Lionel, 1979–present
In May 1967, Lionel Corporation announced it had purchased the American Flyer name and tooling even though it was teetering on the brink of financial failure itself. A May 29, 1967 story in The Wall Street Journal made light of the deal, stating, "Two of the best-known railroads in the nation are merging and the Interstate Commerce Commission couldn't care less". Former Lionel treasurer Robert A. Stein said Lionel did not initiate the deal; both companies had farmed out their accounts receivable departments to Arthur Heller & Co., who initiated the transaction. While various accounts published over the years valued the deal at $150,000, Stein's recollection was that Lionel simply liquidated $300,000-$400,000 worth of American Flyer inventory for Heller in exchange for the tooling, which, by some accounts, sat unused and neglected in a parking lot for some period of time. Lionel Corporation never manufactured American Flyer trains.
Within two years, Lionel Corp. was bankrupt itself and had sold its train lines to General Mills, including the unused American Flyer tooling. In 1979, General Mills' Lionel division started to reissue Flyer products under that name employing a mix of previously unused railroad heralds and traditional Gilbert American Flyer designs.
In 1984, General Mills sold the Lionel Co. to Kenner, a toy manufacturer. One year later, the company was sold to Richard Kughn, a Detroit toy train collector who made his fortune selling and developing real estate. For over a decade, Kughn moved both the Lionel and American Flyer brands forward, getting a shot of momentum from a resurgence in the toy train hobby in the early 1990s. In 1996, Kughn sold a majority interest to Wellspring Partners LLD, a Chicago-based national turnaround firm headed by Martin Davis. Kughn retained a small percentage, and rock star Neil Young, another toy train buff, also became a minor investor. Young's contributions include designing a sound system for trains (RailSounds) in 1992, as well as the Trainmaster Command Control (TMCC), a unique radio control system. The new company is known as Lionel, LLC.
The American Flyer brand name survives today under the guidance of Lionel, LLC, although Lionel's advertising and marketing emphasis seems to remain locked on promoting its own O and O27 gauge product lines. True American Flyer aficionados claim this narrow focus is a conflict of interest and prevents the growth of S Gauge among new train operators. Most of the American Flyer-branded product sold by Lionel, LLC today is reissues of 1950s designs utilizing refurbished old Gilbert tooling, decorated in traditional road names and paint schemes used by Gilbert, as well as an influx of some of today's modern railroad heralds. One complaint by longtime American Flyer devotees is that Lionel isn't creating Flyer products that appeal to the toy train masses—rather, focusing instead on a small market of Flyer collectors.
However, winds of change are blowing. Each year since 2002 Lionel has increased the number of American Flyer offerings, a sign the demand for 3/16" S gauge is growing. In late 2004, Lionel finally debuted a new steam locomotive—a highly detailed, 2-8-2 Mikado in multiple road names. Utilizing all new tooling and issued under the American Flyer name, the Mike is the first original American Flyer steam locomotive design since the late 1950s. Complete with TMCC (Lionel's proprietary wireless remote control technology) and a superb sound chip/system (TrainSounds), the Mikados proved to be a hot seller and their success has led to future similar issues. In late 2006, Lionel began delivering an updated remake of its largest steam locomotive, the famous 4-8-4 Northern, as well as a gray Union Pacific Northern with smoke deflectors (elephant ears); both new versions have digital sounds. Due in late 2006 or early 2007 is a new high-detail Pacific (4-6-2) with both TMCC capability and RailSounds. Additionally, Lionel has just released, in 2006, the first newly tooled passenger fleet. These heavyweight style cars are neither a refashioning of older Flyer designs nor a repurposing of Lionel 027 rolling stock (as some earlier Lionel/Flyer freight cars had been.) Also in 2007 Lionel started to sell American Flyer track, the popular 19" radius curve remaining unavailable to this day. Due late 2008 is an American Flyer Big Boy with TMCC and Railsounds.
The license to manufacture the track had been held by Maury Klein, whose K-Line brand of 0 gauge trains competed against Lionel in the toy train renaissance of the 1980s and 90's and into the 21st. century. When K-Line fell upon hard times in recent years, it was purchased by Lionel LLC, who then got the Flyer track as well as the tooling for two 0 gauge locomotive designs; the UP Big-Boy and the C&O Allegheny. Both of these engines had been tooled to 1/60th. scale so that 0 gauge operators with small layouts and narrow radius curves would be able to enjoy what would otherwise be behemoth engines. Their closeness to 1/64th. scale, however, made these engines naturals for development into the American Flyer Line, particularly since Lionel already possesses tooling for these locomotives in their 0 scale product lines. After considerable delay the company finally delivered the Big Boy in December 2009. No offering has yet been made as to the Allegheny, though collectors and aficionados hold out hope that a sell-out success with the current offering will stimulate the company to proceed further.
Lionel's investment in new tooling is being interpreted among many S-scalers as a sign of commitment by the manufacturer to their market segment, as well as the brand, the gauge, and the hobby in itself.
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