What Does Parlee Cycles Filing for Chapter 11 Protection Mean?

Parlee Cycles manufactures some of the finest carbon fiber road bike frames in existence.  They filed for Chapter 11 protection last week.   With it came media stories and rider inquiries about what the filing means for the industry and what it means for Parlee.

As one of the longest serving Parlee dealers, we have a close affiliation with the brand and its long-term staff.  Since the announcement, we have learned more about what the filing means, why it is happening, and the plan for the future.  What is apparent is that some of the media coverage has not fully represented reality.  Likewise, there is a lot to the story that has yet to be written; the future hasn’t happened yet.

The following is what we know as of today and how we see things for Parlee and the bike industry:

Filing Chapter 11 Doesn’t Mean They are Liquidating or Going Out of Business

While filing for bankruptcy shows the stress that a business is experiencing and the necessity to proceed differently than it has historically, it does not mean that a company is done.  Chapter 11 bankruptcy is not a liquidation bankruptcy (Chapter 7).  In Parlee‘s case, the filing provides a period of time of protection so that they can reorganize and proceed under a new strategy.  Their COO and ownership maintains complete control of the company through the proceedings.   They are implementing a new strategy to help them navigate the future successfully.

Likewise, comments in some media articles about Parlee needing to be bought out or become a partnership to survive are unsubstantiated.  For example, Parlee does not feel a buyout or partnership is the only path to a successful future for them.

Recentering & Empowering the Core Group

One thing that has not received much attention in coverage of Parlee’s filing is the quality and experience of their workforce.  The veteran staff are core to the reorganization’ they all remain and they know where mistakes were made. For example, they know that inadequate experience and non-ideal training of new hires led to decisions during the pandemic that contributed to the filing.   They are adjusting accordingly to counteract this reality and make sure it does not happen again.

The crew at Parlee today are passionate, know each other and the industry well, and believe in the potential of the future.   Many feel like a release has happened with the initial reorganization and they are finally in a position to deal with underlying issues head-on.

Parlee’s Current Inventory Situation

Related to Parlee’s short-term financial situation, they are not filing Chapter 11 because they are out of product to sell.  In fact, the current situation is created more by the opposite.  At the moment, they have more component groups ready to ship than at any other time in their history.   Many companies are trying to manage going from having high-demand and no inventory in-stock to warehousing more inventory than they have seen in years as demand simultaneously normalizes.  These are not just Parlee issues.  These are big challenges that the entire industry is attempting to restructure around.

What are Parlee’s current fulfillment times?   Delivery of new and existing orders right now is better than it has been in years.  Over the past four months, we have seen Parlee’s fulfillment times get better and better.  They have recently received deep inventory of components and have strong stock in their most popular frames (RZ7 and Chebacco).   When it comes to their custom frames that are built-by-hand in Massachusetts, they are back to pre-pandemic lead times.   Nothing involving the bankruptcy filing influences their production capabilities or staffing.

The industry has been struggling with massive changes in demand and supply for three years now.  There are years ahead before true stability and consistency are restored.  There will continue to be collateral damage and adjustments in the interim.  Parlee is a smaller builder who competed directly with heavily financed goliaths during the pandemic for product and factory time.  They, like everyone, got a bit beat up at times in recent years.  However, they are still standing and things are improving and starting to settle.

Parlee’s Commitment to Fulfilling Obligations & Customer Service

Parlee has made it clear that they are 100% focused on fulfilling their obligations to vendors, dealers and riders through the reorganization.   Part of reorganizing is to help them serve dealers and riders better moving forward.  How?  Their plan is to earn trust one bike and one rider at a time by rededicating to excellence in service.  While the market will have to allow them the chance to do this, they have the skilled staff and experience needed to make this happen.  Based on the level of communication they provided during the most strained time the bike industry has ever seen (the C-19 pandemic), there is little doubt to us that they will do everything they can to earn this trust.  Parlee remains one of the most responsive and service oriented companies we work with.

While no one is happy that Parlee has filed for bankruptcy, we are glad to see them take ownership of the situation and work towards productive and open resolution.  They are a resilient, experienced and smart group.  Their future is not written yet.  We plan on doing what we can to help them navigate things successfully on their planned path.  Their bikes are too good to not take this approach.

What About Parlee’s Warranty?

It is important to recognize that the name on the side of bike is only one of many that make up the whole.  Regardless of the frame maker, most components on a bike are made by someone else.   Individual parts in the bike industry are covered by the warranty from the manufacturer of that part.

If Parlee closed shop, there would be risk that there would no longer be a warranty on their frame.   However, this is true with any company.  You don’t have to file for bankruptcy to go out of business in short order.  There are a number of companies in the bike industry who are navigating some pretty turbulent financial waters right now.  Others will likely file for protection moving forward.  No one knows for sure who that will be and when.  Based on this, the long-term warranty status of any bike is a bit of a moving target.

One way that Parlee has earned our support through the years is by having a low rate of warranty claims.   While every company has some warranty claims, there are few companies where the statistical risk of a warranty claim is lower for you as a rider than Parlee.  With few exceptions, the small number of claims we have seen through the years involved a custom finish related issue that was caught at assembly.

Our Conclusions

In the case of Parlee, we remain proud to continue to offer and recommend them.  Parlee heads into the spring in a strong inventory situation.  They are balancing their ballasts to fight the turbulent seas in the bike industry.  If you are interested in one of the most committed and best made carbon road bicycles we know, Parlee remains deserving of consideration.

When it comes to the big picture, the bike industry continues to be challenged.   We are all navigating new and very different waters than the ones we were in not that long ago.  Parlee’s filing for Chapter 11 protection is a reflection on the industry’s situation in general as much as Parlee’s in particular.  The industry has significant issues to deal with and this is just one example.