Rapido Trains Article

I found this article, not sure if it is old news:

Problems in China : The Inside Story

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.

Jason, Rapido Trains

Frankly, I don't see the cost of going to domestic production to be that much higher when one considers the "costs" that the industry is going through at present with production delays and poor quality.  Add to this the fact that political unrest/labor market changes in any and all countries that have significantly reduced labor advantages now will gradually dry up, and I think the better course would be to move to all domestic production (using robotics and CAD/CAM out thew kazoo, of course).  

But I understand the capital cost for equipment represents a considerable sum and that it will take time for Lionel, MTH, and others to find and commit that.  But I hope it happens.

Yes, not only is it old news but I and a few others have mentioned this post by Jason Shron. People should read it again though, as it answers many questions that often get asked about the manufacturer end of the hobby. Even though Rapido doesn't make any 3-rail trains, the issues he addresses are the same ones faced by the 3-rail train makers.

Atlas suffered dearly from the Sanda Kan upheaval and is still recovering. And it was trouble for Lionel too, as then Lionel CEO Jerry Calabresse publicly talked about. There is a reality to being a maker of model trains versus the make-believe world of building and operating a train layout.

In addition, there are the company presentations, interviews, TCA presentations, etc. where representatives from the 3-rail train companies often directly (and sometimes indirectly) answer many questions that come up on the forum.

For example, Lionel is hardly obsessed with fantasy and licensed trains. The reality is that these items make money for Lionel, which contributes to Lionel's bottom line. Which in turn, helps make it possible for Lionel to produce some of the trains that are more talked about here.

As far as making kits (or do-it-yourself assembly products), here's another article by Jason Shron that addresses that question as well as state-side production.

http://rapidotrains.com/rapidonews39.html#anchor7

Old news.  It's from 2012.

From what I understand China won't allow tooling to leave the country.  So to move production would require all new tooling. Do you really think that is economically feasible?

There was an article posted here on the Forum a few years ago about a small company down in Georgia that was making electronics for some firm in China. It's pretty bad when WE are getting used as a "third world" labor supply. I think about that everytime some American CEO says it would cost too much to make something here (meanwhile, shipping costs from China keep going up). It wasn't all that long ago (mid-80's) that Jerry Williams and Mike Wolf used college kids to build their tinplate trains in Columbia MD. Hey, it would certainly beat working at McDonalds.

Old news.  It's from 2012.

From what I understand China won't allow tooling to leave the country.  So to move production would require all new tooling. Do you really think that is economically feasible?