What Would the Real Cost Be?

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Originally posted by Tommys_Trains:
One only has to look to the US Automobile Industry for inspiration. Yes its gone through some rough patches, but look at it now.

......and the only one truly competative is Ford with the lack of "bailout money". Ironically, Ford tops the list as far as unreliable new vehicles are concerned.

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Originally posted by Rusty Traque:
With increasing costs in China, there is a possibility of SOME manufacturing coming back to the US, but more likely that most overseas manufacturing will slowly hemmorage from China to another "low costs" country.

My college economics professor expressed this exact point twenty years ago. He further went on to point out that, after WWII we started buying cheap stuff made in Japan and Germany, and they had the reputation for the longest time of producing nothing but junk. Now, we have pretty good confidence in the things still made in Japan and Germany, but the low end manufacturing moved from Japan and Germany to Taiwan and Korea, then China, and it will move again, as standards of living rise, to developing industrial places like India, Malaysia and Pakistan. He went on to teach us that this cycle will not stop until all countries have risen to the same standard-of-living levels, at which point manufacturing will move the most business-friendly place that is closest to the point of consumption.

Another lesson that he taught that has stuck with me is that you can no more change the laws of economics than you can change the laws of physics or mathematics.

Andy

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With increasing costs in China, there is a possibility of SOME manufacturing coming back to the US, but more likely that most overseas manufacturing will slowly hemmorage from China to another "low costs" country.

That would be my guess, as well.

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My college economics professor expressed this exact point twenty years ago. He further went on to point out that, after WWII we started buying cheap stuff made in Japan and Germany ... Now, we have pretty good confidence in the things still made in Japan and Germany, but the low end manufacturing moved from Japan and Germany to Taiwan and Korea, then China, and it will move again, as standards of living rise, to developing industrial places like India, Malaysia and Pakistan. He went on to teach us that this cycle will not stop until all countries have risen to the same standard-of-living levels ...

An interesting side fact that most aren't old enough to remember is, to where the first great migration of U.S. manufacturing moved. It wasn't Japan and Germany.

It was the American South. And the reasons weren't a whole lot different from what's going on now.

Gentlemen,
For those that think our economy is not manufacturing based you are dead wrong, there are many different types of manufacturing companies, what hurts this conutry and makes a our MFG companies look over seas for actual production is this countries taxes, and complience regulations, which are the highest in the world, these politicians are stealing our country blind, in many different ways. Run a business some time and find out what is really happening before you say our country is not manufacturing based. The real unempolyment numbers are now above 16.5 % and still growing in our manufacturing based country.
Those that understand business know that the production of our trains is not going to come back to the USA, because of the over all cost of doing business, the toy train manufacturing business must seek the lowest cost production base, with the highest quality, to be able to satisfy the American consumer. The taxes and production regulations no longer allow this to happen in the USA for business like toy train manufacturing.
PCRR/Dave

One the left the original American made 1900 Lionel 263E on the right the MTH Foreign made DCS Controlled GG1.

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Originally posted by anzani racer:
eliminate greed on both sides and it can be done.as far as moving manufacturing back to the usa.that's not costly.we have tons of factories here dying for work.we have tons of folks looking for work.the best way to see what is wrong here in the us. is to follow any teacher strike. in the lower end of bucks county teachers make $35,000- 70.000 footed by tax payers. with the high price of health care the school board wants teachers to pay some health care costs . the teachers refuse to pay any more for it.nobody wants to share the pie.each side wants a bigger slice.if you can get ownership and employees to share fairly you will have us.made trains.until then we most live with imports...rob

I do not know about where you live but teachers here also only teach 182 days a year, so work 6 months with full pay and benefits, gotta love it. I am self employed and worked produceing product 327 days last year and was here at least 25 days doing books or repairs, my health insurance was $12000 last year,2500 deductible 80-20 pay till 10000 policy. I think the unions and work ethic is the real problem.

Having just visited Weaver Model Trains. They are doing what they can in house as much as possible. As stated by a previous post, plastic is being made just down the road. They not only do their own paint work, they make and mix their own paint. Also done in house is the stenciling, and engine bench work. The day we were they they were installing sound systems into some diesels. We were also shown a project prototype diesel. It was being done all by hand with over 80 hours into it. When finished, it will be sent out for cost figuring. We were made to feel like VIP's there. Very friendly, out going men and women. I was admiring some RR lanterns in the presidents office, he invited us in to have a look around his office. We talked about the industry in general which is flat so to speak. But he has hopes for a turn a round. Tom

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I do not know about where you live but teachers here also only teach 182 days a year, so work 6 months with full pay and benefits, gotta love it.

Concerning the teachers - the city school yearly budget where I am is just under one billion dollars. That's 1000 X one million. That's for 191 schools and an enrollment of about 100K, which has been dropping. And since they "graduate" "kids" who can't read or write, there's a constant cry and wailing for "improved education" and more property taxes to pay for it.

And I'm already putting out 4K for local taxes per yr on a modest home. And like everyone else, we're looking for the door or the county line, whichever is closer.

But wait, it gets even better...

Guess what the teacher pension deal is. If a retired teacher dies, the pension and I mean FULL pension goes to any named beneficiary for the rest of THAT beneficiary's LIFE.

Stuff like that is killing this country.

Anyway, I agree Weaver is great. They are good people and that must be a labor of love.

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...Join me in a pledge to boycott CHINESE toy trains and if you really have money burning a hole in your pocket, go to Ebay and buy a good used American made product.

Sorry, can't join in that pledge. I have had very few problems with the trains made offshore, find the pricing to be reasonable for items I want, have taken advantage of the absolutely tremendous product variety offered in O gauge in recent years, and don't/won't have anything to do with eBay.

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Originally posted by Ginsaw:

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I do not know about where you live but teachers here also only teach 182 days a year, so work 6 months with full pay and benefits, gotta love it.

Concerning the teachers - the city school yearly budget where I am is just under one billion dollars. That's 1000 X one million. That's for 191 schools and an enrollment of about 100K, which has been dropping. And since they "graduate" "kids" who can't read or write, there's a constant cry and wailing for "improved education" and more property taxes to pay for it.

And I'm already putting out 4K for local taxes per yr on a modest home. And like everyone else, we're looking for the door or the county line, whichever is closer.

But wait, it gets even better...

Guess what the teacher pension deal is. If a retired teacher dies, the pension and I mean FULL pension goes to any named beneficiary for the rest of THAT beneficiary's LIFE.

Stuff like that is killing this country.

Anyway, I agree Weaver is great. They are good people and that must be a labor of love.

Same here, they want more money to churn out dummies that have no work ethic, and resent the country. This country has too many public service unions that have pay that is way higher than the employer( the taxpayer), any entity will fail with those numbers. Our local police and fire retire with 80-100,000 pensions in a town where the average wage is 30,000, anyone see a problem with the business model? I laugh that the teachers claim to be so smart but they have to know their business model can never work.

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Same here, they want more money to churn out dummies that have no work ethic

Isn't there some parental responsibility there?

C.W., it does appear that in many circumstances "parents" in the sense we knew and grew up with, are in fact lacking.

At any rate, I'm not going to say anything else here that doesn't at least mention trains, as this has been an informative thread and I, for one, have been trying hard to avoid mentioning the "P" word or anything that will cause the thread's life to be tragically cut short...

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Originally posted by C W Burfle:

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Same here, they want more money to churn out dummies that have no work ethic

Isn't there some parental responsibility there?

Yes, but the vast majority of those 'parents' support the same political and education leaders in elections...so they share in the miserable results that is public educations.

As to the often cited 30% increase in costs...if manufacturers moved to the US: my guess (and I stress 'guess') is it would be much higher. Nearly every business one can cite will tell you that some 50% of its costs are in labor. Well, if the labor component goes from $3 per hour to $33 per hour for all the reasons Any Hummell cited above, then one might expect something more that a 30% increase in retail costs.

I have a lifetime credential in California, not known for skimping on teacher salaries. I simply could not afford to teach. It just didn't seem all that great a deal to me.

Education is arguably the single most important function of a society. It is the last place we should be looking to skimp on funds.

That is, of course, opinion.

Manufacturing can and is returning to the USA. About 20 minutes from here, in southern Saratoga county, is a new Chip fab. It was the largest construction project in the USA last year, so I am told. They just this month have started making limited amounts of product and should be in full production in the second quarter. This came about with a government/industry partnership to build the plant,and a second chip fab is in discussion. Plenty of people to work the jobs, a great boon to this area. Maybe trains could be built here, who can say.

well not to sidetrack the teacher discussion...

Labor costs are only part of it- there are certainly some downside to china. Shipping costs, shipping delays, quality issues (surprise surprise items made by a foreign low cost bid winner often have quality worse than originally promised- heard stories of entire batches having substituted cheaper materials causing widespread failures), intellectual theft, etc. Large companies (example apple ipod) are able to demand and get reliable quality. Smaller companies often can't, and the cost to constantly police the chinese product quality can be substantial.

At least for some specialty items, these downsides to chinese manufactoring can make chinese factories a bad idea. Missed a christmas shippment? 1000 products with a 90% failure rate? Visiting china every other week? There are examples of made in the usa being a great business move.

I'd imagine toy trains are such a labor intensive area that realistically I doubt we will see the high end/complex models being built here.

The NY Times had a interesting front page article today regarding why iphones are not made in the USA.

In a nutshell they cite quality, diligence, skills and flexibility of workers, factories, engineers that do the work. Workers typically work 12 hrs/day, 6 days a week and live in dormatories on site. Design changes can be implemented very quickly. Productivity is much better than the USA. Availability of skilled labor (technical workers & engineers) is abundant.

We may not like it, but the Chinese are currently a manufacturing powerhouse.

Paul

You will notice, we have not heard from any cost accountants from a manufacturing environment.
Take a simple box car. An injection molding machine can operate 24/7 stamping out shells. Just has be filled with the PVC pellets. These are a chemical product whose price is tied in with the price of a barrel of oil. So watch the "spot pricing" on oil. This will be our first cost center. Now add the bric n brac to the shell another cost center. Still have the wheel assembly and metal plate. Another cost center.
You must also remember that Sales & General Administrative Expense has to be added into the cost. The SG&A is overhead and this is one area that the can be reduced, but no one is willing to give up their catalogs, expense account lunches and first class air travel. When Lionel was in BK--bankruptcy they had SG&A costs that average 30%. For a Master Distributor which Lionel is this number should be in the "teens."
So can trains be manufactured in the USA? No, not with the present business model. You want cruise control, and air conditioning--you have to pay extra. You want smoke, a whistling tender you have to pay extra.
The train market is decreasing so you cannot make it up on volume production. Yes, you do have Fixed Costs, but these can be overcome by increased volume and you have a buying public that is decreasing. So offshore we go. Learn to live with it as we no longer build TV, radios--what is a radio let alone a phonograph in the USA.

That was a very well thought out post. The things mentioned do leave significant domestic opportunities however. That's repair of existing trains and development and production of toy train accessories. There are many of those and some examples are found in the advertising at the top of this page. Others are trackside and layout lights and lighting systems. You could also throw in auction houses and internet web sites.

The need is there and in many cases off-shore outsourcing will always be impractical. Certain things have to be done in the U.S.

If the costs of off-shore production ever get to a certain point, the type of production most here are interested in will "return". I am certain the toy train makers are on board with that.

Btw, one thing I've been wondering. Is it practical on a "cottage industry" basis to domestically re-produce metal parts for toy trains? Is that already being done? Things like that are done in other hobbies.

Practical? Probably not. But I believe Kraemer Repros are still doing it. Underground Railroad produces decals of high quality for 700 stuff. And I believe MEW still makes standard gauge repro castings. I bet the proprietors have to have a day job to keep the lights on.

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So offshore we go. Learn to live with it as we no longer build TV, radios--what is a radio let alone a phonograph in the USA.

There was an excellent article in the Sunday New York Times that recounts why Apple has its iPads and iPhones made in China (and why it can't be done domestically). Cited, for example, is one factory that employs 230,000 people (yes, a single factory with 230,000 employees) to assemble iPhones and iPads. Think about it: One factory with more workers than most U.S. cities have total residents! Kind of mind boggling.

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Cited, for example, is one factory that employs 230,000 people (yes, a single factory with 230,000 employees) to assemble iPhones and iPads. Think about it: One factory with more workers than most U.S. cities have total residents! Kind of mind boggling.

All in the same location??

Anyway, I don't know if we can or should or would want to compete with the Chinese in how the country is set up and organized, but the fact is, there was a time when we used to have pretty big factories here too. Everybody knows that.

But, if bigger is better, then we're still getting it done. One corporation has 12,000 employees at their facility in my city alone.

Btw, I'll answer my own question about "cottage industries" and fabricating toy train parts. I think that is entirely feasible and realistic based on what goes on in other hobbies. There's a "but" though. It all depends on the demand and market being there and that comes first. THAT imo is the big question with our situation and the anchor hanging around the necks of us who enjoy 1:48 railroading.

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All in the same location??

Yes.

My 2 cents,

We currently live in a 20.00 per hr society , do the math. Add up the essentials ,rent, car payment , car insurance , cable , cellphone,electric, water , gas , food . The way people make it by today in America , the "regular job guys and gals is living together, 2 incomes.

Could you sit at a table and put grab irons on boxcars all day , NOT !People could not take the daily insanity 5 days a week of a job like that for what 10.00 per hr. turn over , sick days , missing parts etc. Americans are simply not cut out for work like that . Imagine having 100,000 freight cars to put together , how many people would you need , then figure their cost per employee, the real cost beyond just wages , and the management nightmare of organizing the staffing and hiring , training , then throw on , the overhead. The numbers just won't work.

I build alot of stuff for clients with home layouts, not one person is middle class . Use the formula as state above for any project you build yourself . Does your job when finished look as good as a factory produced item ?

How many hrs did you spend . Can you build an Intermountain Boxcar kit in say 6 hrs. That's 120.00 plus the kit , which has already been produced.

This is very labor intensive , this hobby. You simply can't compete here for a toy . Even China is starting to be priced out of the labor side of it.
We can make the parts here competitively but the assy here with skilled labor , SEEEYAAAAA !! A good electronic assembler who really knows what he is doing is worth atleast 30.00 per hr. then throw on the benefits and government regs. What company making trains can have a staff big enough to handle all the assy.
Ever open up a diesel , all those wires packed in , you can't even get the shell back on . The reason for the poor quality is 1.00 per hr assemblers.

Truth is , these trains are something that we could live without for the most part.What blows my mind is how people keep buying , year after year to keep the companies in business .

I make a beautiful factory or elaborate train station that takes 160 hrs or 4 normal 40 hr work weeks , and will someone pay me 3200.00 plus materials?
Yes , but not many can afford that , and that is cheap labor for the skill needed to make the end product.
Pack and Ship stores , charge 30.00 hr to make a box to ship out items in when a special box is required . Thats cardboard , hot glue , and packing tape. So use my example for the above project train station and now it goes to 4500.00
labor . I have people tell me all the time , they understand the hrs to make the station , and the per hr chg compared to a plumber, auto mechanic or electrician ,is about half the going rate , but how many can buy a 5,000 train station. Not many . Now let's talk regular jobs and regular people in America the dilemma that America is facing , how many people out there actually make 20.00 per hr. so they can just keep a roof over their heads ???

Bernie Winkler

I wish I knew the answer.

In my business (QC in the Oil and Gas equipment business) we are seeing production moving from China to Thailand,Malaysia,Indonesia,India and Vietnam.My brother owns a guitar shop and some of the top brands have moved production of better beginner and mid price instruments to Vietnam.He tells me the workmanship and quality is much better than China.

My $0.02 worth

Ricky

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Originally posted by Scratchbuilder1-48:
My 2 cents,

Could you sit at a table and put grab irons on boxcars all day , NOT !People could not take the daily insanity 5 days a week of a job like that for what 10.00 per hr. turn over , sick days , missing parts etc. Bernie Winkler

I wish I knew the answer.

Finally! Someone put to words what it's like to do assembly work. Bernie left out two 15 minute breaks and half hour lunch, but other than that, you sit at a bench and do the same thing over and over until the bell rings.

I'm sure some of the guys out there would say, "Hey, I've built kits, I can do that!"

The thing is, when you build a kit at home, you can walk away from it when you want to. When doing assembly, you can't just walk away.., unless you're quitting.

Rusty

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Imagine having 100,000 freight cars to put together

At the end of the day the problem with all this is, there's no demand or interest on behalf of the buying public for 100,000 new toy train cars. That's why this is a rather moot question.

Incidentally, is there an average number employed at Chinese factories? They can't all be 250K employees in one location.

Aw, Come on! Is this really that hard to do?

http://apps.detnews.com/apps/history/index.php?id=202

We just choose not to (likewise for manufacturers and consumers). We have met the enemy and he is us.

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It looks to me like each worker was responsible for the entire assembly of each piece in the Michigan plant, the way things should be done. Pride in the final product shows on their faces. And the testing is right there in front of them. Any one of these manufacturer's reps care to show us how things are done in China?

http://apps.detnews.com/apps/history/index.php?id=202

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Originally posted by Tommys_Trains:
It looks to me like each worker was responsible for the entire assembly of each piece in the Michigan plant, the way things should be done. Pride in the final product shows on their faces. And the testing is right there in front of them. Any one of these manufacturer's reps care to show us how things are done in China?

http://apps.detnews.com/apps/history/index.php?id=202

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Does one person build one car from beginning to end?

Or refrigerator?

Or aircraft?

Nope.

Same thing with model trains.

If you look in the center of the picture, that's the assembly line. Each person would add on whatever they were tasked to add, then move it down the line eventually reaching the test track.

And they work to a rate, so many units per given time.

Last person in line tests it.

Notice people in the background are watching the loco run, they should be concentrating on what they're supposed to add on.

Everybody smiles for the camera. A picture with frowning faces doesn't get published.

Rusty

Tom,
Very good point sir, everyone forgets about Weaver and how they make 85% of their product right here in the USA. You got to admire Weaver for what they are doing, its one of the reasons I have a Weaver Masonic Train, I will continue to support them, I know I am not supporting some Commie when my money goes to Weaver.
PCRR/Dave

The Weaver Masonic Train around the Christmas Tree.

Rusty,

I honestly cannot tell given the resolution of the photo and I doubt that you can either. Perhaps a Lionel Hstorian can clue us both in. Does not mean it CAN'T be done that way. To me the phoo still has a great story to tell. These are American Workers making a product that probably worked the first time, and is still working today. When I went to see one of the last Shuttle launches, at the moment of liftoff, a fellow from Michigan took so much pride he was shouting YES WE CAN DO THIS STUFF! OK, so toy trains are not Rocket Science which only puts more emphasis on YES WE CAN DO THIS STUFF.

I can diassemble and reassemble my iRobot Roomba in a matter of an hour or so. It is just as complicated if not more so, than any of these toy machines. All of the parts fit nicely on my kitchen table.

And if it makes a funny noise when I test it, I pretty much know right where to go to fix it.

Pride of ownership is something that has been missing in American manufacturing for a long time and apparently that much has been copied by the Chinese as well. Perhaps its time to tell Henry Ford he was wrong. The finest automobiles in the world are still hand assembled.

Sure you save a few bucks on the final product, but how much is it worth to you to know your $1000 investment will work the first time, and if not, that there are parts readilly available to the OEM right here in the states and there is someone who knows how to fix it.

I repeat, We have met the enemy and he is us.

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Tommy's Trains,
For the most part I agree with you, however I do beleive what the younger generation fails to realize is that these communist countries that we keep supporting, by purchasing their products, unemploy our own countries people.
My generation realized this and always purchased American made 1st.
I know that most of this is due to taxes and regulations however Companies like Lenox China and Silvania Electric, who employed thousands of people here in Pa, and were making good money, decided to relocate their production plants to China, to gain a much larger profit margin, and walk away from the workers who were about to retire in their plants. I will never purchase another piece of Lenox China or another Silvania light bulb as long as I live, having seen what happened to the Pa mountain people in these small towns, when the production plants moved to China. I like my MTH trains, but I also know the fallacy of sending money to communist countries, it produces unemployment and death for our own people.
PCRR/Dave

The last piece of American made Lenox China I purchased for my wife, produced in Donegal, Pa, by American workers.