Last week, third-generation, family-owned Radio Flyer announced it will be shutting down the last of its U.S. manufacturing facilities and moving production to China -- letting nearly half of its 90 employees go.
This is an 87-year-old Chicago-based company that survived World War II by manufacturing the five-gallon metal gas cans bolted onto the back of Jeeps and tanks. It didn't build a single wagon for three years during that period. The company's website says, "Radio Flyer wagons are truly icons of Americana." Perhaps that should be rewritten in past tense. I don't know about you, but for me, knowing the little red wagons will all now come with a "Made in China" sticker takes away from the brand's nostalgia, and I'm not sure I'd feel the same about buying one.
The company says that its Chicago plant was just too expensive to maintain. Do you suppose pricing pressure from Wal-Mart (NYSE:WMT) and Target (NYSE:TGT) had something to do with the decision?
Companies like Radio Flyer are facing a tough choice. Who can blame it for not wanting to pass up the kind of market share the discount retailers have to offer? But the mass distribution comes at a high price.
In its heyday, Radio Flyer's little red wagons were popular toys. But today, they're hard-pressed to compete with 4x4s kids drive themselves, high-tech scooters, and roller blades. My in-laws bought my son a modernized, plastic Radio Flyer wagon when he was a toddler, and we got quite a bit of use out of it, after I bolted nylon webbing to it as a makeshift seatbelt to keep the little guy from toppling out.
In these days of high traffic and mandatory helmets, I doubt my son will experience the inevitable road rashes that I did while attempting to pilot one of these poor-handling, bone-jarring contraptions down a long, steep hill. Our wagon has been relegated to yard-cart duty.
I don't know why Radio Flyer would even try to compete head-to-head on price with Newell Rubbermaid's (NYSE:NWL) Little Tikes line. People don't buy Little Tikes for the same reason they buy a Radio Flyer, really. When most people buy a Radio Flyer, they're buying a memory -- a little piece of history.
And nostalgia is something Americans are willing to pay a premium for. That's why Harley-Davidson (NYSE:HDI) has experienced phenomenal success selling motorcycles (which are Radio Flyer upgrades for most of today's buyers) for a higher price than a compact car. FAO Schwarz suffered a similar identity crisis not too long ago, and look where that got it. The century-old company nearly went down the drain, thanks to its profit-at-any-cost approach.
I fear the same thing is happening with Radio Flyer, and while I sympathize with the struggles that the iconic company is facing, that doesn't make me like its decision to shift production to China any more.
What's your opinion? Will you buy Radio Flyer wagons and tricycles no matter where they are manufactured? Talk about it with other Fools on the Current Events board. We're offering a 30-day free trial of our discussion boards.
Fool contributor Mark Mahorney doesn't own shares of any companies mentioned.
