Bixi company struggles with deficit

Montreal's Bixi bicycles are not proving profitable, and the company that is organizing the bike share network is in financial deficit.

Bixi bicycles are made available to the public at low cost by the city-controlled Public Bike System Company, known in French as the Socit de vlos en libre-service, orSVLS.

PBSCis counting on international sales to recover the sums itinvested in the Montreal shared-bike network.

In 2011, the PBSC needed more money to continue its expansion.

"Montrealers and the self-serve bicycle system benefit of the fact that we export bicycles outside of the country," PBSC president Roger Plamondon said at the time. "It is urgent that we have the financial leverage to continue our operations."

The company wasgranted $108 million in financial aidfrom Montrealcity council.

In 2012, PBSC expected revenue of $91 million and profits nearing $11 million. According to Radio-Canada, revenues are more likely to reach $49.6 million and the profits are projected to tank, with the company losing $2.8 million.

According to the company's president, the provincial government opposed the sale of Bixisystems outside of Quebec, stating that it did not want Montreal to fund the commercial endeavours of Bixi in foreign countries.

The company's falling out with Montreal-based technology enterprise 8D,which provided PBSC with its technologies, is another element that could have impacted the company's bottom line. 8D created the office technology,payment terminals, bike docks, solar energy control and the overall bike sharing system for PBSC.

PBSC decided to develop its own technologyin June 2011 and hired American tech developers Personicaon a$2.3-million contract. Personica used a company located in India for a part of the programming.

Delays in New York City

PBSC's international expansion has been driven in part by its American partner, Alta Bicycle Share,which has upped its efforts to sell Bixi bicycles in large markets like Chicago and San Francisco.

Alta Bicycle Share has already sold New York City on a large system of 10,000 Bixi bikes but New York was unaware that PBSC had to change all of its technologies.

Bixis were intended to roll aroundthe Big Applein July, but Personica was running late on the project.

New York City Mayor Michael Bloomberg announced the project would not be launched until the system worked properly. After signing the deal with Bixi last fall, New York Transport Commissioner Janette Sadik-Khansaid she only foundout in the spring thatPBSC's technology would have to be completely redevelopped.

Plamondon maintains that the New York City administration had all of the information required when it signed the contract with the Montreal company.

As it stands, the Bixi systemis being compliance-tested in New York, where it will be known as Citi Bike. The project is expected to launch in March 2013.

PBSCwill have to wait to receive a part of the revenues from its contract with New York.

Cash shortage

PBSC has had to ask some of its suppliers tohold off on getting paidsince theMontreal company lacked liquid assets to pay its bills.

"I recognize the co-operation and participation of all of our suppliers who recognized that we had to respond to an acute need," Plamondon said.

Plamondon said he also takes a part of the blame for the technology let-down.

"Mea culpa, because we shouldn't have found ourselves in this situation and [we should have] taken measures to assure we were able to deliver," he said.

Plamondon saidPBSCcontinues topay backits $37-million loan to Montreal, but adds that the uncertainty of the company's future makes potential clients harder to come by.

The company is currently attempting to sell some of its assets outside of Montreal.

"In thecurrent context, where every decisionbecomes apolitical debate... we are 100times better off saying, look, we'll stop this adventure. Sell the company," Plamondon said.

Unavailable $60 million

PBSC hit another financialhurdle in recent months.So-called factoring capacitythat PBSC was expecting to get from the National Bankwasnotaccessible for the project launching in New York. Factoring allows a company to assign some of its accounts receivable to a lender in exchange for cash up-front.

The $60 millionin factoring was part of the $108-million financial planguaranteed by the City of Montreal in 2011.

According to PBSC, the National Bank wasreluctant to provide the financingbecause the company's history withits New York client was so short.

"It was a surprise, because during negotiations for the financial package with National Bank, the $60 million in factoring was destined to be used on the New York contract if we had won it," said Michel Philibert, communications director for PBSC.

Members in Montreal

In an Augustreport,PBSC said ithad 49,227 Bixi members in Montreal.

The company has often said it needed 50,000members in order to remain financially afloat.

Philibert confirmed, however, that the number of users has declined over the last month.

"The Bixi membership is not fixed and varies all season long. Currently, our membership holds about 42,000 users," he wrote.

Hesaid thePBSC always sees a decline of 15 to 20 per cent at the end of July during the membership renewal season.

"We then work to gain back what we lost through campaigns, such as the ones we did with the STM, Groupon and an early-bird membership toward the end of the season."