Model Train Firm Bankrupt

The maker of the world famous Lehmann-Gross-Bahn (LGB) trains has filed for bankruptcy. Ernst Paul Lehmann (EPL) Patentwerk in Nuremburg said Tuesday the move had been necessary after the banks froze the Lehmann accounts. They also prohibited further sales, although the turnover for 2006 was according to plan, the company said.

"The pressure on the personally liable owners increased steadily and ultimately became so immense, that the owners decided to file for bankruptcy," the company said in a statement.

The Nuremburg district court has appointed a temporary bankruptcy trustee. He is conducting the business of EPL together with the current owners, the Richter family.

Model railway sector under continuous pressure

LGB was the first company to produce large "G" scale model trains engineered for outdoor and indoor use in 1968. It is the market leader for these types of models.

The company has been under continuing pressure to reduce costs since 2002 due to the ongoing decline in sales in the model railway sector. It said it had been in an "intensive restructuring phase" for the past one-and-a-half years.

Ernst Paul Lehmann Patentwerk celebrated its 125th anniversary in July.

"The common task is now to preserve and secure this enterprise -- and the jobs it provides in Nuremburg -- for the future," the company said. The company said that its 150 employees had been informed.

"Wages and salaries are secured for the next three months, no matter what the resolution of the bankruptcy claims," it said. "The staff expressed its support of the ongoing efforts to continue the company."

Competitor Märklin is on the right track

Despite the shrinking model railway market, fellow German manufacturer Märklin said Tuesday that turnover was up in the first half of 2006. Sales grew by 4 percent to 49.2 million Euros ($62.4 million) in the first six months of the year.

British investment firm Kingsbridge Capital bought Märklin, based in Göppingen, for an undisclosed sum in May 2006. The German company had previously also suffered under the sector's economic situation.

LGB said it is hoping for a new investor. According to German media reports, Kingsbridge is taking a closer look at the company.