Drowning In Debt, Bike Sharing's Bixi Files For Bankruptcy
RENEE MONTAGNE, HOST:
Montreal was the first city in North America to bring in bike sharing. The concept is simple. You rent a bite from a giant rack in one location and return it to another rack somewhere else in the city. Now Bixi, the Canadian company behind bike sharing programs in London, New York and Chicago, has filed for bankruptcy.
Montreal Gazette transportation reporter Andy Riga is reporting on the Montreal-based company's financial woes and what it means for the future of bike sharing.
ANDY RIGA: Good morning.
MONTAGNE: What exactly was the city and its then mayor back in 2009 thinking when Montreal got involved with Bixi?
RIGA: You kind of have to go two years back - 2007, when the city and the mayor wanted to improve transit and transport around the city. And one of the items on that list was bike sharing. The mayor and the city were convinced basically that we could develop a really robust kind of system. It would be very solid and we would sell it to other cities around the world and that would finance bike sharing in Montreal and it wouldn't cost taxpayers a cent. But, of course, it didn't work out that way.
MONTAGNE: What happened? When did things start falling apart? And what hurt Bixi so much?
RIGA: Within a year the city's auditor general started being concerned that it was spending way too much money and it was going to end up costing taxpayers. Then in 2012, it got embroiled in a legal dispute with the developer of the software that kind of runs the system. Bixi decided OK, fine, we're going to develop our own new software that'll work in cities like New York and other big cities where we sell it. And there were all kinds of problems. Several cities had to delay their systems. Customers were angry and it kind of started the ball rolling down the hill kind of.
MONTAGNE: When Bixi started having glitches and other bad experiences with its software, that really hurt it, right? Because it had sold the system to cities like New York and Chicago, who then got mad, but they also stopped paying millions of dollars for this system that they owed Bixi.
RIGA: Right. New York owes $3 million, Chicago 2.5 million almost. And New York also says it wants damages for software delays to the tune of I think about $11 million.
MONTAGNE: The city of Montreal ended up giving a loan and a line of credit - a great deal of money - to Bixi to keep it, what, going?
RIGA: To keep it going and to kind of help with the cash flow through the difficulties, is what we were told. That happened in late 2011. The city said, you know, it's just a temporary thing. We don't want this company to go into bankruptcy because we've got a good thing going. Look at all these big cities, you know, our interest - London has got it. So the city into that $37 million loan.
MONTAGNE: So Montreal is now on the hook for about $37 million as Bixi teeters on the brink of bankruptcy?
RIGA: Correct. What happened this week is the mayor - we have a new mayor - who came in in November and - but what they tried to do is sell the international arm again, the second time now that they were close to selling it and then the buyer - we don't know who - took a closer look at the books and stepped away from the deal. So - and when that happened this month, the new mayor said, OK, we've got to cut the cord here. He forced it into bankruptcy protection and so it's now trying to restructure, but it seems like we're - the city of Montreal is going to be stuck with maybe tens of millions of dollar loss on this deal.
MONTAGNE: Well, if in fact Bixi fails as a company, what does this mean for systems that it has sold to other cities like New York, Chicago? Can they survive if Bixi doesn't?
RIGA: That's hard to say. Bixi says yes and New York, I think, said it doesn't foresee any problems. I mean they own the bikes and the systems. The problem is the software, and these cities have spent a lot of - millions of dollars on these bikes and bike stations, and presumably won't want to just kind of throw them aside and start over. Although some people in New York are suggesting that.
MONTAGNE: Andy Riga is the transportation reporter at the Montreal Gazette. Thank you very much for joining us.
RIGA: Thanks for having me.