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Shimano lost £93 million in sales from its crank inspection programme and total sales down 30% on previous year

Detailing "extraordinary losses" shouldered from the recall and inspection programme of its Hollowtech II cranksets, Shimano reported that the debacle cost the company around £14.5 million, eating into its (still healthy) overall profit margin...

Shimano has published its financial report for 2023, detailing the major cost of its crank inspection programme, the full-year cost for which came in at 17,625 million Japanese yen (just under £93 million) and costing the company around £14.5 million (2,762 million yen).

Despite the financial blow, labelled in the accounts as "extraordinary losses", and further reduction in bicycle-related sales, Shimano still posted a £322 million profit in 2023.

In September, the company announced a voluntary inspection and replacement recall notice for 760,000 Dura-Ace and Ultegra bonded 11-Speed road cranksets in North America, and an "inspection and replacement" programme in Europe and the United Kingdom.

Investigating Shimano’s snapping cranksets Sept 2023

> Investigating Shimano's snapping cranksets: What happened, unanswered questions and an engineer's report

A note included in Shimano's accounts states: "Loss on free inspection  FY2023 (Jan. 1, 2023 - Dec. 31, 2023) Some bonded 11-speed HOLLOWTECH II road cranksets produced by the company on and before June 30, 2019 show bonding separation and delamination, which may produce gap and clearance.

"The Shimano Group therefore recorded expenses associated with free inspection and replacement. The amount of loss recorded includes provision for free inspection and replacement, as reasonably estimated based on information currently available to the company."

As per the company's consolidated statements of income, the "loss on free inspection" totalled 17,625 million yen (£92,795,625), at a cost of 2,762 million yen (£14,537,600) to Shimano.

The world's leading components manufacturer also reported a 24.6 per cent decline in revenue in 2023 compared with 2022, and a 52.3 per cent drop in net profits.

2023 Shimano Ultegra Broken crank delamination 5

Demand for bicycles remained weak, the company stated in its annual financial report, net sales decreasing 29.5 per cent to £1.92 billion, with net sales for bike components coming in at £1.57 billion, which despite the poor year-on-year performance remains higher than pre-pandemic levels.

"Although the booming popularity of bicycles cooled down, interest in bicycles continued to be high as a long-term trend," Shimano reported. "On the other hand, market inventories generally remained high, despite ongoing supply and demand adjustments.

"Overseas, in the European market, the strong interest in bicycles continued in our major market, namely, Germany and Benelux countries, and retail sales of completed bicycles were strong. On the other hand, in other countries, consumer demand waned on account of inflation and an economic slowdown, and market inventories remained at high levels." 

Shimano outlined challenges faced in 2023, when despite "tight monetary policies to tame inflation that had been adopted mainly in Europe and the U.S [being] largely projected to end", the "pace of global economic recovery remained at a standstill as turmoil in Ukraine and the Middle East and a slowdown in economic recovery in China exerted downward pressure on economy". 

2023 Shimano GRX RX820 crankset

Commenting on the economic situation in its main markets, Shimano suggested the European economy "remained lacklustre" despite an "easing" in hikes in energy costs and raw material prices.

Looking ahead, the company said interest in bicycles will continue "to be high as a long-term trend", despite the fact the "booming popularity of bicycles cooled down" in the short-term.

Tempering some of the positivity about the bike industry in 2024 that has been heard in recent times, notably a recent market intelligence agency report that predicted the bike industry is "on the road to recovery", Shimano predicted a further fall in sales during the year ahead.

The predicted decrease in revenue for bicycle components is expected to be around 10.8 per cent, with the European market expected to be hit hardest, with an 18 per cent fall in sales due to the brand's high inventory level.

Shimano also pointed out global supply chains may face further disruption due to conflicts in Ukraine and the Middle East, and that the US presidential election may influence the economy.

2023 represented a challenging year for Shimano, with a class-action lawsuit filed against the components giant, following the recall announcement, for "inadequate" cranksets that put "cyclists nationwide at risk of injury".

In November, the company was allegedly hit by a massive ransomware attack threatening to release confidential data, while an investigation published a month later suggested that workers at Shimano's Malaysian supplier were subjected to "slavery-like" conditions.

Last week, a cyclist sued the components brand, and bicycle manufacturer Trek, for $2 million after a brake lever "impaled" a foot-long wound in their thigh.

Dan joined road.cc in 2020, and spent most of his first year (hopefully) keeping you entertained on the live blog. At the start of 2022 he took on the role of news editor. Before joining road.cc, Dan wrote about various sports, including football and boxing for the Daily Express, and covered the weird and wonderful world of non-league football for The Non-League Paper. Part of the generation inspired by the 2012 Olympics, Dan has been 'enjoying' life on two wheels ever since and spends his weekends making bonk-induced trips to the petrol stations of the south of England.

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22 comments

Avatar
Graveltravelwpww | 2 months ago
0 likes

How did the suing rider get a hand lever impaled in his leg?

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wycombewheeler | 2 months ago
1 like

As per the company's consolidated statements of income, the "loss on free inspection" totalled 17,625 million yen (£92,795,625), at a cost of 2,762 million yen (£14,537,600) to Shimano.

who is bearing the other £78m of cost that isn't Shimano? the dealer network? or insurers?

Avatar
BBB | 2 months ago
0 likes

Ànyone considered buying or start accumulating their shares? It looks like it can't get worse both for the company and the industry in general. Last session ; -7.5%

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froze | 2 months ago
2 likes

So now all forthcoming Shimano buyers will now have to pay for the increase in the cost of all Shimano products to cover the loss Shimano says is huge.  So, we the consumers get punished for their engineering mistakes that hurt people that caused a liability problem, and for expensive broken cranks.

Maybe it's time to move to SRAM and Campy instead!

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mark1a replied to froze | 2 months ago
3 likes

Probably not. It will be amortised off over many years. I think we'll be just fine. Plus it's not like SRAM and Campagnolo offerings are that competitive at the moment, the high volume of lower end sales including the OEM market will offset it for Shimano. 

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don simon fbpe replied to froze | 2 months ago
2 likes

Yep, simple as that, don't buy Shimano.

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wtjs replied to don simon fbpe | 2 months ago
2 likes

I don't agree with that! I first heard on here from our very own HP (beware imitators!) of the Ultegra Pasta cranks- I have long had Ultegra Hollowtech II when it was made of metal and air, as opposed to the present glue and air, and it's excellent. I think Shimano have made a pig's ear of the cover up and are paying dearly for that. However, because of a lifetime's good experiences, I'm sticking with the cheap, durable and amazingly fault-tolerant Sora- although I think the R brifter is failing after being much used and abused over 4 1/2 years. I'm looking forward to a non-pasta GRX Hollowtech crankset, although the FSA cranks the bike came with are showing no signs of being knackered. I can even contemplate venturing into 12-speed electronic in the future, but I think my next unnecessary purchase may be a KOM hub strong alloy wheel

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Backladder replied to wtjs | 2 months ago
2 likes

Sora is not infallible!

 

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Graveltravelwpww replied to wtjs | 2 months ago
0 likes

I had the 105 hollow cranks in the 2000s and old Gen 1 splined xt. No problems in 20 years. I wouldn't touch these glued pieces of junk or anything beyond 9sp Era.

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hapaxlegomenon | 2 months ago
0 likes

Those super Duper lightweight "HoLloWTEcH" ultegra cranks aren't so fast when you're sitting on the side of the road, marooned with no way of moving your bike!!

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wycombewheeler replied to hapaxlegomenon | 2 months ago
2 likes

hapaxlegomenon wrote:

Those super Duper lightweight "HoLloWTEcH" ultegra cranks aren't so fast when you're sitting on the side of the road, marooned with no way of moving your bike!!

left pedal still attached

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Wales56 | 2 months ago
3 likes

me today, 33 miles limping along to train station - mostly on my left leg

well timed (not) article & fault - already in LBS

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mark1a replied to Wales56 | 2 months ago
1 like

Wales56 wrote:

me today, 33 miles limping along to train station - mostly on my left leg well timed (not) article & fault - already in LBS

Wow! Sorry to see that, just out of interest, did you take it in last year for inspection? I'm interested to know if it got a clean bill of health then and also whether Shimano/Madison will cover replacement now. One of my bikes has cranks in the affected production range, was duly inspected and apparently fine, they wouldn't say whether they would be covered against future failure. 

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Wales56 replied to mark1a | 2 months ago
1 like

no inspection
took it straight to the LBS - they say two weeks for replacement at the moment
can't see end date for recall

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mark1a replied to Wales56 | 2 months ago
0 likes

OK cheers for that. I'll wait and see what happens...Hope yours all goes well. 

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Wales56 replied to mark1a | 1 month ago
1 like

got new crankset today (22 Feb) - took 8 days

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mark1a replied to Wales56 | 1 month ago
0 likes

Great news and not too long. 

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wtjs replied to Wales56 | 2 months ago
2 likes

me today, 33 miles limping along to train station - mostly on my left leg

Good effort. My recent disaster was a broken rear mech hanger on the way back from the Lakes with the trailer. I tried to get a spare when I got the bike, but the complex shape wasn't available then. I took the mech off the chain and tried to shorten the chain to give me one single low gear to get home, but the gaps between the cogs on a 11-34 9-speed are too great with vertical dropouts- the chain is either too tight or far too loose. I was lucky- we'd been building things at the climbing hut and the project leader was coming my way with his massive Transit.

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marmotte27 | 2 months ago
4 likes

Maybe learn them to react a little sooner next time...

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hawkinspeter replied to marmotte27 | 2 months ago
2 likes
marmotte27 wrote:

Maybe learn them to react a little sooner next time...

The way they've treated their customers is why I'll look around for alternative products in future. If we can't trust that they've made it properly then they deserve to lose money.

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w61 replied to hawkinspeter | 2 months ago
3 likes

Yep - my bike was off the road for 6 weeks waiting for a replacement crank and I got no joy asking Madison/Shimano for any help or compensation for this. I've chosen Shimano for all previous road bikes but will be moving to SRAM in future.

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andystow replied to w61 | 2 months ago
1 like

w61 wrote:

Yep - my bike was off the road for 6 weeks waiting for a replacement crank and I got no joy asking Madison/Shimano for any help or compensation for this. I've chosen Shimano for all previous road bikes but will be moving to SRAM in future.

If it was a car, you'd get a free loaner... but of course bikes are just toys.

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