As a commentary on the situation with Atlas et al and outsourced suppliers, an article in today's NY Times by a business professor had a couple of relevant paragraphs (the topic was about Apple Computer and its business model, that is cash flow heavy versus being heavier on the profit side)
"How does one achieve this apotheosis of the asset-light strategy? First, create a supply chain in Asia run by companies willing to invest in low-return projects that create your products." This is very relevant to what the train manufacturers are doing more than likely, they are working with contract factories that likely operate on low margins, hair thin, to produce the product, so the company can maximize profit on each unit and also not have problems with cash flow (part of Apple's strategy is they pay vendors very slowly, like 100 days between delivery and payment, not sure the train manufacturers can get away with this, given how small they are, but they may find vendors based on willingness to accept deferred payment as well, which can cause cash flow problems with suppliers)
"Second, hold those suppliers under your thumb." Apple gets away with what they do because suppiers know Apple is a giant and will be a big customers, so they get away with negotiating razor thin margins for the suppliers and things like net 100 day payment, size is important.
"Idolizing asset-light strategies, however, can also lead to underinvestment, an excessive reliance on outsourcing and the artificial division of companies to avoid hard assets." This doesn't entirely apply to the train manufacturers, but the fact remains that as others have pointed out, the train companies are asset light, other than designing the trains and other products, they don't have skin in the game with much in the way of physical facilities, most of what they have here are relatively small capital investment in buildings (headquarters, or with small companies, maybe their house), maybe some wearhouse space, and whatever support they have. Not criticizing this, given the small size of the train market, likely is the only strategy that would work.
"The accomplishments of Apple’s model are substantial. But the financial strategy that has worked so well for Apple is a risky one for less capable companies with weaker strategic positions. For them, aping Apple can just as easily result in too much debt on their balance sheets, precarious supply chains and deferred opportunities for investments." Again, this isn't a direct analogy, but parts of it do apply.A company like Apple, that is so huge in the market, is not weak strategically, they can do a lot more damage to suppliers then the suppliers can to them, if their suppliers pulled what happens with the train manufacturers, that supplier would find themselves in deep doo doo, but with train manufacturers they don't have easy alternatives.
Again, this isn't a critique of the train manufacturers, but rather it explains why something like Atlas could happen, I suspect a lot of the vendors they use are small firms willing to operate on very tight margins themselves, and when you have that you end up with what we see in the industry, delays in production, problems with production, and even factories shutting down. The sheer size of an Apple's business allows vendors to operate on razor thin margins, the bulk of the profit makes up for that as well as the regularity of production, it is very different for the relatively small companies that make trains.
It is an interesting article if anyone is interested
ttps://www.nytimes.com/2018/08/06/opinion/apple-trillion-market-cap.html
