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Old 08-05-06, 11:50 AM
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Eugene co-op shifts gears
The maker of bicycles and bike trailers incorporates
By Sherri Buri McDonald
The Register-Guard
Published: Saturday, August 5, 2006

In a final attempt to save its Eugene bicycle manufacturing business, Burley Design recently ended its 28-year run as a worker-owned cooperative and joined the rank and file of corporate America.

On June 23, a financially struggling Burley, best known for its sporty blue and yellow bike trailers, filed papers with the state converting the business from a co-op to a privately held corporation.

Co-ops are characterized by shared ownership, the sharing of profits or losses, and democratic decision-making, rather than the hierarchical decision-making of traditional for-profit corporations.

On June 26, Burley's board of directors sent a letter to shareholders, which was obtained by The Register-Guard. It said the changes "represent nothing less than a last-ditch attempt to save Burley - the jobs it provides for members, the contribution it makes to the community, and the excellence in product design and manufacturing that it represents."

After three years of losses, including a $1.5 million loss last year, the board of directors warned that "without dramatic changes, by early fall we fear we will have to close Burley's doors - forever."

At stake in Burley's fight for survival are the jobs of about 50 worker-owners, plus the jobs of 60 employees, who have no ownership interest, and nearly $2 million in "retained dividends" invested by the co-op's present and former members.

But as one former member, who asked not to be named, put it: "We've put far more than money into that place."

All of the half-dozen Burley shareholders interviewed for this story requested anonymity because the co-op's bylaws forbid members from disclosing confidential information about Burley. Several also said they didn't want to be blamed for jeopardizing a potential sale of the company.

The clock is ticking for the heavily indebted Burley to line up more cash from lenders or investors. The cooperative structure was impeding those efforts, the board of directors said in its letter to shareholders. "Neither banks nor investors are willing to take a risk on a company with a cooperative structure," according to the letter.

In its most profitable years in the mid-1990s, however, Burley turned down buyout offers.

Burley officials, who were busy this week preparing the company's 2007 catalog, did not respond to requests to be interviewed for this story.

But in an e-mail, Burley marketing manager Cary Lieberman said the company remains worker-owned in the same proportion as under the cooperative, and the same management team and board of directors will guide the company.

"We feel strongly that this transition is a positive one in which we will be able to better serve the needs of our customers and employees while at the same time remaining a viable and thriving company in Eugene," Lieberman wrote.

"We are excited about the direction Burley Design is headed. We have a solid product line-up for 2007 that will be revealed at the end of this month in Friedrichshafen, Germany, and we are confident that Burley will continue to manufacture and distribute products from Eugene while supporting local jobs and families."

The decision by a majority of members to ditch the co-op structure marks the end of an era for Burley, which had been a democratically run co-op since 1978, when founders Beverly Anderson and Alan Scholz sold the company to workers. And it had been held up nationally as a model for other co-ops.

With Burley's conversion to a more traditional business structure, the ranks of worker-owned cooperatives in Eugene - home to at least a dozen three decades ago - now has dwindled to a handful.

That's a loss to the broader business community, said Bruce Creps, a former Burley general manager, who worked at the co-op from 1982 to 1999. Now the owner of a small specialty woods business on Lopez Island, Wash., Creps helped lead Burley from a microenterprise to an international business.

"The alternative businesses offered a different way to organize our economic life," he said. "To have one go by the wayside tends to reduce our imagination and our options of how we do business."

It has been a messy business transforming Burley Design Cooperative into Burley Design Inc. The company recently created 10 different classes...
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