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WisBiz In-Depth: Milwaukee's William K. Walthers Inc.
8/5/2004

By Gregg Hoffmann

The name William K. Walthers, Inc. may not ring a bell for most people, but it's well-known among hobbyists seeking train whistles, chugging locomotives and railroad crossing bells.

The Milwaukee-based company is the leading distributor of model railroading equipment in the world, with a catalog of more than 100,000 products from about 350 companies worldwide. Walthers also continues to manufacture its own equipment, ranging from trains to scenery.

Founded in 1932, by Bill Walthers, the company is now run by his grandson, Phil. About 140 to 150 people work for the company, depending on the season. The longest tenured employee, Bill Wischer, a product engineer, has been with the company for 36 years. Several others are not far behind.

"Walthers truly is a family business," said John Sanheim, vice-president of marketing and sales. "We are proud of the fact that several of our employees met their spouses at Walthers and continue to work for the company.

"Our product is family-oriented. Our ownership remains in the family. Many of our vendors around the world are small, family-run businesses," added Sanheim, who has been with Walthers for 30 years.

When you put all these businesses into a network, like Walthers has, you come up with a distribution system that has helped keep model railroading a popular hobby for generations. While Lionel and other large corporate companies might actually manufacture more equipment, nobody outdoes Walthers for distribution.

Combined with Milwaukee-based Kalmbach Publishing, the leading publisher in the model railroading field, Walthers also gives Brew City a good argument to call itself the model railroading capital of the world.

Founded in 1932

Bill Walthers could not have predicted the success of the company he started primarily intending to turn his hobby into a business. His first catalog included 24 pages and sold for 15 cents. He also produced a Signal and Control Manual, which sold for a whopping $3.

These catalogs primarily contained designs and parts for electrical controls that turned toy railroads into working model systems. Walthers also advertised in Modelmaker Magazine, and by the end of 1932 his company had $500 in sales.

Five years later, the company had outgrown its home location and moved to a warehouse on Erie Street in Milwaukee. By this time, Walthers was producing everything from milled wood parts to metal castings to decals.

The company also purchased Findex Card Punch in the early 1930s and merged it with the model railroad business in the 1940s. Findex was a mechanical card filing system, which was a forerunner to early computers.

During the war, model manufacturers were ordered to stop production in order to conserve critical metal supplies. Walthers produced what it could from nonessential materials -- a series of ads in 1943 showed Bill literally scraping the bottom of a barrel to illustrate the shortage.

Bill retired in 1958, so he could spend more time with his beloved hobby. His son, Bruce, who had been with the company since 1946, took over as CEO. He added the full line distribution of other manufacturers' products to the business. In 1987, Bruce turned the leadership of the business over to his son, Phil.

"I am proud to be a third-generation owner," Phil said. "When I describe our business and the family legacy to someone I am usually told by them how rare it is to reach this stage.

"There also is a great sense of responsibility to maintain the success and continuity of the enterprise going forward."

The company has had offices, warehouse and a store at 5601 W. Florist Ave. for years. Most of its manufacturing now is done in Europe and China through contract work.

Quality and Innovation

Walthers has always been known for the quality of its own products. It also has managed to remain at the cutting edge of innovations in its industry. For example, in 1985, Walthers became the first to introduce what is known as an HO Scale Code 83 track system -- a track system for smaller models that matched the proportions of the trains. Until that time, bigger track had been the norm, but it made the models look out of proportion.

In the early '90s, Walthers introduced a line of modeler-friendly structure kits. "Model railroaders moved from just setting up the trains or buying trains as collectibles to creating entire layouts," Sanheim said. "They continue to do so."

Walthers' "Cornerstone Series", which features easy-to-build kits of industries that often are related to railroads, has proven very popular. "Out steel industry buildings became a hit," Sanheim said. "So have others."

In 1993, Walthers introduced the "Trainline" series of rolling stock and locomotives. These models featured the details that serious modelers want, at a relatively low price.

The "Gold Ribbon Series" structure kits, introduced in 1999, also have provided modelers with snap-together assemblies for layouts, dioramas and Christmas villages. In 2001, Walthers developed the Cornerstone Series into "Cornerstone Series Built-ups, featuring layout-ready structures right out of the box. Just last year, Walthers came out with Engine Servicing Facility kits that have proven popular.

Under Phil's leadership, Walthers has established a big presence in cyberspace. At www.walthers.com, customers can log on and search over 100,000 products with more than 45,000 pictures.

Meanwhile, the company has continued to produce annual catalogs, called Reference Books, which are considered bibles by modelers and collectors. They include trains and accessories ranging from G to Z -- the letters used to denote the two ends of the model railroading size spectrum.

In addition to these vehicles, which bring the products directly to the consumer, Walthers sells to thousands of retail stores in the U.S., Europe, Australia and elsewhere.

Evolving Hobby

"We have evolved with the hobby," Sanheim said. "We get new ideas from customers, from our employees, many who are model railroaders themselves, and from the general public. In fact, we get more suggestions for new products than we could possibly produce.

"Plus, we have a great new product development team that does a great deal of research. We know our markets."

Many people might have had trains as kids and consider model railroads toys. Walthers does everything it can to attract kids to model railroading, but knows from that research that its main customers are primarily adult males, most often from Rust Belt urban areas where model railroading can make the winters more bearable.

"About 99% of our customers are males," Sanheim said. "The typical customer is in his early 50s. He likely was introduced to trains as a kid.

"We encourage those customers to introduce children – their kids, their grandchildren – to trains. Trains make great gifts. Kids love the motion of trains. Model railroading also can be a family thing. Kids love computers these days and become computer literate at an earlier age, but they can't be at them all the time. We can offer an alternative for those kids."

Sanheim said many modelers like "creating their own worlds."

"You can create your own world in miniature, but it also is reality based," he said. "Many create re-create a historic event, or a certain period in history. Inter-modal transportation, which has revitalized the railroad industry, also is reflected in more model railroad layouts."

Because the company is privately held, it does not release revenue figures, but it is a thriving business. And, while Walthers is the type of business that could locate almost anywhere in the world, it remains in Milwaukee, helping make that city a capital of model railroading.

"Our family has deep roots in Milwaukee, and we are pleased that we can provide jobs in the area," Phil Walthers said. "It is especially nice that we can provide jobs that are a short bus ride or walking distance of people's homes.

"We have been located on the northwest side of Milwaukee for 27 years and find it a very good place to be."

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