Peloton to outsource all manufacturing as part of its turnaround

Peloton said Tuesday that it plans to exit all of its in-house manufacturing and instead will expand its current relationship with Taiwanese manufacturer Rexon Industrial, in a bid to turn the money-losing business around.

Peloton Chief Executive Officer Barry McCarthy said this is a step for the company to simplify its supply chain and fix its cost structure, which is a top priority.

“We believe that this along with other initiatives will enable us to continue reducing the cash burden on the business and increase our flexibility,” McCarty said in a statement.

Peloton shares fell around 2% in premarket trading on the news.

Peloton said that Rexon is now set to become the primary manufacturer Peloton’s Bike and Tread machines. The company is also going to be suspending operations at its Tonic Fitness facility through the remainder of 2022. Peloton acquired Tonic in October of 2019.

McCarthy, a former Spotify and Netflix executive, was named CEO of Peloton in early February, replacing founder John Foley. He took over as the company’s expenses spiraled out of control and demand for its connected fitness equipment waned.

At that time of the C-suite shakeup, Peloton announced it was slashing roughly $800 million in annual costs. That included cutting 2,800 jobs, or about 20% of corporate positions.

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