News posted by Rapido's Jason Shron...and it's not good

[Puddington]

This was posed on the Canmodeltrains Yahoo board...gulp ! (A board as well....)

From: j_shron
To: CanModelTrains@yahoogroups.com
Sent: Friday, January 13, 2012 9:18 AM
Subject: [CanModelTrains] Important News in China



Hi all,

A large Chinese supplier of model trains closed down today. This factory employed 3000 people and was a major producer for North American manufacturers.

This is the second large supplier to shut their doors in two years. It will no doubt contribute to delays across the industry as that factory's clients try and move their production to other, overworked factories.

The reality is 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, 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. At some point many modellers will say "that's it - this hobby is too expensive!" and leave. With lower sales, the prices will increase more. So this could be the beginning of an escalating negative spiral.

So far, Rapido has largely been spared from most major cost increases, but I have been warned that our costs are going up soon as well. That being said, we are looking at ways to avoid getting caught up in that negative spiral and keep our quality high and prices competitive. I will keep you guys informed of our progress.

3000 people in China have just lost their jobs a week before Chinese New Year. Not a good day.

Best regards,


Oh brother...............

[skytop35]

Does anyone know which companies are affected?

[Bob Bufkin]

I read over on the Atlas board that Athearn was one.

[inkaneer]

Well the news is not good especially for the long range growth of the hobby.  Maybe this will be the impetus for going back to the kit form of model RR car where some of the cost of manufacture is transferred to the buyer as a sort of "sweat equity".  But I don't think N scale as a whole is ready to embrace that.  So we shall see.

[sirenwerks]

...Bringing the manufacturing back to North America would cost even more...

Statements like this kinda piss me off. I'm not one of these pro-American manufacturing types; I believe businesses should go were their needs are met (that's not to say that being pro-American CAN'T be one of business needs or that profit margin has to rule all). But "would cost even more" than what? Relocating a business, starting up manufacturing, hiring and training new workers always cost more. Duh. But if you ain't got a manufacturer in China, you have to restart somewhere, and if Asia's so damn unstable right now and the US needs jobs, it seems like a win-win to commit to at least a temporary shift to state-side production.

And I would bet that there's tax incentives, low interest loans, and even possible grant monies from fed or state resources for such start-up activity. Some sectors of businesses today, especially smaller ones, seem to be less entrepreneurial than they need to be; they're siloed with the 'this is always how it's been' mentality propagated by some industry opinion leaders.

So we can either pay lots more to wait for product from a more limited China, or we pay more to start-up in the US? Hmmm, this seems like a no-brainer to me.

[Puddington]

I read over on the Atlas board that Athearn was one.

Yes, someone on A board said Athearn and Roco, but the 'trickle down" effect is the issue; whatever's left over there will now be in a better position to hold mfg's ransom for production time; Athearn and Roco will need to get time, so they will "buy it"; thus raising the price and potentially pushing back those we use for n scale products....and it's not like the local gentry have been thrilled with the current flow of new products as it is...

[Dave V]

Bad news, but it's premature to know what will happen hobby-wide.  The impact can't be good, but then I recall that we have at least one major manufacturer in N scale who does most of their manufacturing here in the United States...

With Atlas doing track and structures as well, I hope they are already reviewing alternate options should further "badness" happen in China.

Kato still manufacturers right there in Japan, right?

[ljudice]

The company is CML for any of the industry insiders here who might know what that means.  Another Chinese firm is also supposedly tettering on the brink as well.

[JoeD]

Right now we have limited exposure in China, but I am not real happy that we continue to rely on them (no one here is).  Frankly, when you consider all the hidden costs of doing business there, I'm not so sure you have that big of a savings.  Lot to be said about just cranking up a machine out back and spitting out product.  Right now I am working on components we got from our new supplier and considering the rework and time testing and fixing...it may have been better to just do it here. 

And Mike, I agree about the cost of doing the work in North America.  I worked for a couple of toy companies back in the 80's for a time and we had all of our work done in china.  It was crap.  We even found the companies doing production for their own black market with our components.  Not that it is common, just one of the costs you don't see.  Our normal evolution was to do about 15 cycles with tooling to get all the part correct.  I had a complicated project and found a company in Michigan that did the tooling for us for 20% more.  Guess what.  One cycle for R&D and we were ready to go.  We ended up saving that 20% because we had a company that wanted the work and did a good job the first time.  It's the reason I came to MTL.  I could have gone to the other companies, but I didn't want to go offshore anymore.  Too many headaches.  It also felt good to employ folks here in the States.



Joe
MTL

[jmlaboda]

On the HO A board it is also being reported that Walthers might be affected as well, with it being reported that they have tried to contact the plant over the past couple weeks with no answer... guess we won't be seeing any new passenger cars from them anytime soon... oh, wait... that was before the plant closed.

All jokes aside this is not good news... not for the workers and not for model railroading in general.  As several have stated in various posts, it will affect the production and the cost of a number of model railroad items in the future.

As for some of the hard feelings towards Walthers goes, the ACL-SAL-SCL Modelers list at Yahoo! Group is starting to sound like some of us on N-scale boards... they are equally unhappy with Walthers stopping the production of many southeastern models, and this is in HO scale.  Wonder just how badly the close will affect Walthers' plans... guess we will have to wait to see...

[TrainCat2]

I am VERY glad I did not go down that road. I am proud that all the new items I am doing are from US facilities.

[lock4244]

To me this is what can happen when you contract out any part of the mfg process. This is a pretty big bump in some folks supply chain. Maybe the model train industry needs to look at controlling its means of production?

I shed no tear for the workers though... they didn't care about us when they cost jobs in the west. But I'm somewhat of an a$$ 

[central.vermont]

I think it's time we brought it back!!!
I'm willing to pay a little more just to say my neighbors have a job because of my hobby!!

Jon

[Bob Bufkin]

I'm not too worried.  I haven't gotten anything from Athearn for years and as for others - in business it's survival of the fittest.  Somehow or another better companies wil get over this and still produce the equipment we want.  I am hoping that some of the production will return to the U.S. and Canada and I'll gladly pay a few extra bucks for whatever they make.  Looks like India is in the future for some products and I would think that Eastern Europe formerly Soviet block countries will take on some of the production.

[Bendtracker1]

I think it's time we brought it back!!!
I'm willing to pay a little more just to say my neighbors have a job because of my hobby!!

+1