Struggling interactive fitness Company Peloton, who are flogging their bikes in Australia for up to $3,600, has been accused of covering up rust problems with their premium machines and then on-selling ‘rust bucket’ bikes.

UK publication The Financial Times has revealed that the business, whose products have been under investigation by US Federal authorities, resorted to “project Tinman” in an effort to conceal corrosion and rust in their pricey pedal machines whose interactive screens were down overnight due to a major online outage that prevented customers accessing their online profiles.

Peloton at David Jones

The FT claims that in September last year, staff at Peloton warehouses, which receive high-end bikes, originally manufactured in Taiwan, noticed that paint was flaking off some of the exercise machines.

The cause was a build-up of rust on “non-visible parts” of the bike — the inner frame of the seat and handlebars.

Desperate for stock during COVID 10 lockdowns, it is said, instead of returning the bikes to the manufacturer, executives hatched a plan to conceal the corrosion and sent the machines to customers who had paid between thousands to purchase them.

Four months before the first sighting of rust, Peloton had been pressured by the CPSC to recall 125,000 Tread+ products, each costing $4,300. The year before, the company issued a recall on 27,000 clip-in pedals, following reports of injury while cycling.

Two warehouse workers who handled bikes late last year claimed that many with “severe” rust were delivered to customers. One staffer sent the FT a photograph last week, suggesting rusted bikes were still arriving at one regional warehouse in the US.

It’s also been revealed that months before the first sighting of rust, Peloton had been pressured by the CPSC to recall 125,000 Tread+ products, each costing $5,900.

The year before, the company issued a recall on 27,000 clip-in pedals, following reports of injury while cycling.

Some of the 2,500+ staff who were recently laid off decided to expose the latest scam, which they have described as a nationwide effort to avoid another costly recall just months after the death of a child due to the design of a Peloton treadmill, which was eventually recalled much to the objections of Peloton management.

Internal documents seen by the FT showed that Tinman’s “standard operating procedures” were for corrosion to be dealt with using a chemical solution called “rust converter,” which conceals corrosion by reacting “with the rust to form a black layer.” Employees said the scheme was called Tinman to avoid terms such as “rust” that executives decided were out of step with Peloton’s quality brand.

Peloton has admitted that 6,000 bikes were affected.

Two warehouse workers who handled bikes late last year claimed that many with “severe” rust were delivered to customers.

An internal document read: “It is acceptable if you see some rust through the black layer as the severity of this rust is reduced using the rust converter.”

A former employee who worked at a Peloton call centre said the company declined to help some customers, even if their bikes had been rusted when they received them.

“Some of these bikes were delivered with rust and we weren’t allowed to swap them out,” the person said. “Those were awkward conversations because I had no leeway to make any exceptions.”

Peloton, which before last week had not publicly flagged the problem, said: “If we become aware that this specific issue has caused a problem for any member, we will replace the bike.”

Management claim 120 staff undertook “rigorous testing” on the devices to conclude the rust — which it described as “cosmetic oxidation” — had “no impact on a bike’s performance, quality, durability, reliability, or the overall member experience”.

Tinman procedures dictated that if the bikes failed to meet cosmetic standards, they were to be scrapped or turned into a “refurb.” But multiple warehouse workers have said these quality controls were often not followed in order to hit “unrealistic” sales quotas.

One current employee described their supervisor as “pissed” that they lacked enough specialists to take care of the issue. “We couldn’t keep sending them to our refurbish area. We just had to build them, to try to clear [the rust] off and send them out.”

Another worker said the secondary check would sort bikes into “sellable” and “non-sellable” categories.

He added that when Peloton was experiencing low inventories amid a supply chain crisis that made it hard for the company to keep up with demand, some workers felt pressure to reclassify “medium rust” bikes to “light rust” then clear them for shipment.

“It was all very subjective,” this person said. “It was framed as a ‘It’s either this or no delivery,’ which was a non-option from our management.”

Peloton said this was not company policy. “There was no direction by Peloton to reclassify or deem this inventory unsaleable and it is against Peloton’s policy and practices for Peloton to put in the market unsaleable inventory. If anyone did so, they were acting against the company’s policies and practices,” it said in a statement.

A visit to the Peloton web site reveals that Rust is not covered under the Company’s warranty policy.

They claim it’s up to Peloton product owners to wipe down their bikes to prevent sweat from causing corrosion.