From "Lionel Goes Fishing" page 203 of "All Aboard! The Story of Joshua Lionel Cowen & His Lionel Train Company" by Ron Hollander, c 1981.
"Both Cowen and his son enjoyed fishing. It was through Lawrence's interest in the sport that Lionel acquired its subsidiary company, Airex. Lawrence was on a fishing trip on the St. Lawrence River when he met Bache Brown, one of the world's leading fresh water casters. Brown was using a new type of spinning reel manufactured by the Airex Company, with which he was connected. Lawrence was impressed not only at the accuracy and length of Brown's casts, but at the absence of backlash that frequently fouled conventional reels.
Enthusiastic both about the reel and the opportunity to make his mark at Lionel, Lawrence returned to New York and set about acquiring Airex. By January 1948, Lionel had purchased two thirds of Airex's stock for $15,000 plus future bonuses to the stockowners. Lawrence explained the purchase to Lionel's stockholders by noting that many of Lionel's retailers, such as hardware stores, already sold fishing tackle, which would simplify the distribution of Airex.
But it was not until 1953 that Lionel began using the train catalog to promote Airex. The fishing equipment appeared on the back cover, startling children, who wondered what a trout fisherman was doing in their train catalog. Perhaps some of them thought the fisherman was part of a new operating car, a kind of milkman who dangled his line from a passing freight train.
While it was true that probably as many dads as sons read the Lionel catalog and it was therefore a logical place to advertise rods and reels, Airex's appearance was a merchandising blunder. Having an actual piece of adult paraphernalia invade the fantasy world of Lionel Land was shocking. It undermined the carefully-constructed illusion of the catalog, whose magic lay in presenting the toys as if they were real. Showing true adult objects in the catalog exposed the myth.
Airex was Lionel's only significantly profitable attempt at diversification. The company did well until cheaper Japanese imports in the late fifties were able to undersell it."
From page 227 "Lionel started development of an outboard motor in conjunction with an Italian company, the feeling being that the motor could be distributed through the outlets selling the faltering Airex fishing equipment. Some $50,000 were spent on development, but the motor never went into production."
Lionel originally started as a business in 1900 selling "Electric Novelties" but no trains. In fact, the first train Cowen made, a cheesebox with the motor from a failed attempt at making an electric fan mounted on it's underside, was intended as a merchandising display for store windows. An earlier success for Cowen was a battery powered device for setting off magnesium flash powder for photography. That lead to the development for the U.S. governement of a device for setting off mines. In the 30's they made a small but fully operational electric stove for little girls to cook on.
During the wars Lionel made compass binacles, code key sets and other items of a more military nature. In the 50's Lionel produced a few low end train cars with the Airex name on them and later started selling chemistry sets, record players and slot car tracks. They even had an electric fence system called the "Stock Watch" for farmers and ranchers. Maybe most ominously, at the height of the cold war, Lionel made radiation survey meters.
So Lionel has a long history of making things other than toys, some more sucessfully than others.
Edit: And Firelock is a faster typist than I am!