Could Bixi's Financial Problems Affect Bike-Share in New York, D.C. and Beyond?
You could say that Montréal is the cradle of the bike-share movement as we know it today in North America. The Canadian city is the headquarters for PBSC Urban Solutions, a.k.a. Bixi, the company that manufactures the bikes and stations for one of the most prevalent bike-share systems now in use in cities across the continent and the world. PBSC’s bikes and stations are the backbone of some of the biggest and most high-profile systems out there – Washington, D.C., New York, Chicago, Boston, and Minneapolis, to name a few. The company also supplied the hardware for the London bike-share scheme.
Montréal’s own Bixi bike-share, the inaugural PBSC venture launched in 2009, was the largest system in North America until Citi Bike launched in New York this summer. (Technically, PBSC is the parent entity and Bixi refers to the bike-systems in Montréal and other cities where PBSC runs operations, although in practice the two names are often used interchangeably.) But according to a letter filed last month by Montréal’s auditor general, the company’s finances are in disarray – the latest chapter in a series of money woes that have plagued PBSC and Bixi, which was founded in 2007 by the City of Montréal's parking authority for the purpose of creating a bike-share system for Montréal and is still under the city's administration.
According to numbers released late last month by the City of Montréal, the company is $42 million in debt, with a $6.5 million deficit and $5 million in outstanding payments. Montréal’s auditor general, Jacques Bergeron, wrote a letter to the city’s leadership in which he said he had "serious doubts about Bixi's ability to continue operations." He wrote that he has been having trouble getting to the bottom of the situation because the company has been slow to release its 2012 financial statements.
Bergeron’s letter caused speculation in the Montréal city council that Bixi might be on the verge of bankruptcy, although the councilor in charge of transportation, Réal Ménard, moved quickly to say that the problem is nothing more than a cash flow issue and that Montréal’s 5,100-bike system will be back in the spring after its usual cold-weather hiatus. “We are optimistic that the crisis we are talking about will be solved,” Menard told the CBC.
In Toronto, meanwhile, where the municipal government has been looking at taking over operations of the 1,000-bike Bixi system there from PBSC, the company’s financial troubles have caused city councilors to question the viability of the system in that city. “I’m doing my darndest to save Bixi,” said Denzel Minnan-Wong, chair of the public works committee, in remarks quoted by the National Post. “We are trying to reach an arrangement where we would assume the operations. We have to be assured that we are buying a public bike-share system that will survive and that will endure.” Ottawa is also questioning the long-term future of its much smaller Bixi system.
The financial problems of PBSC and Bixi have been going on for years. The design of the company’s chief product, with its rugged, heavy-duty bikes and solar-powered docks, has won numerous awards and has proven to be one of the most popular cycle share models in the world. But its unexpected success as an export did not translate into a stable financial model. It has lost money since the beginning. PBSC recorded a $6.9 million shortfall in its first year, and in 2011, the City of Montréal stepped in to to bail the company out when it was near collapse. The city lent PBSC $37 million to cover its deficit at the time and also made $71 million in loan guarantees for international expansion.
At that time, Montréal’s auditor recommended that the company sell its international operations, since the law technically prevents Québec municipalities from running for-profit businesses, and sales to other cities is the part of the business that is potentially profitable. He also criticized the company's "questionable accounting treatments" and its management. “Whatever the outcome, let’s hope it gets resolved quickly because the uncertainty makes everybody uncomfortable,” Roger Plamondon, then chairman of PBSC told the National Post in 2012. “It really is a testament to the incredible reputation of the bike that cities would contemplate doing business with us while this is going on.”
PBSC did not respond to repeated requests for comment on this story. But in a letter to employees that was quoted in a story by reporter Andy Riga in the Montréal Gazette, the company’s interim CEO, Michel Philibert, wrote that a planned sale of the company’s international operations fell through last June, and that PBSC is bringing in a restructuring expert to help guide the company through its cash crisis.
In a statement on its Facebook page, the company blamed its current cash-flow difficulties on the rapid expansion of its international business, in which it sells systems that are then managed by other entities. "As you may have learned from the media, [PBSC] is currently experiencing difficulties in liquidity," the statement says in French. "This is temporary. It is mainly due to the success we have had in our international sales."
Will PBSC’s ongoing cash-flow problems affect system users in the multiple U.S. cities that use its bikes and docking stations? Mia Birk, vice president of Alta Bicycle Share, insists that the answer is no. Alta is the exclusive operator of Bixi systems in the United States, managing in a total of eight U.S. programs as well as the one in Melbourne, Australia, and acting as the contractor between municipal departments of transportation and PBSC.
Birk writes in an email: "Within the last year, Alta Bicycle Share and PBSC have successfully launched four new systems in Chicago, NYC, Columbus OH, and the San Francisco Bay Area. We continue to work with our clients to expand and improve these systems, and to add to the growing number of cities deploying and benefitting [from] bike share. We are aware of the allegations in the Montreal media. No matter what happens with PBSC, Alta Bicycle Share will continue now and in the future to provide world-class products and services to our clients."
Birk would not comment further. It's not clear how Alta might fill the gap if Bixi ever stopped producing hardware for the systems.
PBSC’s growing pains are ongoing even as bike-share is being adopted by more and more cities around the globe. As Feargus O’Sullivan recently reported, in some places, such as Brno in the Czech Republic, bike-share is emerging as a small-scale, just-for-kicks addition to the urban palette, where the stakes – as well as the costs – are low. But in cities such as New York and London, where bike-share is being promoted as an integral part of the transportation system, there’s a lot more riding on the scheme, both figuratively and literally.