We simply do not have the information to assess Lionel's viability as a company. The publicly revealed information does not tell us whether their expenditures are for capabilities for future production (e.g., expenses for Legacy development; new tooling) versus current operating expenses for goods sold. These are key pieces of information a potential creditor or investor will use to determine whether Lionel is a good or poor risk, and no one outside Lionel and the bankruptcy court have access to the critical details. Until the reorganization plan is approved by the bankruptcy court, or Lionel fails to produce an acceptable plan, it's all just so much speculation, which is good sport but nothing more.
It's nice that Neil Young and Mike Wolf have a mutual admiration society, but it may have little or no impact on how the industry operates in the near and distant future. It's apparent from their commentary that their friendship has had no effect on the level of mutual disregard and hostility of the two corporate entities to date. One can hope for better in the future, but the past track record isn't exactly encouraging.
Meanwhile, we do know two things for certain. Lionel is a valuable brand name, and even if the company goes through further distress, it likely will be ultimately rescued by someone with money, hopefully someone who understands the broad product line they produce and the company's fascinating and emotionally resonant history, and avid consumers.
Conversely, MTH is a brand name that has recent cachet, thanks to Mike Wolf's robust and insightful efforts at marketing. But if Mike Wolf decides to leave the business and become a full time Miami Dophins fan, MTH will soon be forgotten and a distant memory, leaving few or no known survivors.
Yep he's right. We have no real information on MTH's finances. Just Lionel's. MTH quite possibly be out of cash or swimming in the dough. My guess they are probably doing just OK in the current economy. Anyone telling you different is just guessing. Unless of course it's Mike himself and I doubt he's letting anyone know his current financial status.
Lionel would be doing a lot better once past the lawsuit and out of bankruptcy. It is no doubt an uphill battle.
Trying to update my avatar since 2020
MartyE and Kodi the Husky Dog! ( 3/31/90-9/28/04 ) www.MartyE.com My O Gauge Web Page and Home of Kodiak Junction!
It has been brought out that MTH is having financial issues of it's own. One thing that I have noticed is MTH has cut back on visibility to mass consumers, while Lionel has noticebly increased it's outreach to the masses.
First, where has it been brought out that MTH is having financial difficulties? MTH has a Credit rating with D&B.
Visibility to mass consumers? Yes, Lionel bought it's way in shelf space in every Big Box Store and will end this year $7,000,000 in the hole.
The main problem with folks making all kinds of claims about the business aspect of trains, is they carry thier emotional baggage into it. You like a train so you think the company made money on it. That's often not the case. You may believe the company with the largest sales is the best off financially, again that's not the case.
We have only one set of numbers to accurately judge and that's what Lionel has been forced to make public by their Bankrupt status. Before K-line went under everybody was sure they were doing great. Low prices, expanding like mad, but the insiders knew they were racking up debt. That same situation can be applied here. Take the time to go to the kccllc.net website, study the figures from month to month comparing 06 and 07.. Then you'll get a feel for the real story.
trigtrax wrote: However, there's always the chance he has some emotional desire to own Lionel.
Chance? That goal is a freely admitted obsession for him. He has wanted to own Lionel for years, and, ever since his falling out with Richard Kughn, I believe that he has been trying to ruin Lionel in order to get his hands on it. Andy Edelman once told me how fervently Mike yearned for the loyalty that folks give the Lionel name.
Statements from both parties on the other forum suggest that the comments and attitudes attributed to each are materially inaccurate. Sad to see that from a mag like Forbes.
And a merger between the two would be a disaster for the hobby as it would create a defacto monopoly except for the basic (Williams*) and very high end (3rd rail) hobbyist, barring Atlas - which is sort of its own subgroup anyway. There is no question the challenge posed by MTH made Lionel step up and improve, and we are the beneficiaries of that.
* assuming, as one would hope, that Williams remains what it is.
A merger is an interesting idea, but would a combined Lionel/MTH have enough potential revenue to service both companies' debts?
People seem to be confusing a downturn in sales with an increase in debt. MTH is managing it's finances, it still has credit and is chugging right along.
From a business standpoint it doesn't make any sense for Mike Wolf to merge MTH with Lionel, based on the financial statement published on kccllc.net, Mikey should take his settlement payment and run. However, there's always the chance he has some emotional desire to own Lionel.
Still Lionel really needs to find financing or some new "partner" at this point. There is no other way out for them.
brianel027 wrote: Captaincog, pick up the latest issue of Classic Toy Trains and look at that article written about his layout from one of our fellow posters here, jumijo. It's not a complex layout, yet it's really nice. None of the trains he runs are expensive or top-end trains, yet him and his family obviously have a lot of fun running them. And for a relative newcomer to the hobby, he and his kids have done some impressive modeling!It's an entertaining article about his fabulous family train layout... which is really what the hobby is about! And sometimes gets lost over all the legal drama and drooling over unaffordable trains that don't do enough to help the hobby grow with the potential next generation of train enthusiasts.
Captaincog, pick up the latest issue of Classic Toy Trains and look at that article written about his layout from one of our fellow posters here, jumijo. It's not a complex layout, yet it's really nice. None of the trains he runs are expensive or top-end trains, yet him and his family obviously have a lot of fun running them. And for a relative newcomer to the hobby, he and his kids have done some impressive modeling!
It's an entertaining article about his fabulous family train layout... which is really what the hobby is about! And sometimes gets lost over all the legal drama and drooling over unaffordable trains that don't do enough to help the hobby grow with the potential next generation of train enthusiasts.
I did get that issue and so far 3 out of the 4 family memebers have read it. My daughter is more into cars than trains, but then she helps wrench on the race car...
Now the debate in the house is building layout tables. My son wants his own, so we decided to build one 4'(or maybe 5)x8' upstairs and then a 6'X9' coffee table in the downstairs living room. Now I gotta learn to work with wood. The upstairs will be the combo set of Fastrack and O27 while the downstairs coffee table style layout will be all Fastrack at my son's request. I am doing lots of reading now and just need to find help. My son and I joined a local TTOC club this past Sunday, so we will see......
Founding member of the All Aboard Fastrackers! See us at: www.allaboardfastrackers.com
An even more consumer friendly corporate recombination of LIONEL and MTH is this:
Company A = Conventional and Inexpensive TOY Trains.
Company B = Command and Moderate priced Model Trains.
Company C = Command and Rare, Expensively priced Exact Model Trains.
This is a real picture of competition.
Andrew
Watch my videos on-line at https://www.youtube.com/user/AndrewNeilFalconer
Good for you Captaincog! By the way, even us seasoned train guys can have trouble with that cattle car and cattle corral... those were problematic from the beginning.
What you say with "What I love about these trains is that my son and I can play for hours, try new things, and fix things" is really what the hobby is truly about. If you get lucky, you will be able to find some other beaters or well-used trains that you can get on the cheap, and then learn about repairs by actually doing them... that's how I learned. Sometimes you might say "was this really worth it" given all the work you might put into a one single repair project. But it is worth it because it will make the next repair project go that much quicker.
If you can find the parts and learn to fix things yourself, or make improvements to lesser expensive trains, that does make this hobby much more affordable. All these legal problems and the ensuing drama is just a sideshow, though it does have ramifications for the hobby - at least from the business side.
brianel, Agent 027
"Praise the Lord. I may not have everything I desire, but the Lord has come through for what I need."
A couple of random thoughts:
A merger is an interesting idea, but would a combined Lionel/MTH have enough potential revenue to service both companies' debts? And having worked for a company that "merged," in reality it was an acquisition, and I believe most mergers are. In that case, one company has to pony up the cash for the other, and neither of them is all that strong financially.
If that hurdle can be cleared, then there's the debt issue. I worked for a large company that had a larger debt. The company makes just enough each quarter to pay the interest on its debt. Usually there's a small profit, but not enough to keep the investors happy, and not enough to pay down any significant amount of that old debt. For now they're OK because they have only one competitor and it's one of the most hated companies in the known universe. But if the industry changes, they could sink quickly.
Of course with MTH being a private company, we can only speculate how much debt it has and how much cash it has on hand.
As far as the main thrust of an article being five minutes of a much longer conversation, I can think of one instance where I was guilty of doing the same thing. You have to play up the angle that will get the reader to keep reading. When I explain the whole Lionel/MTH thing to my wife, I guarantee there are about three things that she takes away from the discussion: 1. Neil Young (THE Neil Young) is a part-owner of Lionel. 2. Some guy named Mike started building trains in his neighbor's basement and ended up making the legendary Lionel nervous. 3. That guy's company sued Lionel and won. Sort of.
Forbes already told parts 2 and 3 of that story last year. Without the Neil Young angle to play up, is there a story? To a train magazine, possibly. But to Forbes? No way.
brianel027 wrote:"I have had one shop owner tell me that I was wasting my time collecting or trying to use old Lionel items and repairs could not be made. He suggested that I throw the stuff away."Captaincog, I want to be sure you don't actually believe that poor advice. It's actually easier to repair some of the older postwar and MPC-era Lionel trains for the simple reason that parts are readily available in most cases. And where original parts aren't available, sometimes there are reproduction parts on the market. In other instances, it's actually just as affordable to buy another junker or less-than-collectible condition piece and use parts off that to repair your other item. It's actually some of the newer trains that are run in low quantities that do not have parts available.All that, and with a Greenburg or K-Line published repair manual, or one of the Kalmbach books on making repairs, you can usually make them yourself. And while I admire those who can self-repair some of the complicated higher end trains, I feel a little intimidated by those.Sounds to me like this was a dealer who A) just wants to sell some new trains, and B) doesn't have a clue how to repair the older ones himself, of which there are many dealers who can make extra income providing repairs and parts.
Thanks biranel,
You are correct in that I did not believe that advice. Having owned several old British cars and kept them running, restoring an old muscle car and racing PTCruisers, fixing trains is fairly easy. The hard part is learning where to get the parts and learning how it should function. After getting all my "why not?" questions answered, I have found a couple of dealers that I do trust. I am even thinking of going out with my family to a local train club tomorrow. What I love about these trains is that my son and I can play for hours, try new things, and fix things. My point is that for those that do not have my background they might just walk away from the hobby. I did get the repair manual and have used it several times. I ended up with two cattle corrals and made one work right off. The second one will take some work, maybe even some reengineering, but since it is tinkering project, no problem.
I still have lots to learn and that is the fun of it, isn't it?
There are several factors that are going to be a problem for Lionel, or for any other traditional market segment business. The primary issue of financing will be difficult because most investors want an immediate return. These investors do not care about long term investments because of their beliefs that another investment will come along. Lionel, like the article stated, is in a category with several other companies that face the prospect of no financing while still having a viable business model, just not one that an investor wants to see. The subprime mortgage market seems to be the crack for the investment addict. Since these "addicts" cannot get their "fix" from their normal source, the market has gone sideways.
What happens really depends on what the courts decide as the direction for business in the US. Either help the business or liquidate the business and hold a harsh line. I agree with others that there needs to be some decisions made as respect to tooling and investment costs versus the ROI and profit margins that exist in a tough market. I have been out of the model trains for quite a while and there are some newtrends that I have noticed. The first trend is that the train hobby is a people hobby that has been price challenged. The hobbyist is budget conscious and now has many avenues to get a cheaper price often without the personal service associated with a traditional hobby shop. As an example, there are far more cell phone stores than either hobby shops, barber shops, fabric shops, and craft shops combined. No company has yet found the key to reaching the new model train enthusiast to generate the needed market growth to establish new brick and mortar locations. Until someone does, we have what we have. Do I price shop? Yes, but I do try to spend and support those shops that give me the service that I want. I have had one shop owner tell me that I was wasting my time collecting or trying to use old Lionel items and repairs could not be made. He suggested that I throw the stuff away. That does not help the hobbyist. This is a heritage business that drives it's current business model through the past. Lionel understands some of the potential, but in my obsevations, just not enough.
Okay, I am leaving my business soapbox and returning you to your regular scheduled Lionel hobby activities now....
edw, your response was very good and it is possible there exists some real logic to your suggestion.It's been discussed many times on this forum before, that Lionel and MTH both face uncertain futures due to changing demographic trends. Mike Wolf, himself, has acknowledged as much. Why not take the steps now that will strengthen both companies, and put the toy train industry in the best position for the future?Of course, we're not really talking about "toy" trains in this particular instance. Most of the financial strain, investment dollars and legal problems stem from scale high end products. And from the desire of two different companies to dominate a market that is very small and simply cannot suitably or profitably support such a multitude of expenisve top end products.
There's nothing wrong with the high end trains, but the hobby (both the consumer, the press and the train importers) have gone gung-ho and overboard. The consumer doesn't think immediately about the millions of dollars that go into the development of one single high end steamer. And the train importers have been blinded to common sense by again, this desire to be perceived as the most innovative number one company. The train importers can hardly afford to continue making such a multitute of new high end products every single year, to only lose money on most of them.
Which in my mind, brings up the most interesting aspect of the Forbes article and the related responses is that Neil Young and Mike Wolf have done a 360 and absolutely changed their tone here. The Coil Couplers Hi-Rail Times has had plenty of harsh and unflattering things to say about MTH over the years. And Mike Wolf said recently after some legal proceeding in so many words, that there was no love between Lionel and MTH. So now we have some flattering words and the bit that "Harvest Moon" was actually written at Mike Wolf's house. Which begs the thought, where was all this kindness and "God Bless" over the past few years?
Maybe you are right edw... maybe there's conversations going on that none of us yet know about? Who knows.... the 3-rail soap opera continues.
And a response:
"I agree with Neil 100% that this article is very misleading. The legal problems between MTH and Lionel never spilled over to our relationship and Neil was never involved. This was made clear by me in the interview. I also told the interviewer about the times at the York Show that Neil refers to, but those parts didn't get in the story. This interview started as a story about Model Railroading and one of the questions came up about Neil and his involvement with Lionel. He asked if I knew Neil and more question came. This interview went on for over an hour and I would say the story was base on about 5 minutes of that time. I try and do all interviews I can to get the story about Model Trains and our name outside the model train market, but I know that has some risks. It is a shame that conflict sells. Being taken out of context is not new to me but its part of the game. I could go into many more examples of being taken out of context, but I don't want to get this thread going in another direction. I hope Neil knows I fell the same about him and it came through a little at the end of the article. ("Personally I really like the guy. He's very creative, goodhearted," said Wolf. "Who knows, our paths might cross again someday.") Also left out was fact that Neil is a great golfer and we won a golf tournment together. Mike Wolf"
From another forum:
"Articles like this is why I don't do that many of those type of interviews! Mike and I have never had an unkind word. The mess that the article refers to and the reference to "Grown men fighting over toys," is very misleading.If you read the story, you will see that the real difference of opinion was never between Mike and I. That had nothing to do with me. I still talked with Mike at York even during the lawsuit. The last time I saw him, he signed an MTH catalog for me "God Bless". You won't see that in the story.But reporters would rather associate me with the big disagreement and aftermath because of my notoriety. Even if I had done this interview it would have been slanted one way or another. I know this from experience. There is no "bad blood" between us. There never has been. We are owners of competing companies in a small marketplace. I have the utmost respect for Mike. He is a great competitor. Both of us are fascinated with this hobby, and captivated by the possibilities. We just got caught on the other side of the fence from one another.I had to set this straight.Enjoy your trains!ny"
Interesting article, Neil. On a related note, it appears that Lionel is having difficulty finding suitable financial backers to enable it to emerge from Chapter 11 bankruptcy by the end of March, the deadline imposed by the bankruptcy judge. Jerry Calabrese says Lionel is looking for a partner that shares its vision for the long haul, and not someone looking just for a short term business opportunity. Apparently, the current credit crunch has severely reduced the number of potential backers with the necessary capital to enable Lionel to pay off all of its creditors.
http://money.aol.com/news/articles/_a/lionel-llc-still-seeking-loan-backers-to/n20071219171009990024
Conceivably, if Lionel fails to come up with adequate financial backing in the next three months, the company's assets could be liquidated by the court.
As the first article pointed out, MTH has some serious problems of its own, with sales revenue having dropped 50% over the past few years. And even the undisclosed settlement that Lionel has agreed to pay MTH (something less than the original $40 million judgment), is not likely to dramatically alter MTH's long term financial prospects.
Taking all this all into account, I believe these two struggling companies should give serious consideration to a radical solution...A Lionel and MTH merger!
Both companies obviously share the same long term vision, and a merger would allow Lionel to reduce its overall debt by the amount of the settlement owed to MTH. With a merger, that part of the debt could be written off internally. Perhaps, MTH could also bring some cash to the table, as well. However, even without an influx of cash from MTH, a combined company would be in a stronger position to secure suitable financing to pay off the remaining portion of Lionel's debt.
Obviously, such a merger could not take place in the next three months, and the court would have to agree to extend the deadline to allow the companies to work out the details. But if the alternative was that Lionel would not be able to secure financing, and its creditors would be paid less than what they were owed, then all parties might allow more time for resolution.
Our community is FREE to join. To participate you must either login or register for an account.
Get the Classic Toy Trains newsletter delivered to your inbox twice a month