The P&WV Hi-Line

[PWVJer]

Here is just another reason why several P&WV (all-scales) & other
related projects (MTR,NKP, W&LE, WM etc.) are now on a "long-hold-time-frame" or
cancelled completely!


...hitting the problem right on the nail head. Here is a letter from Rapido Trains.

Copy and Paste---------------------------------------------------

This situation applys to EVERY toy train company...we didn't just make this up!

If there is a common theme throughout this newsletter it is that
"stuff has been delayed." We are not the only ones. Most model train
manufacturers have experienced production delays, and here is why.

In January I broke the news on the CanModelTrains forum that another
large model train factory in China had shut down, forcing 3000 people
out of work. Whatever your beliefs may be about globalization, nobody
wants to hear that 3000 people lost their jobs just before a big
family holiday. This was just the latest event in the ongoing saga of
manufacturing model trains in China .

A couple of years ago, Sanda Kan was purchased by Kader Holdings (the
Chinese company that owns Bachmann Trains). Sanda Kan was the largest
supplier of model trains in the world, and most of the trains made by
North American and European manufacturers came out of Sanda Kan 's
many factories in Guangdong province, China .

After initially telling their clients that nothing would change, Kader
decided to dump the vast majority of their customers. Suddenly, about
50 model train companies around the world had no factory to produce
their models. As you can expect, a form of panic ensued as everyone
was scrambling to find a supplier. Our industry is what you could call
"cash poor." We manufacturers make money, and then invest it in new
tooling. That means that for all but the biggest manufacturers, a
delay in production can cause serious cash flow problems as we don't
have piles of cash lying around.

The result of Sanda Kan booting out their customers is that the
existing model train factories found themselves with an onslaught of
new clients desperate to get their models back into production. These
clients also needed to start new projects to ensure that they don't
run out of cash in the long term. No model train factory was, or is,
anywhere near the size of Sanda Kan. The demand outstripped the supply
- by a huge margin

The industry is still recovering from the eviction of Sanda Kan 's
clients. The January closure of one of the largest remaining suppliers
in the industry will only add to our collective problems. This closure
was caused in large part by the fact that model railroad price
increases (averaging 10%-25%) have not kept pace with cost increases
in China , and it is often difficult for the Chinese suppliers to stay
in business while meeting the demanded price point from their major
North American clients.

Our industry is currently tied to Chinese production, as southern
China has developed the special skill set required to produce model
trains. Bringing the manufacturing back to North America would cost
even more due to very high start up costs and higher overhead, and
there are no reliable model train factories set up yet in places like
India . So I think we're looking at tough times ahead in our industry:
more delays and even larger price increases.

..and some fans still wonder why this election-cycle is
important!

[jayrod]

All true. I've been watching this unfold for a couple of years, now. I first became aware of it with Lionel's delivery problems in 2009/10. I wondered about the effect of having to depend on your competitor to supply your product.

Also correct is with the model railroad industry basically a cottage industry, with all the CNC machinery required, no one has the deep pockets to build a new factory even if you built it as an independent co-op.

I'd guess that even if you approached existing molding companies that have some of the necessary equipment, the volumes would be too low to turn out profitable products at not-too-ridiculous prices.

For now, we're lucky to have what products we have at the higher prices we're paying and the extreme lead times.

It will be interesting to see how it all shakes out in the long run.

jayrod

[PWVJer]

Intermountain Hobby. The new twin offset 60-ton hoppers.
IM folks were first told this Oct. 2012 delivery. A good Holiday
Sales boost date?
Now, pushed back, till' March 2013, folks, "in the know"
tell us Good Luck with that date as well!

Both Atlas & Athearn have real interest in FM H-20-44's.
As we understand it, drawings/artwork & market plans
were in the works. However, based on all the Asian-Factory & Economic issues these
and many other projects have been shelved.

Even the High-End Brass Importers (Overland/Division Point etc.)
who work on a pre-order-sales are backing-off many new projects.

Bottom Line: Scale Hobby fans are going to pay a lot more $$$$
and see an ever shrinking "new product line" market, for at least the
near future.

[PWVJer]

...have a little time to post. Ran across some Large-Scale news & had to post.
Could this be the start of a trend to move additional scale model productions(O, S, HO, N)
back to Europe or even to the USA????

"A major problem with producing in China. Once you set up buisness over
there you will basically never get your tooling back again. This is a well known
fact. That is why buisness over there which feel the shipping prices are no
longer worth producing in China can't move because they are trapped.
They will get "Lost" (Not Accidentally Either) or end up in a "Chineese
Inspection" before release where the tooling basically will sit around until
they feel like getting around to looking at it which could be days, months or
years."

Also check out how much the Chineese "Import Tax" is compared to the USA. The
"Import Tax" is very high.

"As far as we know, the only LGB items previously, pre-2006, manufactured in Korea were Lehmann Toy Train items

Before 2006, a lot of the LGB US prototype items were moved to China for production
to keep the costs lower to compete better with USA Trains and Aristocraft.
Marklin has been trying to move the production that is in China
out of there but are not having much luck doing so.

So right now, LGB products are manufactured either in Hungary or China depending on the products."

The Marklin/LGB could possibly be sold to another company called "Simba-Dickie" which is a German toy maker company.
Simba-Dickie has been going over the "Marklin" books and is in negotiations.
Also in consideration and possible part of the sale would be LGB and Trix. The sale negotiation is expected to be complete by Febraury or March.

Marklin was founded in 1859 then ran into bankruptcy problems in 2009 right after that purchase of LGB which also went bankrupt. In 2011 Marklin turned a profit of 12 million euros.

Simba-Dickie claims to be the biggest German toy manufacturer
and has bought out other toy manufactuers such as Shuco.

We could see a new owner for Marklin and LGB in 2013????
This is "NOT" a rumor and has been validated.

[jayrod]

Another really valid point. The tooling (molds) and the engineering to design them are the most expensive and vakuable pieces of the puzzle. Even though most agreements to produce state (or should state) the ownership of the tooling, good luck getting it back even though you paid for it (possesion is 9/10 of the law). Things just don't work the same way elsewhere as they do here.

Sure would be nice to bring that production home...

jayrod

[bowestym]

There was an interesting talk at the Naperville RPM meeting by ExactRail. The owner had lots of money and has decided that he wants to move all of the ExactRail manufacturing to the US. They have already bought several high end injjection molding machines.

I believe that Bowser and Accurail also do their manufactiuring in the US. Tichy may also manufacture in the US but I'm not sure about them.

Larry Kline

[Rich_S]

At one time Athearn was 100% made in California. The last I heard what we once referred to as Athearn Blue Box, which is now referred to as Ready to Roll are still manufactured in California along with the former Roundhouse line.

As far as the molds situation, I sent a letter to Atlas several years ago when they stopped dealing with Austria and started dealing with Chinese manufactures asking two simple questions, why are second and third runs the same price as first runs? and why are all runs limited editions? Their answer basically was; a limited run was because they had to pay up front for the entire run, which at the time was hovering around $5,000,000 if I remember correctly and secondly, they told me the molds were destroyed after each run, so for additional runs, new molds had to be created.

The thing I often wonder is where is the break even point? At what point is is cheaper to create high quality models here in the USA?

I'm just hoping like ExactRail has figured out, the advantage of dealing with China or Europe is disappearing and hopefully more manufactures will follow suite and once again produce high quality models right here in the USA. I guess only time will tell?
_________________
Regards,
Rich S.

[jayrod]

That they would destroy the molds after a run never made sense to me - I've heard of that before. With CNC machining and all, maybe it has become less expensive to recycle the metal and reproduce the mold when needed. Then you wouldn't need to worry about theft and all the international legal crap that would encompass. But then, theft of software is way easier to acomplish than stealing some big, heavy chunks of metal - a teeny thumb drive you can put in your pocket versus a truck. Naw, it still doesn't make sense.

Both Round House and Athearn started out as small mom & pop style factory operations in the L.A. area - not far away from each other - and they did thier own casting. I don't know if they sub'd out the mold making but they probably used them until they wore out and couldn't be repaired any longer. That tooling was most likely the highest value line item of both companies net worth.

jayrod

[PWVJer]

A hi-line fan sent this TO link:
http://www.trainorders.com/discussion/read.php?3,2932216

well, this is only the start folks, there is much more trouble(s)
brewing on the Asian-horizon for all your little choo-choo imports.

[jayrod]

Whoa, that's quite a rant fest. Kadar bought Sanda Kan about three or four years ago, I think, so this really isn't a new problem. Suppliers probably cringe every time they publish any "expected" dates knowing that there are no hard delivery dates. They aren't "promised" dates. Two years ago it seems most items were running about 9 months late from the factories with delivery promises made and broken repeatedly. The vendors are just as frustrated, if not more, than their consumers. When you pre-order, just know that no one knows when you'll get it, if at all. Sadly, that's the current state and it's going to take big wads of cash to fix that a lot of the suppliers don't have. Let's hope our favorite suppliers can hang on through this mess.

[Rich_S]

Isn't it funny, even a company like Athearn has products produced over seas. I think it's only the Genesis engines that are produced over seas, but I'm not 100% sure on that. Con-Cor is another example, I believe they produce all of their rolling stock in their Tucson, Az factory, but all of their locomotives are produced over seas. The worst example of these delays I've personally experienced is from Intermountain. Their latest "N" scale caboose was announced in 2011 and per the latest announcement, will not arrive until May 2013, it was suppose to arrive May this year. I still wonder just how much longer companies like Atlas and Athearn will put up with these constant delays. They paid up front for these products and every delay just ties up their money which may delay a new project they have on the drawing board.
_________________
Regards,
Rich S.