To assist with Rich’s suggestion, both Champ Decal and Westerfield Models (American companies producing products in America) are up for sale. Perfect opportunity for an expert.
Without any data on manufacturing costs, all the discussion regarding how much a Chinese worker really makes these days and how it impacts the price of MRR items is speculative.
All MRR companies are privately held, and thus are not required to disclose financial information. Even if they did, it would still be difficult to determine specific costs. This detail is usually held in the strictest of confidence (assuming the Chinese factories even disclose such detailed information to their American clients).
I would also disagree that the problem is labor cost or a corporate need for high profits.
As for labor costs, it not what the workers actually make that is too high in North America, it is all the “hidden costs” of having employees. High taxes, high insurances, unemployment insurance, health care (side thought - if you don’t care about your health, why should be entitled to health care on someone else’s dime?), etc,etc.
Not to mention regulations about this, that and the next thing that drive up the cost of doing business.
Common sense has been outlawed by the socialists, and all the jobs have left with it.
Get the government, the envro nuts, and the unions out of the way and there would be plenty of jobs, and building model trains would be among them.
But what do I know, I’ve just been running my own businesses for most of my 54 years.
Sheldon
The economic and profit issues have been replied to, and I agree with them. I’ll take issue with:
Has the skillset of a machinist, or for that matter, a mold design engineer, changed over the years? Absolutely. Are they less skilled professions than they once were? Arguable, but I’ll give you - possibly. Is it “plug and play”? Absolutely not.
I am 57, have been a machinist (tool & die maker, actually) all my adult life. Yes, I’m still working in the field here in the US, and before you ask how, I credit 4 things:
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I moved around a lot and learned all I could, constantly tweaking and adding to my skillset, to make myself more versitile and therefore more valuable, while watching others my age shy away from CAD/CAM, CNC, and computers in general
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I was smart enough to see the writing on the wall, and persued more stable employment
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I found said employment with the US Government
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Luck (there’s always some luck involved)
Ed
And I have made this same point over and over again as well in similar discussions, but all the experts on here who have never run a business keep telling me I am wrong.
Sheldon
Randy…All…
ExactRail engineers, designs and manufactures their own tooling in house in the US - then they ship the semi-finished product to Hong Kong for ASSEMBLY.
It is amazing to me that it can be more cost-effective, to ship the unassembled model to china, have it hand assembled and/or decorated, and then have it packaged and shipped back the US for distribution , than it is to just assemble the model here.
That tells me where the most labor-intensive part of the manufacturing process is. And that is the per-unit-cost factor of assembly-line labor. As already mentioned, employee labor costs, FICA, payroll, medical insurance benefits, etc …all add up to what could be the alternative of a much higher cost - possibly double -over what it costs now for your average model loco or freight car, for example.
I can’t see the market bearing that type of increase.
Not in the current economy anyway.
HeritageFleet1
Look at the stuff we use in model railroading. A lot of that stuff after coming off the injection machine still needs to be assembled and painted. A lot of that is exacting work, and a lot of it still can’t be automated. And that’s not going to be a high paying job, anywhere. And our market, as it is today, is looking for RTR.
Funny you should bring this up. A lifelong friend, and retired hobby shop owner, and I were discussing the possiblity of buying Champ or starting some sort of model train manufacturing company just last week.
Few modelers today understand just how small most model manufacturers are, even the “big” ones.
Sheldon
Isn’t it really all about the U.S./Canadian (and to an extent, European) consumer? Aren’t we the one that are really to blame, not the manufacturer? I mean, surely there’s enough blame to go around, there always is, but… aren’t we buyers the main culprit.
Let’s take an imaginary dollar amount, say… $30. You go into your local hobby store and they have two lines of Bachmanns on the counter, one made in the US or Canada, the other in China. You’re looking at the Consolidation steamer, dcc and sound. The Chinese box touts a price of $169 U.S. and the Made in Hoboken New Jersey model is $199. They’re identical except for the ‘Made In’ label and the price. That or you’re hard pressed to actually see a difference.
I’m betting that 8 out of 10 buyers check out with the Chinese made merchandise ASSUMING that particular Bachmann line runs and sounds as good as the North American made item.
Do I like it? No, I wish it wasn’t that way, but its human nature.
Jarrell
It is my understanding that Intermountain and Bowser also do this and that for a number of years before all production was moved to China, so did Athearn.
This is not new to this industry or any industry. 30 years a MATCO tools bought German steel, shipped it to Japan, did the first half of the process to make sockets there, then shipped them here to be finished.
It was a new proccess, that was much better than the old way of making them, they were half the price of Snap On and much higher strength.
Again, regulations involving painting alone raise cost here by quite a bit.
Sheldon
The pattern doesn’t just hold for MRR items. In southern Indiana there are furniture factories, near the hardwood forests, Oak, Maple, etc. Apparently it is cheaper to cut the timber and ship it to China for assembly, and ship the finished furniture product back to the US, than it is to just assemble the product in the US. Maybe if shipping costs were to rise, (fuel) manufacturing would be more local.
The problem is that there is too much consolidation among manufacturers, of all kinds. Throwing American companies into international competition for labor tends to make all countries have similar economies. We no longer have capitalism, we have a “market economy” (i.e. government managed). Consolidatons are reported to take place for economic efficiency. However, many times, consolidations take place merely to eliminate the competition. Horizon/Athearn eliminates MDC, Walthers eliminates Life-Like, and apparently, Bachmann has purchased and has merged/eliminated most of the hobby’s factories in China.
Why do you buy the product you buy? By making the best choice among a vast selection or do you make it because there is little other choice? The pre-order system is a choice-limiter tactic also. Buy it now or never.
Perhaps we remaining hobbyists are a bit of a captive market. And they keep raising prices because we keep buying.
And, as a general rule, government policies favor the big guy, not the little guy. So again I say, get the government out of my business, my pocket and out of my way - and I will start a company that builds trains in America - but not until.
Sheldon
Well…after carefully reading all the replies here I want to know who is going to tell Kadee that they obviously can’t be doing what they are doing. Maybe they use “magic”!!!
Let’s just be honest here, every time we went to the “Chinese Outlet Store”, (Wal-Mart), and bought the products from China instead of the ones marked “Made in the U.S.A.” we were essentially sticking the knife in our own backs, now we are living with the consequences of our own actions. I could add more to this but the question there is “why” as it obviously isn’t going to change the buying habits any so why not continue with business as usual and just gripe about it instead. As one of the other posters mentioned, I’m on the downside of life so I probably won’t have to deal with it’s total effects, I’ll leave that for the younger guys with all the answers.
P.S. Oh yes, and would somebody please tell the folks at Kadee that they can’t actually be doing what they are doing, it’s just not “cost effective”!!! Have an average day!!
Mark
I hesitate to enter a discussion where people who borrow or save money or use their personal equity to make a product are then greedy when their risk is rewarded but they are not the problem If you have not started a company you have no idea of the cost of an employee and the tax burden the states and feds take. I can assure you they get more then the owner every time. When the government treats businesses as partners rather than a piggy bank to raid you will see US jobs return. Until then it is a hassle to be avoided if you want to remain in busines.
I know a number of cottage model railroad companies that are outsourcing to in addition to the bigger companies. All that is required is to pay for the tooling up front.
The problem is that if these model railroad companies were to produce the products here, they could not sell them at a price that modelers would be willing to pay and still make a profit. And as to the bigger outfits: if their competitors are doing it, they also have to, in order to stay in business.
There is only so much automation you can do to get the unit price down. I worked (past tense) for a small automotive parts manufacturing company that spent a few million on robotic automation. However, our customer yanked the product line to anyway unceremoniously as the worker there was only making $2 a day and his government was subsidizing the shipping.
But have you noticed the lack of quality control on many of the products we buy from ? When it is good it is great but when it is bad, it is horrible. Our customer was willing to deal with the fall out on the ba
If you added the in shipping costs to ship the models overseas from china wouldn’t it be cheaper to produce them here?
Nope. Containerization has drastically lowered shipping prices. It costs about $0.12 to ship a bottle of Australian wine in a container. The physical dimension requirement is about the same as for an HO scale locomotive. N scale would be even cheaper on an item by item basis. Shipping’s not even a factor here.
http://www.spiegel.de/international/spiegel/0,1518,386799,00.html
Andre
A little over $1.60 an hour. Not bad. Maybe we are creating a middle class in China after all. Why would I be in for a shock? I had just said my Indian workers had some serious wage inflation. That is just a bit more inflation than I figured, especially in a communist country.
The real point this thread is bringing out is that it is a combination of many many factors.
- The market (marketing, buyers habits, size of the market)
- The wages
- The regulation
- The taxes
- The cheapness of transportation and communications
- The exchange rate
- The tariffs or lack thereof
Until one actually goes into the market many of these are hidden variables. I heard from an employee that Intermountain has all the equipment to manufacture here. It sits idle and they import cause it is cheaper.
Yes labor cost are higher here. And those “hidden” costs such as health care, unemployment, social security are part of the workers wages as well. That makes it cheaper to use overseas labor. But instead of advocating that the American worker come down we need to invest in education and train our workforce to do jobs that can’t be done overseas (yet, the line is always moving). I think it’s great that Chinese workers are making more and have a rising standard of living. And Vietnam is probably next. It makes a more stable world, we just need to get more countries on board.
So I don’t expect larger model railroad manufacturers to return here, I expect more to move there. The small time operations where the owner does most of the work will continue here - they will also continue to charge more than products made overseas, and survive or fail by how well they fill a niche.
It’s a changing world.
Enjoy
Paul
Personally, I am disappointed that the RTR stuff has taken over. My biggest pleasure in the hobby is to build something myself. The old Roundhouse 3 in 1 kits were a blast even if they were rather crude. The opportunity to detail them was just too good to pass up. There seems to be a solid North American structure kit industry. I think there is a market out there for reasonably priced rolling stock kits. I am not talking about the easy to assemble stuff, but more along the lines of the Tichy Train Group products. Interestingly, on the side of the Tichy boxes it says “Made with pride in the United States of America” I am a Canadian, but I can live with North American product, especially if it is as detailed as the Tichy stuff is. Also, the Tichy products are very reasonably priced.If you are not familiar with Tichy, go to www.tichytraingroup.com .
Dave
In response to the question of whether we would choose North Americam product at a higher price vs Chinese product at a lower price, I think that with the current awareness of the North American job losses perhaps more than 20% would choose the higher priced North American product. Too bad we will never have the chance to make that decision. You may be right though, considering the demise of so many LHS’s because of the internet discounters.
Dave