Lionel trains have long been a standard of model railroading. It may be the best known name in
the world of scale model trains.
It was founded as the Lionel Manufacturing Company in 1900 by Joshua Lionel Cowen
(spelled Cohen at the time), a young inventor. Joshua Lionel Cowen, born in New York City on August 25,
1877, did not set out to create the electric model train or to found one of the most successful 20th
century toy manufacturers in the United States. Cowen dropped out of Columbia University and began work
as an assembler at an electric lamp factory. However, Cowen's natural skill with electric devices and
his desire to innovate led him to conduct electrical experiments after hours at work. About 1898 Cowen's
tinkering led to his development of a fuse for igniting magnesium powder for photographers. The U.S. Navy
heard about the invention and contacted Cowen to build fuses to be used for exploding mines. Cowen gained
$12,000 from his subsequent contract with the Navy, which he used to open a small shop in New York City in 1900.
The new enterprise, christened the Lionel Manufacturing Company, produced fuses, low-voltage motors, and
electrical novelties. Cowen continued to experiment with electricity, and in 1900 he developed the first
dry cell battery.
In 1901 Cowen created a window display for his shop that would change the direction of his company.
To showcase one of his small electrical motors, he placed one in a model railroad car and ran it on
a track in his shop window. Cowen had hoped the train would grab the attention of passers-by, and
they would stay to buy his products. The train did indeed attract the attention of people, but what
they wanted to buy was the train! Cowen was soon selling the trains to individual customers and other stores.
Cowen founded Lionel Trains in a small office at 24 Murray Street at the age of 23. Within two years,
the Lionel Manufacturing Company was issuing catalogs for the trains.
In 1901 Cowen began production of 2-7/8 gauge two rail train equipment. His Electric Express and the
products to follow would leave its mark on the United States toy train market. The first catalog, in 1903,
featured these 2-inch gauge trains and track. The gauge refers to the width between the rails of the track.
In addition to locomotives, the catalog offered a steel derrick car and a gondola car. A particular
train in this catalog, a steel reproduction of a Baltimore and Ohio R.R. locomotive powered by a
wet cell battery, initiated a demand for small scale reproductions of real trains. Designing and
manufacturing reproductions for those interested in this new hobby would become a staple for Lionel.
Business grew rapidly. In 1905 Cowen hired Mario Caruso, a young engineer, to help with manufacturing.
Soon a strict division of labor developed: Cowen handled the marketing of the trains, and Caruso ran
the manufacturing plants. Caruso remained with the company until 1945.
In 1906 Lionel changed to three rail track in 2-1/8" gauge, declaring it "Standard Gauge", a trademarked name.
This track has a center rail that carried the electrical current and was designed to eliminate short circuits.
2-1/8" gauge was an improper interpretation of the old Märklin defined
gauge which was 2- 1/8" (nearly 54 mm) between rail CENTERS not between their inside faces,
as Cowen interpreted it. As it was a toy standard, rather than a scale modeling standard, the actual
scale of Standard gauge locomotives and rolling stock varied. The 1906 catalog offered a single
locomotive, two electric trolley cars, two passenger cars, and seven freight cars, which
included an oil tank, a coal car, a cattle car, a box car, a gondola, and a caboose.
An important change occurred in Lionel train design in the first decade of the century.
The increasing number of homes wired for electricity meant that the trains no longer had to be
powered by dry cell batteries. Cowen developed a transformer that reduced household current to a
safe level for use with Lionel trains.
Production quickly outgrew the company's New York manufacturing plant, and in 1910 Lionel moved
to a new factory in New Haven, Connecticut. In addition to an increase in the sheer number of trains
produced, the selection expanded rapidly as well. The 1910 catalog offered several different locomotives,
an increased number of freight and passenger cars, and eleven trolley cars. The company had also
introduced tin lithograph stations and small human figures to aid in the creation of realistic scenes.
Cowen quickly realized children as well as adults would soon tire of watching a train go round and round
so it wasnt long until detailed working accessories came on the scene. Most were engineering marvels in
their day. Play value became the modis operende for Lionel. Lionel Trains sought out other markets early
in its history. It put out a line of electric racing cars in 1912 that predated popularized slot cars
by nearly 50 years.
Gauge became an important marketing factor when Lionel competitor Ives Trains introduced the 'O' gauge
train in 1910. Smaller than the standard gauge train, the 'O' gauge had only 1 inches between the
rails. The gauge's popularity led Lionel into that market in 1915, when the company introduced 9 sets
of 'O' gauge trains. At the time, Lionel offered 17 sets of trains in standard gauge.
Lionel changed its name to the Lionel Corporation in 1918 and exceeded Ives
in sales in 1924. This marked the start of the Classical Period of flamboyant, bright trains. By the 1920s,
Lionel Corporation (as it was now known) was building sites outside the US and was buying up the competition.
Increased production again forced the company to move to larger facilities, this time to a plant in Irvington,
New Jersey.
The demand for reproductions of real trains grew through the 1920s. Throughout this time Lionel
produced several sets of highly authentic trains as part of its numerous offerings of locomotives
and train cars. During this "classic period" for Lionel, the company created model cars and engines
with an astonishing attention to detail, including many models with brass and nickel trim. For
example, the powerful 408E twin-motored engine featured six running lights, operating pantographs,
and all brass detail. Lionel sets from this time, which included highly detailed passenger cars in
addition to the locomotives, became valuable collectors' items, sought after by collectors and
train enthusiasts through the end of the century.
The depression took its toll on train sales and killed the extravagant Standard Gauge by 1940 in favor of
lower cost 'O' gauge trains, which Lionel began to make in 1915. Lionel also increased its size and market
share by acquiring its biggest competitor, the bankrupt Ives Manufacturing in 1928. Initially Lionel bought
the company in partnership with the model train company American Flyer Trains,
and both companies supplied some parts for Ives trains through 1929 and 1930. However, Lionel bought
out American Flyer's interest in Ives at the end of 1930. Lionel then closed the Ives plant in Bridgeport,
Connecticut, and transferred the operations to its New Jersey facility. Lionel itself entered into
receivership in 1930.
Despite the focus on lower costs, Lionel continued to introduce new models. The company's first steam-type
'O' gauge locomotive debuted in 1930; within five years, Lionel made eight different 'O' gauge steam engines.
Streamlined passenger trains were introduced in the middle of the decade, as was the first steam whistle.
Some demand for high-priced reproduction models remained, and Lionel filled it with its exact scale 'O'
gauge New York Central Hudson steam locomotive in 1937, which cost $75 at the time.
Lionel spent a little over four years in receivership. It recovered by 1939 largely with the help of its
hugely successful, low-priced, Mickey Mouse hand cars. This is an item that antique dealers and collectors
long for- a wind up handcar featuring Mickey and Minnie Mouse first made in 1934 in collaboration with
the Walt Disney Company. The one-dollar toy enjoyed a vast popularity. Its success engendered a whole
line of similar toys, including a Santa Claus hand car, introduced in 1935; Donald Duck and Peter
Rabbit "chick mobiles," which came out the following year; and the Mickey Mouse Circus Train.
Mickey, as the conductor of the tin locomotive, led the train filled with Disney passengers past
a cardboard backdrop of a circus.
In 1937 the company employed 1,000 people and produced approximately 40,000 model train engines,
1.2 million railcars, and more than a million sets of track. That year Lionel offered stock to
the public for the first time.
From 1938 to 1942 Lionel produced several 'O' and 'OO' scale models as part of the birth of the
scale model movement. Its first 'OO' gauge train was a scale model of the Hudson engine with a tender
and four freight cars.
During WWII, as it had in WWI, Lionel made naval navigation equipment, primarily compasses, while it stopped
building metal trains. It did offer, for a time, a non-electric paper train set. After the war, Lionel
began producing steam engines that made smoke. Lionel never resumed its line of 'OO' trains once the war ended.
Toy train production resumed in 1945 under the direction of Lawrence Cowen, the son of Joshua Lionel Cowen.
Having assumed the presidency that year, Lawrence remained at the head of the company until its sale in 1959.
He oversaw the introduction of the company's all-time top-selling train engine, the Santa Fe Diesel,
in 1948. Not only did Lionel begin producing diesel engines in 1948, it used plastic in its trains for
the first time. The year of its fiftieth anniversary, 1950, Lionel unveiled Magne-Traction,
a system designed to increase the pulling power of the locomotives. By inserting permanent
magnets into the locomotive driving axles, a magnetic attraction was induced between the wheels
and the steel track, enabling the locomotives to pull more cars and work better on steep grades. By the 1950s,
Lionel was a household name and was offering combat-oriented train sets.
The peak postwar year was 1952. By 1953 Lionel was the largest toy manufacturer in the world and
employed 2,000 people, annual revenue had reached $32 million and Lionel had become one of America's
most beloved and recognized brands. Mismanagement and a shrinking market, however, reversed the company's fortunes.
In the mid-1950s Lawrence Cowen attempted to diversify Lionel's products and holdings, perhaps
in response to decreasing interest in model trains from the public. In 1957 the company began marketing
HO gauge trains, licensed first from Rivarossi and later from
Athern, but the line didn't sell and was dropped in 1967. By 1955 the toy train
market had soured and Lionel headed into the red. Cowen introduced a stereo camera and acquired Airex
Corporation, a fishing reel manufacturer, but both ventures proved unprofitable. Labor disputes added
to the company's misfortunes, disrupting production at the New Jersey plant with strikes. In 1958 Lionel
lost $470,000 on sales of $14.5 million, the company's first yearly loss since the Depression.
In 1959 Cowen and his son sold their stock to a group of investors, sparking almost three decades of
shifting ownership. Roy Cohn, a corporate raider and Joshua Cowen's great nephew was head of the investors. Cohn
tried cutting costs and implementing massive diversification only to wreck the company by 1964. Cohn
hoped to gain government missile contracts by acquiring electronics firms. Cohn placed John Maderis, a
former major general, at the head of Lionel but replaced him in 1962 with Melvin Raney. Not only did
government missile contracts fail to appear, but sales remained stagnant as well. Cohn sold Lionel at
a significant loss in 1963 to financier Victor Muscat, who resold the company later the same year to
a group led by A. M. Sonnabend of the Hotel Corporation of America. Sonnabend died the next year,
and Robert Wolfe, a former toy company executive, was named president.
The 1960's saw some misguided marketing steps- mainly, not recognizing the popularity of HO scale or
making product to suit the demand. Lionel produced or distributed fishing reels, race sets, chemistry sets,
record players and other odd products. Quality was often negated to the quick buck. Lionel managed to
buy the rights to Flyer in 1967 and keep a toy line going until 1969 when
bankruptcy occurred.
Wolfe took over a company that had suffered at the hands of its numerous leaders in the previous decade.
Employees had been let go, and high-quality product lines had been discontinued in order to cut costs.
Efforts to diversify the company's product line, including ventures into microscopes, science labs, and
tape recorders, had only served to blur the company's focus. Wolfe was determined to return Lionel
to its traditional niche as a high-quality toy train manufacturer. However, even with the company's
focus back on producing high-quality electric trains, Lionel continued to lose money. Its 1967
purchase of American Flyer Trains, its largest competitor, did nothing to stem the tide.
In 1969 the company was forced to reorganize by a bankruptcy proceeding. Lionel sold the train making
rights and all of the company's manufacturing equipment to General Mills Model Plastics Division (MPC),
which later changed its name to Fundimensions. Under Fundimensions, Lionel branched into the toy retail
business in the 1970's. What was left of the original Lionel Corporation emerged as a holding company
for toy stores and hobby shops. Production of Lionel trains was resumed by General Mills at a plant opened
in Mt. Clemens, Michigan under the Fundimensions name. For a while they maintained the quality of the old days.
In 1973 Fundimensions attempted to revive the Lionel 'HO' gauge line, manufacturing the trains in Mt.
Clemens and the Orient. However, the line once again failed to sell and was discontinued five years later.
In 1979 Fundimensions reintroduced the American Flyer 'S' Gauge trains as part of the Lionel line.
In general, Lionel trains regained its health in the 1970s, enjoying increasing sales through the decade.
Fundimensions had the advantage of great experience in the plastics industry which they incorporated
into the train line. The size of the line ebbed and flowed, peaking in 1978 and 1983. Quality was
good on the whole, with top of the line items being far superior to old Lionel and bottom of the line
being worse. Fundimensions became a part of Kenner-Parker Toys in 1983 and was moved to Mexico. The new plant
had a difficult time maintaining the quality of Lionel products and frequently missed delivery dates to
retailers, injuring the reputation of the brand. When Kenner-Parker Toys, Inc., spun off from General Mills
in 1985, Lionel went with it as one of its divisions. That year Lionel moved its train production back to
Mt. Clemens. Lionel production under Fundimensions continued until 1986 when the name, rights and
facilities were sold to Richard Kughn, a Detriot based collector and real estate man, and a group of
investors.
After paying an estimated $25 million, Kughn created Lionel Trains Incorporated (LTI), an autonomous
train maker. Kughn, who took over as the company's chairman, was an avid model train collector and,
when he became interested in purchasing Lionel, already owned thousands of trains in a collection
whose worth was estimated at nearly $1 million. Within two years of the purchase, Lionel's sales
rose 150 percent, to $50 million a year, and market share reached 60 percent. Both the Collector
and Traditional lines of trains showed record sales that year. Initially there were numerous
excursions into semi-scale models and Standard Gauge reissues, but their production was reduced greatly
by 1991.
Between the 1980's and the end of the 1990's, the company had been sold a
couple of more times, though not before a resurgence of the 700E locomotive that had a surprisingly
long run of production, and the introduction of true wireless train control. Lionel floundered
financially as a holding company until bankruptcy around 1990.
The line was significantly re-vamped providing more and higher quality beginner level
equipment and an overall more balanced line up to $600 diesels. Quality and selection were also
greatly increased. LTI introduced new and innovative items with a vigor matched only by the Lionel Corp.
of the 1950's. They made substantial use of the latest electronics in such items as Railscope (a
locomotive introduced in 1988 with a miniature video camera in the nose), RailSounds (a micro-electronic sound
chip placed inside the engines in 1989 that held an exact sound recording from full-size trains), RailSounds II,
electronic e-units, and the TrainMaster wireless control system. Through a joint venture with Lionel called
Liontech, the rock singer Neil Young developed the TrainMaster in order to share his passion for
model railroading with his son Ben, a victim of cerebral palsy. Easier to use than a traditional
transformer, the hand-held controller uses on-board electronic processors to move the train via
electronic signal and incorporates digital sound to more closely reproduce such sounds as engines
churning or cars uncoupling.
Completely new product lines also expanded Lionel's offerings during the late 1980s and early 1990's.
Ready-to-run sets of trains with an 'O27' gauge, slightly smaller than the 'O' gauge, were first
offered in the late 1980's. A new line of trains that were the scale of real trains was introduced in 1987.
Roughly twice the size of the 'O' gauge trains, the Lionel Large Scale was made of weather resistant
plastic to allow their use indoors or out. In collaboration with the Smithsonian Institution, Lionel
created a collection of museum-quality 'O' gauge engines. An exact replica of the 1938 New York
Central Dreyfuss-Hudson locomotive, the first engine produced, was offered in a limited edition
run of only 500. Lionel sales in 1992 were $55 million.
In September 1995 Wellspring Associates LLC acquired LTI and the trademarks of the original
Lionel Corporation, previously leased by MPC and LTI. Their intentions included increased marketing
toward the general population rather than just the toy train market. Neil Young's interest in Lionel
expanded in 1995 when he joined with former Paramount Communications chairman Martin Davis to
purchase Lionel from Kughn. The purchase was friendly, with Kughn remaining as chairman emeritus
and retaining a minority share in the renamed Lionel L.L.C. Wellspring Associates L.L.C., an
investment firm started by Davis, held Davis's majority share. As part of the deal,
Lionel became the full owner of Liontech, the joint venture with Young.
In 2000, MTH, then known as Mike's Train House, sued Lionel after its South
Korean supplier stole some of MTH's train designs. In 2004, a Michigan jury awarded MTH $38.6 million
- a decision that forced Lionel to file for bankruptcy in November that year. But in late 2006,
a panel of judges from the 6th U.S. Circuit Court of Appeals overturned the verdict and ordered
a new trial.
Privately held Lionel, based in Chesterfield, Mich., is owned by the estate of former chairman of Paramount
Communications Inc., Martin Davis, and rock musician Neil Young. The Davis estate owns 80 percent of Lionel.
Young owns a 20 percent stake. The 107-year-old company filed for
bankruptcy on Nov. 15, 2004. Lionel LLC has yet to line up financing to emerge from Chapter 11 protection.
Lionel recently pegged its value upon exiting Chapter 11 at $100 million. Lionel recently reached a
tentative deal with rival MTH Electric Trains to settle their long-running, trade-secrets battle.
The 107-year-old toy company has already filed a reorganization plan with the bankruptcy court that
would pay its creditors in full. Judge Burton R. Lifland of the U.S. Bankruptcy Court in Manhattan
has set an end of March 2008 deadline for Lionel to exit Chapter 11. If Lionel fails to come up with
adequate financial backing, the company's assets could be liquidated by the court. In 2007, Lionel
had pretax earnings of $10.8 million on sales of $62.2 million.
Link to Lionel Web Site.
