The insolvency administrator for Märklin (Göppingen / Germany; www.maerklin.com) has revealed plans to restructure the tradition-steeped 150-year-old model railroad manufacturer. Altogether, nearly 400 of the company’s 1,400 jobs will be eliminated, including 166 of the 650-member workforce at Göppingen and 58 at the Nuremburg / Germany plant, which will be closed. Although a few Nuremberg workers will find jobs at Göppingen, most redundant German staff will be offered a chance to participate in a six-month requalification scheme while collecting 80% of their previous net salary.

Some 180 of the 520 employees – mostly temporary contract workers – at Györ / Hungary, where the majority of the injection-moulded plastic parts are manufactured, will lose their jobs. At the same time, Märklin will discontinue production of some of its less profitable models, while retaining all of the trade names, including “Märklin”, “Trix” and “LGB”.

Märklin declared itself insolvent on 4 February 2009 after lender banks declined to renew its credit lines, and negotiations with private equity owners Kingsbridge Capital and Goldman Sachs about an injection of fresh capital failed. The two investment groups rescued the model train group from insolvency three years ago, but attempts to turn it around did not produce the desired results, despite investment of around EUR 60m. From 2006 to 2007, the debt burden climbed from EUR 67.8m to EUR 106m. The state attorney’s office in Stuttgart is currently investigating whether payments of EUR 24-40m made to managers or external advisers from 2006 to 2008 were excessive.

In 2008, Märklin posted a loss of EUR 21m on sales of EUR 121m, but temporary administrator Michael Pluta believes that with restructuring the company could break even in 2009 and return a profit of EUR 2.5m in 2010. Some 110 potential investors in Märklin are said to have come forward, including “seven to 12” that Pluta considers to have a realistic chance. Investors will have to provide equity of EUR 100m and a viable concept for keeping the company afloat. Insolvency proceedings are due to be opened on 1 April 2009.