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Written by Paul D. Race for Family Garden Trains

September 22, Special Update from Family Garden Trains Note: This is an HTML version of a special edition e-mail newsletter from the Family Garden Trains website, which publishes information about Garden Trains and related topics. If you would like to subscribe to the newsletter, please join our Mailing List, and specify that you want to receive e-mail updates. Fine Print: If you are receiving our e-mail updates and you no longer wish to subscribe, please e-mail me with a "Please Unsubscribe" message (worded any way you wish), and we will graciously remove you from our list. SPECIAL ISSUE: HOW WILL CHANGES AT LGB AFFECT THE HOBBY? Note: If you don't have any LGB(r) brand trains, this article may not interest you much, but a good percentage of my readers DO own LGB trains, so I thought this would be of interest. LGB trains, which reinvigorated the garden railroading hobby in the 1980s and 1990s are made by Ernst Paul Lehmann Patentwerk OHG (EPL) in Nürnberg. (LGB stands for Lehmann Big Trains in German.) Early Rumblings: Changes in North American Distribution and Marketing: For some time, the distribution and marketing of LGB trains in North America has been handled by a subsidiary, LGB of America, or LGBoA for short. Several weeks ago, we heard that LGBoA was going to be "shut down" and a new company, G45, was going to take over its responsibilities. (The name G45 refers to the 45mm track on which "G-gauge" LGB trains run, so it's not as scary as it sounds.) Most of the management and employees of G45 are actually former LGBoA employees, and some of them are friends of mine, so I wasn't too worried by the original announcement. In fact, G45 is going to be able to import products made by companies besides Lehmann, so that's probably a good thing for consumers. Still, there have been rumors that Ernst Paul Lehmann (EPL) Patentwerk was struggling to maintain sales, so other people weren't surprised when the next few news items hit. First Shock: EPL Announces a Hostile Takeover Attempt: Early on September 18, 2006, EPL (makers of LGB) announced that they were taking legal steps to avoid a hostile takeover attempt of the company. According to the company web site, their creditors (meaning mostly the banks they owed money to) had reorganized, allowing a new company that did not have the best interests of EPL at heart to take over EPL's debts. When the new creditors began taking strong actions to control the company (including freezing EPL's bank accounts), EPL promised to do some quick legal action. Aftershock: EPL Applies for Bankruptcy Protection: The same day (though one press cycle later) EPL applied for Bankruptcy Protection in Nürnberg. As far as I can tell, this is similar to the bankruptcies that Chrysler and some North American airlines have gone through - the point is to protect the company from its creditors until it has a chance to reorganize and become profitable again. Dr. Steffen Goede, a senior partner of a German law firm, is supposed to work with the Richter family (the present owners) to help the company get through this crisis. At the moment, Goede and others are claiming that their longterm goal is to help the company survive as a family-owned enterprise, but that their short-term goal is to keep the factories open for holiday deliveries. Pundits React: Some North American garden railroaders have long complained that LGB wasn't offering trains they wanted, meaning mostly scale models of US-style trains. In addition, LGB seemed to think that they could maintain profitability by feeding the "collector" market one "collectible" product after another (usually silly things like Coca Cola(r) trains that most garden railroaders weren't interested in running). But even the most loyal collectors get tired of trying to own all 37 or 197 "paint jobs" of the same product. (This is a lesson Lionel didn't learn until the company had become a tiny shadow of its former self and was all but pushed out of its niche by competitors.) Loyal LGB customers, as well as occasional LGB purchasers have been "crying out" for new products that looked better on their railroads, but, sadly, they've been getting more of the same. This week a German author claimed that he and many others in Europe had been telling EPL management the same things for years. Here is a rough translation: Obviously [EPL] . . . did not have any notion, what the market really wanted EPL to produce. Certainly not Disney(r), Coca Cola(r), Peanuts(r) and other multicolored, garish, out-of-any-scale rolling stock. The customer wanted something entirely different! The same author also claims that flimsier packaging, cheaper labeling and the low quality of the early Chinese products discouraged even loyal collectors. Apparently, EPL thought that outsourcing to reduce product cost would somehow overcome the fact that they weren't producing the products their customers wanted period. I'll add that ALL model railroad manufacturers took a huge "hit" because of the economic slowdown of the early 2000's, and the hobby itself seemed to stagnate for a while. Only a very healthy company can overcome two or three years of such stagnation. Several smaller companies, including Roundhouse/MDC closed their doors. Even a company with established markets and excellent brand recognition need to pay close attention to expressed customer needs in such time. But like the Lionel of the 1970s, 1980s and 1990s, LGB management seemed to maintain an "if we build it people will come" mentality that has now pushed EPL to the brink. LGB's Future? At the moment, the official reports imply that some products that were outsourced or were planned to be outsourced to China will be manufactured in Nürnberg after all. And the Richter family will still hopefully be involved in management, to safeguard the "family business" traditions of the company. Clearly the Richters are hoping for a good holiday season to ease their immediate cash flow problems (which were made greater when their creditors put a "hold" on many of their accounts before the company filed for bankruptcy protection). At least one other European hobby manufacturer has offered to help LGB in some way that probably involves some transfer of ownership - and that's a mixed blessing. How Will Changes at LGB(r) Affect the Hobby? For many people, the term LGB is synonomous with "garden railroading." To this day, I meet people who say "LGB" when they mean "garden trains" the same way most folks say "Kleenex" when they are referring to any brand of "facial tissues." Does that mean that it will destroy the garden railroading hobby if LGB products become unavailable for a time (or, worse yet, forever)? No. Most garden railroaders today (even those who started out with LGB) have products from a range of manufacturers. And many garden railroaders who are going for a particular look (such as U.S. industrial steam or modern diesel) have already stopped looking to LGB to supply their needs at all. LGB fans, of course, will be unconsolable, if the company and its products fail to reemerge with some resemblance to their former selves. But to me the biggest losses to the hobby would be the losses of brand recognition (as described above), continuity, and potential. My hope is, not only that EPL/LGB will overcome this hurdle, but that, as a result of this "near-death" experience, the company will decide to stop coasting on their successes of the 1980s and 1990s, and start fulfilling their potential to build the market and create new ones - then everyone will benefit, including folks who currently have no idea what garden railroading is all about - yet. But I won't make a prediction - I'm usually wrong so why bother? Whatever happens, G45 promises to continue providing support for LGB products. Enjoy your trains, and especially enjoy any time you have with your family in the coming weeks. Best of luck, Paul Race familygardentrains.com Note: On October 11, I made a followup announcement about LGB available to the general public. If you'd like to see that announcement, please click here. To view August's newsletter, click here. To view September's newsletter, click here. To view October's newsletter, click here. To read more, or to look at recommended Garden Railroading and Display Railroad products, you may click on the index pages below.