model cars

Trouble in Toytown

Der Prototyp des wohl teuersten Modellautos der Welt von Modellautobauer R. GŸlpen steht am Donnerstag (08.09.2011) auf einem Tisch in Traunstein (Oberbayern). Die Endversion des Modells eines Lamborghini Aventador LP 700-4 besteht wie der Prototyp aus Carbon sowie Edelsteinen und wird einen Materialwert von etwa zwei Millionen Euro haben. Foto: Andreas Gebert dpa/lby [ Rechtehinweis: usage Germany only, Verwendung nur in Deutschland ]
Small, but perfectly formed: A model Porsche.
  • Why it matters

    Why it matters

    Small and medium-sized toy companies say their businesses are threatened by high licensing fees and other demands made by companies such as Opel, Porsche and Volkswagen.

  • Facts

    Facts

    • Model maker say car manufacturers demand between 5 and 15 percent of the net sales price of replicas.
    • Court rulings have generally sided with the model makers, maintaining that toys “recreate objects.”
    • The German Toy Association wants to negotiate with carmakers to reach an amicable agreement.
  • Audio

    Audio

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Lothar Rietze makes miniature toy cars, but he has an outsize opponent: some of the world’s leading auto makers.

For 33 years, Mr. Rietze has been producing model cars in a small town near Nuremberg, southern Germany. From the hubcaps to the windows, everything on his models is “Made in Germany.”

The cars may be small but the troubles are not: Mr. Rietze is worried about the future of his business and its 70 employees.

The car companies demand high licensing fees and their countless conditions are eroding his income and his business base, he said. The brands are demanding between 5 percent and 15 percent of the net sales price of his model cars.

But it’s difficult to increase the prices in the toy stores and other retail outlets, Mr. Rietze says. Moreover, were he to follow the carmakers’ rules, he would have to destroy molds worth thousands of euros as soon as a contract runs out.

“They're robbing the kids. ”

Kurt Hesse, Owner, modelmaker Autec

Just like Mr. Rietze, many other toy manufacturers are angry with the carmakers.

When Mr. Rietze opened his factory in 1983, the carmakers were happy when somebody made model replicas of their vehicles. What’s more, the car companies bought the models on a large scale from Mr. Rietze and his competitors. For example, the company supplied Audi with 1.4 million model cars up to 2002.

“They’re robbing the kids,” said Kurt Hesse, owner of the slot-car racing set producer Autec.

Klaus Kiunke is the business manager and owner of Model Car World in Flörsheim, central Germany; the firm says it’s the largest retailer of model cars in Europe.

“Model cars are allowed to be produced without licensing, which is simply being ignored by the companies,” Mr. Kiunke said.

Years ago, Autec’s Mr. Hesse won a legal dispute before the European Court of Justice and the German Federal Supreme Court in a milestone ruling for toy manufacturers. Opel, owned by General Motors, had sued Mr. Hesse. The company wanted to prevent him from using its trademark, a bolt of lightning, on one of his models. The judges in Luxemburg and Karlsruhe ruled in favor of the businessman. Opel cannot prohibit a model car on the grounds of its trademark rights, the judgment said.

The advocate general at the European Court of Justice in Luxemburg, Dámaso Ruiz-Jarabo Colomer, said something in 2006 that Mr. Hesse has liked to quote ever since: “The essence of a toy is that it recreates objects and events in world history.”

Since then, carmakers have frequently dragged Mr. Hesse into court. The judges usually came to the same conclusions, Mr. Hesse said. It’s the right of the toy industry to recreate models for children to play with.

Mr. Hesse is considered by some to be exceptionally confrontational. He can afford to be as he isn’t dependent on toys. That isn’t the case with many of his competitors.

“As a small company, you think really hard about getting involved in a legal battle with a car company,” said Mr. Kiunke. His subsidiary, Premium Classixxs, is currently being sued by Volkswagen in the regional court in Hamburg.

For small and medium-sized companies, being in the right is one thing. Having their right upheld in court is another. But there is something else that stops small companies from taking on the corporations: The carmakers are often their biggest customers – or at least they were until recently. When the latest car models came out, the firms often ordered thousands of models for their dealers.

Thomas Schmadalla runs Autoart, a Chinese importer of high-quality models. He pays the carmakers €1 million in licensing fees annually. He mostly just wants to be left in peace. Autoart’s owners in the Far East simply don’t want to get involved in a court case, Mr. Schmadalla says. But the licensing fees for his collector pieces, each worth several hundred euros, add considerably to the price, curbing business.

Sports-car maker Porsche can’t understand the anger of the toy companies. “For over 20 years, we have been granting licenses to toy and model manufacturers. There has been no significant increase in the licensing fees in recent years,” said the spokesperson. “Given its dimensions, it also isn’t an area that Porsche depends on, or that Porsche is forced to optimize to the last cent.”

VW didn’t respond to Handelsblatt’s inquiries.

Ulrich Brobeil, the director general of the German Toy Association (DVSI), is hoping for an amicable agreement. He wants to negotiate with the carmakers to find a solution for the whole industry. Mr. Brobeil recently met with the German Association of the Automotive Industry and has also spoken with individual car producers.

Mr. Brobeil said he sees “a light at the end of the tunnel.”

Meanwhile, the model car makers are continuing with their confrontational policy. “We are letting all the licensing contracts run out,” said Mr. Kiunke of Model Car World.

Mr. Rietze has also terminated all his contracts with VW, once his most important customer.

All the same, the toy manufacturers have an interest in reaching an agreement, because the car manufacturers provide licensees with design details for new models early. Licensees are able to have the miniatures in the stores before the competition. So that’s why the small and medium-size companies are hoping to come to some kind of cooperation or partnership agreement in which they pay for receiving the data and, before the models go on sale, present them to the carmakers for their approval. It remains to be seen whether the car companies will agree to that.

Mr. Rietze has given up hope of surviving with model cars. Now, his son is expanding the business with production services, sharing the company’s knowledge about building miniatures to customers from other industries: mold and die production, injection molding and lacquering.

 

Martin-Werner Buchenau reports from Stuttgart as Handelsblatt’s Baden-Württemberg correspondent. Joachim Hofer covers the high-tech industry and IT sector for Handelsblatt. To contact the authors: buchenau@handelsblatt.com and hofer@handelsblatt.com

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