By IAN AUSTENJAN. 21, 2014
OTTAWA — The bankruptcy protection filing of the Canadian company that has supplied the bicycles and the technology behind most of the bike-sharing programs in major American cities is revealing a complicated and messy financial foundation.
No one anticipates that systems like Chicago’s Divvy or New York’s Citi Bike will collapse because of Monday’s filing by the Société de Vélo en Libre-Service, a company usually called Bixi. But its roots inside Montreal’s municipal parking authority led to the creation of a company whose product, while quickly proving popular with riders, was doomed never to make money.
Court documents and interviews with suppliers, customers and politicians show that Bixi’s acumen with technology and design has been undermined by an often ad hoc approach to business and a lack of a clear mandate. One of the Bixi mysteries is its relationship with its agent in the United States. Unlike the three Canadian cities with Bixi systems, Ottawa, Toronto and Montreal, American municipalities have generally not dealt directly with the Canadian company. Instead, Alta Bike Share, a relatively small company in Portland, Ore., sells the Bixi system and operates it.
Michel Philibert, the acting chief executive of Bixi, declined to discuss the relationship between the two companies, citing contract confidentiality. In court filings, however, Bixi has repeatedly described Alta as a “partner.” Officials at Alta and its parent company, Alta Planning & Design, did not respond to several interview requests about its contractual relationship with Bixi.
In an email, Mia Birk, president of Alta Planning & Design, said that the filing had no effect on the operation of existing systems, nor had it altered Alta’s relationship with Bixi’s bicycle supplier, and that it should not delay a coming introduction in Portland. “Ultimately,” she said, “we are confident that this will be a positive result.”
Another mystery concerns the dispute over the software than runs the bike-sharing systems. At first systems installed in the United States — those in Boston, Washington and Minneapolis — mirrored Montreal’s original Bixi system and relied on payment terminals and software developed by 8D Technologies, a Montreal company and one of Bixi’s creditors. When a rider borrows a bike, the software in the kiosks handles the credit card payment and memberships and tracks how long it is used and where it is checked in and out.
In what seems to have become something of a pattern at Bixi, Isabelle Bettez, the president and chief executive of 8D, said her company’s involvement began with “a very casual conservation” at Montreal’s semiautonomous parking authority, which initially ran Bixi. The parking authority asked if her company could modify the solar-powered, wireless-payment terminals and financial-processing software 8D had developed for street parking to handle bike-sharing. The parking authority, through contractors, designed and built the bicycles and docking stations.
At first, according to Ms. Bettez and court filings from Bixi, all went well, and 8D supplied the software and terminals used in London and Melbourne as well as the other Canadian cities. But the documents indicate that as Alta was bidding on operating what would become Citi Bike in New York, things turned very sour.
Ms. Bettez said she was told in January 2012 by Bixi that it was ending a contract that was supposed to run until the end of 2013 and that it would develop its own software and terminals. Mr. Philibert said in an interview that he was unable to explain the decision. But in court documents, Bixi argued that 8D was overcharging for both its terminals and software, making it impossible to bid competitively in New York — an accusation Ms. Bettez denies.
Whatever the cause, Bixi’s designing its own software took customers by surprise. Philip Pugliese, the program coordinator for the Chattanooga, Tenn., bike-sharing system, said that it was only after his city decided to go ahead that it learned it would be the test bed for the new software and terminal system.
The change was not without consequences. It delayed the introduction in New York, and during that system’s early days software problems often frustrated usersby either not releasing or refusing to accept bikes at docking stations. Mr. Philibert said that the problems for consumers had been resolved, but that the portion of the software that handles payments and system management was still not working properly. As result, Alta, Bixi’s erstwhile partner, is withholding 5.6 million Canadian dollars in payments related to Chicago and New York’s systems.
“You don’t change the recipe when you have a successful product, but they did,” said Ms. Bettez, who is suing Bixi for 26 million Canadian dollars over the contract cancellation. Her company, however, is continuing to service cities that rely on 8D’s software.
Bixi’s woes may at least delay decisions by other cities to adopt bike-sharing systems. Vancouver, British Columbia, has a tentative deal with Alta for a system. But Heather Deal, the member of the City Council responsible for bike-sharing, said that the city was now going back to Alta for further information about Bixi as well as sponsorships.
She says she is confident, however, that the city will put in place some system. “There are lots of bike manufacturers around the world,” she said. “I’m suspecting that there are many of them waiting to fill any gap.”
Can you smell that faint odor of smoke being blown up your skirt? It is always interesting to listen to the wealthy discuss why their empires are never going to collapse. It reminds me of the story that the unions told the workers at Hostess. Of course once the parent company got divested and the pieces old off all the “players” were back in business, making money. And what did the workers get?
Now in the case of Bixi what we are hearing is that we want to keep our personal fortunes. Alta is in a bit of a bind because until it can secure a replacement partner (should it decide that to be the best option) everyone has to tell the public that things are just fine. “Please ignore the man behind the curtain.”
But ask yourself this. What delayed the rollout of Divvy? It was the kerfuffle surrounding the technical support Bixi provides. Yes you can find manufacturers who can make the bikes, but they are not stupid. They will want more money for their work because they know you need it done now and have few others to supply the finished product. And as for the technical side of things that is very troubling. It is something that really needs to work well otherwise you have a replay of the technical rollout of the Affordable Care Act and we all now how painful and embarrassing that was.
In the meantime every single Bicycle Advocacy Organization that is attached to a city that either has a BikeShare system or has one on order is trying its darnedest to get its Board Members to help them keep the lid on this thing. In the end cities are either going to have to cough up more money or find different sourcing for their BikeShare services. All of this means the threat of taxation increases for something that while nice is probably closer to non-essential than is a third baseball franchise in Chicago.