Lionel Corporation

Lionel Corporation

Company type	Public company
Industry	Toys and hobbies, Retail
Founded	1900
Defunct	1993
Fate	Liquidation
Successor	Lionel, LLC
Headquarters	New York, New York
Key people	Joshua Lionel Cowen (Co-founder and owner) Roy Cohn (owner)
Products	Lionel trains/tracks
Website	None

Lionel trains

Lionel Corporation was an American toy manufacturer and retailer that did business from 1900 to 1993. Founded as an electrical novelties company, Lionel specialized in various products throughout its existence, but toy trains and model railroads were its main claim to fame. Lionel trains, produced from 1901 to 1969, drew admiration from model railroaders around the world for the solidity of their construction and the authenticity of their detail. During its peak years, in the 1950s, the company sold $25 million worth of trains per year. In 2006, Lionel's electric train, along with the Easy Bake Oven, became the first two electric toys to be inducted into the National Toy Hall of Fame.

Lionel remains the most enduring brand name associated with model trains in the United States, its products prized by collectors. Lionel, LLC now owns all of the trademarks and most of the product rights associated with Lionel Corporation; there is, however, no direct connection between the two companies.

Company History

The original Lionel Corporation was founded in 1900 by Joshua Lionel Cowen and Harry C. Grant in New York City. The company's devotees disagree over the date of incorporation, as the official paperwork gives a date of September 5, but the paperwork was not filed until September 22, more than two weeks later.

Initially, the company specialized in electrical novelties, such as fans and lighting devices.[1]

The Pre-War Era

Lionel's first train, the Electric Express, was not intended for sale to consumers, but rather, as a storefront display. Delivered in 1901, it ran on a brass track and was powered by a battery and a motor Cowen originally intended to use in an electric fan. Cowen hoped to use the public's fascination with railroads and electricity to capture the public's attention and direct it to the goods for sale. Members of the public started approaching store owners about buying the trains instead, prompting Lionel to begin making toy trains for the general public. Lionel ended up selling 12 examples of the Electric Express.

Lionel's earliest trains were larger than the sizes commonly available today, running on two-rail track with the rails 2 7/8 inches apart. In 1906, Lionel began offering a three-rail track that simplified wiring of reverse loops and accessories. Its outer rails were 2 1/8 inches apart, which did not match any of the existing standards that other manufacturers had been using since 1891. Whether this was an accidental misreading of Märklin's Gauge 2 specifications or an intentional incompatibility is unclear, but Lionel named this non-standard track Standard Gauge, and then trademarked the name. When other U.S. companies began using Lionel's standard, they usually called it Wide gauge. Starting in 1915, Lionel followed most of its U.S. competitors and adopted the smaller O gauge standard for its budget-level trains.

By the end of World War I, Lionel was one of three major U.S. manufacturers of toy trains, and it grew rapidly due to shrewd marketing. Cowen began getting department stores to incorporate his toy trains as part of their Christmas tree displays, linking toy trains to Christmas and making them into popular Christmas presents. Lionel made its trains larger than anyone else, making them appear to be better values. When competitors criticized the realism of Lionel's trains--Cowen had been unwilling to invest in the equipment necessary for lithography, so its early offerings were simply painted with solid colors of enamel paint with brass detail parts--Lionel targeted advertising at children, telling children its products were the most realistic toy trains. Additionally, Lionel criticized the durability of competitors' products in ads targeted at parents.

William Walthers, a large seller of model railroads, asked Cowen in 1929 why Lionel painted its trains bright and unrealistic colors. Cowen said the majority of trains were purchased by mothers for their children, and the bright colors attracted women buyers.

By the 1920s, Lionel had overcome Ives to become the market leader, selling metal trains with colorful paint schemes. Lionel's fierce ad campaigns took their toll on Ives, who filed bankruptcy in 1928. Lionel and American Flyer bought Ives and operated it jointly until 1930, when Lionel bought Flyer's share. Lionel operated Ives as a subsidiary until 1932.

The Great Depression badly hurt Lionel. In 1930, Lionel's operating profit dropped to $82,000--its operating profit in 1927 had been more than $500,000--and in 1931, it lost $207,000. The trains were considered a luxury item, and at the height of the Depression one of Lionel's more extravagant locomotives cost as much as a used Ford Model T. In an effort to compete with companies that were willing to undercut Lionel's prices without diluting its premium Lionel and Ives brands, Lionel introduced a line of inexpensive electric toy trains under the Winner Toys or Winner Toy Corp. brand name, which it sold from 1930 to 1932. The starting price for a set was $3.25, including a transformer.

These and other efforts to improve its financial standing were unable to keep Lionel from going into receivership in May 1934.

The product widely credited with saving the company was a wind-up handcar featuring Mickey and Minnie Mouse that ran on O gauge track and sold for $1. Lionel manufactured 250,000 units but was still unable to keep up with demand. At a wholesale price of 55 cents, the handcar's sales would not have provided enough profit to pay off Lionel's debts of $300,000, but it nevertheless provided much-needed cash. Lionel avoided bankruptcy and emerged from receivership the next year. By 1939, Lionel had discontinued its standard gauge products, concentrating instead on the more-affordable O gauge and 00 gauge, which it had introduced in 1938.

Lionel ceased toy production in 1942 to produce nautical items for the United States Navy during World War II. The company advertised heavily, however, promising new and exciting products and urging American teenagers to begin planning their post-War layouts. It also introduced the so-called paper train, a detailed set of cut-and-fold models of Lionel trains printed on cardstock that was notoriously difficult to put together.

The Post-War Era

Post War Lionel trains and accessories

Lionel resumed producing toy trains in late 1945, replacing their original product line with less-colorful, but more realistic trains and concentrating exclusively on O-gauge trains. Many of Lionel's models had a new feature: smoke — produced by dropping a small tablet or a special oil into the locomotive's smokestack.

During this period Lionel produced a construction set, utilizing a unique component set. While competitive sets used nut and bolt fasteners, the Lionel set employed a round-head aircraft rivets, retained with a rubber grommets, eliminating the need for tools. The structural elements were hollow beams of square cross section made from folded and quite thin sheet aluminum, as a consequence subject to destruction if stepped upon. A more substantial folded aluminum base plate was used to form the foundation of most constructions and additional circular plates could be used to construct larger wheels or pivots. Pulleys, gussets, and splices were also included. An electric AC motor with a worm drive and reduction gearset was powered from household power. While innovative, the lack of general purpose beam members with lots of holes limited the adaptability of the set to complex constructions. Finished assemblies also lacked the robust durability of its principle competition at the time, the Erector Set.

During the 1950s, Lionel outsold its closest competitor, American Flyer, nearly 2:1, peaking in 1953. Some Lionel company histories say Lionel was the largest toy company in the world, by the early 1950s. Had that been the case, it was a short-lived greatness: Lionel's 1955 sales were some $23 million, while rival Marx toys (more than just trains) sales were $50 million.

The 1946–1956 decade was Lionel's Golden Age. The Lionel 2333 diesel locomotive, an EMD F3 in the colorful Santa Fe "Warbonnet" paint scheme, introduced in 1948, became the Lionel company icon and the icon of the era, yet, Lionel declined rapidly after 1956. Hobbyists preferred the smaller, but more realistic, HO scale trains and children's interest shifted from toy trains to toy cars. The shift caught Lionel off guard, and, in 1957, they hastily introduced a line of HO-scale trains licensed from Rivarossi and a line of slot car racing sets, neither product line was as popular as its O-gauge trains. Efforts to increase train set sales by cheaper manufacture were largely unsuccessful; 1957 was Lionel's last profitable post-war year.

In 1959, Cowen and son sold their interest in the Lionel company and retired. The buyer was Cowen's grand nephew Roy Cohn (businessman and attorney to Sen. Joseph McCarthy), who replaced most of Cowen's management. The business direction of the Lionel company changed; it added subsidiary companies unrelated to toy train sets, among them, Dale Electronics, Sterling Electric Motors, and Telerad Manufacturing. Lionel train enthusiasts consider 1959 the end of the "true Lionel train". Cohn's unsuccessful tenure of Lionel lost the company more than US$13 million in his four years of running the company.

Lionel's efforts to diversify failed to compensate for the public's declining interest in its toy trains. By 1966, Lionel's revenue was $28 million, 40 percent from government contracts. Meanwhile, Lionel's closest competitor also was fading, in January of 1967, the parent company of rival American Flyer, the A. C. Gilbert Company, went bankrupt. Lionel bought the American Flyer brand name and product line in May of that year in a $150,000 deal, however, Lionel lacked the money to exploit them, and filed bankruptcy less than four months later, on August 7, 1967. In 1969, Lionel Corp. sold the product dies for its struggling train line — sales declined to just over $1 million per year — and the rights to the Lionel brand name to the cereal company General Mills. The Lionel brand name continues today, owned by Lionel, LLC, yet most Lionel train enthusiasts consider 1969 the end of the "true Lionel trains" (or is it 1959 as stated exactly the same way above?), because the design and manufacture changed, sometimes for the worse, under Lionel's new owners.

The end of Lionel Corporation

After the sale of its train product lines, Lionel Corporation became a holding company that specialized in toy stores. By the early 1980s, Lionel operated some 150 stores, under the names Toy City, Lionel Kiddie City, Lionel Playworld, Lionel Toy Warehouse, and Lionel Toy Town. For a time it was the second-largest toy store chain in the United States. Lionel ran into financial trouble during the early 1980s recession and filed for Chapter 11 bankruptcy in February 1982. After reducing itself in size to 55 stores, it emerged from bankruptcy in September 1985.

By 1991, the chain grew to 100 stores and was the fourth-largest toy retailer in the country, but once again ran into trouble due to a combination of factors. In 1989 the Robert I. Toussie L.P., a partnership of several retail executives, attempted to buy the company. Lionel resisted, and the fight drained the company of cash. Meanwhile, non-specialty discount stores expanded their toy sections and undercut the prices of specialty toy chains. Additionally, Lionel found it difficult to compete on price with the larger Toys R Us, and the chain attempted to expand too rapidly in a weakened economy. After several successive unprofitable quarters, it filed for Chapter 11 bankruptcy on June 14, 1991. In 1992 Lionel attempted to reverse its fortunes by merging with the bankrupt Child World, the United States' #3 toy retailer, but was unable to secure financing. By February 1993 Lionel had closed all but 29 stores in six states, concentrating on the markets of Philadelphia, central New Jersey, Baltimore, Washington, D.C., Cleveland, and south Florida. Unable to reach an agreement for reorganization with its creditors, on June 2, 1993, Lionel announced its intention to liquidate all of its stores and go out of business[2].

The Lionel trademarks were purchased by Richard Kughn, a Detroit real estate magnate who had bought the Lionel product line from General Mills in 1986. See Lionel, LLC.

On April 15, 2004, fire destroyed the former Lionel train factory located in Irvington, New Jersey. According to a report from the local fire department, it took 100 firefighters to extinguish the blaze. The building had been vacant for the last ten years, and was in a state of disrepair, according to Fire Chief Don Huber.

The old Lionel factory in Hillside, New Jersey, where Lionel Corporation manufactured trains from the early 1920s up to 1969 still stands. Photos of the Factory can be seen at Ihorse.com [3].

Identifying Lionel Equipment

With very few exceptions, all Lionel products can be identified by a four-number identifier, printed either right on the side of the car or locomotive, or stamped on the bottom.

Contrary to popular belief, not all Lionel trains are worth large sums of money. A Lionel 1110 Scout locomotive, for instance, typically sells for around US$40 in good condition—very close to what it would have sold for in 1949-1952. A rarer and/or more versatile locomotive from the same time period can sell for several hundred dollars, or, occasionally, more than $1,000.

Lionel's O-gauge tracks actually came in two different radii: O and O27. O scale is supposed to approximate 1/48-1/55 scale and O equipment can accommodate curves of no less than 31 inches (790 mm) in diameter. In practice, O27 cars are shorter than O gauge (but the same width and height) making them better able to handle sharper turns in the track -- as O27 track is 27 inches (690 mm) in diameter for a circle. O track tends to ride slightly higher than O27 track and come in longer sections. The two types are easily identifiable with a ruler: a straight section of O27 track is 7/16 inch high and about 8 3/4 inches long, while a straight section of O track is 11/16 inch high and 10 inches (250 mm) long. A circle of 8 pieces of curved standard O track measures 31 inches (790 mm) in diameter, while 8 pieces of O27 curves make a circle 27 inches (690 mm) in diameter, hence the name O27. Also, remote electrically operated switches were provided only for the O gage track sets.

O27 trains will run without trouble on O track, but longer O locomotives and cars can struggle on the tighter curves of O27 track, coming to a stop or derailing.

The easiest way to identify the vintage of Lionel equipment is to examine the train couplers. Lionel trains made before World War II use toy-like couplers that resemble a hook. The cars tend to be made of metal and have colorful paint schemes, somewhat similar to those of a holiday tin. Lionel trains made after World War II use two types of couplers. The less common (and less desirable) couplers, used in Lionel's entry-level Scout series, are longer and resemble a capital 'G'. Scout couplers do not open. The more common couplers open when you pull a peg on the bottom of the coupler. These couplers are compatible with modern O-scale cars from Lionel and other manufacturers.

There were two types of electrical couplers produced, each type being opened by electrical current applied to a straight decoupling section. The earlier type (early post-war) uses two rail sections between the outer rails and the third rail, forming a five rail track. A contact shoe on each truck makes contact with this rail and operates a solenoid in the coupler when power is applied. A later version uses a single inductive coil in the center of the section - a wide spot in the third rail. A corresponding coil in the truck provides electricity to the coupler. The inductive method addressed a problem with the contact shoe method - these had a tendency to get hung up on switch points, causing a derailment.

Toy trains manufactured by Louis Marx and Company between 1938 and 1978 often resemble Lionel trains and are largely compatible with them, but most Marx locomotives and cars are slightly smaller and have less detail than their Lionel counterparts. Many Marx locomotives had three-number identifiers, which helps distinguish them from Lionel, and many Marx cars had no identifiers at all. Marx couplers also differ from Lionel and are usually more toy-like.

See also

• Lionel Coin Bank

External links

• Postwar Lionel trains guide