QUOTE: The MPC (General Mills) era The bankrupt Lionel Corporation sold the tooling for its then-current product line and licensed the Lionel name to General Mills in 1969, who then operated Lionel as a division of its subsidiary Model Products Corporation. General Mills did not buy the company, however. The Lionel Corporation became a holding company and invested in a number of ventures, including what would eventually become an East Coast chain of toy stores known as "Lionel Leisure World." Due to General Mills' cost-cutting measures, production of Lionel-branded toy and model trains returned to profitability, but sometimes at the expense of quality. Detail was often sacrificed, and most of the remaining metal parts were replaced with molded plastic. A number of MPC's changes to the product line endure to the present day, the most noticeable being the use of needlepoint axles and trucks made of Delrin, two changes made to reduce friction and allow longer trains. Also starting in 1973, MPC experimented with a line of cars it called "Standard O," which were scaled to 1:48 (most postwar Lionel and MPC production was undersize for O scale). The experiment's failure is generally blamed on MPC's lack of a 1:48 locomotive and caboose to go with the cars; when it was repeated again in the 1980s with locomotives of appropriate size, it proved more successful. An internal reorganization after 1973 caused Lionel to become part of General Mills' Fundimensions group. Although Lionel's tenure with MPC was relatively short, "MPC" is the most commonly used term for the 1970-1985 era. In 1979, General Mills resurrected the American Flyer brand and product line, which Lionel Corporation had purchased from its bankrupt competitor (The A. C. Gilbert Company of New Haven, Connecticut) several months prior to its own bankruptcy in 1967. American Flyer products by Gilbert made after World War II are scaled roughly to a 1:64 proportion and are known as S gauge; their most distinctive feature, however, is that they operate on two-rail track as opposed to Lionel's three-rail trackage system. With so many years of absence from the market, Gilbert American Flyer S gauge trains were no longer considered a direct competitor to Lionel's 1:48 proportion O gauge trains. To this day, Lionel markets American Flyer S gauge in limited quantities as collectibles. The year 1982 brought General Mills' ill-fated move of train production from the United States to Mexico. Some Lionel fans were angry simply because the trains had been made in the United States for more than 80 years, while others criticized the quality of the Mexican-produced trains. Lionel production returned to the United States by 1984. During this time, corporate offices were retained at the company's Mount Clements (later, Chesterfield), Michigan, location. When General Mills spun off its Kenner-Parker division in 1985, Lionel became part of Kenner-Parker. Lionel was sold again in 1986, this time to toy-train collector / real estate developer Richard P. Kughn of Detroit, Michigan. The Kughn era Kughn was a prolific toy train collector who said that his friends joked that the only thing his collection lacked was the company who made them. Kughn believed that if he moved production to Detroit, it would be possible to improve quality to a level characteristic of the original Lionel Corporation and still maintain profitability. After his purchase, Kughn founded a company called Lionel Trains to continue the brand, and Lionel Trains Inc. opened a plant in Chesterfield, Michigan. In 1989 Lionel Trains introduced a locomotive featuring realistic electronically-produced sounds. During this time frame, Lionel began producing new products based on designs from the Post-War era, when its popularity was at its peak. Additionally, some offerings began to depart from Lionel's toy-like design and place more emphasis on scale realism and detail, mirroring MPC's earlier "Standard O" experiments but to a larger degree. Lionel also began selling reproductions of its designs that dated from the period before World War II, mostly in Standard Gauge. These products were made by MTH Electric Trains using original Lionel Corporation tooling, which had been sold at bankruptcy in the late 1960s after sitting unused for decades. This arrangement ended in the early 1990s after a disagreement between Kughn and MTH owner Mike Wolf. The year 1993 brought Kughn's Lionel an opportunity. The original Lionel Corporation had recovered after the sale of its trains and survived as an entirely separate entity, operating a successful chain of retail toy stores for 24 years and becoming for a time the second-largest toy retailer in the country. However, it went bankrupt in the early 1990s under increased competition and liquidated in 1993, allowing the train manufacturer to purchase the Lionel trademark after years of operating as a licensee. The Wellspring era Lionel changed hands again in 1995, when Kughn sold controlling interest in the company to an investment group that included rock and roller Neil Young and holding company Wellspring Associates. The new company became known as Lionel LLC. The company continued marketing reproductions of its vintage equipment, and the trend towards producing new equipment that was ever-more-detailed (with a correspondingly higher price) continued. Additionally, Young, who has a 20% stake in the company[1], helped finance the development of Trainmaster Command Control, a technology similar to Digital Command Control which permits, among other things, the operation of Lionel trains by remote control. In order to proliferate this standard, Lionel has licensed it to several of its competitors, including K-Line. Lionel, LLC continued to manufacture and market trains and accessories in O scale under the Lionel brand and S gauge under the American Flyer brand. While most of the American Flyer product comprises re-issues using old Gilbert tooling from the 1950s, the O scale equipment is a combination of new designs and reissues. Lionel also ventured into HO scale at times during its history, with limited success. In 2001, Lionel closed its last manufacturing plant in the United States, outsourcing production to Korea and China. While this move proved unpopular with some longtime fans, the backlash was minor in comparison to the failed move of production to Mexico in the 1980s. The company also licensed the Lionel name to numerous third parties, who have marketed various Lionel-branded products since 1995. The 2004 Christmas movie Polar Express, based on the children's book of the same name, provided Lionel with its first hit in years. Lionel produced a train set based on the movie, and stronger-than-anticipated demand caused highly publicized shortages. Various news stories told of a reporter's quest to locate a set, and some dealers marked the prices up above the suggested retail price of $229. Sets turned up on eBay with buy-it-now prices of $449 as Lionel ordered an additional production run but said it would not be able to deliver the additional sets until March of the following year. Although many criticized Lionel for not producing more sets, Lionel's management called the set a great success. This era was marked by legal troubles. In April 2000, competitor and former partner MTH Electric Trains filed a trade secret misappropriation lawsuit against Lionel, LLC, saying that one of Lionel's subcontractors had acquired plans for an MTH locomotive design and used them to design locomotives for Lionel. Additionally, on May 27, 2004, Union Pacific Railroad sued Athearn and Lionel for trademark infringement because both companies put the names and logos of UP, as well as the names and logos of various fallen flag railroads UP had acquired over the years, on their model railroad products without a license. While Athearn quickly settled and acquired a license, Lionel prepared to fight, arguing that it and its predecessor companies had been using the logos for more than 50 years and had been encouraged or even paid to do so. The misappropriation lawsuit by MTH eventually went to trial, and on June 7, 2004, a jury in Detroit, Michigan found Lionel liable and awarded MTH $40,775,745. On November 1, 2004, a federal judge upheld the jury's decision. Lionel announced it would appeal, but two weeks later filed for bankruptcy. In September 2004, the troubled company dismissed its CEO, Bill Bracy, and replaced him with Jerry Calabrese, a former Marvel Comics and NASCAR executive. Along with Bracy, another 17 high-level employees were also dismissed. Bankruptcy On November 15, 2004, Lionel, LLC filed for Chapter 11 bankruptcy protection, citing the $40 million-plus judgment in the MTH lawsuit as the primary factor. In the filing, it listed $55 million in debt and $42 million in assets. The largest secured creditor was PNC Financial Services Corp., owed $31 million. The MTH judgment was not included in the $55 million figure. Collector value The collector value of "modern era" Lionel trains has been limited compared to the trains produced by Lionel Corporation prior to 1969. There has been only limited collector interest in trains produced by this succession of entities, from MPC through to Lionel Trains Inc. and Lionel, LLC, especially if the items are in less than mint condition and do not include the original box. In addition, Lionel's reissues have somewhat decreased the collector value of even vintage Lionel and American Flyer equipment. The MPC era is often derided, especially by fans of recent-production Lionel products that have better scale fidelity than the majority of MPC production and by fans of Lionel Corporation's postwar era. These critics often call MPC an acronym for "Mostly Plastic Crap." MPC has a small following due to the quality of the graphics, variety of roadnames produced, and play value. Others are attracted to MPC because of its low cost and the ease of finding MPC-produced train sets and accessories, often barely used, in its original packaging.
QUOTE: American Flyer This American Flyer S gauge 4-4-2 steam locomotive and tender dates from 1960 American Flyer was a popular brand of toy train and model railroad in the United States in the middle part of the 20th century. The Chicago Era, 1907-1938 Although best remembered for the S gauge trains of the 1950s that it made as a division of the A. C. Gilbert Company, American Flyer was initially an independent company whose origins date back nearly a half century earlier. Chicago, Illinois-based toymaker William Frederick Hafner developed a clockwork motor for toy cars in 1901 while working for a company called Toy Auto Company. According to the recollections of William Hafner's son, John, he had developed a clockwork train running on O gauge track by 1905. Hafner's friend, William Ogden Coleman, gained control of the Edmonds-Metzel Hardware Company, a struggling hardware manufacturer in Chicago, in 1906 or 1907. Hafner and Coleman began producing toy trains using Edmonds-Metzel's excess manufacturing capability after Hafner was able to secure $15,000 worth of orders. By 1907, two American retailers, G. Sommers & Co. and Montgomery Ward, were selling Edmonds-Metzel trains. In 1908, Edmonds-Metzel adopted the American Flyer brand name for the trains, and by 1910, Edmonds-Metzel was out of the hardware business and changed its name to American Flyer Manufacturing Company. Initially American Flyer -- aka "Chicago Flyer" -- was something of a budget brand, undercutting the prices of Ives, which was at the time the market leader. The trains proved popular, and American Flyer was soon expanding its product line. However, the company's rapid growth led to strains in the relationship between Hafner and Coleman. In 1913, Hafner left the company. Believing he would be given a significant portion of the company if the trains proved successful, Coleman refused when Hafner asked to exercise this option. Hafner started the Hafner Manufacturing Company, which sold a line of trains called Overland Flyer. Sommers immediately stopped carrying the American Flyer trains in favor of Hafner's brand. Initially, the Hafner and American Flyer product lines were very similar, suggesting they may have been built using the same tooling. This suggests the possibility of the two companies continuing to collaborate. Hafner's business surivived as a manufacturer of clockwork trains until 1951, when he sold his business to All Metal Products Company. American Flyer's business grew during World War I, which locked out German manufacturers, which had dominated the U.S. toy train market to that point. During this time, American Flyer also introduced bicycle and motorcycle toys, segmented its market by creating both a low-priced and a high-priced line, and began to depart from its earlier designs by William Hafner. In 1918, American Flyer introduced its first electric train, an O gauge model that was simply a windup model with an electric motor in place of the clockwork motor. This was a common practice at the time. The same year, William Coleman died and his son, William Ogden Coleman, Jr., took over the company. In 1925, American Flyer began offering Wide gauge electric trains at a premium price, attempting to compete with Lionel Corporation at the high end of the market. Like most of its competition, American Flyer did well in the 1920s, selling more than half a million trains in its best years, but suffered in the Great Depression, during which the company's focus shifted back to the more economical O gauge trains. In 1928, American Flyer's competitor Ives went bankrupt. American Flyer and Lionel jointly purchased and operated Ives until 1930, when American Flyer sold its share to Lionel. During this time of joint operation, American Flyer supplied Ives with car bodies and other parts. During the early 1930s, American Flyer struggled under increased competition, especially at the low end of the market. In 1931, Flyer announced it would not produce an electric train set to sell for less than $4 like its competition had. However, within three months, it relented and released a train without transformer that sold for $3.95, and in 1932, it released a set with transformer that retailed for $3.50. Sales increased, but the company was not profitable. Expansion into other toy arenas also failed. [edit] A. C. Gilbert Company, 1938-1966 In 1938, W.O. Coleman sold American (Chicago) Flyer to Alfred Carlton Gilbert, a former Olympic pole vaulter who first made a name for himself in the toy industry earlier in the century when he created and manufactured Mysto Magic sets for youthful magicians. A few years later, his A. C. Gilbert Company also became the makers of Erector Set construction toys. The two toy magnates were just finishing shooting on Gilbert's game reserve in New Haven when Gilbert casually mentioned he was thinking about manufacturing toy trains. Instead, Coleman said he'd give his struggling American Flyer Co. to Gilbert in return for a share of the profits. Gilbert quickly agreed. Gilbert soon moved the company from Chicago to New Haven, Connecticut, and re-designed the product line. He pioneereed the 3/16" to one foot (S-scale) variant of O gauge in 1939, in which the locomotive and car bodies are scaled to 1:64 scale, making them approximately 25% smaller than the standard 1:48 for O gauge while still running on the same type of three-rail track. This allowed the S-scale trains to navigate tighter 27-inch curves that would cause a conventional O gauge train to derail or jump the track. While this resulted in curves that were much tighter than those that appear in the real world and O27 gauge train cars that appeared "stubby" in length, it allowed more track in a smaller space. By 1941, Gilbert had discontinued the earlier designs and advertised his new American Flyer products as "Every train 3/16" scale from front end to rear end." Some boxes were labeled "3/16 scale" and others labeled "Tru-Scale." As most prior trains from American Flyer and other manufacturers paid little attention to scale (proportional size mirroring the prototype), this new wrinkle made Gilbert American Flyer distinctive, as his cars at 1:64 were much closer to the prototypes on real railroads than the comparatively stubby 1:48 scale rolling stock that ran on O27 track. At the same time, Gilbert also released a line of HO scale trains. In 1946, after World War II, Gilbert discontinued manufacturing three-rail O gauge trains entirely in favor of the slightly (25%) smaller and more realistic S gauge and in the process eliminated the most unrealistic aspect of toy trains -- the center rail. His 3/16" American Flyer used two-rail track sized closer to 1:64 scale, or about seven-eighths inches between rails. In order to further differentiate his product line from that of Lionel, Gilbert employed a bullet-shaped (link) coupler, but within a few years (1952), a newer, more realistic knuckle coupler design appeared. Flyer played up its improved realism and attention to details, with two-rail track and prototypical couplers, with Gilbert himself saying the design was inspired by his son's dissatisfaction with other toy trains available on the market. "Kids want realism," he said. His trains, which were closely proportioned to their prototypes, also had more detail elements than most O gauge competitors. Although popular, American Flyer was always the No.2 brand to Lionel in terms of market share at the high end of the market. With Marx and a handful of other brands relegated to the low end of the market, Lionel and American Flyer shared premium status. A rivalry emerged between both companies' fans that continues today. Like Lionel, Gilbert was caught off guard by the popularity of HO scale trains that offered better realism at a lower price than its American Flyer S gauge products. But the true reason for the demise of the toy train industry was the changing interests of American youth. A new technology called television was taking the place of many traditional hobbies, and the toy market was subject to the success of unpredictable overnight fads like the Hula-Hoop and yo-yo. Kids were also eschewing their Lionel and American Flyer trains in favor of remote-control slot car racing sets. Finally, the national phenomena of the discount store craze was ravaging toy train companies' traditional distrubution network -- mom-and-pop hobby shops -- and sending them into financial oblivion. The discount stores demanded train sets at a low wholesale price and refused to offer the personal attention and repair services of the hobby shop. In order to get product on the shelves of discounters, toy train manufacturers cheapened their lines to get the price point down on sets -- which exacerbated the downward economic spiral. Longtime train collectors and hobbyists were offended at this newer production, dismissing the new products as "cheap junk," an accurate description. These problems were compounded by the death of its founder, A.C. Gilbert in 1961. With the popularity of toy trains and construction toys declining, and without another successful product line to buoy the company's finances, Gilbert found itself in serious financial trouble. Finally, a majority of the company was sold by the family to a holding company, the Wrather Group, in 1962 with A.C. Gilbert, Jr., acting as CEO. Within a few months, though, A.C. Jr., died. The company continued to manufacture trains of limited appeal, thanks to the questionable quality. Under the new ownership, the A.C. Gilbert Co. continued to struggle, although the new owners took a more aggressive approach to advertising and marketing than when the firm was headed by the more conservative A.C. Gilbert. It manufactured a wide variety of poorly-designed and poorly-conceived toys (dolls, racing sets, games) that sold slowly, if at all, and was nearly overwhelmed by store returns of defective merchandise. Gilbert took an especially-hard hit when a majority of a poorly-designed and manufacturered James Bond 007 slot car racing set flooded back as returns after component failures. In addition, the company delivered many of its toy line products to discounters with a "100% sale guarantee." When the merchandise didn't sell through, it ended up back in Gilbert's warehouses. The company discontinued the American Flyer train line in 1966 and finally declared bankruptcy in 1967.
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