At SRAM, we believe in the power of bicycles. Our mission is to create components and experiences that inspire consumers and expand the potential of cycling. We know that you too share this passion, and that cycling for you is more that just a hobby – but a lifestyle.
In October 2013 at an OEM ride camp in Germany we discovered a quality issue with our new road hydraulic brakes. We analyzed the root cause and determined that we had a bad part that was generated from an unapproved process change by one of our part suppliers. This affected about 4,000 systems of the 38,000 systems that we had manufactured to that point. We were able to track the date range of the process change and put a fence around most of the product before it got to consumers.
Last weekend a bigger alarm went off. There were a number of reports of brake failures at cyclocross races in sub freezing conditions. We investigated these failures and determined that the seal material we were using for the brake lever lost its performance characteristics in the extreme cold. We were able to duplicate the failure mode through testing.
On Friday, December 13, 2013 we decided to quickly get notice out to the cyclocross community and beyond to stop using the product and to issue a full recall. Safety was our primary concern. We are working alongside the US CPSC and other global product safety organization to register this as an official recall, and to abide by local laws and regulations.
The recall now totals all 38,000 systems (the total production run) and at two systems per bike potentially affects 19,000 bikes less those systems not yet assembled. Of these 19,000 bikes our estimate is that there are 5,000 bikes in the hands of consumers. Hopefully this number comes down with more diligence. The balance of the bikes or systems are in warehouses or at retailers yet to be sold.
While the numbers are limited in the grand scheme, these are high profile bikes at high profile dealers. This is a particularly tough recall because many consumers bought these bikes with the hydraulic as a primary feature and unlike say a wheel recall, they just can’t pop the quick release, stick another set of wheels on the bike and get back at it. Their investment in their new bike and their sport is essentially out of commission until we get them a replacement. The replacement plan may first be a mechanical disc followed by improved hydraulics. This scenario is extremely disruptive to cyclists, dealers and bike brands, and of course the new installs will have their own compatibility frustrations and potential for mistakes.
The disruption will be hardest felt at a personal level by those cyclists and dealers who purchased our components because of our technology and our brand promise. They counted on us, and we have just disappointed them, shaken their confidence, and disrupted their cycling life or business. We have chosen to be a high performance product development company. This choice carries risk, and we have just found a very painful edge.
Bike brands, OEM factories, dealers and consumers are going to be angry and dismayed at SRAM.
We are going to continue to analyze failure modes and we will develop a redesign. At this point, we don’t know when this will be complete.
I am leading a senior team meeting daily to complete a recovery and replacement plan for the channel and consumers. Because we don’t have immediate replacement product or know when we might be back in production with hydro, this will especially disruptive.
The cost will be high. There will also need to be compensation throughout the channel for the disruption. We don’t yet know how this will play out. We need to go over the top here in order to preserve our brand and our relationships.
We are going to stay focused on improving our quality and as part of our strategy we will make operational decisions prioritizing product quality and launch quality. We have come a long way during the last several years and we have further to travel.
For the next few weeks on Tuesday mornings Chicago time, we will post a technical and customer update about the recall on our website. I would encourage everyone to review this report so that we can all stay current and on the same page. There may be more frequent updates if helpful or needed.
On behalf of the 2,700+ employees at SRAM, I am truly sorry for this situation and we will do everything we can to regain your trust, business and respect.