Atlas acquires Microtrains

[Chris333]

FWIW On the Nn3 list the owner of Showcase Miniatures asked Paul Graf about trucks and couplers:

There are no plans to discontinue any of the current product line.  In fact, there are things that have been mothballed because of lack of capacity that we would like to get back into production.
 
The only thing I can't answer for you right now is how quickly things will be back into production.  We are working on getting up and running as soon as possible.

[nkalanaga]

I would think that the Nn3 trucks would be an obvious product.  Atlas is producing Z scale, including track, and Nn3 trucks would use the same wheels on the same track.  It wouldn't be an entire new scale/gauge, just some truck frame castings.

If they wanted to expand it, I'd like to see a cast-frame Nn3 truck, either for the East Broad Top or the D&RGW's modern steel flatcars.

[Ed Kapuscinski]

Most jobs at InterMountain at that time paid minimum wage with next to no benefits.  One thing I noticed in that two years from going to shows was that the modeling public seemed to think the industry was bigger than it was.  And also that the industry (both companies and employees) were making good money.  Not really true at all.  That said, the industry is a labor of love, so lots of the folks I met at other companies were also passionate about model railroading and trains. 

See this is exactly the reason why it pisses me off when people reflexively ***** all over the companies in the industry.

NOBODY does it for the money, and when people talk ***** it makes it much less desireable to do 'for the fun of it'.

[randgust]

When I started making my own resin kits 20 years ago.... John Coots (N Scale of Nevada, Scale Structures Limited) was my personal "Yoda" (RIP)

Best questions as we discussed my plan, so which I owe him everything that developed....

"Are you doing this to make money or see your name in Model Railroader as  vendor"?

"Are you actually making any money now?"

"And if you are, that puts you ahead of 60% of everybody in this business.   Don't mess it up with ego".

And he showed me a closet full of stuff he couldn't sell, mostly photoengraved brass 3-track signal bridges for Ntrak modules.  Yikes.

"Don't build to inventory, build to orders if you can".

I worked in a hobby shop as a teenager, and got to see firsthand how tough a business it could be as I was in college as an accountant.   It was sold at bank auction two years after I left, given the murderous bank interest rates on inventory in 1977, and an inventory turnover ratio of about .75   

But I'm equally convinced that the 'savings' by manufacturing overseas can easily be killed off by missed communication, cultural differences, currency fluctuations, shipping delay and damage (containers at the bottom of the ocean), and now, reflexive and unpredictable tariffs.   I watched it kill my previous employer in an attempt to save $.14 per unit cost on a $200 product by moving production to Mexico, only to have quality issues result in a 10,000 unit recall.    And in my current business, found it relatively possible to do business in Ontario (then), as long as it had Canadian on-site  employees, but absolutely impossible in Quebec, unless you could be fully technical in French.  Surprise.

The parts and material I have to purchase from overseas that are now getting blasted with shipping issues and tariffs have stalled me out, at least for now.  Can't possibly predict costs.

[Ed Kapuscinski]

But I'm equally convinced that the 'savings' by manufacturing overseas can easily be killed off by missed communication, cultural differences, currency fluctuations, shipping delay and damage (containers at the bottom of the ocean), and now, reflexive and unpredictable tariffs.   I watched it kill my previous employer in an attempt to save $.14 per unit cost on a $200 product by moving production to Mexico, only to have quality issues result in a 10,000 unit recall. 

You know, I think there's something really interesting to that. I don't think companies like Atlas make this stuff in Asia because it's particularly cost effective. I think they do it because it's the only place it's actually possible.

It's why I think the whole thing is a misguided attempt to recreate a past that never actually was.

[OldEastRR]

I guess most people think model railroaders are nerdy little guys with engineer caps and overalls completely lost in their miniature world, but I have to say that in my reading of stuff on TRW I've learned more about business, economics, politics, general world knowledge of the actual workings of things than I ever get from the media, websites, specialized blogs, etc. Maybe because the high level of expertise of the TRW community about these matters but it certainly is educational and welcome.
I too also have come to believe people get involved in MRing because they love the concept, not for grand ideas of fame and fortune. As pointed out, businesswise it's a very teeny industry but it soldiers on year after year. No worries about vulture capitalists trying to take over Atlas or Railsmith.

[Point353]

But I'm equally convinced that the 'savings' by manufacturing overseas can easily be killed off by missed communication, cultural differences, currency fluctuations, shipping delay and damage (containers at the bottom of the ocean), and now, reflexive and unpredictable tariffs.   I watched it kill my previous employer in an attempt to save $.14 per unit cost on a $200 product by moving production to Mexico, only to have quality issues result in a 10,000 unit recall.    And in my current business, found it relatively possible to do business in Ontario (then), as long as it had Canadian on-site  employees, but absolutely impossible in Quebec, unless you could be fully technical in French.  Surprise.

Interesting.

A company I worked for in the '80's tried moving manufacturing to China in order to cut costs.
That effort succeeded only after they hired a US employee who was willing to move to and live in China fulltime to babysit the operations there.

Another company I once worked for was forced to move circuit board assembly from the US to a factory in Mexico owned by their parent company.
The problem was that our products were all designed with modern surface-mount components, while the factory in Mexico could only assemble older through-hole style boards.
The solution was not to install surface-mount capable equipment at the Mexican plant but rather to have us redesign our boards with through-hole type parts.
That was when I decided it was time to leave.

Another company had a factory located in Quebec.
Being able to communicate with the employees there in their native language was the only time that the French I learned in high school became useful in a business setting.

[basementcalling]

Just in case anyone was wondering about the impacts the 2018 fire had on Micro Trains and the community of Talent, I saw the fire discussed as an emergency preparedness response example in this video about Oregon prepping for a potential 9.0+ megathrust earthquake on the Cascadia Subduction Zone with similar impacts to the 2011 Tohoku quake in Japan.

The segment on Talent starts about 30:48 minutes into the video.

https://youtu.be/Apn_ia2OinI?si=76nuAma04-CdbKby&t=1852

[spookshow]

I guess most people think model railroaders are nerdy little guys with engineer caps and overalls completely lost in their miniature world.

Oh, but they are. Believe me, I know! 

-Mark

[thomasjmdavis]

I guess most people think model railroaders are nerdy little guys with engineer caps and overalls completely lost in their miniature world, but I have to say that in my reading of stuff on TRW I've learned more about business, economics, politics, general world knowledge of the actual workings of things than I ever get from the media, websites, specialized blogs, etc. Maybe because the high level of expertise of the TRW community about these matters but it certainly is educational and welcome.
I too also have come to believe people get involved in MRing because they love the concept, not for grand ideas of fame and fortune. As pointed out, businesswise it's a very teeny industry but it soldiers on year after year. No worries about vulture capitalists trying to take over Atlas or Railsmith.

This reminds me I need to put new overalls on my Christmas wish list.

You are absolutely right, but... since this is Railwire, I am going to quibble a little anyways.

"little nerdy guys"?  Most I meet are like me- 3 or 4 inches shorter than we were 50 years ago (all that walking on concrete basement floors), but 50 to 70 pounds heavier- (attributable to beer and snacks and hot dogs and donuts consumed while building and operating model railroads). So, we are short (or shorter, anyway), but hardly 'little'.  The upside is that I no longer bump my head on the ductwork.

"No worries about vulture capitalists trying to take over Atlas or Railsmith."  True... but the danger for customers of small businesses is not vulture, or even venture, capitalists.  It is retirement.  In the case of Railsmith, particularly.  We can only hope Lowell has a succession plan.  Be a shame if Railsmith were sold to Walthers and mothballed forever at some point in the (hopefully far) future when Lowell decides to retire.

[Rossford Yard]

Sound ideas, for sure. But maybe not viable for this industry?


.... I think many are missing the point on just how small and unique the industry that serves our hobby is. We do tiny runs compared even to other hobbies. For example, if a Scalextric does a run of Porsche 917's, it is in the area of 20,000 copies of the same body. The most significant part of that run is NOT the plastic. Plastic is the easy part- once it is set up, it runs. What MicroTrains would do because they had their own shop was plan products over a year in advance, and stockpile bodies accordingly. Not everyone could do that due to space and cost.

..... The set up costs for paint masking and print decoration with pad (or tampo) printing raises the amortized cost of each item significantly, and most suppliers will simply pass as it isn't worth it. This is coming down with the advancement of printing technology, but the industry is not in a growth cycle, so it becomes a race for survival instead of a necessary increase in profitability.

.... I saw some comments on the book of faces that "Eric Smith must be getting a lot of cash" from this sale. I had to laugh. I know what the business was 'throwing off' in profit, and there was no way that any purchaser could spend a ton on the company to try to justify the cost out of the 'disposable income' from the sales. It had to be a play to grow the market, or reduce overhead to make it pencil.

Atlas has big challenges ahead to continue the culture of MTL that we have all come to cherish, but thank goodness they were willing to take the plunge. The alternative in a very real possibility was a complete shutdown.

This.

I have always been fascinated with the business of model railroading, and things like production numbers, so I ask various industry folks, which of course, are reluctant to share much.  One exception was Intermountain, as Frank used to present at shows all kinds of production numbers.  While this was ten years ago, I recall him saying that the covered hoppers kept them afloat, selling (at that time) over 250,000 of them in both N and HO (N has smaller market share in general, but the NTrak folks like long trains of coal or grain).

He mentioned that their modern 60 ft flats (which I had been waiting for) only sold 8,000 units over all road names.  At that time, they retailed for about $20-$25, so IM (at 40% of retail, assumed) must have grossed only $160-$200K for their efforts.  I don't know what their true cost was, but even at 100% profit (i.e., $80K cost and $80K profit) that isn't a lot for what must have been 2+ years of work, and it was probably less.

I have heard the minimum run was usually 300, but know that some of those Atlas road names (IHB, BRC, EJE, Houston Terminal, IAIS, etc. probably fell in the 50-75 for each road runs.  Paul Graf once told me that there were no printing limitations, i.e., that the old pads needed replacing at a certain number)  That is my relevant point - Atlas in particular seems to go out of their way to cater to variety in N scale, and not just focus on ATSF, UP, SP and successors.  So, I hate to negatively speculate on any of their motives.

(Other random but semi-related nuggets:

- A Kato rep told me their BN locos outsell BNSF)
- Old Life Like locos used to have a parts list and their costs in the box, which if put together, equaled the MSRP of the loco, suggesting what each part of those locos actually cost to produce.  I don't recall the numbers, but it was interesting to see what the costs per unit were.
- A Walthers rep did confirm that they needed 300 pre-orders to rerun a structure.
-I recall the first run of Kato SD70Macs (about 1994) had a run of 20K, about 5000 each for the three roads they made then.  They had a printing problem on the BNSF units and took the undecs out of the run to cover the redo of that paint job.  I presume it was about the same as one paint scheme, but we don't know.
-Reps from most companies have told me that the 2001 recession really took sales numbers down, and then the 2008 recession really finished the growth of MR manufacturing for the most part. As one put it at the National in Salt Lake years back, "Things don't really sell anymore."
- I used to track the HIA sales numbers until they stopped making those public ten years back.  MR was, back then, a surprising leader in wholesale revenues, holding steady or growing slightly at $ 425 million, which would translate to almost a billion in MSRP products, in line with the few other studies I saw.  However, the worriers credited that to a surge in O scale memories of old guys, and other seasoned model railroaders upgrading to DCC and then sound.
-I recall the old Allied Trains going up for sale for a million, which they said represented a year of annual sales, big for a hobby shop.
-One Atlas rep told me that (in contrast to the point above about IM) that they thought they would have trouble getting an equal salary at other jobs, so it appears Atlas pays at least OK.
-A friend once estimated Atlas as a $15million company, by calculating how much could fit in a 20 ft container, based on an Atlas announcement that they ship one of those containers per month.

Again, posted as an FYI, and am sorry if this qualifies as more hurtful speculation. Still, again, I tend to favor the mfgs for giving us more and better products all the time, as opposed to us modelers who moan about the slightest flaws in their products.

[nkalanaga]

thomasjmdavis:  I agree about hoping Lowell has a successor plan for Railsmith, but doubt that Walthers would buy them.  He bought the original tooling from Walthers.

If anybody, Atlas might like an upscale, well-engineered, and well-received streamline-era passenger train line.  That's one thing they haven't had since the 70s.

[thomasjmdavis]

thomasjmdavis:  I agree about hoping Lowell has a successor plan for Railsmith, but doubt that Walthers would buy them.  He bought the original tooling from Walthers.

If anybody, Atlas might like an upscale, well-engineered, and well-received streamline-era passenger train line.  That's one thing they haven't had since the 70s.

I agree.  My using Walthers in the example was a 'worst case' scenario.  But, in any case, I anticipate that Lowell will outlive me by a couple decades, and wish him continued success. Which reminds me, I need to buy myself a Christmas present....

[peteski]

- Old Life Like locos used to have a parts list and their costs in the box, which if put together, equaled the MSRP of the loco, suggesting what each part of those locos actually cost to produce.  I don't recall the numbers, but it was interesting to see what the costs per unit were.

Weren't those prices of the spare parts? I never tried to add them all up, but I have hard time to believe they would all add up to the MSRP of the model.  Those parts diagrams were for modelers to be able to purchase spare parts (just like Kato or Atlas now offer on their websites).

Many European companies still include exploded parts diagrams with the cost of purchasing each part shown.

[thomasjmdavis]

I just added up the parts prices on an E6- came out to $73.50 not including the cost of the weights (listed as 'N/A').  According to the MR review on Spookshow's site, the MSRP was $65.  At least, parts were reasonably priced.  I paid $35 for that particular loco- so they were heavily discounted.

I don't recall ever trying to purchase LL parts direct, so I have no idea what was actually stocked, or for how long.  I very much appreciate the Kato and Atlas online parts departments- parts are reasonably priced, and I can tell at a glance what is available.