Scott Sports embroiled in bizarre “power struggle” as sacked CEO Beat Zaugg claims he’s still in charge

Beat Zaugg, who has served as Scott Sports’ CEO since 1998, has claimed that he’s still in charge of the American bicycle, winter equipment and sportswear company despite its parent company’s decision to fire him. The sacking has led to a bizarre power struggle, which has resulted in Zaugg questioning his successor Kim Juwon’s credentials to lead the brand in the European bicycle market.

The immediate termination of Zaugg from the role of CEO was announced last week with full support from the Korean company Youngone, which took over Scott Sports in 2015 after a 50.1 per cent buyout of shares. It has since financed much of its growth in the international market.

It was also announced that Kim Juwon, who has over 17 years of experience in investment banking and was head of growth strategy and mergers and acquisitions at Youngone, as well as being a member of Scott’s board of directors, will be taking over as the new CEO. He would be advised by two industry experts from Germany and the USA with many years of experience with Specialized, Accell Group (the owners of Raleigh) and Focus & Kalkhoff Holding.

The decision, the company said, was taken to “refresh Scott's development to become a world-class manufacturer in bikes and other outdoor sport categories”.

Scott Sports’ press release announcing the change in CEO said: “The board of directors of Scott emphasizes that the long-standing commitment of majority shareholder Youngone to Scott remains central and is not called into question.”

However, what seemed to be a routine leadership change at the organisation at the apparent tail-end of troubling times in the bike industry has been thrown into jeopardy following staggering claims from an unamused Beat Zaugg, who’s the second-largest shareholder at the company.

Beat Zaugg, former Scott CEO (screenshot, YouTube: Fribourg Development Agency)

“This announcement was made to destabilise the company and its employees,” Zaugg told Bicycle Retailer News on Monday. His claim is that the announcement had been made via a PR agency that works for Scott's majority shareholder — Korea's Youngone — not Scott Sports, and that the dispute is born of a “culture clash” between Youngone and the company.

“I am still standing in this power struggle,” he said. “Youngone’s financial support is based on the fact that, as everyone knows, stocks of consumer goods are generally tight. It doesn’t matter if industry consultants will support the announced interim successor Juwon Kim or not — Kim himself would have no idea about the European bicycle and outdoor market.”

He added that similar to many major bike brands, Scott is facing challenges in the current environment. “Like everyone else we have too much inventory, although we are doing a little better than most in Europe,” he said.

> Dirty Deeds Done Dirt Cheap: Bike manufacturer Scott loses trademark case against late AC/DC singer’s estate

Last December, Youngone, a supplier to brands including Patagonia, Adidas, Lululemon, Outdoor Research, and The North Face, with factories in Korea, Bangladesh, China, Vietnam, and Thailand, announced a 150 million Swiss francs (£131 million) loan to Scott Sports for additional liquidity.

However, according to Zaugg, the need for the loan arose because Youngone had “destroyed our banking relationships”.

He said: “(Youngone) prefer we are on their infusion… Although we had other ways to finance, they didn’t let happen. They are always saying ‘We have been so helpful.’”

Zaugg conceded that Youngone controls a majority of the board, but said the board did not terminate him correctly. “So far they did it wrong,” he said, albeit without much elaboration. “This has to be my secret for the time being.”

He also concluded that Youngone’s announcement is going to put a “strain on the cooperation between the well-established Scott team and European independent bike dealers”.

“The fact that they found out about the Korean parent company's decision from the press is also something that is not exactly conducive to Scott’s values and our European ideas of management,” he said.

“I regret the announcement published by Youngone without being informed in advance. The Scott team would have preferred it if majority owner Youngone had continued to place its trust in them in the current situation and let them use their many years of experience and well-established IBD partnerships.”

It’s been reported that Zaugg intends to contact the Scott board sometime this week.

Last year, Scott Sports found itself in the middle of another peculiar battle, after legendary  AC/DC frontman Bon Scott’s family sought to register his name as a trademark for merchandise, including a line of clothing, sunglasses, and bags.

However, Scott Sports contested the application, claiming that the ‘Scott’ trademark was too similar to their own and could potentially lead to “customer confusion”, ostensibly between their range of aero bikes and wallets bearing the name of a hard rock icon.