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Getting your tools out of China

One manufacturer's battle takes 2 years and several twists and turns
By Nick Bullock
Published: April 23, 2012
It took almost two full years, but model railroad distributor S Helper Service finally received its tooling — most of it, anyway.

S Helper Service was one of 60 companies that received of notification letter in June 2010 stating that their contract manufacturer, China’s Sanda Kan Industrial, was no longer able to make their products. Since then, S Helper Service and the other companies in the same boat — companies such as American Models, Bowser, Märklin/Trix and Micro-Trains — have been fighting for the return of their tooling.

Fighting, however, may be the wrong word, as it implies that these dealers have had some sort of recourse.

“Recourse? We didn’t hold any of the cards,” S Helper Service co-owner Don Thompson said. “Your tooling’s half a world away.”

Thompson estimated Sanda Kan has returned about 90% of his company’s tooling, including all of its hard tooling. Others are still waiting for theirs.

The problem began around the time Sanda Kan was acquired by Hong Kong-headquartered Kader Manufacturing Trust in 2008. A 2010 Model Railroader article reported that “numerous model railroad companies that have products manufactured at Sanda Kan have seen delays in deliveries over the past 18­–24 months.” Some companies reportedly moved their production elsewhere.

Many of those that didn’t ended up paying the price.

A copy of the letter sent to S Helper Service, obtained by Model Retailer, states, “over the past 12 months it has become increasingly clear that changes to the Sanda Kan business model would be necessary.” The letter goes on to explain that the first step in this process was consolidation of Sanda Kan’s customer base.

Thompson has his suspicions why Sanda Kan’s smaller customers, such as his, fell by the wayside. But they are just suspicions, formulated from his conversations with reliable vendors, he said.
Thompson said Sanda Kan’s tumultuous decade of previous ownership forced the company to fall behind on payments to its suppliers. The company was bought, sold and gutted several times during the early 2000s. By the time Kader purchased the company, Thompson said, Sanda Kan’s reputation was so damaged that even new suppliers stayed away. He suspects Kader had no choice but to shed all but its largest customers.

Thompson said 20 companies — such as Bachmann, Lionel, Atlas, Walthers and Aristo-Craft — did not receive letters from Sanda Kan.

But then came the tricky part for Sanda Kan. How does a manufacturer return tooling to 60 clients all at once? The short answer? It doesn’t.

“It’s physically impossible to move that much tooling … in a timely manner,” Thompson said, estimating Sanda Kan has around eight production facilities.

While Sanda Kan figured that out, S Helper Service waited.

“We haven’t had anything new in over a year,” Thompson said. “And the hobby industry is based on, ‘What have you done for us lately?’ So the worst thing that can happen to any hobby (distributor) is to have nothing new.”

Thompson said he's been told he’ll find out about the remainder of his tooling soon.

In the meantime, S Helper Service has found a new manufacturer, the name of which Thompson said he is contractually obligated to withhold until a press release can be drafted.

As for some of the other 60 companies cut loose by Sanda Kan, Thompson said he knows one large S-gauge distributor also just finally received all of its tooling, but he knows of others that are still in limbo.

“It’s been a trying time,” Thompson said. “But just about everyone in the model railroad industry had some connection to Sanda Kan.”