Unfazed by Tread Recalls, Peloton to Build $513 Million U.S. Factory

Unfazed by Tread Recalls, Peloton to Build $513 Million U.S. Factory

After investing $US100 ($128) million to ship delayed products by air, Peloton announced today that it’s putting down another $US400 ($513) million to build its first U.S.-based factory in Troy Township, Ohio.

Construction on the factory, which will be called Peloton Output Park, is expected to start later this summer. Peloton Output Park is described in a company press release as a “state-of-the-art factory” and will purportedly feature the “latest in industrial technology and automation,” as well as renewable energy sources. At more than 200 acres in size and more than 1 million square feet of “manufacturing, office, and amenities space,” the factory is on track to be massive. Peloton views the facility as more than a factory: The company also stated it plans to include a fitness centre, a team lounge for collaboration, and an on-site showroom. The investment is expected to create roughly 2,000 jobs in the area, and Peloton fans will also be able to take tours of the facility.

“While we will continue to invest in our Asian manufacturing footprint as well as our existing facilities in the U.S. via our Precor sites, the new Peloton Output Park gives us a massive strategic lever to make sure we have capacity, quality, and economies of scale in our bike and tread product lines, to support our continued growth for years and years to come,” CEO John Foley said in a statement.

This isn’t surprising if you’ve been paying attention to Peloton’s recent money moves. At the end of last year, the company bought commercial fitness equipment maker Precor for a whopping $US420 ($539) million, thereby acquiring 58,064 sq km of U.S. manufacturing space. This Peloton Output Park. news builds upon that acquisition by shoring up Peloton’s supply chain, which was majorly hit by the covid-19 pandemic. Despite seeing record growth in 2020 and beefing up its manufacturing capabilities, Peloton upset some new customers with months-long delays and constantly rescheduled delivery dates.

As for what products Peloton plans to produce at its new factory, the press release says it expects to produce the Peloton Bike, Bike+ and Peloton Tread beginning in 2023. A noticeable omission is the Peloton Tread+, which was voluntarily recalled earlier this month after numerous reports of injuries and in one case, the death of a young child. The more affordable Tread was also recalled at the same time, as there had been reports in Canada and the UK of its display detaching due to faulty screws. In an earnings call following the recalls, Foley noted that fixing the Tread could potentially be as simple as replacing the screws, with the device “hopefully” relaunching sometime in July. (The Tread was initially supposed to go on sale in the U.S. this week.) It appears Peloton feels relatively confident that the Tread could make a quick comeback, considering it included the device in its plans for the new factory. By the same token, leaving out the Tread+ could be a sign that the company isn’t quite so sure about the more premium treadmill.

In any case, it doesn’t appear the recalls have impacted Peloton’s overarching plans in the home fitness space. Between dropping $US100 ($128) million to ship products by air, the $US420 ($539) million Precor deal, and this new factory, Peloton has invested at least $US920 ($1,180) million in the last six months to ramp up U.S. production. To be fair, Peloton hasn’t gotten any indication it should act otherwise. Several loyal customers told Insider that they had no plans of returning the recalled treadmills, and its connected fitness subscriptions jumped up 135% year-over-year to 2.08 million.

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