What Happened?
In an all-too-often occurrence these days, another hobby company is under duress. Hobbico, one of the largest distributors of Radio Control products in the United States filed for Chapter 11 bankruptcy protection on January 10, 2018.
According to the petition, company leaders cited changing conditions in the industry and an inability of the company to service its debt as reasons for seeking protection. The court filing requires the petitioner to list their top 30 creditors. Futaba is first on this list with $2.2m owed. Overall, the filing indicates the company owes in excess of $100m.
During the Chapter 11 proceedings, the company expects to continue operations while searching for a buyer; however, company leaders notified employees mass layoffs could occur starting in April to comply with the Illinois Worker Adjustment and Retraining Notification Act.
About Hobbico
Hobbico owns several major brands and is the exclusive North American Distributor for many other well known brands. Phoenix Model looms large in that list as a provider of high quality balsa ARF RC planes (see the Phoenix Spitfire in the linked article). Futaba, Associated, Testors, and Hitec are other big names on the top 30 list of creditors.
Tower Hobbies is arguably the best online retail source of Radio Controlled Airplanes in the U.S. The company has earned a solid reputation in the market for quick shipping, fair shipping prices, and top shelf customer support. The hobby retailer carries a massive hobby product lineup including airplanes, cars and trucks, field equipment and building supplies. They also carry many Hobbico products including Great Planes, and Tower’s own lineup of RC Airplanes including this author’s all time favorite, the Millennium Master. Finally, Tower is the exclusive North American distributor of Phoenix Model ARF RC Airplanes. In case you didn’t know, Phoenix makes excellent airframes at compelling price points.
The Hobbico brands included in the filing are:
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- Estes-Cox Corp.
- Hobbico, Inc.
- Axial R/C Inc.
- Great Planes Model Manufacturing, Inc.
- Revell Inc.
- Tower Hobbies, Inc.
- United Model, Inc.
What Does This Mean?
Let’s break down why this is a hugely disappointing turn of events:
- Tower Hobbies: There is a real risk a top online hobby retailer will seriously change or go away all together. While there are alternatives, Tower has a stunningly compelling RC airplane lineup. Price-wise, even Hobbyking is on-par at best.
- Great Planes: One of the founding Hobbico companies along with Tower produces, well, great planes. GP ARF kits go together straight, and fly well. Potentially losing another source of high quality ARF kits is disappointing to be sure.
- Even though company leaders expect to continue operations during the process, the truth is we have no idea what this means in practice. Product availability is likely to suffer immediately as suppliers will be less willing to extend credit to a company in Chapter 11. Additionally, the judge will have something to say about incurring incremental debt to be sure.
- To comply with Illinois labor laws, leadership notified employees mass layoffs are possible in April. Since this is a serious step potentially jeopardizing staffing levels, we should expect to see some sort of decline in capabilities as employees jump ship.
While it is unfortunate to see such a storied supplier facing dim prospects and a looming shutdown, let’s not forget the uncertainty facing over 330 employees of this great American company. We wish them the best and hope providence finds a way for them to keep working and providing for their families. 