Lionel Model Trains

Lionel didn’t intend to sell model trains. They did intend to use model trains to lure customers into their stores, banking on the popularity of trains in 1901. The customers began to increasingly ask about buying the brass trains instead. Lionel decided there was a market to meet, and began construction.

The earliest Lionel trains ran on a 2 7/8th gauge track, but in 1906 the company switched to a 2 1/8th inch gauge which did not match any of the commonly used gauges in model railroading. It is not clear if this was due to an error or deliberate plan, but Lionel trademarked this as Standard Gauge. Other US companies began to make this gauge, calling it Wide Gauge. Later, in 1915, Lionel followed most US manufacturers into the O Gauge for budget trains.

By the 20s Lionel was the market leader, but was hit hard by the depression in the 30s. The company flirted with bankruptcy, but eventually opened a low cost subsidiary to compete with companies trying to beat Lionel’s prices. The Standard Gauge was a casualty of the rough times, with the company moving entirely to O and OO gauge. During WWII, Lionel ceased work on toys in favor of war related construction.

1945 saw the return of the toy train. The new trains were more realistic than the older models, and were exclusively available in the O gauge. A new feature was added: Smoke. A tablet dropped into the smokestack created smoke to increase verisimilitude. Until 1956 the company dominated the toy train market, but the market changed dramatically at that point. Toy cars began to eclipse the traditional trains, and those enthusiasts who were left preferred HO gauge. Lionel attempted to branch into those markets, but the company was sold in 1959. In 1967 the company filed for bankruptcy, and their brand and rights were sold in 1969 to General Mills, which created a new company, Lionel LLC, to continue the tradition. Lionel Corporation still exists, but is now a holding company.

Lionel LLC was able to return the line to profitability, but at the cost of quality and detail. Metal parts became molded plastic. Some changes were improvements, such as a redesign of the trucks, the wheel assemblies under the cars, to allow longer trains. Others were more controversial, such as a short duration move to manufacture the trains in Mexico. The company has been sold and resold, has moved in new directions and tried to return to its roots.

In 2006, the Lionel electric train was one of the first two toys inducted into the National Toy Hall of Fame. The movie “Polar Express” also proved a success for Lionel. Despite these, the company was forced into bankruptcy by lawsuit. Union Pacific Railroad sued over unlicensed use of logos and markings used by Union Pacific and defunct railroads, which Union Pacific bought out. This was settled for $640,000 and royalties. Another lawsuit was an allegation by MTH Electric Trains that a subcontractor had stolen the designs for an MTH train and used the design for Lionel. Lionel was found liable for more than $40 million. The judgment was overturned on appeal, and a new trial is scheduled for March 2007.

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