Fitness equipment recalled; company's stock drops

CPSC Monitor, Feb-March, 2004

One recent CPSC recall created an immediate financial problem for the manufacturer. The company involved reportedly lost an estimated $80 million when customers and investors reacted to the news story.

A Vancouver, Washington-based company, The Nautilus Group, Inc., had

joined with CPSC in announcing a recall of its Bowflex Power Pro strength machine Jan. 29. (5) The fitness machines had a defect that posed a risk of injury to the user. According to CPSC, while being used in the incline position, the backboard bench can collapse and break. In addition, the "lat tower" can rotate forward and fall, possibly injuring the user. Nautilus received at least 70 reports of the backboard benches breaking and 18 reports of the "lat tower" falling.

The machines sold originally for between $1,200 and $1,600.

A report in The Columbian newspaper, of Clark County, Washington, Jan. 30, indicated that confusion caused by CPSC's use of the word "recall" to describe the action resulted in the company's stock price dipping from $15.83 on one day to $13.37 the next. Greg Hammann, the company's CEO, said that the stock price decline caused the company's net worth to drop by approximately $80 million. (6)

The company is providing free repair kits upon request by equipment owners. Consumers may call 8883020-3020 or go to www.bowflex.com on the Internet.

Hammann told the newspaper that the company would soon be back to normal and that Nautilus' financial condition will stabilize in the long-term. The Columbian reported that the recall news release from CPSC happened to be issued on the same day that Nautilus released its fourth-quarter and year-end earnings report. The earnings report was a "mixture of good and bad, as the company is in the midst of an 18-month turnaround effort," according to the newspaper.

(5) "CPSC, Nautilus Direct Announce Recall of Bowflex Power Pro Fitness Machines," U.S. CPSC, Office of Information and Public Affairs, Jan. 29, 2004. Release # 04-073.

(60 Nelson, Jonathan, Columbian staff writer, "Nautilus Stung by Recall," The Columbian, Jan. 30, 2004.