh and a lot of other large European bike companies was eerily similar to Schwinn's. Different words, same tune.

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  10. Im in Australia,50yrs old and i remember Schwinn being the dream bike for a farmboy to ride on gravel,sand,lawn and concrete to school and with mates on adventures.I never got one ut a school friend got one in 1972 and he became the coolest kid in the area. We were 8years old back then , and it was a heavy tank but it felt safe, sturdy, rugged and was cooler than cool. weekends and school in 1972. I been into Bmx early 80s with a chrome moly alloy Mongoose, plastic 5 spoke Tuffs rims ,fixed, with stunt pegs doubling as wheel nuts and road commuter carbon 29inch Giant these days.I've loved following this post. Which all leads me to ask, has Schwinn been reborn as a friend has an 2008 Schwinn Madison "fixie".
    From seat post to bottom brkt 600mm,Prologo Nago seat,Vittoria IKE carbon forks,MTB Pro carbon composite handlebars,Gebhardt 135mm drive ring and frame number SNIT7103154FES5L04 or just a rebadged bicycle that's non-Yankee manufactured?

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    1. There is still a Schwinn brand - but it's now just one of many brands owned by a huge conglomerate (it's changed hands so many times, I'm not sure who owns it anymore. I think it might be Dorel Industries), and they're all made in China, and just have Schwinn stickers put on them. The big American auto makers, like Ford and GM, would often make the same basic car for multiple divisions, with only minor cosmetic differences between them. A Chevy Caprice was pretty much the same car as a Pontiac Bonneville, and an Oldsmobile 88. The practice was called "Badge Engineering." With these conglomerate owned brands, it might properly be called "sticker engineering." I do understand that there are 2 "levels" of Schwinn - one that is sold through mass merchandisers, and a higher-level that is sold through the website, or through some bike shops. The Madison might be one of the higher-level bikes.

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  11. Thanks very much for this informative and interesting series. I really did enjoy reading the series, and do enjoy your blog as well.

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    1. Thanks, Jay -- there's one more part coming.

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  12. Another fascinating piece. I think people who grew up in other parts of the world might not get it, but back in the '70s, Schwinn was it. You could get a bike at Sears or Penney's or Western Auto, but if you wanted something a little better, you went to the Schwinn store -- and there were no other choices, at least where I grew up, in Spokane, Wash. As a schoolkid in the early '70s, reading the Schwinn ads in "Boy's Life," and drooling over the bikes my friends got as presents every Christmas, I was sure I wanted a Schwinn Varsity or Continental and kept bugging my parents for one. Instead I rode mainly cheap department-store bikes or things picked up at garage sales, because, you know, I was a kid. By the time I could actually contemplate a bike costing $100 or more, in the late '70s, I was becoming aware that perhaps the Varsity wasn't the best bike out there -- it did seem pretty heavy. At high school graduation in 1980, my dad took me down to the local Schwinn store and told me to pick something out. There was a Paramount hanging on the wall, priced at an impossible $700. The salesman told me they'd just stopped making the Paramount, but they still had a couple in stock, and the boss might be willing to deal. That wasn't my price range, I said. I probably made a few disparaging remarks about the Varsity -- "everybody rides them, but they're so heavy!" And he explained that while they were very popular, they were sort of a starter bike. And since I obviously knew something about bikes, he said Schwinn was importing some interesting bikes from Japan, for a little more money -- they had a few, if I wanted to look. Then he let me in on something. Really, if I wanted the best value in a lighter-weight bike, the store had started to carry another line, from Japan, called Centurion. Derailleurs as good as Campagnolo, build quality as good as anything Schwinn was importing, and way, way lighter than the Varsity. But priced very competitively. I rode out of there with the Centurion Super LeMans 12. It cost $230, and it still serves me now -- I recognize today it was an above-average high-tensile steel bike with lugged construction, not really special but still superior in many ways to anything else I would have gotten at that price. My friends were impressed with how light it seemed. (How that makes me laugh today!) And I think this little snapshot of the bike world in 1980 helps illustrate the story behind this piece. When you thought about bikes back then, the first word that popped into your mind was "Schwinn," and the place you went to buy a bike was the local Schwinn store. But even a guy still in high school knew there were better bikes than the Varsity. Looking back on it, sure, I wish I'd had the money for the Paramount on the wall, but I think the best value in the shop was the lightweight Centurion Pro Tour they had for $330. Forget all the exotic European bikes they were making back then -- you just didn't see them in a place like Spokane. This was what the bike market was really like.

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    1. I think your memory of that time would be similar to what a lot of us remember from that time, all over America. We actually had 2 Schwinn dealers near me -- we lived about half-way between them. One was an older shop, Schwinn-only. The other was a little newer and carried Schwinn and Panasonic. The ironic thing there was that the Panasonics and the imported Schwinns were basically the same, made in the same factory - but the Panasonics were cheaper.

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