Tommy McArdle is a digital news writer at PEOPLE covering stories across all of the brand's verticals. Prior to joining PEOPLE, Tommy covered the entertainment industry at Looper and sports at The Sporting News and Boston.com. He graduated from Emerson College in 2019.
Peloton announced that it will no longer manufacture its own bikes and treadmills in a "natural progression" in the company's "strategy to simplify its supply chain and focus on technology as it moves forward.
The company said Tuesday that Taiwanese manufacturer Rexon Industrial Corp. will take on a primary manufacturing role for Peloton's bikes and treadmill products, expanding an already-existing partnership, according to a press release. In addition to the change, Peloton is suspending operations at Tonic Fitness Technology's facilities in Taiwan, which it acquired in 2019, for the rest of the year.
Peloton CEO Barry McCarthy called the decision to stop manufacturing its own products "another significant step in simplifying our supply chain and variablizing our cost structure," referring to it as "a key priority" for the company in a statement.
"We believe that this along with other initiatives will enable us to continue reducing the cash burden on the business and increase our flexibility," McCarthy said in the release.
Peloton chief supply chain officer Andy Rendich called Rexon "a proven partner for our global operations," and said in the release that the company plans to retain "a significant corporate and manufacturing presence in Taiwan" moving forward. The company's moves will result in layoffs for about 570 employees in Taiwan at Tonic Fitness Technology, which previously helped build its bike models after its purchase in 2019, according to Bloomberg News. Rendich said over 100 Peloton employees will remain in Taiwan to work with the company's new external partners.
The company has made drastic changes in recent months to combat a drop in demand for new Peloton products and dips in membership. After interest spiked for Peloton early in the COVID-19 pandemic with people at home, the company had announced that it would open its first factory within the U.S. to meet higher demand, according to Bloomberg. But since then, any plans for that facility have been set aside, CNN reported.
RELATED VIDEO: Dads Make Mini Peloton For Daughter Who is Obsessed With Their Bike
And in February, Peloton co-founder and then-CEO John Foley stepped down and was replaced by McCarthy, a former CFO at Spotify and Netflix. The company also laid off 2,800 employees — about 20 percent of its entire workforce — at that time.
Foley called that announcement "one of the more challenging ones in our history" in the letter.
Never miss a story — sign up for PEOPLE's free daily newsletter to stay up-to-date on the best of what PEOPLE has to offer, from juicy celebrity news to compelling human interest stories.
He added, "Let me be clear about one thing: this team has built Peloton into what it is today. And this means YOU. Brick by brick, this team has developed the hardware, software, content, delivery and retail experience that is helping improve the lives of millions of Members. This is rare and powerful."
Just weeks before the February layoff announcement announcement, Peloton temporarily halted all production of its bikes and treadmills in response to a "significant reduction" in demand, according to internal documents obtained by CNBC — a decision that Foley denied at the time.