Hi Guys; This is a copy of a message I had recieved from Tom Tomblin, President of CMT / Canadian Model Trains, explaining what is going on with all the over-seas production delays for model trains.
I'd thought I'd pass it on and open up a bit of a debate. Maybe it's time to shift manufacturing back to local factories and looking into 3d laser production methods? Have fun - David


PRESIDENTS NOTE - JULY 23, 2012 - INDUSTRY UPDATE


Hello David

I would like to give you an update on the state of the model train industry.

Industry Update

The hobby is in a manufacturing turmoil, due to a lack of production capacity now. There is no question; you have seen the delays from virtually all manufacturers. Pick any manufacturer’s name and their products are delayed. Why you ask? There are several reasons.

The primary one is that the largest factory which produced models for a wide variety of manufacturers has shut its doors to those manufacturers. After it had been bought and sold several times, it was bought out by the Bachmann group and now produces models solely for Bachmann. This was a huge production facility, about 10 times the normal size of a typical Chinese factory. Or think of it as 10 factories operating under one name.

There is no other "big" factory, equivalent in size. As a result, many manufacturers have been forced to scramble and find another factory that can produce their models. However, there is no other "A" size factory, the next size is "B" size, 1/10th of the "A" size.

If you can imagine the size of China’s manufacturing sector, you might well say to yourself there should be lots of factories. There is, they produce lots of electronics, such as games, toys, appliances, telecommunications, etc. However, model trains are way down at the bottom of the list, as it is such a small market.

Believe it or not, there are very few companies capable of model train production. There are about three "B" size main factories and some smaller "C" size factories.

Then you have the issue of complexity. Our hobby products involve tool and die making, electronics, motors, plastic extrusion, assembly, and painting. All of this has to be done with fine tolerances. All of these areas require dedicated areas and skilled employees. Compare all of that to an example, a “Barbie doll”, with much greater tolerance for error.

The result to you the modeler is that your promised future models have been delayed.

As dealers, we and all other dealers are the recipient of modelers’ frustrations, as we are their direct contact. I can certainly understand and empathize with modelers’ frustrations. We have the same frustration, except it is multiplied a hundred times or more. We, as dealers and distributors, plan on models delivered in future months for our cash flow planning, staffing and other commitments. Every store, distributor and manufacturer is experiencing the same problems. There is no immediate fix or date when “normalcy” will return to the hobby.

Another issue affecting production is working capital, or more specifically, the lack of working capital, both in North America and in Asia. The financial crisis of 2008 has hammered businesses around the globe. Working capital has dried up for many manufacturers. In foreign countries, a number of manufacturers may be taking funds from one customer and applying them to another, they are “robbing Peter to pay Paul” to stay in business.

I know of a number of our North American importers, with manufacturers overseas, who are in this position of waiting, and waiting, and waiting. They have supplied funds to their overseas manufacturers for research and development, tooling, raw materials and production costs, and are waiting on receiving a pre-production sample. They may even have approved the sample and are waiting for production to occur, but they are still waiting. It is out of their control.

Now is not the time to berate manufacturers for not delivering products to you. It is a global issue.


As one of the major dealers in North America, we have a large number of reservations. We are also a distributor and a manufacturer (with our own Pointe St. Charles caboose project). We like you are experiencing the frustrations of delays.

The only thing we can say to you is to be patient. Take care.

All the best,
Tom Tomblin, President,
Canadian Model Trains Inc.

Capitalism at work, the guys who own Bachmann suck everyone into their production facility.

Then tell the competitors to find somewhere else to make their competitive product.

Ahh, capitalism, Darwinism at it's best. Survival of the fittest.

Harold

You would think this would encourage the companies to bring the manufacturing back to North America. The quality control issues had gotten so bad that I haven't bought anything made in Asia in over 4 years now and I never will again. If the companies want my hobby $$$$$$ they will make it here.

Where are they going to manufacture anything in the US?

The US manufacturing base was gutted in the '90's by "vulture" capitalism, all the "moneychangers in the Temple".

I was in the injection molding business in the '90's when it was leaving, that is all gone now.

Harold

It's worth pointing out that Kadee has continued production in the US, bringing out models at prices and quality comparable to China. Accurail also has a market niche comparable to the old bluebox Athearn and does its production in the US. The laser wood and hydrocal structure manufacturers are all US-based. It's also worth pointing out that based on the presentation a VP of ExactRail made at several prototype modelers meets this year, Chinese prices had been rising to the point that their margins were squeezed, resulting in their decision to go direct-only.

I don't think the problem is exclusively capacity, and in fact the ExactRail guy had nothing to say about capacity, it was all costs from his viewpoint. I would guess that, as with other industries, the economics may be swinging back to allowing more production in the US. I would also guess that the obstacles there would include lack of working capital to move production back and open a new facility, and the various tax and regulatory burdens that inhibit hiring a new workforce. This would also apply to any new startup that might consider US based production.

I think business decisions by US firms also play a part. The line of US-made freight cars from the companies that were E&C Shops/LBF/Huberts were quite good, again like Accurail an updated and somewhat better-quality version of bluebox Athearn, but everything I've heard suggests that their failure came from things like overstaffing and lack of budget discipline, not foreign competition.

Right offhand, I think someone could make a go at a bluebox quality product line produced in the US, with quality equivalent to the Bachmann S-4 and Accurail, that substantially undercut the price level of what's coming in from China. The obstacles probably include regulatory and tax burden, lack of working capital, and business acumen. But it could be done.

Tyson Rayles Wrote:You would think this would encourage the companies to bring the manufacturing back to North America. The quality control issues had gotten so bad that I haven't bought anything made in Asia in over 4 years now and I never will again. If the companies want my hobby $$$$$$ they will make it here.

Mike,That won't happen any time soon thanks to zoning laws,EPA,taxes,more taxes,NIMBYS,more government red tape,more local red tape and more taxes,PETA,Save the blank groups and the lack of skilled workers in the plastic model industry.

Could it be done? Yes,but,it would be costly.

KD,MT and Accurail are well establish manufacturers.

That's O.K. Larry, they can take their sweet time, because in the meantime it's saving me a boatload of money!

Yellow is not an easy color to read on gray.

Counterbalancing the regulatory and labor problems in the US, I believe there are problems with corruption in China, which might well interfere with the ability to build larger plants there. Also, I've read that without US-style accounting standards, it's easier for companies to get in hot water, which seems to be one factor that caused the A-size plant to go under and be acquired by Kader. I don't think China has ever been manufacturing heaven, but for 20 years or so it was very cheap. No longer. In my lifetime, offshore manufacturing has moved from Japan to Austria/Italy/Yugoslavia (AHM-IHC), briefly Brazil, to Korea to China. Over time, nobody's been frightened to try something new -- I remember the first tries at Korean brass. So how about India, Indonesia, Viet Nam, Mexico? I think some sort of shift is inevitable.

railohio Wrote:Yellow is not an easy color to read on gray.

For some, it is yellow on blue - it depends on your forum settings. But if people would like to quote a letter or whatever, you can always use the "quote" function above.

Like this:

CNJ774 Wrote:Hi Guys; This is a copy of a message I had recieved from Tom Tomblin, President of CMT / Canadian Model Trains, explaining what is going on with all the over-seas production delays for model trains.
I'd thought I'd pass it on and open up a bit of a debate. Maybe it's time to shift manufacturing back to local factories and looking into 3d laser production methods? Have fun - David

or this. Note that you can modify the quote code for people who aren't even members here, simply by using the formula {quote="ANYNAME"}, but with square brackets instead [ ].

Canadian Model Trains President Wrote:PRESIDENTS NOTE - JULY 23, 2012 - INDUSTRY UPDATE


Hello David

I would like to give you an update on the state of the model train industry.

Industry Update

The hobby is in a manufacturing turmoil, due to a lack of production capacity now. There is no question; you have seen the delays from virtually all manufacturers. Pick any manufacturer’s name and their products are delayed. Why you ask? There are several reasons.

The primary one is that the largest factory which produced models for a wide variety of manufacturers has shut its doors to those manufacturers. After it had been bought and sold several times, it was bought out by the Bachmann group and now produces models solely for Bachmann. This was a huge production facility, about 10 times the normal size of a typical Chinese factory. Or think of it as 10 factories operating under one name.

There is no other "big" factory, equivalent in size. As a result, many manufacturers have been forced to scramble and find another factory that can produce their models. However, there is no other "A" size factory, the next size is "B" size, 1/10th of the "A" size.

If you can imagine the size of China’s manufacturing sector, you might well say to yourself there should be lots of factories. There is, they produce lots of electronics, such as games, toys, appliances, telecommunications, etc. However, model trains are way down at the bottom of the list, as it is such a small market.

Believe it or not, there are very few companies capable of model train production. There are about three "B" size main factories and some smaller "C" size factories.

Then you have the issue of complexity. Our hobby products involve tool and die making, electronics, motors, plastic extrusion, assembly, and painting. All of this has to be done with fine tolerances. All of these areas require dedicated areas and skilled employees. Compare all of that to an example, a “Barbie doll”, with much greater tolerance for error.

The result to you the modeler is that your promised future models have been delayed.

As dealers, we and all other dealers are the recipient of modelers’ frustrations, as we are their direct contact. I can certainly understand and empathize with modelers’ frustrations. We have the same frustration, except it is multiplied a hundred times or more. We, as dealers and distributors, plan on models delivered in future months for our cash flow planning, staffing and other commitments. Every store, distributor and manufacturer is experiencing the same problems. There is no immediate fix or date when “normalcy” will return to the hobby.

Another issue affecting production is working capital, or more specifically, the lack of working capital, both in North America and in Asia. The financial crisis of 2008 has hammered businesses around the globe. Working capital has dried up for many manufacturers. In foreign countries, a number of manufacturers may be taking funds from one customer and applying them to another, they are “robbing Peter to pay Paul” to stay in business.

I know of a number of our North American importers, with manufacturers overseas, who are in this position of waiting, and waiting, and waiting. They have supplied funds to their overseas manufacturers for research and development, tooling, raw materials and production costs, and are waiting on receiving a pre-production sample. They may even have approved the sample and are waiting for production to occur, but they are still waiting. It is out of their control.

Now is not the time to berate manufacturers for not delivering products to you. It is a global issue.


As one of the major dealers in North America, we have a large number of reservations. We are also a distributor and a manufacturer (with our own Pointe St. Charles caboose project). We like you are experiencing the frustrations of delays.

The only thing we can say to you is to be patient. Take care.

All the best,
Tom Tomblin, President,
Canadian Model Trains Inc.

So no matter what forum colour scheme you use, if you use the quote function, it should come out legible to everyone.

Andrew

How well I remember the days - when there wasn't all that much "availability" of model railroad products - or as I call it, the days of Model railroading, the days of scratch building just about everything. My now limited income, makes RTR, and even most kits, an "out-of-the-question" option. These are the days when, the things I had to learn as a young hobbyist, are now some of the most valuable resources that I have.
The other benefit of being in this hobby for so long is, I have a large enough collection of unbuilt kits, that the one asset I may not have enough of, is time.
All of the lumber for these two scratch built bridges, built in 1968, came from an old Navy packing crate, cut to size with a radial arm saw, using a "cabinet makers blade". ( no kerf - 'A tooth set that has an alternating, left-right sequence' - ) No, I can't use that for HO 1 X 6, 2 X 4, 2 X 6, but anything larger is possible, and was done.
[attachment=11739]

I guess the ultimate "definer" here is: Do I want to have?, or, do I want to do.
Personally, I get more satisfaction from the doing, than from the having. But then, I am 'old'.

Awesome bridge Pete!

May be the expected production predominance of Bachmann will bring us back to the good old blue box days (I am too new in the US model railroad hobby to have they era experienced).
If Bachmann floods the market with engines like the Geeps we may take them as a base to build what ever skill, time money etc. permits. That may be helpful to shift the hobby from collectors/consumers/buyers back to builders. All the smaller US companies supplying the add on details would become more important and stronger than today.
I am extreme pleased and satisfied with my perfect running and finished expensive Atlas models but I am proud of my Corman Geeps... just my two cents

Pete's right, we've become too interested as a hobby in RTR. Previous generations did everything from scratch. I plead guilty to this.

I think one of the mistakes all these Co's made was to stop making the car kits (blue box, proto,round house,etc) that's what I look for when I go to train shows or hobby shops. We all build building kits , scratch build or kit bash but Co's said know one what car kits anymore so most stop making them,Why? I like the Exactrail rail cars, but they what to charge you the same for the kits as for the RTR cars, Why? just my 2 cents