Model Railroading > Model Power Closing Shop

After 50 years of service to Model Railroaders, Model Power is closing. My very first train set as a kid was from MP, so this is a sad day. Many found memories of that set that last for about 10 years during my youth before other things took over.

http://www.modelpower.com/default.asp

Cheers,
Brian

Not good news. Many of the budget customers in our store buy Model Power freight cars. That, and mommies and daddies who want to buy an extra car or two for the first train set and don't want to break the Christmas bank. While we all like to talk about Atheren vs Broadway vs MTH vs Bachmann, losing Model Power is not good news for the hobby.



Edited 2 time(s). Last edit at 04/22/14 08:12 by DRGW483.

DRGW483 Wrote:
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> Not good news. Many of the budget customers in
> our store buy Model Power freight cars. That, and
> mommies and daddies who want to buy an extra car
> or two for the first train set and don't want to
> break the Christmas bank. While we all like to
> talk about Atheren vs Broadway vs MTH vs Bachmann,
> losing Model Power is not good news for the hobby.

There is an almost unlimited supply of brand new, never touched, factory fresh HO freight cars, passenger cars and locos, available on the second hand market. Put a sign up in the store looking to buy second hand equipment. Sure, there will be a lot of junk that walks in the door, but there should still be a lot of nice stuff as well. Check Craigslist & ebay for NOS items. The stuff is usually sold very cheaply and with the main collector group getting into their 70's, you should have no trouble keeping your shelves full with attractively priced, decent quality models, most of which will be of far superior quality to the stuff Model Power put out. Just my two cents worth.

Sad to hear... this is important in that it is another sign of a changing hobby. Not only did Model Power supply train equipment, but they also were a source of accessories such as figures, buildings, track, etc at a reasonable price. As they mention, their lenders saw them as a high risk, and thus the money stopped flowing. Model railroading is turning into a risky venture. Companies need large amounts of $ to design tooling for these extremely detailed locomotives and freight cars we want. The payback period on that sort of investment isn't a sure thing either. The good news is while we lost some manufacturers, we have gained some too.

-Sean

Not surprising considering most of what they make is made of plastic. Which is an OIL based product and we know where that's going in price. Sad to see them close though.

Posted from Android

CR4103 Wrote:
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> Not surprising considering most of what they make
> is made of plastic. Which is an OIL based product
> and we know where that's going in price. Sad to
> see them close though.
>
> Posted from Android


If you read their post, the reason they're closing is because of the banks not wanting to lend them money like they used to.

After many banks stepped on their you know whats in the mortgage crisis they are overly anxious about not having a sure thing. Having been a financial controller for a company that was slowing down, I can tell you banks are really friendly when business is good but get real nasty when you make them nervous. Every business has it's ups and downs but the bankers have become like the wall streeters in my opinion. Yes, they should be allowed to protect their investment but sometimes its just crazy. In our business we called it "getting in your knickers" even when we had loan guarantees from wealthy owners of the business.

But how many stores carry train sets anymore other than hobby shops around Christmas? This was much of Model Power's business wasn't it?



Edited 2 time(s). Last edit at 04/23/14 21:08 by wabash2800.

I'm sorry to see them go, but after 50 years, a private company like this should have been financing most everything themselves, without relying on banks. Sounds to me like they were living a bit too high all these years and not plowing enough back into the company. The banks know all about the "graying effect" on this and other hobbies. They know all about the rate at which hobby stores are closing. Then they saw how poorly MP was probably capitalized and they pulled the plug. Business is business and sometimes it just isn't pretty. Now Bachmann will pretty much have the entire low end to themselves. RIP Model Power.

Most businesses, including many big ones use external financing, either with a credit line to level out the ebbs and flows of cash inflows and outflows or burrowing money for capital expenditures. It's also used for "leverage" to grow faster and interest expense is tax deductible.

Don't know what my LHS will do, he's got 35 ft of shelf space at least of Model Power stuff

Ed Stewart
Jacksonville, FL

Streamliner Wrote:
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> Now Bachmann will pretty much
> have the entire low end to themselves. RIP Model
> Power.

Besides Bachmann, Walthers' Trainline and former Life-Like lines hit the low end of the market fairly well. And yes, Model Power cars will cycle their way through train shows for generations as those beginners who stick with the hobby (as well as those who don't) sell it off. Some will probably even try to fob that stuff off at "collectible" prices, just like Tyco.

I bought a Model Power cylindrical hopper once, then got rid of it as soon as Intermountain's car came out.

Streamliner Wrote:
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> I'm sorry to see them go, but after 50 years, a
> private company like this should have been
> financing most everything themselves...

wabash2800 Wrote:
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> Most businesses, including many big ones use
> external financing...

The way their letter read, it sounded like blaming the banks for not wanting to float large quantities of slow turning inventory which is a business model that went out of style a good number of years ago. Without knowing the full picture it seems like they either needed to modify their business model or use their own money to float the excess inventory (which if they have been profitable they should have had). Many small businesses are perpetually cash poor because the owners suck out all the excess (their right, but not generally a good way to run or grow the business). Not saying that's the case here, but them deciding to close shop pretty much validates the banks decision not to lend - they've effectively declared "we can't make money running the business the way we have in the past". The owners have presumably made money for 50 years on it but aren't willing or able to plow enough money back into the business to keep it going - or it's simply stopped being a money maker so they pulled the plug instead of trying to 'fix' the business model. Regardless it's a shame for the hobby which already suffers from a dearth of "cheap options" for new entrants.

MDH Wrote:
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> Streamliner Wrote:
> --------------------------------------------------
> -----
> > I'm sorry to see them go, but after 50 years, a
> > private company like this should have been
> > financing most everything themselves...
>
> wabash2800 Wrote:
> --------------------------------------------------
> -----
> > Most businesses, including many big ones use
> > external financing...
>
> The way their letter read, it sounded like blaming
> the banks for not wanting to float large
> quantities of slow turning inventory which is a
> business model that went out of style a good
> number of years ago. Without knowing the full
> picture it seems like they either needed to modify
> their business model or use their own money to
> float the excess inventory (which if they have
> been profitable they should have had). Many small
> businesses are perpetually cash poor because the
> owners suck out all the excess (their right, but
> not generally a good way to run or grow the
> business). Not saying that's the case here, but
> them deciding to close shop pretty much validates
> the banks decision not to lend - they've
> effectively declared "we can't make money running
> the business the way we have in the past". The
> owners have presumably made money for 50 years on
> it but aren't willing or able to plow enough money
> back into the business to keep it going - or it's
> simply stopped being a money maker so they pulled
> the plug instead of trying to 'fix' the business
> model. Regardless it's a shame for the hobby
> which already suffers from a dearth of "cheap
> options" for new entrants.

True, but the business model is what kept stuff so cheap.

Another point is did they actually make anything? Most of their structures seemed to be rebranded European stuff.

Yes, I don't know the details about Model Power. But my point is that many banks have become overly cautious, stifling business for not only their customers but their own. A bank can make money on loaning money to a small business with personal guaranties from owners (on their personal assets) and setting limits on how much they can pull out of the business (equity computations, which has always been the case). But yes, some owners can choose to put less or not enough money back in the business. And with the number of bank mergers and fewer bigger banks, personal service can be lost. This may come back to haunt banks like it has on other big businesses that lost touch with their customers. Enough said.

Will not be at all surprised to see their imported items reappear soon in someone else's packaging.