Dec. 9 (Bloomberg) -- A holiday toy-train exhibit that first went on display 21 years ago at the Citigroup Center office tower is nearing the end of the line, derailed by the bank’s cost- cutting.

The lender, which is eliminating 52,000 jobs after getting a $45 billion government bailout, canceled sponsorship of the free show visited by more than 125,000 people a year. It means a savings of about $240,000 for Citigroup Inc.

Unless the bank reconsiders or another sponsor steps up, the show that started in 1987 in the building’s lobby will end Jan. 2.

“The difficult decision to discontinue this sponsorship was part of Citi’s ongoing expense-reduction efforts,” Citigroup said in an e-mailed statement. Chief Executive Officer Vikram Pandit, 51, announced on Nov. 21 that he wants to cut costs by about $2 billion per quarter starting next year.

Dunham Studios, the Pottersville, New York-based operator of the 750-square-foot model railroad, was notified of Citigroup’s decision last month, co-owner Clarke Dunham said in an interview.

The installation features 30 separate train sets snaking around a replica of Manhattan’s skyline, panoramas of the Adirondack and Catskills mountains and a miniature drive-in theater playing the final shootout scene with actor Gary Cooper in the movie “High Noon.” Sponsoring the installation for the 2009 holiday season would cost Citigroup about $240,000, Dunham said. The bank had a clause allowing it to opt out of the contract with 30 days’ notice, he said.

‘Money Well Spent’

Dunham Studios’ main costs include storing the exhibit for 11 months a year at an upstate New York facility, hauling it back and forth using two 53-foot-long trucks and paying a 22-person crew to assemble it in late November and take it down in early January, Dunham said. He also has to pay to staff the exhibit seven days a week during the holidays.

“I think it’s a pretty serious mistake on the part of Citi,” said Dunham, 72, a Tony-award nominated Broadway set designer who started building model railroads professionally in the 1980s. “It’s money well spent. This is the cheapest form of advertising.”

Among major U.S. banks, Citigroup is the hardest-hit by the credit crisis that pushed the country into recession. Writedowns on mortgage bonds and surging consumer-loan delinquencies stuck the bank with a year-long string of net losses totaling $20 billion. Last month, the bank got a $20 billion infusion from the U.S. Treasury, on top of $25 billion of economic-rescue funds received the previous month.

Keeping Mets Agreement

Pandit plans to eliminate about one-seventh of the lender’s global workforce of 352,000 through job cuts and asset sales. He also has been removing color copiers from offices where they aren’t necessary, requiring pre-approval for corporate events costing more than $10,000 and restricting travel, entertainment and meals at functions not attended by clients.

The bank last week pledged to keep its $20 million-a-year sponsorship of a new baseball stadium in Queens, New York, for the New York Mets.

In its e-mailed statement, Citigroup said the Mets agreement was “legally binding” and that the contract “continues to provide a very positive way for us to support our community and to connect with present and future customers.”

Dunham erected the first model railroad for the bank, then known as Citicorp, in 1987. He runs the studios with his wife, Barbara, 71.

The Dunhams and their model railroad weren’t invited back in 1991, when Citicorp balked at the expense after becoming mired in soured investments on commercial real estate, said Clarke Dunham.

Name Change

The show resumed in 1996, and was canceled again in 2000, Dunham said. On Dec. 15 of that year, Dunham said, he got a call from what he described as an anxious-sounding Citigroup executive who wondered if it was too late to set up the display. The bank had received 22,000 complaints, Dunham said. He agreed to set up a much smaller show in the skyscraper’s lobby at Citigroup Center. Since then, Citigroup and the Dunhams have agreed to three-year contracts.

The disappearance of the holiday train show isn’t the only change afoot at Citigroup Center. The 59-story building will be renamed 601 Lexington Ave. by the middle of next year, a spokeswoman for owner Boston Properties Inc. said. The name change “has been in the works for years,” and has nothing to do with Citigroup’s struggles to stay solvent, said Arista Joyner, the spokeswoman.

Arlene Hinkemeyer, 65, of East Hampton, New York, said she was visiting the exhibit for the first time and that she was “sorry to hear it’s the last year.”

She said some taxpayers might support Citigroup’s decision to cut back.

“The public probably would not want them to sponsor the extras,” she said.

To contact the reporter on this story: Bradley Keoun in New York at bkeoun@bloomberg.net.

Last Updated: December 9, 2008 13:59 EST