Dear Train Folks:
There has been a lot of discussion and concern as to whether the factory closings in China of late are affecting our planning or production. The answer is, always, but we are prepared. That's my job, to make sure we can weather the unexpected storms.
We do most of our manufacturing with Korean owned factories in Eastern China and Korea and one of our suppliers is run by a Chinese American. They have the expertice to make Brass and Aluminum models, but they are a bit expensive. And if you squeeze them too much for lower prices they will go out of business. So it takes some give and take to keep them solvent and in good fincial condtion.
That means sometimes you have to raise your prices to ensure the project gets done.... Period... We have been accused of this, but it is necessary.
We usually have 4 or more sources for our models and never load up one of them with too much or we risk what others importers are experiencing right now (too many eggs in one basket). You never know when there will be a decision to close a factory, you just have to be prepared. This has been going on since we started Sunset Models in 1974.
For example, in 1992-94 Williams was making the PRR S-2 Turbine with a small Korean factory called Hyodong. The factory was slow in producing and Big L cataloged the same engine from their factory in Korea, Samhongsa (used to be Sunset Models main supplier, then Lionel, then MTH, then out of business, resurfaced as TOP TRAIN, now closed).
Back to Hyodong... Williams let their LC expire since Hyodong was late in delivering and the small factory went bankrupt. Williams took their production to China at that point. The bank put locks on the factory door in Korea and put up the material for sale in Korea.
My father's builder contacted us and said he could offer a good price to the bank, get the materials and make the project for us. So we agreed and 3rd Rail was born... We finished the PRR S-2 Turbine, upgraded the gearbox, motor and sound system. The model was a hit and we continued to build 3 Rail models with this new builder for another 5 years. PRR I-1 and others.
Why do they go out of business so often? Mismanagement of funds, greed, dishonesty, poor planning, all of these contribute to their demise. We offer them stability, but in return we want stable prices and a flow of pruduct as well. It doesn't last long, they usually self distruct with in 5 years and we have to move on to another supplier. It has been this way since we started.
The big suppliers in China are a new phenomenon. They are well managed, lots of burocracy, some are direct to distributors like Bachmann of Kadarr. But when they fall, they take many other companies with them, that were dependent on their exellent engineering, low prices and easy financing. It never lasts very long. Labor prices are dictated by Gov here, and go up 25% a year. That is not sustainable. Most new laws are pro labor and anti business. So the factories at some point see no reason to continue and close. I see this trend continuing. One of our Korean builders is setting up in Manila. Now that is exciting news.
So every time I come to Korea and China, I talk to new suppliers, learn what is happening around us, keep my ears and eyes open for trouble and act accordingly.
We have many projects planned for the future. The schedules are a little uncertain. But what is certain, is that we will be around to produce these and service you in your hobby for many years to come.
Thanks for all your wonderful support over the years.
P.S. If you want to try your hand at importing model trains, don't send cash...
Regards,
Scott Mann
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