This is an article by HJ Neumann from his blog "IIm Online Nachrichten" that HJ Neumann wrote in September of 2006, just right after LGB declared bankruptcy. This is a pretty long article, no pictures. The bankruptcy fact ripped right into HJ Neumann's heart - having been a staunch, seriously devoted, lifelong fan of all things LGB. In this article HJ Neumann poured his heart out. YT wants to share his thoughts back then on the occurenec of the event 13 years ago this week.
This is Part 2
The next question that needs to be asked is: how to proceed? For now an insolvency counselor (similar to a bankruptcy judge in USA) has taken over the executive board.With that delivery to dealers will start again. It is the cardinal task of the insolvency counselor to secure daily business and continue until a buyer has been found. Or - if none is found- to sell off any assets left to satisfy creditors.
The damage that has been done to the brand "LGB" by that! What is going to happen to the employees? What's going to happen to the dealers, the suppliers and their employees? Who can be found to take over LGB? An investor alone will not do. There has to be a new leadership team. Just remember when POLA was taken over by FALLER. All hell broke lose inside the company and until today the brand didn't really recover. And LGB is somehow bound to stay at their manufacturing site Saganer Street. You can't just remove all the machinery and reassemble somewhere else...
Here's the opinion of one insider: exchange the complete top management. Then choose the best from the leftover employees, invite the 50 best (biggest in sales volume) dealers to Nuremberg and present them right then and there with a new product program and a new concept. Then start the whole business again, slowly but surely. With this simple concept may be an investor would be willing to supply the needed funds. But he needs to be found first...
LGB itself had this to say:
"The ERNST PAUL LEHMANN PATENT WORKS (EPL) in Nuremberg, manufacturer of the world-renowned Lehmann Big Train is part of the traditional Nuremberg toy industry. The family owned business celebrated its 125th anniversary in July of 2006. Since March 2005 LGB is in serious restructuring. Due to the ongoing negative development of sales within the model train industry the measures to control costs which had started in 2002 already had to be drastically intensified.The 150 employees supported the restructuring process by sacrificing their wages.Due to the close bond to the production location Nuremberg and the high standard of quality manufactured here EPL gave up manufacturing in the Czech Republic. Safeguarding the jobs in Nuremberg had priority. In spite of these positive parameters the creditors locked the bank accounts on 09/01/2006 and prohibited any product sales. Sales projections and supply-and delivery schedule are according to plan for the business year 2006. Also, the loss producing American subsidiary LGBoA was sold to an US entity with contractual agreements to proceed with the operative partnership long term. Despite of considerable liquidity flowing into the accounts due to the sale they stayed locked.
The banks kept pressuring the owners (of EPL) who had guaranteed the loans personally to a point where the owners decided to declare bankruptcy, as of today. Interested investors now have access to EPL. With this, the owners opine, the tradition of the 125 years old world renowned company can continue and the delivery of the New Items Program which is highly anticipated by customers is secured."
YT likes to stress that the article is the opinion of HJ Neumann and the last paragraph ("LGB itself had this to say:") is a statement by LGB itself. HJ Neumann is and was a very loyal LGB customer, editor and author of LGB Gauge II News and member of a local, very big LGB club. During his career as editor he did a lot of interviews with the LGB top management. However, some information was not available to him relating to LGB: Financial structuring of the company for instance, banking policies, bookkeeping practices, asset management, maybe shady transfers, things along that line. Please take this into consideration in regard to his opinion here.
As to the statement LGB gave in September 2006: YT is stunned that China activities weren't mentioned. LGB had transferred major portions of production since 2000 at least. Oh and please this one: on the day the employees accepted their wage sacrifices, Johannes Richter presented his just bought $ 100,000.00 car in LGB red to the stunned LGB workforce by doing doughnuts in the factory parking lot................
And last: Since 2011 and with SIMBA-DICKIE GROUP Germany taking over Marklin, LGB and others better times were ahead. Today LGB under the SIMBA-DICKIE leadership is a shining example of Gauge II model trains bringing back a lot of the old LGB glamour. The program is good, the locomotive-model variety serves the German market as well as the US market. Customers on both sides 'of the pond' are flocking back to LGB for years now and new dealer stores (some online) spring up in the USA to offer LGB again.
Sunday, September 22, 2019
E.P.L. in Bankruptcy ---Remembering 2006 - Part 1
This is an article by HJ Neumann from his blog "IIm Online Nachrichten" that HJ Neumann wrote in September of 2006, just right after LGB declared bankruptcy. This is a pretty long article, no pictures. The bankruptcy fact ripped right into HJ Neumann's heart - having been a staunch, seriously devoted, lifelong fan of all things LGB. In this article HJ Neumann poured his heart out. YT wants to share his thoughts back then with the occurrence 13 years ago this week.
On Monday September 18, 2006 it was announced that LGB Nuremberg had declared bankruptcy. LGB published their version of the news on the LGB web site.(YT: see original wording in Part 2)
As much as these news stir up emotions:insiders already knew for a long time that the policies management chose for the last years were doomed to fail. Lehmann (YT: the L in LGB) was "resistant to consulting" as a major LGB dealer once said. And he was right! Even though LGB had a many consultants within the last years who delivered their written expertise for a lot of money. But were those really heeded? There was no chance. Did they actually talk about the LGB product in these expert reports; there was no chance for that because they absolutely couldn't have a clue about that subject. And the product has always been the most important.What does the customer want and what may it cost so he can afford and buy it? That was the '$64,000.00 question' and for years they picked the wrong answers. They never asked their own people, not the salesmen in the field nor the LGB dealers big and small - they just got the crude facts slapped in their faces. In addition (LGB) constantly embarked on hiring the wrong people and thus couldn't even make up for their own incompetence.
"The pilot is disembarking" another author wrote when the former Vice President of Sales, Klaus Baumann, was retired. This statement was true as well. Especially in hard times which we are under for a while now it is important to have somebody who can steer the ship around the cliff. Not one qualified species was left at LGB in the end. And right off the bat the ship ran aground. She had been off course for a while already and the leakages below the waterline were explicitly apparent. But nobody wanted to notice. The captain had no certified license...
And then there was that eXtra huge whole in the hull. Well, it just sped up the process - it wasn't the cause. But it showed the arrogance , the overestimation of their own capabilities, the misjudgment of realities. Obviously nobody knew what the market really wanted. Definitely no Disney-, Coca-Cola, Peanuts- and other colorful, often ugly paint-splashes, and predominantly no mangled standard gauge locos. The customer wanted something completely different. But the panel that knew the market was no longer in demand nor consulted. Even though there had been a series of good new items for a few years - many a fans were staring in disbelief. Compare it to a pack of lions. When a new one enters the scene he thinks he needs to lock jaws with the others. Well if the CEO tolerates this then he has to accept responsibility for that later as well...
"Lifeblood was barely trickling" I wrote about this year's "LGB Summer Fest". But maybe that was nothing but tinted water...
A company that mainly consisted of a giant legal department could not function properly. Definitely not with hobby products for people who wanted to enjoy them. (LGB) put so much weight on pointless bits and pieces when it was too little, too late, already
The "LGB-family" hadn't been cultivated anymore for quite a while. They liked to take but never gave. The "LGB Depesche" (LGB Telegram in USA) used to be a connecting agent but now resembles a sales brochure. Flat and typical for everything else.
Old friends were spooked and scared away. Those who missed long accustomed-to Christmas cards were 'Bourgeois" or 'small minded'. They petty much had forgotten that these 'small minded' people had loyally supported and upheld (their LGB). And they saw the writing on the wall for a long time coming. And they were wondering why nobody at LGB did put on the emergency brakes. Instead big words and the big show ruled LGB as if nothing had happened. As if it isn't in the last minute of the eleventh hour..
Pretty fresh in our memories are the stories the LGBoA boss told on how they pampered their VIP customers and the success they had with that. How this all resulted in profits. Lehmann was never destitute for something like that. Their opinion was : They already make enough money with our products!"
Their cardboard boxes got thinner, the protecting cardboard wrapper was omitted. Labels were printed at the factory and in black+white. Thanks to China product quality decreased immensely but prices increased ever more. There was no way this would work out! The eXtra shop annoyed the customer base. Despite well meaning tips it wasn't stopped nor canceled. And nobody can comprehend a New-Item-program consisting only of color variations. What a blistering pace LGB displayed in their early years. Our articles about the LGB history are witness to that. We do remember quite well the statement by the senior CEO of LGB how "Out of each Dollar earned we have to reinvest 99 cents". That must have been ages ago; otherwise (LGB) should have had all those new items on offer with which the competition already had passed them by - and which are still missing in their offerings.
Now it is too late! Singular measures like re-importing US-specialty-products or establishing an in-house LGB Club were way too late. Karma slaps you in the face when you're that late!
LGBoA was the first to go. And the stories they tell over there are just ludicrous, absurd. Taking a well oiled machine and smashing it into a wall like that - quite a pro you need for that! Where are the models the Americans wanted to buy supposedly? The "Gallopping Goose", The "Heisler', the "Climax", a "K 28" or "K 27"? Instead they built a "Mikado" that nobody wanted, had gear problems and blocked the form building department for more than a year. They even had a "See Through" F 7...
They even killed the LGB/ASTER series. To choose a GG1 at the very end could be viewed as sabotage, almost. The Wuerttemberg Mallet was way to big in scale and that's the reason it didn't sell. The last 200 engines were re-painted green. You could count on it, now everyone wanted a black one But they were green now!
For a while now people were saying none of that would have happened if Eberhard Richter would have still been alive. May be, but it doesn't help right now. Why didn't his brother intervene in all those years? With all due respect - this question must be permitted.
++++++++++++++ to be continued... Please see part 2 of this article on the next LGB Yarner
On Monday September 18, 2006 it was announced that LGB Nuremberg had declared bankruptcy. LGB published their version of the news on the LGB web site.(YT: see original wording in Part 2)
As much as these news stir up emotions:insiders already knew for a long time that the policies management chose for the last years were doomed to fail. Lehmann (YT: the L in LGB) was "resistant to consulting" as a major LGB dealer once said. And he was right! Even though LGB had a many consultants within the last years who delivered their written expertise for a lot of money. But were those really heeded? There was no chance. Did they actually talk about the LGB product in these expert reports; there was no chance for that because they absolutely couldn't have a clue about that subject. And the product has always been the most important.What does the customer want and what may it cost so he can afford and buy it? That was the '$64,000.00 question' and for years they picked the wrong answers. They never asked their own people, not the salesmen in the field nor the LGB dealers big and small - they just got the crude facts slapped in their faces. In addition (LGB) constantly embarked on hiring the wrong people and thus couldn't even make up for their own incompetence.
"The pilot is disembarking" another author wrote when the former Vice President of Sales, Klaus Baumann, was retired. This statement was true as well. Especially in hard times which we are under for a while now it is important to have somebody who can steer the ship around the cliff. Not one qualified species was left at LGB in the end. And right off the bat the ship ran aground. She had been off course for a while already and the leakages below the waterline were explicitly apparent. But nobody wanted to notice. The captain had no certified license...
And then there was that eXtra huge whole in the hull. Well, it just sped up the process - it wasn't the cause. But it showed the arrogance , the overestimation of their own capabilities, the misjudgment of realities. Obviously nobody knew what the market really wanted. Definitely no Disney-, Coca-Cola, Peanuts- and other colorful, often ugly paint-splashes, and predominantly no mangled standard gauge locos. The customer wanted something completely different. But the panel that knew the market was no longer in demand nor consulted. Even though there had been a series of good new items for a few years - many a fans were staring in disbelief. Compare it to a pack of lions. When a new one enters the scene he thinks he needs to lock jaws with the others. Well if the CEO tolerates this then he has to accept responsibility for that later as well...
"Lifeblood was barely trickling" I wrote about this year's "LGB Summer Fest". But maybe that was nothing but tinted water...
A company that mainly consisted of a giant legal department could not function properly. Definitely not with hobby products for people who wanted to enjoy them. (LGB) put so much weight on pointless bits and pieces when it was too little, too late, already
The "LGB-family" hadn't been cultivated anymore for quite a while. They liked to take but never gave. The "LGB Depesche" (LGB Telegram in USA) used to be a connecting agent but now resembles a sales brochure. Flat and typical for everything else.
Old friends were spooked and scared away. Those who missed long accustomed-to Christmas cards were 'Bourgeois" or 'small minded'. They petty much had forgotten that these 'small minded' people had loyally supported and upheld (their LGB). And they saw the writing on the wall for a long time coming. And they were wondering why nobody at LGB did put on the emergency brakes. Instead big words and the big show ruled LGB as if nothing had happened. As if it isn't in the last minute of the eleventh hour..
Pretty fresh in our memories are the stories the LGBoA boss told on how they pampered their VIP customers and the success they had with that. How this all resulted in profits. Lehmann was never destitute for something like that. Their opinion was : They already make enough money with our products!"
Their cardboard boxes got thinner, the protecting cardboard wrapper was omitted. Labels were printed at the factory and in black+white. Thanks to China product quality decreased immensely but prices increased ever more. There was no way this would work out! The eXtra shop annoyed the customer base. Despite well meaning tips it wasn't stopped nor canceled. And nobody can comprehend a New-Item-program consisting only of color variations. What a blistering pace LGB displayed in their early years. Our articles about the LGB history are witness to that. We do remember quite well the statement by the senior CEO of LGB how "Out of each Dollar earned we have to reinvest 99 cents". That must have been ages ago; otherwise (LGB) should have had all those new items on offer with which the competition already had passed them by - and which are still missing in their offerings.
Now it is too late! Singular measures like re-importing US-specialty-products or establishing an in-house LGB Club were way too late. Karma slaps you in the face when you're that late!
LGBoA was the first to go. And the stories they tell over there are just ludicrous, absurd. Taking a well oiled machine and smashing it into a wall like that - quite a pro you need for that! Where are the models the Americans wanted to buy supposedly? The "Gallopping Goose", The "Heisler', the "Climax", a "K 28" or "K 27"? Instead they built a "Mikado" that nobody wanted, had gear problems and blocked the form building department for more than a year. They even had a "See Through" F 7...
They even killed the LGB/ASTER series. To choose a GG1 at the very end could be viewed as sabotage, almost. The Wuerttemberg Mallet was way to big in scale and that's the reason it didn't sell. The last 200 engines were re-painted green. You could count on it, now everyone wanted a black one But they were green now!
For a while now people were saying none of that would have happened if Eberhard Richter would have still been alive. May be, but it doesn't help right now. Why didn't his brother intervene in all those years? With all due respect - this question must be permitted.
++++++++++++++ to be continued... Please see part 2 of this article on the next LGB Yarner
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