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Taiwan bike makers bitten by Schwinn/GT bankruptcy

Taiwan contract bicycle maker Merida said on Friday it would slash its 2001 pretax profit forecasts by 43 percent due to bankruptcy filings by a major client, Schwinn/GT of the United States.

Merida, one of Taiwan's three largest bicycle manufacturers, cut its 2001 pretax profit forecast to T$242.56 million ($6.93 million) from T$423.31 million, the company said in a statement to the Taiwan Stock Exchange. 

Merida said it estimated it would lose $4.02 million in money owed to the Taiwan parent firm and its Hong Kong unit, and would take legal measures to reclaim as much as possible. 

``Our OEM (orginal equipment manufacturing) client Schwinn/GT has applied for chapter 11 protection in U.S. bankruptcy court, which will affect our company's accounts receivable, increase losses from bad debt and reduce orders,'' Merida said. 

Schwinn/GT said on Monday a bankruptcy filing was necessary for the sale of its cycling unit to bicycle and scooter maker Huffy Corp (NYSE:HUF - news). 

Taiwan's largest outsourced bicycle maker, Giant Manufacturing also said on Friday Schwinn/GT owed Giant accounts receivable of $883,000 and estimated it would lose T$30.42 million. 

Giant said in a statement that repeated negotiations to reclaim the money had been rebuffed. 

On Friday, Merida shares fell T$0.90, the seven percent daily trading limit, to T$12.00, while Giant fell T$1.40 or 3.85 percent to T$35.00. The broad TAIEX (^TWII - news) share index rose 0.71 percent. 

Merida and Giant, considered China plays in Taiwan due to major manufacturing operations on the mainland, have also been hit by profit-taking from a share price rise after Beijing's successful bid to host the 2008 Olympic Games. 

source: Yahoo! Finance. 20.07.2001