A chat with Lee Riley, or why Bachmann N has dummy couplers.

[3rdrail]

Mr. Lee Riley of Bachmann was in a loquacious mood Saturday morning. Some probing questions about the status of the Ten-Wheeler and Russian Decapod in N scale (both dead), led to some surprising information. The only motor Bachmann could find for these was Swiss and $40 each. From other statements, Bachmann figures a final price of $1.00 for every dime (10¢) in supplies, so such a motor would increase the price by $400.00!! In addition, the Swiss company could not produce at the rate required, 1.5 seconds per motor.

The dummy couplers are there because the cheapest license fee Bachmann could pay for any magnetic knuckle coupler is 38¢ per coupler, or 76¢ per car. By Bachmann's reckoning, this would add $7.60 to the price of the car or locomotive. How this got the price of the H16-44 up to $125.00 as he stated escaped me.

The most interesting was that he mentioned tooling costs for N scale cars and locomotives. Cars are $150K and locomotives are $250K up to $500K. At those rates you've got to sell a helluva lot to amortize tooling costs. He also said that Bachmann has plowed over $250K into new tooling for the Northerns, including an all new mechanism, but the magazines are not interested in reviewing it as it is not a totally new model. Huh?

[Denver Road Doug]

That's a typical bean-counter mentality being used to drive a company's products.  Kinda like an automobile manufacturer saying....  "Hmmm, these rubber tires are awful expensive.  If we used stone or wooden tires they'd be MUCH cheaper".  Few customers would be kicking THOSE tires, lemme tell ya.

Truthfully, considering the time and money to purchase and install commercially available magnetic couplers, many modelers would pay the $7.  But that begs the question...if all other manufacturers can produce their products (at an arguably higher quality, but I digress) at a lower price point, why can't Bachmann?

[asciibaron]

based on the tooling figures from 8 years ago i saw while at MTH, those seem about right.  tooling ain't cheap.  Bachmann needs to buy time on the line, and if they want fast turn around and high volumes, they are paying a premium to the Chinese vendors.

toy trains ain't cheap to make due to the small market.  that is why you see cars lettered for a railroad that didn't have them - it's easier to pad print the car than make one - even if you simply replaced a few slides in the tooling.

don't kid yourself, economics drives this hobby - if no one bought a 800.00 loco, it wouldn't be made.  thus the pre-order.

-Steve

[CVSNE]

So, how long did Lee hold you captive? ;D ;D ;D

Usually the trick with Lee is to get him to STOP talking . . . to the point that I would often be talking to him (let me rephrase that - listening to him) when he would suddenly say "I have to go." Turns out the rest of the staff would be turning off the lights in a hint for Lee to go home . . . 

Marty

[nscalesteve]

Bachmann needs to buy time on the line, and if they want fast turn around and high volumes, they are paying a premium to the Chinese vendors.

...and I thought Kader owns Bachmann... ?  ???

[Walkercolt]

Steve, it's alot more involved than "Kader ownes Bachmann". There's Bachmann USA, a US owned corporation, and Bachmann Europe, German owned, I believe. Then there's copyrights on US styled freight cars and design patents and intellicitual property rights. That's why there are international business lawyers who charge tens or hundreds of thousands of dollars an hour, and are busy all the time. Now think about Micro-Trains and how much money they have tied-up in tooling and not enough capacity to make all of their cars all of the time. That should explain the "Twevle Days of Christmas" cars and other "collectables".

[kiwi_al]

Walkercolt I think you need to read this:

http://www.bachmann.co.uk/home.php4

The Kader Company was established in 1948 with the purpose of making models and toys for export around the world. In 1952 Kader made the first Model Trains for Bachmann‘s American market. This relationship developed and prospered until 1984, when Kader acquired the Bachmann Company in its entirety.

 ;D

[asciibaron]

Bachmann needs to buy time on the line, and if they want fast turn around and high volumes, they are paying a premium to the Chinese vendors.

...and I thought Kader owns Bachmann... ?  ???

huh?  what does the owner of Bachmann have to do with manufacturing in China?

[soo]

"It employs up to 18000 workers and annually produces over 1.3 million train sets for the U.S market alone!"

Golly, if all other mfgs, like MT, Athearn, and the LHS who put together train sets for Xmas match that number, we might have 3-4Mil kids (or Dads) buying their first train set each year.....Seems to me like if we keep 1% of those in model railroading, the future is bright.  Hard to imagine 30,000 new modelers a year when MR subscriptions total 167,000. Even 3,000 new modelers would be pretty good (0.1%)

BTW, got to ask a few questions, even if you probably can't know the answer....

If MT couplers cost us about $2.50 per car/loco, adding those to a Bachman car for $0.76 isn't that bad a deal, is it?  IM and RC put them on their cars. When Atlas offered both types couplers, the price difference was about that of the retail of MT.  Why would he have to add more than say 115% of his actual coupler cost to offer MT couplers?

The tooling costs sound about right, but I have heard some who supposedly know say that now that tooling is done overseas to similar quality of US tooling, that the prices have dropped, by a third to half or more.  To be competitive, it sounds like they have to re-engineer their business model a bit.  Just MHO, as I am looking at this from afar.

Thanks for the interesting info.

[3rdrail]

The 38¢ is the license fee, not the amount paid for a coupler. Bachmann or Kader actually manufactures the coupler, under license from the patent holder, MTL, Accutrains, or Horizon Hobbies.

Kader was written up in MR some years back. It is headquartered in Hong Kong with factories in Guangdong province, so it is a Chinese company.

[asciibaron]

The 38¢ is the license fee, not the amount paid for a coupler. Bachmann or Kader actually manufactures the coupler, under license from the patent holder, MTL, Accutrains, or Horizon Hobbies.

Kader was written up in MR some years back. It is headquartered in Hong Kong with factories in Guangdong province, so it is a Chinese company.

i doubt they own the factories they use - it's very strange - they literally buy the factory for a given period of time, say 2 weeks, while they make their products.  the actual factory owner is probably the government.


-Steve

[bicknell]

Mr. Lee Riley of Bachmann was in a loquacious mood Saturday morning. Some probing questions about the status of the Ten-Wheeler and Russian Decapod in N scale (both dead), led to some surprising information. The only motor Bachmann could find for these was Swiss and $40 each. From other statements, Bachmann figures a final price of $1.00 for every dime (10¢) in supplies, so such a motor would increase the price by $400.00!! In addition, the Swiss company could not produce at the rate required, 1.5 seconds per motor.

I think I see the bean counter problem here, and it's one I have had to deal with before.

On average, he's in the right ballpark.  Figure of MSRP (we'll use $100 to make the numbers easy), $50 is what the manufacturer will sell it for to the dealer.  Of that $50, half is repayment for development costs (or $25), and the other half is split between parts and labor, boxes, shipping.  Depending on the widget anything from 75%/25% to 25%/75% is believable.  It's easy to see how that may break down to $10 in parts, $10 labor, and $5 other stuff (boxes, shipping).  So you average it out and $10 in supplies turns into a $100 locomotive.  You can see how a $40 motor doesn't fit into this equation at all.

Here's where the bean counters go wrong though.  If the couplers would be $0.76 per car they do the math and come up with $7.60 more on the price, that is the unit was just turned into a $107.60 price point.  However, they could also offer them at cost, making it a $100.76 locomotive.  Yes, they make no profit on that particular addition, but they (hopefully) get more sales.

The problem with this (to the bean counter) is now it's not a supply cost of 10%, but of 10.1%, and they freak out that "costs are rising".  That is only partially correct.

The most interesting was that he mentioned tooling costs for N scale cars and locomotives. Cars are $150K and locomotives are $250K up to $500K. At those rates you've got to sell a helluva lot to amortize tooling costs. He also said that Bachmann has plowed over $250K into new tooling for the Northerns, including an all new mechanism, but the magazines are not interested in reviewing it as it is not a totally new model. Huh?

So at $25 per unit above to recover the costs of tooling and such we're taking about having to sell 10,000-20,000 locomotives to make up for the tooling cost.

[CVSNE]

The 38¢ is the license fee, not the amount paid for a coupler. Bachmann or Kader actually manufactures the coupler, under license from the patent holder, MTL, Accutrains, or Horizon Hobbies.

Kader was written up in MR some years back. It is headquartered in Hong Kong with factories in Guangdong province, so it is a Chinese company.

i doubt they own the factories they use - it's very strange - they literally buy the factory for a given period of time, say 2 weeks, while they make their products.  the actual factory owner is probably the government.





-Steve

Huh????

[asciibaron]

Huh????

what do you mean "huh?" have you ever dealt with a factory in China - i have and it's a PITA.  the owner is not the owner and the labor is not hired by the factory.  it's like migrant farming, but in a factory. 

[3rdrail]

Huh????

what do you mean "huh?" have you ever dealt with a factory in China - i have and it's a PITA.  the owner is not the owner and the labor is not hired by the factory.  it's like migrant farming, but in a factory. 

Steve, the person going by CVSNE is none other than Marty McGuirk, formerly of InterMountain and Model Railroader, so I would think he certainly is familiar with dealing with Chinese factories. We have several IMRC "alumni" on The RailWire.