by Joseph Stachler
On October 15, 2001 William L. Bracy began his new position at Lionel as Chief Executive Officer. The press release announcing his appointment indicated his vast career included most recently being President and Chief Operating Officer of Bell Sports, a company best known today for manufacturing bicycle helmets. He has also been in executive management positions at Mattel and Lenox Brands, a company known for China and silver. Early in his career, he worked for General Mills and Fundimensions. General Mills owned Lionel from 1970 to 1985. Fundimensions was the General Mills subsidiary, created in 1975, which oversaw the various hobby product lines, including Lionel. Bracy was primarily involved in the financial aspects of the company.
Now it is 2001 and Lionel is over a century old. Mr. Bracy, who prefers to be called Bill, returns to the company where he began his career. His appointment as CEO is reminiscent of last year's hiring of John Brady as Vice President of Marketing. Like Bill, John began his career at Lionel during the General Mills era. Both left to pursue other interests, gaining experience with other companies, and both have returned to Lionel.
We were not sure if interviewing Bill Bracy was going to be fair to him after being CEO for less than 30 hours. But we decided that Wellspring Associates, the owners of Lionel, wasn't about to hire someone who didn't have any idea about Lionel or the market place. Certainly, he would have ideas about business strategy. This interview tries to provide answers that the hobby may have about his appointment, Lionel's future, and the future of Dick Maddox, Lionel's President and Chief Operating Officer.
We talked to both Bill and Dick about all of these issues and others including questions about the economy as it relates to Lionel's future. The interview was conducted over the phone.
Toy Train Revue:
How does it feel to return to Lionel?
Bill Bracy: It's great to be back. I feel very comfortable here. I've enjoyed seeing the six to ten people that I knew 25 years ago.
TTR: Did you have trains growing up?
Bill Bracy: Well, one of my uncles was a train engineer with the Union Pacific Railroad. So I was in a cab of a steam engine, I think at the age of four, and still remember feeding the firebox at that age from the tender. I made a few trips with him even as he moved on to diesels. So that's been in my blood from a very early age. My friend from down the street had a big Lionel train layout. I logged a lot of hours on that and had dreams of converting my basement into a big layout but never made it that far.
TTR: Because of your previous involvement with Lionel, did
you finally get any trains of your own? Do you have trains today?
Bill Bracy: Yes. During the time I was here, I picked up a few pieces of the rolling stock. I picked up an early set from that time called Trains-N-Truckin' for my four-year-old daughter. I spent one Christmas Eve putting together the crane and other items so that she could play with them on Christmas morning. We used a tag-line back in those days, I think it was "the big train for small hands." We wanted to get that message across that this was a particularly good way to get young kids involved in model railroading with a larger scale. They can handle it. It isn't quite as fussy as HO is sometimes.
The first train set I got was for my son when he was three months old, which Dick [Maddox] appreciates because it was a Bachmann train. Of course, it was a gift for me rather than for my son.
TTR: When did you start at General Mills/Fundimensions?
Was this where you began your career?
Bill Bracy: I started at General Mills in June of 1974, which was located in Minneapolis, right out of school. I came to Fundimensions in February of 1976. At the time, Lionel was part of Fundimensions, which also included MPC and CraftMaster. They were all part of General Mills. I was actually part of that whole General Mills toy and game division for about fifteen years. My last office here is about fifteen feet from where I am now.
Can you describe the progress of events that led to
your becoming CEO at Lionel?
Bill Bracy: I became something of a free agent over a year ago after Bell Sports was sold and the company changed. The headhunter at Wellspring tracked me down for this job and the timing was right so we made it happen. I've obviously met with the investors in New York and with a couple of the key managers here at Lionel in the process of interviewing for the job.
TTR: As CEO, what are your responsibilities at Lionel? Are
you there for new ideas or executing directions?
Bill Bracy: I think, partly, what they did was create a couple of positions so that Dick and I can work side-by-side together. The clear purpose is for me to come to understand, as much as I can, what Dick has been able to achieve here at Lionel over the last couple of years. To carry that continuity forward in terms of products and services to our customers and ultimately the collectors and operators who buy the product.
The investors recognize what a key contribution Dick has been making and will continue to make in the coming year. They brought me in as a sort of a side-kick, if you will, to work with him and make sure that we maximize the opportunity for us and our customers during this next period of transition.
Dick Maddox: The reality is that my management background has always been with very small, entrepreneurial companies that dealt by the seat of their pants. I'm kind of a "gun-slinger" here, and Bill is just the opposite. Bill is a true professional manager, and that's where Lionel has to go now. And, quite frankly, I'm not equipped to do that. I really welcome Bill coming in because I figure, in spite of the fact that I'm going to retire next year, I wouldn't mind working for a guy that's had some real experience in some big companies, is a true manager and is equipped to take this company forward. I think that this is the best move that Lionel could possibly have made.
TTR: So what does this mean for your position as President
and COO for the coming months?
Dick Maddox: [Laughs] We're still working that out. We don't know yet. I'm sure Bill hasn't made up his mind yet on what he wants me to do and we're working through it. We've only had a day and a half together.
My contract with Wellspring is up at the end of July 2002. Frankly, when I came aboard, I made no bones about it, everybody knew that I only really planned to spend three years here doing this and then go back to Philadelphia where my children and grandchildren are. We're all hoping that I don't have to divorce myself from Lionel one-hundred percent after that. If there's a place where I can be of some value, I certainly will happily do whatever services I need to do for Lionel. But I really would like to think that by the end of next July, or at least by the end of the year, that I will be back in Philadelphia.
The area that I have the most fun, that I'm best equipped to work in, is sales, marketing and product. I'm hoping that Bill's arrival means that I'm going to free up and do some of the "in-the-trench" work that I love to do, and that I can dump some of the awful stuff that I hate to do, like managing the place, off on Bill. He's better at that than I.
It's working great and I think we're off in the right direction.
Bill Bracy: What I can say, right up front, is that one of the things that I've become very engaged in business over the last few years, and in a couple of different settings, is to address the development of a very smooth process that goes from the customer placing an order with us, to our going through the process of fulfilling that and getting it to them and to the ultimate consumer. I think that there are many things that we can do to make that a smoother and a better process for everybody in the link. That will be a big part of my attention here at Lionel with the many terrific customers we've got. To make sure that we're supporting them in the best possible way, and the most efficient way for everybody concerned.
Obviously, there are some questions in terms of what the whole marketplace is going to be like for the next 12 to 18 months. I think as I've talked with a few of the other key people in the industry already, we see some very good opportunities that may present themselves, and we want to be in a position to take advantage of those opportunities. But given a certain amount of uncertainty, which is in the situation as well, we've got to coordinate more closely than ever before, to make sure we're in synch with our business plan. And that neither one of us -- us at the supplier level and our customers at the purchasing level-- are working with expectations that are at cross-purposes with each other. So that will be a big part of what we're going to do during this period of time.
Of course, Lionel has experienced quite a bit of change and quite a bit of progress in the things they've been trying to achieve in the last couple of years. But some of this needs to be put into routine and standard processes so that we in the trade become comfortable with how the business flows. The team of people here are aware of all of those things and are anxious to be involved in improving and perfecting the services that we provide to our customers. So we're going to put resources in place, the processes in place, to make that happen.
TTR: I've been hearing a lot of good things from people
about the consumer services department.
Bill Bracy: That's very good feedback and that's really consistent with a strategic thrust of trying to differentiate ourselves with the competition that we have in the industry. We want to make sure that we're on the cutting edge in terms of products and services that we're providing to our customers.
TTR: So to summarize, your coming to Lionel now, with
Dick's retirement months away, is to get up to speed while he is here?
Bill Bracy: Exactly. And also that the trade and the customers by that point will know me and be comfortable with me well-enough so that I can somewhat fill Dick's shoes in terms of the relationship with them, which is so important.
TTR: You said in the press release that you have been
following Lionel's progress over the years since you left over twenty years ago.
What are your impressions of Lionel over the past two decades?
Bill Bracy: Well, I'm incredibly impressed with the degree of sophistication and technology that they've brought into the products. Of course, all of these electronics, in terms of what they provide in control systems and realism to the whole model railroad experience, that's all completely new to me versus when I was here before. The attention to detail and the styling, the excitement that they've brought to the product over that period of time is just incredible. I think it came from having a clearer focus on satisfying that collector/operator on the upper end of the scale who was looking for those kinds of things.
I'm not totally up on all of the things that are under development here, but you're going to see even more excitement in the future.
TTR: At Bell Sports, you significantly reduced overhead,
improved productivity, while greatly increasing sales and profits. In Lionel's
case, there have already been some steps taken to that end by closing domestic
production. What else can be done to achieve the four results you were able to
have at Bell Sports?
Bill Bracy: I would go back to what I said a bit earlier in terms of having us work closely with our customers: to take a look at all of the different steps in the processes that we go through in dealing with each other. To figure out how to make those as efficient and frictionless as possible so that we can really focus our resources and our energy on meeting the ultimate consumer's needs and desires.
TTR: And that includes you dealer network?
Bill Bracy: Absolutely. Every link, from us to the ultimate consumer, we need to look at and make sure that we all are doing our respective roles and that we're not creating artificial problems in that process that costs time and money and creates aggravation and doesn't contribute to the fulfillment of what the customer is really looking for. They're not interested in whatever pains we go through in terms of getting them the product. They're interested in the product.
As you know, Lionel is in Michigan because of the
plants it once used to produce trains. Since the plants are closed, is there a
possibility of moving the headquarters to someplace like California, closer to
Bill Bracy: That isn't even on a list of things that we're looking at. My house in California is up for sale.
TTR: Lionel has acquired a lot more direct competition
since you were there. What are your impressions of the market?
Bill Bracy: Well, I think that competition has actually caused Lionel to be better than it was since we've responded to some of the things that they've done so well. It's forced us to raise our performance to a higher level. So, in one sense, obviously that competition has benefited us, and the consumers, in terms of providing better products to them. We're working with all the energy we can to make sure we stay on the top of that.
TTR: Do you foresee any difficult decisions that will have
to be made for Lionel's future? Dick had a very difficult decision when closing
Bill Bracy: I don't see anything of that magnitude on the horizon.
TTR: Lionel's dealer network has always been a sort of "touch-and-go" in terms of successful programs initiated by Lionel. Making adjustments in dealer programs or cutting them out of any sales is often, if you'll forgive the pun, like touching a third rail. In 1997, Lionel tried to implement the Heritage program with dealers. The Century Club featured locomotives Lionel sold directly to consumers. What can Lionel do to increase sales and cultivate good relationships with the dealers they depend on to maintain existing sales?
Dick Maddox: I'd like to answer part of that for Bill because he's not totally up to speed on this after only one day. I'm not sure that the whole Heritage program was a workable program on a long-term basis anyway. But the Century Club, on the other hand, is not a problem with the dealers. We encourage the consumer to go through his local dealers, and dealers themselves recruit members for the Century Club. In return for that, a dealer is paid 10% of the sale, which in reality is probably better profit than he makes on normal products that he has to buy, pay freight on, inventory, advertise for, and discount. So he gets a clear 10% profit without having to do anything. The dealer really doesn't hate that program. In fact, many of our larger dealers support that program and bring us a huge percentage of the business we do in Century Club products.
TTR: But consumers could still order direct from Lionel?
Dick Maddox: They could order direct. However, in the processing of their order we encouraged them to choose a local retailer so that we can in fact benefit the retailers. Even if they came to us without going to the retailer first, we encouraged them to choose a retailer to pick up the products from. It is not our purpose to take away from the retailer ever. It is our purpose, however, to expand our market place. And we constantly look for programs that will enable us to that. The Century Club has been one of the very successful programs initiated by the previous management. And it was so clearly good for everyone: the consumer, because of the limited quantities of products that we made; the dealer, because we paid him a clean percentage that he has no overhead that he has to apply to; and for Lionel, because we clearly expanded the business that we were doing in the marketplace as a result of the program.
Bill Bracy: I just might add to that the experience that I've had in business says that you do everything possible to focus on strengthening the distribution channels that you're working with. That is certainly going to be the thrust of our efforts here. To draw closer and closer to the people that we're doing business with right now, and figure out how to make their business better with them.
Note: The Century Club was created in 1996. Customers could join for either $100.00 or $500.00 to be able to purchase five locomotive reproductions from the early Postwar era. Each locomotive was released one per year from 1996 to 2000. If the customer wanted to purchase all five, the $500.00 entry fee was applied to his or her cost. If he or she only wanted one or two of the locomotives, it would have been in their interests to pay the $100.00 entry fee, although it was not applied to the cost of the purchases. The Century Club was extremely successful for Lionel, and it generated instant income for Lionel well before, in some cases years before, deliveries were to have been made. Due to the success of the Century Club, Lionel introduced Century Club II with the same guidelines. The new locomotives are to be created with brand new tooling.
TTR: Some dealers are concerned about past problems
related to delivery during off-peak seasons. Specifically, receiving product
that is too close to Christmas or worse, right after in January.
Bill Bracy: Let me address that by saying that is of key importance to us as well internally. That goes back to the earlier comment that I was talking about in terms of structuring processes within the company so that we can achieve those results. I'm very excited to report, even in the last 24 hours, we've had major discussions in terms of continually moving forward that calendar of development, so that we're in a better position to control those delivery dates to the trade and fulfill our promises as we announce them.
Dick Maddox: There's no question that every company, like Lionel, tends to have anything that they are having issues with in products slip to the right towards December and sometimes even out of December and into January. It's something that none of us really wants to do, but it's almost unavoidable that some product does that. We won't release a product until it's ready. However, one of the complaints that I've heard recently about Lionel from the consumer is that Lionel is delivering so much on time. We're hitting our dates and we're bringing out product. Some of the consumers are saying, "I wished they had more time in between delivery dates so I can save my money." Lionel is hitting each delivery date right on the button. So, contrary to where we were a couple of years ago, we are hitting delivery dates in the month we promise, but sometimes even a month in advance.
TTR: Before the tragedy of September 11th, the economy was
already teetering on recession. Even during the recession of the early 1990s,
Lionel produced many great trains that were popular and successful. Is there a
strategy to cope with potential economic hardships?
Bill Bracy: Well, the first thing to address on that is to go back to the concept of working closely with our customers. Conceivably even getting consumer understanding, as well as to what is really happening out there and what is taking place in the market place, and then making sure that our business programs in terms of new product development and launches is in synch with expectations and the reality of what's happening in the market place. So I think one key strategy for getting through however long this period might be, is to draw closer and closer together in terms of those connections during this period of time.
TTR: Finally, how do you feel about being CEO of Lionel?
Bill Bracy: Well, I'm terrifically excited. One of the first things I did was get in touch with my buddy who had the Lionel train set down the street and tell him that, hey, now I'm here with the company. So, for me, this is kind of the ultimate "one-upsmanship" in a relationship that's gone on for over fifty years.