Atlas Factory Shut Down

With state subsidized and managed manufacturing, I can only imagine how much of China's industry mirrors our own free world government run businesses and services.  I can't help but think these company closures lead to mass amalgamations that become easier for the communist government to control.   China has, in a matter of a few decades, become the largest economy in the world.  Seems like all the makings of a mega economy crisis to me.  JMO, of course.

Bruce

Completely designed with your mind in mind.

bigkid posted:
Will Ebbert posted:

If the difference in cost to make product in the states vs China is so small, then why are they all made in China. Clearly it's a fairly substantial difference or else nobody would've loved production over there. It's not rocket science. 

Actually it is, it isn't the simplistic idea people have. When production initially moved to China you were dealing with a country with a lot of people to employ and wanted to become a major player in the world economy, and they had a state run economy (which it still very much is, though a hybrid now), they had a government investing in the infrastructure needed to produce  things, rail, roads, airports, container ports, and they had a huge labor force willing to work for very low wages with no benefits (basically the workers kind of lived like day laborers do here in the US, lived in conditions with many people sharing a room, and so forth). And the gap was staggering, you were talking 50c  an hour wages and because of no labor laws, working 6,7 days a week, 15 hours a day, compared to a typical wage in the 20 bucks an hour range, plus benefits...and even with the difference in living standards, that wage rate in China is not middle class or even what we would consider working class. Other things help level the cost difference, but it was enough to make a significant difference  in cost.  The irony was a lot of the companies who went offshore were making money, but being able to slash labor costs that sharply and quickly was a big inducement. There were costs to doing this, quality went out the window in many cases, from what has been published things like the reject rate and doa off the lines is high, and when you have assembly like that your costs downfield go up, too, and that cost made building in China not as cheap as you might think...and this depends on the type of product being made, too, different for a cheap gee gaw and something like an Iphone.  

It is a different story these days, China is trying to move upscale and get away from the low wage manufacturing that put them on the map, they want to make their own products higher up the food chain, and the costs have risen there a lot all across the board (from what I have been told by friends who deal with vendors there, things like electric power were once heavily subsidized, these days is market rate, and the cost of materials to a certain extent was subsidized), plus they are having trouble finding people willing to work the kind of jobs we are talking about, so prices have risen, and significantly. It is still cheaper than the US, but for the really low margin items, Chinese factories have been interestingly enough automating, and they also are building factories in places like Vietnam and Africa to take advantage of low wages there, basically for the really low wage stuff the moving wheel is in action again, the same wheel that moved mill jobs from the northeast to the south in the US when labor rates went up, and then went offshore. 

The real cost is as others have pointed out, to move back to the US they likely would have to start from square one. It would require modern, heavily automated plants relying on things like CNC machines (in China, things done here on a CNC would be done via old fashined jig and manual cutting kind of thing), but more importantly probably recreating a lot of the tooling, which can be impossible to get out of China (one company decided to move its tooling out of China, they owned it, and mysteriously "it was lost in shipping" from an account I heard at a conference I was at), and that is costly. You can see the rise in costs with how much the trains we buy are going up, but given all the factors, especially for small companies like Lionel and Atlas, it still is cost effective for them given all the other factors. Eventually things like 3D printing, if it does what some think it will do, could bring back manufacturing here or other more efficient technologies, you could have contract manufacturers  here  building things for small companies, though likely wouldn't not involve a lot of jobs either. 

The real question (to me) is technology is taking jobs faster than outsourcing is, and no one has an answer to that one.....

Bigkid,

I work for a big global manufacturing company and we have begun to slowly insource key parts of the business (manufacturing and labor) as we found out it does not make sense to just unilaterly farm it out. We do manufacture in country when possible but we have learned that quality people and products are not a lowest cost commodity. 

One can only hope that long term more companies come to the same conclusion we did. The destruction of the American manufacuring has to be one of the biggest tragedies of the last 40 years. 

Mike

The destruction of ALL WESTERN WORLD manufacturing has to be one of the biggest tragedies of the last 40 years not just America your only one country it's many countries that China has destroyed their manufacturing.

I could tell you how it changed two successful business that I owned, I never went broke but I closed down the reconditioning side and bought brand new Chinese items cheaper than I could recondition them for and this is 30 years ago!  Lots of people lost their jobs lots of skills lost to enable me to keep the doors open but that's another story not for here. I've been through it only not with model trains. 

I'm just hoping for my childrens sake that eventually China will get greedy and price themselves out of the market then we will have to start again not me I'm old and retired. Roo.

After reading all these replies I have to say I find this very interesting, and some of the information a weeee bit inaccurate.

We just ordered 1,000 of our die cast gear boxes & gear box caps from our die caster in Massachusetts. (That's in the USA, for those who aren't aware.) They were manufactured and delivered for less than many of you on here pay for one high end MTH (if there is such a thing) or Lionel locomotive. In fact it's about half. 

That's enough gear boxes to assemble 500 locomotive kits. Along with the die cast frames, they are the most expensive parts of the typical kit, and they're pennies.

The manufacturing of our die cast parts is surprisingly less than you might think, in fact, it's less than I even imagined it would be when I took over this company. We toyed with having our die casting done in China, and the cost per part was about 85% of the price we pay here. Not a big savings, and not worth the aggravation.

The big difference here is the over seas manufacturers not only pay less for labor, but they make smaller profits than US companies do. I know what a Lionel Challenger costs to build, and it's crazy what you all will pay for one. The HUGE mark up is done here, by our own companies, in this example, Lionel.

We're greedy. Bottom line.

T

Supposedly, Lionel has been far from a very profitable company over the last many years. So say some folks who claim to know. Since we don’t know in any dependable sense how profitable they are, all is speculation here. 

What constitutes a fair profit today? Gross profit or net?

This is going way off track. Back to Atlas and production costs.

Look, it’s downright ridiculous to compare some small element like the casting of gear boxes to the design of a locomotive scaled from data, engineered for tight tolerances, incorporating computer technology with fine circuitry, involving numerous suppliers on separate components of varying materials, using fine injection moldings made from specialized tooling, and depending on costly paint masks, all of which has to be assembled, then shipped in marketable packaging and distributed across a large country. They are not in any way the same thing on which to base production cost comparisons between the U.S. and China.

In fact, it’s downright frustrating to hear people make arguments that production can be done here for nearly the same costs, because it shows how incredibly unwilling some people are to acknowledge basic realities and shows that they’d rather make fallacious arguments drawn from pure stubbornness.

Not convinced? Well, then consider this: It wasn’t just American O gauge companies Lionel, Atlas, Weaver, K-Line and MTH that moved locomotive production into China years ago. It was also Germany-based LGB, Great Britain-based Graham Farish and Hornby and other international firms.

Still not convinced? Then consider the numbers. Roughly 70 firms from around the globe in the model train business were booted out of the Kader-owned Sanda Kan production facility in 2010. Seventy! And that wasn’t all of the train firms in Chinese production either at the time. That’s a whole lot of companies supposedly looking for insignificant production cost decreases.

Atlas moved production to improve its profit margin, as did Lionel and others. You could argue Lionel could have improved dealer margins or lowered the MSRP to save the end consumer some money, but greed? Really? Not from a business standpoint.

In the long term, Atlas may regret its decision to move all of its production to China. The deal is getting worse and worse for our train companies. But for decades now, our N, HO and O gauge companies have saved on production costs enough to keep them going. Those who did not adapt, such as European firms Rivarossi, Arnold, Trix, Fleischmann and others, are gone.

That could have been Atlas.

Jim R. 

Jim R. posted:

In the long term, Atlas may regret its decision to move all of its production to China. The deal is getting worse and worse for our train companies. But for decades now, our N, HO and O gauge companies have saved on production costs enough to keep the going. Those who did not adapt, such as European firms Rivarossi, Arnold, Trix, Fleischmann and others, are gone.

That could have been Atlas.

Rivarossi is still available through Hornby.  Trix is a part of Marklin.  Fleischmann sold their HO line to Roco, but is still making N Scale.

Rusty

Rusty Traque posted:
Jim R. posted:

In the long term, Atlas may regret its decision to move all of its production to China. The deal is getting worse and worse for our train companies. But for decades now, our N, HO and O gauge companies have saved on production costs enough to keep the going. Those who did not adapt, such as European firms Rivarossi, Arnold, Trix, Fleischmann and others, are gone.

That could have been Atlas.

Rivarossi is still available through Hornby.  Trix is a part of Marklin.  Fleischmann sold their HO line to Roco, but is still making N Scale.

Rusty

Not the tooling. The companies are gone (except, apparently, for Fleishmann in N scale).

Rivarossi went bankrupt and was acquired by Arnold. Arnold ran into financial trouble and was acquired by Hornby. (Hornby produces in China.) Model Power controlled the Minitrix N American scale line made in Germany until it disappeared, and Trix sold its European HO and N lines to Marklin, which went bankrupt in 2010, re-emerged and was sold to an investment firm.

There is very little model train production in Europe now, though I think LGB and Marklin have production facilities in Hungary as well as Germany.

Jim R. 

Jim R. posted:
Rusty Traque posted:
Jim R. posted:

In the long term, Atlas may regret its decision to move all of its production to China. The deal is getting worse and worse for our train companies. But for decades now, our N, HO and O gauge companies have saved on production costs enough to keep the going. Those who did not adapt, such as European firms Rivarossi, Arnold, Trix, Fleischmann and others, are gone.

That could have been Atlas.

Rivarossi is still available through Hornby.  Trix is a part of Marklin.  Fleischmann sold their HO line to Roco, but is still making N Scale.

Rusty

Not the tooling. The companies are gone (except, apparently, for Fleishmann in N scale).

Rivarossi went bankrupt and was acquired by Arnold. Arnold ran into financial trouble and was acquired by Hornby. (Hornby produces in China.) Model Power controlled the Minitrix N American scale line made in Germany until it disappeared, and Trix sold its European HO and N lines to Marklin, which went bankrupt in 2010, re-emerged and was sold to an investment firm.

There is very little model train production in Europe now, though I think LGB and Marklin have production facilities in Hungary as well as Germany.

Hi Jim,

Questions/assumptions on my part...

I thought Kader owned Hornby.  I also thought that Horizon had their hand in on MP/Mantua?

And a passing thought......although the Mantua tooling is old, there is a renewed interest in old HO, hence the new magazine from White River:  HO Collector.

Lou N

Lou N posted:
Jim R. posted:
Rusty Traque posted:
Jim R. posted:

In the long term, Atlas may regret its decision to move all of its production to China. The deal is getting worse and worse for our train companies. But for decades now, our N, HO and O gauge companies have saved on production costs enough to keep the going. Those who did not adapt, such as European firms Rivarossi, Arnold, Trix, Fleischmann and others, are gone.

That could have been Atlas.

Rivarossi is still available through Hornby.  Trix is a part of Marklin.  Fleischmann sold their HO line to Roco, but is still making N Scale.

Rusty

Not the tooling. The companies are gone (except, apparently, for Fleishmann in N scale).

Rivarossi went bankrupt and was acquired by Arnold. Arnold ran into financial trouble and was acquired by Hornby. (Hornby produces in China.) Model Power controlled the Minitrix N American scale line made in Germany until it disappeared, and Trix sold its European HO and N lines to Marklin, which went bankrupt in 2010, re-emerged and was sold to an investment firm.

There is very little model train production in Europe now, though I think LGB and Marklin have production facilities in Hungary as well as Germany.

Hi Jim,

Questions/assumptions on my part...

I thought Kader owned Hornby.  I also thought that Horizon had their hand in on MP/Mantua?

And a passing thought......although the Mantua tooling is old, there is a renewed interest in old HO, hence the new magazine from White River:  HO Collector.

Lou N

No, Kader owns Graham Farish, not Hornby. Horizon owns Athearn, which bought out Model Die Casting (Roundhouse), not Model Power.

I just looked online to Hornby’s website. It looks like the company is publicly traded (and, as you are likely aware, owns the Arnold and Rivarossi brands but none or little of the original American-prototype tooling).

Jim R. 

As of last week Model Power was still owned by Adam Traeger who had a hand in International Hobbies Corp (IHC) until they went away.

One set of Mantua Sharks, both A & B is owned by hobbytown of Boston, but at last look was still in the Traeger's hands, and still here in the USA, since they ran the shells before heading over seas.

Model Power was supposed to restart the Metal Trains line last year, but never did...and they say they still plan to. 

However in light of some more recent information that may not have hit the forums yet regarding the possible reprise of Mantua and Model Power, I'll button my lip until it is made known.

Nick

Guys....the mods got alerts about how this thread is straying away from the 'spirit' of the thread.  Most of the worst ones have been edited/delted.   Please keep the comments directly related to the topic...this is not a automotive site, nor a political site.  This is a good thread so lets not get it closed....

Alan Arnold
Publisher/Partner-Advertising Sales Manager
O Gauge Railroading magazine
adman@ogaugerr.com
800-980-OGRR (6477)

Rusty Traque posted:
catnap posted:
EBT Jim posted:
kanawha posted:

I received an email from an HO mail order dealer listing the companies affected and their response.....

.....Atlas and Bowser say this affects all products announced since January 2018, …..

 Ken

Thanks for posting all that, Ken.

The above quoted sentence bodes well for Atlas engines …. both O and HO. (If O scale is actually involved, anyway)

Jim

I hope this is true because I have a couple of SD40's preordered from August 2016. I have some Trinity hoppers and an extended vision caboose preordered from this year's announcements but I don't mind if these are delayed.

Frankly, anything not yet built is affected.  Unless they're in a container on the dock or on the water, expect even more delays. 

Plus, getting things scheduled in with a new builder isn't going to happen with a snap of the fingers.  I'm pretty sure the remaining builders have full production schedules.

Rusty

Rapido has offered the use of their factories to some of the affected companies, which seems to be a very class act.

Jeff C

.

Another post today by Jason Shron, Rapido Trains founder ….

****************************************************************

China Factory Closure
 
Many of you have heard the news by now that a major factory that produces model trains in China has shut down with very little notice. Affatech was owned by K.K. Ku (who used to live near me in Toronto) and he made models for many North American and European manufacturers. We found out about it accidentally as our junior production manager used to work at Affa and still knows everyone there. We have already reached out to some of the manufacturers affected and have offered the use of our factories.
 
This is not the first time a closure like this has happened and it won't be the last. Businesses all over the world shut down for a variety of reasons. In this case, K.K. was ready to retire and his kids didn't want to take over the business.
 
In light of this, I want to dispel some of the myths about production in China. Regular readers will know most of this already.
 
1. We can't bring production back here.
 
The industry of super-detailed model trains was entirely home-grown. Home grown in Dongguan, China, that is. It never existed here. If you're about to shout "Kadee" tell me how many locomotives they bring out. And if you're about to shout "Micro-Trains" or "Accurail" tell me how many parts are assembled on their models compared to the super-detailed models made in China. These jobs can't come back to the USA or Canada because they never existed here.
 
2. This has nothing to do with tariffs.
 
There are currently no duties on model trains, which are classified as toys. If tariffs are placed on toys made in China, everyone's Christmas shopping bill will increase by 25%, and it will likely cause a revolution on the streets of America. I doubt that any tariffs will be placed on toys, and I hope for all our sakes that I am right. It would cost hundreds of thousands of American jobs, including the jobs of most hobby store employees. If you are worried about it, I suggest you write to your local Congressman or Congresswoman and express your concerns. Remember - they work for you.
 
3. Have no worries.
 
Back in 2007 Rapido lost its factory, but in that case the owner stole the money and ran away. We eventually got our moulds out of the locked building. It was stressful and difficult but we got through it. The same will happen with the manufacturers affected now. If these guys got through the recession, they will get through this hiccup. Rapido's two factories are still open and we're expanding to meet the expected surge in demand. There are plenty of other factories in China that can make the models as well. So have no fear - the industry is not yet in dire peril!
*********************************************************************************************
 
The letter that was posted on the door at Affa last month. (Can anyone translate it?  ) ….
 
rapidonews103-26-Affa
 

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brianel_k-lineguy posted:

Along with Rapido's Jason Schron, here is a link to another article about this closure, written by Jim Conway, the owner and founder of Con-Cor Trains and posted yesterday.

It is a lengthy article, but written by someone who IS in the train business, and therefore an interesting read.

https://www.con-cor.com/

This is a well written piece.  What is still weird about the factory closing down is the sudden nature of it, even if the founder is sick, usually in these situations they don't just shut down, they give suppliers notice, etc, even for China from what I know this is weird, to be honest whatever the guy who owned the factory was facing, to me it shows someone who didn't have much respect for his clients (and yes, this has happened in the US plenty of times, Railway Express basically shut down like this back in the early 70's and left behind chaos, stuff was lost, people had a hell of a time making alternate shipping plans, etc). 

The article points out a lot of the problems with outsourced manufacturing and 'reshoring', that it wasn't just the big manufacturers that were moved away from here, when those factories and such moved offshore so did the supply chain..the reality is that  the supply chain isn't here for most things any more, the kind of relatively small shops that small companies depend on. Yes, they could source parts from Chinese companies, but the cost of doing that, the lags in shipping and other logistics would make that difficult.  I agree with the author that someone wanting to 'inshore' train production would likely need to be a multi faceted shop, ie  making things for more than the train industry, trains are just too small a market. There is a kind of a chicken and the egg thing here, it would be hard to manufacture here without suppliers of common products like screws being here, but those suppliers can't come back unless there is enough clients. This exposes a myth I think a lot of people believe, that if let's say China disappeared tomorrow, there is the infrastructure in the US to immediately "take back" production, and what this shows is that infrastructure really isn't here for a lot of it. It isn't just tooling at the train factory (and places to make replacement parts for the tooling, or upgrade it), it is a ton of other  things, the circuit boards they use, the screws, the tiny bearings, etc....it is what they call the 'supply chain', and the logistics behind that are complex.  With more mass market products (something like a stanley tape measure, that now have ones put together here), they get around that with parts sourced elsewhere combined with some local produced stuff, and 'Assembled in the USA"), they can get away with that, they can stockpile parts because  they are used in more than 1 product family, that isn't  true of little guys. 

The article does hint at one thing that holds potential, where the factory automated screw production, in the future with things like the way 3D and other  forms of advanced manufacturing are heading, because these makers are flexible it would be a lot easier to get the supply chain either in house or via vendors who can make a lot of different things flexibly, so the same guy making screws for let's say a train manufacturer could also easily make screws for a car company, a widget maker, etc......but that is kind of a brave new world. It would not be a glory days kind of things, such manufacturing will require relatively few workers, so it won't be a return to large scale manufacturing jobs.  Local production here in the US will happen, as with Japanese cars and European cars being made here, when there  were  reasons to do so (some political, with BMW cheaper costs, some because of hedging against currency fluctuations and the ease of sourcing parts locally was cheaper than bringing it in from Japan). However, problem is an obvious one, this brave new world may still not be as cheap (tallying all costs) as doing the same thing offshore. The one advantage of this kind of manufacturing is that if something like this happened, it would be a lot easier to move suppliers, current tooling and the like is clunky, alternate manufacturing should be flexible enough (if it comes to pass) that all they would need to do is send the digital scripts that control production to the new place, rather than having to move physical tooling.

 

The person who dies with the best toys dies a happy person

AMCDave posted:

 Hobby products designed, tooled, MANUFACTURED and packaged in the USA. Many here say manufacturing in the USA is impossible....these guys say no....THAT"S what it has to do with trains. 

95% of hobby plastic kits today are tooled and manufactured in China and marketed here by AMT, MPC and until they shut down last month Revell. (much like MTH, Lionel and Atlas) They have a MSRP of $30-45 USD Salnino's USA kit has a MSRP of $40. 

 

Dave,
Where were the AMT, Revell, Monogram, etc. kits produced back in the fifties, sixties and seventies?

Google Translate to the rescue... or as good as it can.  From above photo.

Announces All employees of Dongguan Shijie Yafu Hardware Co., Ltd.

First of all, I am very sorry to tell you that because Yafuʼs boss is seriously ill, there is no way to manage and manage the companyʼs business. The company's business can no longer be operated, so the company needs to terminate all the employees of the factory before July 31, 2017. The salary of the factory will be arranged on July 27th. The staff will be sent to the employee's salary card. The salary will be arranged in July. Before August 10, the employee's salary card will be sent to all employees. The factory will coordinate with the staff of the Shiji Village Committee and the labor bureau to solve the problem. I hope that all employees will be safe, and the news will start tomorrow. The factory will arrange the staff of each department to have a holiday, please do not stay in the factory, leave your contact number to the department head, there is something convenient to contact, thank you for your cooperation!

Dongguan
Shiya Ya Co., Ltd. 2018
July 27
idonewsT03-26-Affa

Marty Eibeck

 

Below the Signature...

"This is the Polar Express!"

Matt Makens posted:

All this dead horse beating doesn’t change the fact that the factory is kaput!!!!

Unless it was a dead horse factory...then there is nothing to beat.

Marty Eibeck

 

Below the Signature...

"This is the Polar Express!"

I don’t think the discussion is pointless, though. Thanks to  Brian’s website link to the Con-Cor site and Jim Conway’s letter, I learned something more about Chinese production and the history as it pertains to our models.

Also, in a truly rare moment of transparency, Conway provided a measure we seldom see in terms of size of production runs these days. You want to know how many pieces are being produced typically. Then click on the link and read.

Very interesting and enlightening overall.

Jim R. 

rdunniii posted:

What I find interesting is apparently the Chinese see no value in the capability of the group of people and the tooling regardless of the building or the machinery.  Here we always try and find a buyer (for anything) before liquidation. 

Well, it IS a communist country, so why would the "government" be concerned about such things.

Hot Water posted:
rdunniii posted:

What I find interesting is apparently the Chinese see no value in the capability of the group of people and the tooling regardless of the building or the machinery.  Here we always try and find a buyer (for anything) before liquidation. 

Well, it IS a communist country, so why would the "government" be concerned about such things.

Nonsense.  If it was a true Communist country the government would have would have kept it going regardless.  In communist countries they care about the workers more than the company and having them keep producing stuff that earns foreign exchange is valuable.

Most communist countries have a system of what we in the western world would call bribes they call it business.

As long as the chain doesn't get broken and everyone gets something the government will leave you alone if there is a "link" in the chain that is faulty (someone gets greedy or jealous) and the chain gets broken the Government come down hard really hard and even though you might be helping their country you run the risk of losing all your workers and have to start with a new lot, the skill is to keep everybody happy to avoid this unpleasant situation.

Source: My best friend who I went to school with and still see quite often is a Civil Engineer and has worked in these countries all his working life (50 years).  Nothing to do with Atlas Model Trains just thought I would throw it in.. Roo.

Lots of speculation here that is more and more political....thus, topic is closed.  It always amazes me the amount of participation in topics like this while we have some great posts by members about their projects, layouts, etc....with very little discussion or feedback compared to controversial topics!

Check this out which may address some of the speculation:  https://www.con-cor.com/

Alan Arnold
Publisher/Partner-Advertising Sales Manager
O Gauge Railroading magazine
adman@ogaugerr.com
800-980-OGRR (6477)

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