By Kannaki Deka
(Reuters) – Exercise equipment maker Peloton Interactive said on Tuesday it will cease all in-house production of its bikes and treadmills and move manufacturing to partners in an effort to simplify its operations and reduce costs.
The New York-based firm will cut around 570 jobs at its Tonic Fitness Technology unit, a Taiwan-based firm bought by Peloton in 2019, according to a source familiar with the matter.
Peloton did not immediately respond to a request for comment. The company will also be suspending operations at the facility through the remainder of 2022, it said in a statement earlier on Tuesday.
Shares of Peloton, which have lost about three-fourths of their value this year, were up 2.8% at $9.17 in afternoon trade.
The company, under new chief executive Barry McCarthy, has moved to cut costs and shore up capital this year after demand for its popular home equipment dropped as people went back to working out at gyms.
He has also brought in former Amazon.com Inc executive, Liz Coddington, as Peloton’s new chief financial officer.
McCarthy, a former Netflix Inc executive, has now moved to broaden Peloton’s alliance with Taiwan-based Rexon Industrial Corp, which will now become the primary manufacturer of the hardware for Peloton’s product lines.
“We believe that this along with other initiatives will enable us to continue reducing the cash burden on the business and increase our flexibility,” McCarthy said.
Once a pandemic darling, Peloton has seen its fortunes plummet following easing COVID restrictions and soaring costs that have led to bloated inventories and subscription cancellations.
McCarthy warned in May the company was “thinly capitalized” and that unsold inventory coupled with mounting costs pushed it into a big quarterly loss.
However, a five-year $750 million debt agreement with J.P. Morgan and Goldman Sachs soothed some investor concerns.
(Reporting by Kannaki Deka and additional reporting by Aishwarya Nair in Bengaluru; Editing by Anil D’Silva, Shinjini Ganguli and Shailesh Kuber)
