GEORGETOWN, Conn. (AP) _ Joe Montgomery doesn't backpedal when it comes to justifying the expense of the bicycles he makes.

Montgomery is the founder and president of Cannondale Corp., which builds stylish, aluminum-frame bicycles that can cost more than $1,500 apiece.

''We're in the Mercedes-Benz, BMW, Porsche business,'' he said. ''We have always manufactured a high-end, high-value product ... Our objective is to produce the best value.''

Montgomery, 46, was an investment banker in New York following the sporting goods industry when he decided to launch Cannondale in 1972. He found the bike industry attractive because it showed a steady growth of about 8 percent a year since the 1930s.

''I felt if somebody got in there and showed some imagination and applied some businesss principles that they could build a company,'' Montgomery said.

Today, Cannondale makes biking clothes, shoes and other accessories, as well as 14 styles of bikes including racing, touring and all-terrain models. The least expensive bike costs Cannondale at least $300 to make, Montgomery said. The retail prices range from $450 to $1,550.

Confident in its quality, the company will replace any damaged frame for $175. The many special features include hand-painted finishes and hand-made frames initialed by their makers. Experts rate the bikes among the best made in the world.

Montgomery refused to give specifics of the privately held company's finances, but said Cannondale sold more than 50,000 bikes last year, when industrywide sales topped an estimated 12 million bicycles and $1.8 billion.

Montgomery also said company sales have increased 30 percent annually since 1983. The company's sales volume places it among the nation's top 20 bike makers, according to the Bicycle Market Research Institute in Boston. Some estimate the company's sales at about $30 million last year.

The company's first location was in a small studio atop a pickle factory in the Cannondale section of Wilton in Fairfield County. Montgomery opened shop with $60,000 borrowed from a local bank. The company name came by chance after an associate of Montgomery's saw a Cannondale sign on the village railroad station and used the name to order a telephone.

The company's first product, a two-wheel trailer for bikes, also came by chance. Montgomery got the idea for it after seeing a biker struggling to pedal up a steep hill while wearing a heavy backpack.

''He looked like he had just crossed the Sahara Desert, and I reflected on the fact that if that had been me and I had to carry that much stuff on a bicycle, I would transfer that and build a little trailer for myself,'' Montgomery recalled.

He fashioned a prototype for what became the ''Bugger,'' the two-wheel trailer the company still sells, and Cannondale soon had its first, limited success.

''We thought we were going to knock them dead with this trailer, but it was not enough to support the company,'' Montgomery said.

Cannondale exanded its product line to include bags that attach to bicycle seats and handle bars. The accessories hit the market just as the Arab oil embargo in 1973 led to a surge of bicycle purchases nationwide, and Cannondale's sales took off.

The surge was short, however. By 1975, the bike rush ended, and the numbers of bikes sold industrywide fell to 7 million in 1975.

Cannondale's sales were cut in half and the company faced $250,000 in debts. But rather than give up, Montgomery continued with the support of dealers who trusted the quality of Cannondale's products. The company slowly built to annual sales of around $8 million.

Montgomery, meanwhile, continued to harbor a dream of building his own bike, and in 1982 the dream was realized. During that year, Montgomery received a letter from an engineer at Electric Boat, the submarine shipyard in Groton, Conn. The engineer, David Graham, wrote about his plans for an all- aluminum bike. Montgomery met with Graham, then 25, and hired him.

One year later, the first Cannondale bike was rolled out. The design, using wider tubing than on typical steel-frame bikes, gave the Cannondale great strength.

The design also required Cannondale to manufacture most of its own hardware at its plant in Bedford, Pa. The company continues to make about 95 percent of its bike parts in the United States, Montgomery said.

The first bike was well received. About 6,000 of the original touring bike sold that first year.

''We used a dealer network that had been established with our other products,'' Montgomery said. ''We had a good reputation and they trusted us.''

Montgomery gives credit for his company's success to his 250 employees, who are treated to an open-minded style of management. Flannel shirts, hiking boots or jogging outfits are the common attire at company headquarters, a practice that once led a visitor to believe she had stumbled into an athletic club.

The employees set their own hours, participate in a profit-sharing plan and are provided with recreational facilities. A new corporate office under constructing in Goshen, in northwestern Connecticut, will be equipped with a swimming pool, a basketball court, weight rooms and a jogging trail.

''Our people have a job to do and they know what their part is. We expect them to get their job done,'' Montgomery said. 'Our people are involved. They believe in what they do. That's the reason we're so successful. I tell our people, 'If you're not having a good time and if you don't enjoy what you're doing, then you should go someplace else.'''

End Adv Weekend Editions March 14-15