Life Fitness parent Brunswick Corp. is seeking damages of more than $3.9 million from LeMond Fitness to compensate for hundreds of complaints it says it has received about allegedly broken and problematic RevMaster Pro indoor cycles.
In the lawsuit filed with the Cook County (Illinois) Circuit Court May 27 Life Fitness said it also is seeking interest, fees and all legal costs and a court declaration that the quality issues plaguing the bikes entitles Life Fitness to an early termination of its distribution agreement with LeMond.
Life Fitness did void its exclusive agreement with LeMond, per the court documents, on the same day it filed its lawsuit that claims breach of contract. Problems began to surface in late 2007, the court filing stated, and complaints by the hundreds allegedly began pouring into Life Fitness as of early 2008 related to broken or failed handlebars, seats, seat clamps, CAM clamps, pedals, shrouds, seat height adjustments and seat frames as well as loud noises during cranking.
“The cumulative effect of the quality problems caused Life Fitness’ customers to refuse to purchase – and in many cases, insist upon returning – the RevMaster,” court papers stated. “In short, the RevMaster has developed the reputation of being a ‘lemon’ and is difficult, if not impossible, to sell.”
Life Fitness has declined to comment on the matter, and LeMond Fitness President John Post responded to phone and email requests for comment with an email to SNEWS® stating only, "I was both surprised and shocked given the seven years of working with Life Fitness, and we are trying to understand what the actual issue/complaint is."
LeMond Fitness, which originally was the group-cycling division of StairMaster, incorporated as a stand-alone company in May 2002 after it was split out of the bankruptcy sale of StairMaster to what is now Nautilus (then-Direct Focus) in January 2002 since that company already gained group cycling when it acquired Schwinn in Schwinn’s earlier bankruptcy. (Click here to see a June 6, 2002, SNEWS® story, “LeMond Fitness revs up.”)
LeMond Fitness, backed by past Tour de France winner Greg LeMond as chairman, then followed up by inking an agreement in June 2002 with Life Fitness for that company to be the exclusive distributor of the LeMond RevMaster group cycling bike and programs in the commercial markets in North America and certain international markets. (Click here to see a June 27, 2002, SNEWS story, “LeMond Fitness inks deal.”)
The agreement was revised to add the new Revmaster in September 2007, the court papers stated. According to the court documents, “Within months of executing the distribution agreement and the first shipment of new product,… the RevMaster bikes began to exhibit various quality problems. Beginning with customer complaints of broken handlebars on European models in early 2008, over the next year Life Fitness was flooded with hundreds of customer complaints about various quality and performance issues with the Revmaster.”
In the suit, Life Fitness seeks reimbursement of incurred expenses in warranty and service work, any future expenses for warranty and service work, and payment for Life Fitness’ anticipated margin on sales of RevMasters, which it states were to be $3.68 million.
To date, the court documents stated that Life Fitness has spent more than $238,803 on parts and labor attempting to fix problems.
SNEWS® View: SNEWS® View: LeMond Fitness was already taking a sharp pencil to its P&L from the likely loss of $702,700 in the 2008 bankruptcy by Fitness Holdings International. Losing its sales with Life Fitness and related international sales, and facing a possible court battle and the costs involved could mean really putting the pencil-sharpener into overdrive – at least while the company regroups, which we don't doubt it will. According to the court papers, Life Fitness had agreed to a minimum purchase by September 2008 of 5,500 bikes with a total of 14,000 a year later and a total of 23,000 by September 2010. That’s not small change and could mean the need for LeMond to replace seven digits of sales. Sure, LeMond has the reputation to be able to do that but the economic conditions won't make it a quick regroup. And, of course, Life Fitness is not the company’s only source of sales (it has sold more than 100,000 indoor cycles since its inception), but it’s still a big dent that needs to be banged out.
In addition, Life Fitness is now left at a huge competitive disadvantage without an indoor cycle or program to sell in its package deals to clubs. Since the court papers noted the company had turned down other opportunities to distribute bikes by others, we expect the company will waste no time in attempting to nail down at least some stop-gap partnership with another indoor cycle company. Especially for club deals, having an indoor cycle could make or break a sale since at least a third of clubs offer a cycling program and those bikes also need replacing every few years. Which makes us wonder…could Life Fitness be making a move to weaken LeMond enough to gain acquisition leverage so it can gain its own indoor cycling category? Of course, like other fitness manufacturers in today’s times, Life Fitness has seen revenues and profits fall precipitously and it simply can’t afford additional losses – or guaranteed bike sales it may not be able to manage. We will expect further announcements quickly as the case develops.