Inside ‘Project Tinman’: Peloton’s plan to hide rust in its exercise bikes

As Peloton’s stock price began to fall last fall and just months after a costly recall of the connected fitness company’s pricey treadmills, its executives faced a new crisis.

In September last year, staff at Peloton warehouses, which receive high-end bikes originally made in Taiwan, noticed paint peeling off some of the exercise machines.

The cause was a buildup of rust on the “invisible parts” of the bike – the inner frame of the seat and handlebars – and did not affect the integrity of the product, Peloton recently told the Financial Times.

Instead of returning the bikes to the manufacturer, executives hatched a plan, internally dubbed “Project Tinman,” to cover up the corrosion and ship the machines to customers who had paid between $1,495 and $2,495 to buy them.

The project was first revealed in FT Magazine last week, but eight current and former Peloton employees in four US states have provided additional details about the operation.

They described the plan as a national effort to avoid another costly recall just months after the company’s most tragic episode – the death of a child due to his treadmill design.

Internal documents seen by the FT showed that Tinman’s “standard operating procedures” called for the corrosion to be treated with a chemical solution called a “rust converter”, which hides the corrosion by reacting “with the rust to form a black layer”. Employees said the program was called Tinman to avoid terms such as “rust” that executives felt were out of step with Peloton’s quality brand.

Insiders were also angry at the enactment of a plan they said went against Peloton’s supposed focus on its users, who are called “members” to evoke a sense that buyers are more than just consumers. customers and become part of a larger community. Tinman also emphasized the company’s quality control process against meeting aggressive sales targets in the pursuit of growth.

“It was the single determining factor in my early days of hating the company I had spent the previous year and a half falling in love with,” said an outgoing team leader, who reviews products before they were released. are not shipped to customers.

Peloton said the problem affected at least 6,000 bikes and that 120 employees carried out “rigorous tests” on the devices to conclude that the rust – which it described as “cosmetic oxidation” – had “no impact on the performance, quality, durability and reliability of a bicycle. , or the overall member experience”.

The U.S. Consumer Product Safety Commission, which oversaw Peloton’s treadmill recall, did not say whether it had been alerted to the corrosion issue, but said companies should notify it if they suspect any defects “which could create substantial danger to the product or . . . an unreasonable risk of serious injury or death”.

The company is in turmoil, having announced 2,800 job cuts this month, with co-founder John Foley stepping down as chief executive. Peloton plans to cut $800 million in annual costs.

The move came after 12 months in which the company’s shares had fallen 80%, wiping around $38 billion of its market capitalization. Shares of the company have since rallied, in part on news that Nike, Amazon and other groups were evaluating potential deals and as activist investor Blackwells Capital pushes for a sale.

Four months before the first rust sighting, Peloton had been pressured by the CPSC to recall 125,000 Tread+ products, each costing $4,300. The previous year, the company issued a recall on 27,000 clip-on pedals, following reports of injuries while cycling.

Two warehouse workers who handled bikes late last year claimed a lot of “severe” rust was delivered to customers. A staff member sent the FT a photo last week suggesting rusty bikes were still arriving at a regional warehouse in the United States.

Peloton said the issue was ‘cosmetic’ and was resolved by sending the products to special locations to ‘rework’ before they went to a ‘last mile’ warehouse, where they would undergo another check before being released. to be delivered to customers.

An internal document said: “It is acceptable if you see rust through the black layer as the severity of this rust is reduced using the Rust Converter.”

The directive alarmed some employees because Peloton had previously banned bikes exhibiting rust from becoming a “retrofit” — a discounted bike only available to employees and their friends — let alone sold at full price.

“Even for the Bike-Plus [products that cost $2,495] that were rusty internally, they kept delivering them,” said a current employee. “Sometimes the bikes had stuff on the outside so we couldn’t deliver it, but . . .[there were]lots of bikes that were rusty inside that they were still selling.”

Tinman’s procedures stated that if bikes did not meet aesthetic standards, they were to be scrapped or turned into “retrofit”. But several warehouse workers said these quality checks were often not followed in order to meet “unrealistic” sales quotas.

A current employee described his supervisor as “pissed” that there are not enough specialists to deal with the problem. “We couldn’t keep sending them to our refurbishment area. We only had to build them, to try to clear [the rust] go and send them.

Another worker said the secondary check would categorize bikes into “saleable” and “non-saleable” categories. He added that when Peloton was experiencing low inventory amid a supply chain crisis that made it difficult for the company to keep up with demand, some workers felt compelled to reclassify “medium rust” bikes to “light rust” and then clean them for shipment.

“It was all very subjective,” this person said. “It was presented as ‘it’s this or no delivery’, which was not an option from our management.”

Peloton said that was not company policy. “There was no instruction from Peloton to reclassify or deem this inventory unsaleable and it is against Peloton policy and practice for Peloton to release unsaleable inventory. If anyone did, they acted against company policies and practices,” he said in a statement.

Rust is not covered under warranty, according to the company’s website and interactions with members on social media, as it is up to Peloton owners to wipe down their bikes to prevent sweat from causing corrosion.

A former employee who worked at a Peloton call center said the company refused to help some customers even though their bikes were rusty when they received them.

“Some of these bikes came with rust and we weren’t allowed to trade them in,” the person said. “These were awkward conversations because I had no leeway to make exceptions.”

Peloton, which until last week had not publicly reported the issue, said: “If we find that this specific issue has caused a problem for a member, we will replace the bike.”

Additional reporting by Andrew Edgecliffe-Johnson in New York

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