||This article needs additional citations for verification. (August 2012)|
|Industry||Toys and hobbies, Retail|
|Headquarters||New York, New York|
|Key people||Joshua Lionel Cowen (Co-founder and owner)
Roy Cohn (owner)
Lionel Corporation is an American toy manufacturer and retailer that has done business since 1901. 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. They published a television advertisement in the mid-1980s with a very well known and remembered jingle, "Lionel Kiddy City, turn that frown [clap, clap] upside down."
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.
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.
Lionel's first train, the Electric Express, was not intended for sale to consumers, but rather, as a storefront display. Delivered in 1901, it operated 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 2⅞ inches apart. In 1906, Lionel began offering a three-rail track that simplified wiring of reverse loops and accessories. Its outer rails were 2⅛ 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, which 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 operated 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.
Since 1901, Lionel had competition with Hornby and Bachmann since the late 1800s and early 1900s. Since 1947, it had competition with American Flyer trains.
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 round-head aircraft rivets, retained with 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. The deluxe kits included an electric AC motor with a worm drive and reduction gearset that 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 principal competition at the time, the Erector Set.
Outsells American Flyer
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 profitability and/or sales by cheaper manufacture (largely by replacing castings and folded sheet metal with unpainted injected—molded colored plastic) 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.
As part of this diversification, Lionel formed a relationship with the Porter Chemical Company, whose owner Harold M. Porter was a member of the Board of Directors of Lionel. Lionel began making a variety of scientifically oriented, hands-on educational toys, designated "Lionel-Porter." The product line, cataloged from 1961 to 1968, included Chemcraft chemistry sets, Microcraft microscope sets, Biocraft biology sets, and sets teaching about mineralogy, physics, geology, mathematics, and industrial science, along with a junior line of tool sets.
Decline and bankruptcy
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 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 die tooling 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", because the design and manufacture changed, sometimes for the worse, under Lionel's new owners.
In the early 1970s Lionel bought Morsan Tents from founder Mort Jarashaw. It was a small chain of sporting goods stores based in New Jersey, which became Lionel Morsan.
Bankruptcy and buyout
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 Play Town, 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 entered financial troubles during the early 1980s recession and filed for Chapter 11 bankruptcy in February 1982. After reducing to 55 stores, it emerged from bankruptcy in September 1985.
By 1991, the chain had regrown to 100 stores and was the fourth-largest toy retailer in the country, but it once again ran into trouble[clarification needed] due to a combination of factors. In 1989, 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 it attempted to expand too rapidly in a weakened economy. After a string of unprofitable quarters, it filed for Chapter 11 bankruptcy on June 14, 1991. In 1992, Lionel again tried 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.
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 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 the ihorse.com website.
The former Lionel factory at 28 Sager place, Irvington, NJ; and the Hillside, NJ factory are the front and back doors of the same building. The building that housed the last Lionel office, located at 26750 23 Mile Road, Chesterfield, MI, is currently for sale. The former Lionel assembly factory was located at 50625 Richard W. Blvd., Chesterfield—a short drive from the office building.
- David Lander "Lionel" American Heritage, Nov./Dec. 2006.
- Osterhoff, Robert J. "When the Lights Went out at Lionel, Classic Toy Trains, May 1999. Page 76.
- Corporate Snapshot
- LIONEL'S VERY FIRST CATALOG DISCOVERED!!
- Stephan, Elizabeth A. O'Brien's Collecting Toy Trains, 5th Ed., Krause Publications. Page 181. ISBN 0-87341-769-0
- The Rise and Fall and Rise Again of Lionel Trains
- Grams, John A. "Realism Comes to Lionel, Classic Toy Trains, March 1997. Page 72.
- Stephan, Elizabeth A. O'Brien's Collecting Toy Trains, 5th Ed., Krause Publications. Page 182. ISBN 0-87341-769-0
- Osterhoff, Robert J. "When the Lights Went out at Lionel," Classic Toy Trains, May 1999. Page 76.
- Price List of Lionel Stock Certificates
- Better life through chemistry, Classic Toy Trains Magazine
- Liebeck, Laura: "Deja vu all over again: Lionel re-visits Chapter 11", Discount Store News July 8, 1991
- "Liquidations leave Toy's R US, Kay-Bee toying alone", Discount Store News, July 5, 1993
- "Lionel Leisure 'branches out': toy retailer acquires part ownership of closeouter", Discount Store News, September 17, 1990
- Liebeck, Laura: "Child World is grounded: rescue by Lionel falters", Discount Store News, August 3, 1992
- "Lionel closing 27 stores in struggle for survival", Discount Store News, February 1, 1993
- One of the World's Largest and Most Prestigious Collecting Societies
- Factories of the LIONEL CORP