Peloton, Pedaling Ahead of Crisis, Issues Safety Warning Regarding Its Treadmills

CEO John Foley Emails Customers with Tragic News and Important Precautions                       

3/18/21 – – Shareholders of Peloton Interactive, who saw their investment in the innovative home exercise company grow 350% in 2020, have been having a bumpy ride in the first quarter of 2021. The red-hot stock has declined by about 25% as COVID vaccinations and loosening government restrictions are returning our “stay-at-home” world to a more normal footing. Today alone, Peloton shares closed down 5%.

What happened?

Peloton CEO and Co-Founder John Foley issued a warning to owners of the company’s Tread+ treadmill (not the iconic exercise bike). The urgent communication was prompted by the recent death of a child involving a Tread+. While the market’s immediate reaction was understandably negative, I believe Foley’s proactive customer outreach is a positive sign of the company’s continuing maturation and commitment to consumer safety.

Transparency and openness are effective crisis mitigation strategies. Controlling your own destiny — driving the narrative — significantly lessens the opportunity for others to define you negatively as the world turns its attention to whatever challenge you’re facing.

Consider how much better it is for Peloton that we first learned about this tragic incident from the company — in the form of a safety warning — rather than from an attorney representing the family of the deceased child in the form of a media release announcing a lawsuit.

As we discuss in The Crisis Preparedness Quotient, reporters ask manufacturers three questions when covering an accident involving a consumer product: What did you know . . . When did you know it . . . and What did you do about it? It appears that Peloton has good answers to those questions. They’re doing the right thing by acting quickly to share what they know with families at risk. At the same time, they’re alerting the public and shareholders to a material risk the company is facing; litigation is almost certainly on the horizon.

Here’s how Foley’s email begins:

I’m reaching out to you today because I recently learned about a tragic accident involving a child and the Tread+, resulting in, unthinkably, a death. While we are aware of only a small handful of incidents involving the Tread+ where children have been hurt, each one is devastating to all of us at Peloton, and our hearts go out to the families involved.

While appropriately expressing concern and condolences, he defines the scope of the problem, assuring readers that the company is “aware of only a small handful of incidents” resulting in children being “hurt.” He does not dismiss the possibility that more incidents may come to light (“aware of” is legal language for “we’re not saying we know everything”), but gives some comfort to customers who may be fearful there’s a deadly defect in the Tread+ sitting in their family room.

Foley then encourages families to “review and follow all the safety warnings and instructions that we provide,” emphasizing:

Keep children and pets away from Peloton exercise equipment at all times. Before you begin a workout, double check to make sure that the space around your Peloton exercise equipment is clear . . . When you finish a workout on your Tread+, remove the safety key and store it out of reach of children and anyone else who should not be able to start the Tread+. 

While assuring readers that the company will learn from this incident, he suggests that any fixes will address “precautions,” not product defects:    

We are always looking for new ways to ensure that you have the best experience with our products, and we are currently assessing ways to reinforce our warnings about these critical safety precautions to hopefully prevent future accidents. 

Foley reaffirms the company’s focus on safety:

We design and build all of our products with safety in mind . . . We care deeply about your health and wellness, starting with your safety and the safety of your family. 

He provides concerned readers with a convenient channel for additional information and support:

Please reach out to our Member Support Team at 844-410-0141 or reply to this email if you have any questions or concerns.

Finally, Foley explains why he can’t be more specific about how the child died:

I hope you understand that out of respect for these families and their privacy, we don’t plan to provide any additional information about these accidents. 

In Chapter 12 of The Crisis Preparedness Quotient (“The Five Rs of Crisis Response”), we focus on the five elements of effective crisis response statements: Regret, Reform, Restitution, Reaffirmation and Recovery. Foley hits most of the bases. Restitution to the family of the deceased child (it’s hard to imagine, regardless of the facts, that there will not be any) will be determined by litigation.

So, I am impressed with Peloton’s proactive response, with one caveat: It’s impossible to accurately grade Peloton’s strategy without knowing the details of the accident. Hopefully for Peloton, its customers and its shareholders, this death was not caused by a product defect. If different facts were to come out in court, the harm to Peloton’s and Foley’s credibility would be devastating. The stock would fall by a lot more than 5%.

I don’t give investment advice. But I’m optimistic that Peloton is playing this straight, will settle with the family quietly and put this tragic incident behind them.

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