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Key supplier to Portland's bike share vendor files for bankruptcy (updated)

Posted by Jonathan Maus (Publisher/Editor) on January 21st, 2014 at 1:14 pm

City of Portland bike sharing demonstration-16
Montreal-based Public Bicycle System Company (PBSC), the makers of the Bixi bike share system that has been deployed throughout North America and a key supplier of equipment and technology for Portland bike share, has filed for bankruptcy.
(Photo by J. Maus/BikePortland)

More big — and bad — news from Montreal's Public Bicycle System Company (PBSC, a.k.a. Bixi) was announced yesterday. The company that supplies the hardware and software for America's largest bike share systems has filed for bankruptcy protection to help restructure $38 million in debt.

In other words, in order to continue operating, the company has been granted the right to ignore some of its debts and negotiate with its creditors on any other available ways to compensate them. Though this doesn't seem likely to directly affect Portland's coming bicycle share system launch (and may actually improve things, since a bankruptcy-protected Bixi could be more financially stable) it is big news within the fast-growing bike sharing industry.

Given our plans to expand current systems and launch new systems this year, we’re in constant communication with both PBSC as well as its suppliers to ensure we can do so successfully.
— Alta Bicycle Share

Bixi supplies the rental station kiosks, software, and other technologies for bike share systems in New York City, Chicago, Washington D.C., and others. The company was created in 2007 by Montreal's parking authority and it helped set off a tidal wave of bike share systems in North America. But for several years Bixi has been beset by financial and legal problems that seem to have finally caught up with them.

Bixi is also the equipment and technology supplier to Alta Bicycle Share, the local company that is currently working to launch Portland's bike share system.

In an email Tuesday, Alta vice president Mia Birk wrote that Portland Bike Share is still planning on using Bixi equipment.

"We still get to use the award-winning, top-of-class system," Birk wrote. "Our 2014 system will launch as planned."

On their blog yesterday, Alta wrote that its systems will "continue to operate without interruption" and that "given our plans to expand current systems and launch new systems this year, we’re in constant communication with both PBSC as well as its suppliers to ensure we can do so successfully."

As they have in the past when Bixi's software delays made headlines in New York City, Alta continues to say that the company's business trouble won't impact the delivery of Portland's system. That being said, Andy Riga of the Montreal Gazette reports that Alta is asking Bixi for $11 million in damages. Those damages are likely related to the delays by Bixi to deliver software that runs the bike share systems.

This bankruptcy of a key supplier comes as the Portland Bureau of Transportation and Alta Bicycle Share are nearing a public announcement of a private sponsorship deal that will fund operations of Portland bike share. While this news is likely to bring out even more skepticism from bike share detractors, Bixi's problems are more a function of poor business practices and less a sign that bike share itself is a risky proposition.

Doubts about Bixi's business plan surfaced early on. The idea initially pushed by the City of Montreal (who made a promise similar to Portland that the system would cost taxpayers nothing) was to develop the premier bike share equipment and technology in the world (which they did) and then finance the operation of their system by selling copies of the Bixi system to other cities. On the surface, the plan worked. Cities all over the world flocked to Bixi's system and there are now over 37,000 Bixi bikes in operation. However, the business arrangement that mixed government, politics and private business — was fraught with risk from the beginning.

As Canadian magazine Maclean's wrote last month, Montreal's inspector general concluded in 2011 that "Bixi was essentially conceived on a whim: 'No one interviewed could provide any feasibility studies, business plans, risk analysis or cost-advantage studies.'"

That's not the case with Bixi clients such as Portland Bicycle Share itself. And the continued operation of Bixi's biggest competitor, the Trek-backed B-Cycle, suggests there's nothing inherently unprofitable about bike-share equipment manufacturing.

But Bixi's problems as a company will need to be resolved somehow if it's going to keep serving clients, including Alta and Portland Bicycle Share.

As for Alta itself, a report on Forbes this morning hints at how they could possibly be in an even more dominant position after all the dust settles. "What happens to cities with Bixi bike sharing programs?" writes Forbes. (That'd be Montreal, Toronto and Ottawa.) "They could find other operators, such as Alta Bike Share, or run the systems themselves."

News Editor Michael Andersen contributed to this story.

— For more background on this story, read the excellent coverage by Andy Riga in the Montreal Gazette.

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Comments
  • scott January 21, 2014 at 1:18 pm

    38 million is not a large enough debt for me to see a better company coming out of this. They will be sold or dissolved soon.

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  • John Liu January 21, 2014 at 2:36 pm

    The brief reading I've done suggests that Bixi's financial problems probably come in large part from its role in operating the Montreal bikeshare system.

    Bixi aparently owes the city of Montreal $38MM for loans/credit lines provided by the city. The Bixi/Montreal business model was to use hoped-for profits from Bixi's international business to fund the city of Montreal's own bikeshare system. In other words, Montreal did not arrange to fully fund its own bikeshare system with sponsorship, user fees, or other sources, like other bikeshare systems that use Bixi as a supplier have done.

    The "international business of Bixi" is sales of software, systems and hardware (stations, bikes) and in some cases services (operating some other cities' bikeshare systems). It isn't clear to me if Bixi's international business is profitable, separate from the Montreal bikeshare system. But anyway it has not been profitable "enough" to fund the operations of Montreal's bikeshare system. More recently, Bixi's international business ran into problems with major customers like New York, Chicago, and Alta itself, who appear to have withheld payments of $5-6MM and/or sought damages of $11MM from Bixi, for late software updates and other claims.

    The city of Montreal is now talking about taking the operation of its own bikeshare system away from Bixi. The city says that will cost about $1.5-2.0MM/yr for their 5,000 bike system, which is presumably net of user fees and whatever sponsorship/other revenue the Montreal bikeshare system has.

    It will be interesting to see what happens, and some delays to rolling out new Bixi-based bikeshare systems would not be surprising, but companies routinely reorganize in bankruptcy and go on to operate successfully, often under new ownership. This sounds like such a planned bankruptcy.

    What could well happen here is that the city of Montreal takes over its own bikeshare system, some of the other bikeshare systems that Bixi currently runs get taken over by Alta or are run directly by the cities involved, and the software and hardware system part of Bixi's international business keeps running as a standalone business or gets bought by a larger company.

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  • dwainedibbly January 21, 2014 at 5:19 pm

    Alta should put Bixi on hold for now and find someone in Portland to build the bikes (and stations) for Portland's bikeshare system. It isn't like nobody here knows how to build bikes. Perhaps let Bixi keep the software side, but build the bikes locally.

    Or, just maybe Alta is waiting for Bixi to file bankruptcy so that they can buy the remains for pennies on the dollar. Let's watch....

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  • John Liu January 21, 2014 at 6:02 pm

    The bikeshare bikes are quite special purpose. Not something that just anyone is tooled up to build, I'd bet. Ditto the stations.

    From my experience using the bikeshares in NYC and Boston, the bikes and stations work well and the software does too, at least the user-facing part of the software. That's all been developed and refined by Bixi, at considerable expense (of the citizens of Montreal?), there's not a huge reason that I can see to re-invent the wheel . . .

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    • Michael M. January 21, 2014 at 7:39 pm

      According to the StreetBlog article on the same topic, one of the problems is that Bixi parted ways with 8D Technologies, which did the original software design for Bixi, over some kind of "intellectual property" dispute, and switched developers, which has led to glitches and delays. So, yeah, special purpose, but it doesn't seem like Bixi has been consistently able to accomplish that purpose.

      A commenter to the other article mentioned NYC-based Social Bicycles, which has just landed the city of Hamilton, Ontario, as its biggest customer to date. That model of operation is so much more appealing to me than the Bixi or B-Share model because you need only specialty bikes that can be parked anywhere, rather than needing special kiosks. It just seems like this would blend so much better with Portland's existing infrastructure and would make a bike sharing system so much more useful. (One of the frequent complaints I've read about Citibike is that people have trouble finding a docking station that isn't full when they get to their destination.) I suppose Alta is pretty wedded to what it's doing and Portland is wedded to Alta, but I wish we could rethink this.

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    • David W @ ZenBikeFab January 22, 2014 at 7:26 am

      We can build them :)

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      • David W @ ZenBikeFab January 22, 2014 at 7:27 am

        (The frames that is)

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  • 9watts January 21, 2014 at 8:05 pm

    I think Alta/City of Portland/whoever is making decisions about the Portland bikeshare system should sub this out to Kiel Johnson. Seems he has a better sense of how to turn ideas into workable businesses that scale better and aren't so damn complex.
    http://bikeportland.org/2013/08/28/portlander-designs-low-cost-bikeshare-station-for-apartment-buildings-93067

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  • John Liu January 21, 2014 at 9:42 pm

    I thought that system has bikes that belong to, and are always returned to, the same apartment building dock. Very different from the free floating bikes in a Bixi/Alta type of bikeshare.

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    • 9watts January 21, 2014 at 9:45 pm

      Yes.

      But give him a week or two.
      I'm pretty sure the system Kiel invented was not meant to compete with/deliver on the promise of Alta's system, but given the opportunity I bet he could come up with something. :-)

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  • anon1q2w3e4r5t January 22, 2014 at 10:30 am

    Let's set aside for a moment that there isn't an urgent demand in Portland to have bike sharing in the first place. Sure, you got the people who are primarily concerned about transportation convenience supporting it. And, then, you got the naive bicycle/livable streets advocates supporting it simply because everyone else is doing it.

    While the aforementioned support for bike sharing riles me, what really riles me are those who support it in order to make money or make a living off it directly or indirectly. Essentially, trying to make a buck off the livable streets movement with no genuine desire to really contribute it.

    Let me be clear, currently, there are 2 bike sharing models: kiosk-based (ex: Alta Bike Share) and bicycle-based (ex: Social Bicycles). I'm opposed to the former not so much to the latter.

    With that said.....

    NO TO BIKE SHARING!, YES TO REAL BICYCLISTS!

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    • GlowBoy January 22, 2014 at 12:29 pm

      So are you also opposed to point-to-point car sharing like Car2Go, and supportive of return-to-the-same-damn-place car sharing like Zipcar?

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      • anon1q2w3e4r5t January 23, 2014 at 7:20 pm

        I fully support a car-lite lifestyle. I'm not too familiar with car-sharing simply because it is not available in my area. But, I believe I would support all car sharing services because they help decrease car ownership. We want less cars on the streets. I don't care how "green" a car is, it can still kill someone on the streets. Since we're on the topic of cars, I will say now that I'm against mainstream use of autonomous cars when that day comes.

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    • Frank January 24, 2014 at 4:38 pm

      Couldn't agree more for one simple reason: the weather in Portland is such that demand will be very low for most of the year, because to ride you also need proper cycling rain gear. Its a great city for riding if you own the stuff. The kind of person who would make use of a bike share program does not own said stuff. Cold is not a barrier (like in Boston, DC, etc) because you need cold weather gear just to walk around. But for the average person, riding around in pouring rain in jeans or similar = misery.

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      • anon1q2w3e4r5t January 26, 2014 at 8:13 pm

        Wow, I didn't realize that, that's an excellent point Frank. I'm surprised I haven't heard anything about this until now. How many days does it rain in Portland? I knew Seattle, WA was known for its inclement weather, but not Portland. So, I just looked at Google Maps, and what do you know, they're pretty much right next to each other.

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  • matt f January 22, 2014 at 11:58 am

    Jonathan, I know you're not objective on this issue, but come on...in this article, every time you mention a big issue with this company, you immediately say how this won't affect Portland's bike share. ("Though this doesn't seem likely to directly affect Portland's coming bicycle share system launch (and may actually improve things...") This is starting to remind me of the CRC...an impractical idea that supporters can't be swayed from no matter what happens. Signed Matt Forness everyday bike commuter

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    • meh January 22, 2014 at 3:37 pm

      To paraphrase George Orwell.
      Two wheels good, four wheels bad.
      This project fits the Bike Portland editorial stance that all things bike are good.
      No further in depth analysis required.

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    • Michael Andersen (News Editor) January 22, 2014 at 10:37 pm

      For transparency's sake: Jonathan didn't write the sentence you mention, I did. We were tag-teaming this piece because J was out of town.

      From my perspective, I added that sentence not because I think bikesharing is a good idea (though I do) but because this is a very confusing situation and I thought a dose of analysis ("this is what this news doesn't mean") was necessary.

      In the US and Canada we use one word, "bankruptcy," to describe
      a) a company that's ceasing operations and selling off its assets, and
      b) a company that's being freed from its debt, usually in exchange for giving away an ownership stake, in order to keep operating.

      (A) would be the end of Bixi and disastrous for Portland's bikesharing launch. (B) is, as I noted, actually a way to keep the company solvent. As Scott notes above, it may not work out in the long run. We explore the situation in the article and John Liu and Michael M above have very smart comments on this. But my goal here was to make it clear to a passing reader, without getting into bankruptcy law, that what's going on is (B), not (A).

      Yes, obviously BikePortland starts from the perspective that bikes are good. Hopefully our reporting doesn't stop there, and we're able to bring something useful to your understanding of what the eff is going on in Montreal. If we failed that for you this time, I'm sorry.

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  • Frederick U Quan January 22, 2014 at 2:23 pm

    "'We still get to use the award-winning, top-of-class system," Birk wrote."

    You mean we get to use the same "award-winning" equipment that has failed in NYC, Chicago, and every other City?

    Checking the PBSC website, The "awards" were dished out in 2008-2009, before PBSC tried to develop software themselves. The bikes aren't the problem, it's the software, that's why Cities don't pay, that's why Alta is suing them and that's why the company is bankrupt. What Alta has is a bankrupt partner with the worst software in the industry. But yeah, let's get that award winning equipment to Portland ASAP!

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  • John Liu January 22, 2014 at 10:31 pm

    Well, Citibikes does do 10,000-15,000 trips a day, which isn't exactly "failing". From a user's perspective, the software works fine; things may be more frustrating for the bikeshare operator. But maybe a restructured Bixi under new management/ownership will work with 8D again.

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  • Rob Chapman January 23, 2014 at 12:33 am

    I won't pay a dime for this disastrous scheme. Why put local bike rental businesses out of business with public money? Sorry Mia Birk, maybe some other city will have you. I'm sure you won't miss meals in the interim.

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  • John Liu January 23, 2014 at 8:02 am

    But do bikeshare systems actually put bike rental companies out of business?

    A bikeshare bike is only "used" for a short period (usually max 30 minutes), with longer usage the cost rises dramatically (to discourage it). They are meant for short utility/errand/commute trips from point to point. Compare to a rental bike that is rented for hours or a half or whole day. They are primarily used for sightseeing.

    In NYC, bike rental shops are split on whether Citibikes bikeshare hurts or helps their business. That is as of last year, when the bikeshare had been running for a few months. I don't know of updated info.

    How many bike rental shops are there in Portland, anyway? Only a handful of stores actually focus on their rental fleet. I'd think a full-scale bikeshare system could employ as many people as are employed full-time doing bicycle rentals.

    Bikeshare bikes are typically used 5 to 8 times/day, so a bikeshare system will put more cyclists on the road than an equivalent size fleet of rental bikes. Is protecting a handful of small businesses (maybe) a good reason to block a system that will increase bike mode use?

    Using a transit analogy, connecting MAX to the airport surely took some money from taxi drivers, but would that have been a good reason to not do it?

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    • Rob Chapman January 23, 2014 at 12:43 pm

      John this is the first time I've seen the question about bike share's effect on existing businesses publicly addressed by it's cheerleaders. Thank you.
      The fact remains that we were initially told that the system would pay for itself but now we have Leah Treat saying that the city will probably have to "borrow" public funds to pay for it instead. It seems to me that if this where a great idea sponsors would be jumping all over it. Where are they again?

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    • Rob Chapman January 23, 2014 at 12:49 pm

      Did I spell debacle correctly?

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  • John Liu January 23, 2014 at 3:57 pm

    I see bikeshare systems as bringing certain benefits to a city, which have to be balanced against the costs.

    The benefits:
    - Bikeshare increases the number of cyclists on the roads, sometimes substantially. In New York, the latest counts indicate that Citibikes are 30% of bicycle traffic in the system's operating area. http://www.streetsblog.org/category/issues-campaigns/bike-sharing/ Probably some of those cyclists replaced their own bikes with bikeshare, but many will be net additions to local cycle traffic.
    - More cyclists should increase the funding for and construction of, bike infrastructure. It is easier to get infrastructure funded when studies show high ridership and demand. That will benefit all cyclists, even those of us who ride our own bikes everywhere.
    - Bikeshare reduces the use of other transportation modes. Reducing car usage is a good thing. In the short run, reducing bus, Streetcar or MAX ridership may not be a good thing, but Portland is a growing city and we will eventually need more transportation capacity.
    - Adding capacity by bikeshare is cheap compared to the alternatives. Trimet spends about $160MM/yr on buses, $50-60MM/yr for MAX, $9MM/yr or so for Streetcar, and that is operation and maintenance, not the billions in construction and equipment costs. A single modern diesel/hybrid municipal bus costs around $0.7MM, a typical articulated light rail car around $3MM (very rough, maybe outdated numbers). Trimet gets 50-60% of its operating budget from taxes, i.e. public funding. Adding capacity by building more roads for cars is also very expensive, and entirely funded by taxes. In comparison, a bikeshare here will cost around $5MM to launch and call it $2MM/yr to run (also very rough numbers).

    The costs:
    - Who pays that $5MM startup cost and let's say $2MM/yr operating cost? Ideally, sponsorship and user fees. A couple of bikeshare systems are doing that or on track to get there, Citibikes/NYC being the highest-profile example. Hopefully Portland can achieve the same thing. If public funds end up paying for a significant fraction of the ongoing operating costs, I will be disappointed, but compare to the cost of buying and operating/maintaining just one new city bus . . .
    - Will "competing" business be hurt? Bike rental shops are the obvious example, some could also worry that people might use bikeshare instead of buying personal bikes. We talked a bit about the rental side already.
    - Over-crowded bike lanes? Wobbly newbies and tourists getting in this way, causing accidents, getting hurt? Based on the bikeshares in operation, I don't see that. Most of the New Yorkers on Citibikes ride like pros.

    I don't have any connection with or inside info on the bikeshare industry, I'm just a user of the NYC and Boston bikeshares and an interested reader of reports on the topic. So I could be wrong, but that is how I see it.

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  • TV January 27, 2014 at 6:39 pm

    I tried Bixi in Montreal a couple of years ago. It was great for me as a tourist, but bikes really don't cost that much to buy and own. In portland you can even take them on the bus and Max, so I just don't think the idea of Bixis really has legs

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