Industry Update from CMT
I would like to give you an update on the state of the model train industry.
The hobby is in a manufacturing turmoil, due to a lack of production capacity now.
There is no question; you have seen the delays from virtually all manufacturers. Pick any manufacturer’s name and their products are delayed. Why you ask? There are several reasons.
The primary one is that the largest factory which produced models for a wide variety of manufacturers has shut its doors to those manufacturers. After it had been bought and sold several times, it was bought out by the Bachmann group and now produces models solely for Bachmann. This was a huge production facility, about 10 times the normal size of a typical Chinese factory. Or think of it as 10 factories operating under one name.
There is no other "big" factory, equivalent in size. As a result, many manufacturers have been forced to scramble and find another factory that can produce their models. However, there is no other "A" size factory, the next size is "B" size, 1/10th of the "A" size.
If you can imagine the size of China’s manufacturing sector, you might well say to yourself there should be lots of factories. There is, they produce lots of electronics, such as games, toys, appliances, telecommunications, etc. However, model trains are way down at the bottom of the list, as it is such a small market.
Believe it or not, there are very few companies capable of model train production. There are about three "B" size main factories and some smaller "C" size factories.
Then you have the issue of complexity. Our hobby products involve tool and die making, electronics, motors, plastic extrusion, assembly, and painting. All of this has to be done with fine tolerances. All of these areas require dedicated areas and skilled employees. Compare all of that to an example, a “Barbie doll”, with much greater tolerance for error.
The result to you the modeler is that your promised future models have been delayed.
As dealers, we and all other dealers are the recipient of modelers’ frustrations, as we are their direct contact. I can certainly understand and empathize with modelers’ frustrations. We have the same frustration, except it is multiplied a hundred times or more. We, as dealers and distributors, plan on models delivered in future months for our cash flow planning, staffing and other commitments. Every store, distributor and manufacturer is experiencing the same problems. There is no immediate fix or date when “normalcy” will return to the hobby.
Another issue affecting production is working capital, or more specifically, the lack of working capital, both in North America and in Asia. The financial crisis of 2008 has hammered businesses around the globe. Working capital has dried up for many manufacturers. In foreign countries, a number of manufacturers may be taking funds from one customer and applying them to another, they are “robbing Peter to pay Paul” to stay in business.
I know of a number of our North American importers, with manufacturers overseas, who are in this position of waiting, and waiting, and waiting. They have supplied funds to their overseas manufacturers for research and development, tooling, raw materials and production costs, and are waiting on receiving a pre-production sample. They may even have approved the sample and are waiting for production to occur, but they are still waiting. It is out of their control.
Now is not the time to berate manufacturers for not delivering products to you. It is a global issue.
As one of the major dealers in North America, we have a large number of reservations. We are also a distributor and a manufacturer (with our own Pointe St. Charles caboose project). We like you are experiencing the frustrations of delays.
The only thing we can say to you is to be patient. Take care.
All the best,
Tom Tomblin, President,
Canadian Model Trains Inc.
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