For generations of little boys -- and their fathers -- it wasn't a merry Christmas without a toy train from Lionel under the tree. The nation's #1 model train manufacturer, Lionel LLC makes more than 300 lines of trains, steam and diesel locomotives, and accessories. The company's sales peaked in the mid-1950s and then declined as interest in toy trains has waned. Today, entry-level models and new collectors driven by nostalgia are fueling sales. The company has also been updating technology, releasing more sophisticated control systems and more authentic replicas. Founded in 1900 by Joshua Lionel Cowen, the train maker emerged from a two-and-a-half year stay under Chapter 11 bankruptcy protection in May 2008.
Lionel had filed for Chapter 11 in November 2004 to stay a $40.8 million judgment from a Michigan grand jury, which found the company guilty of misappropriating trade secrets from rival Mike's Train House Inc. Following its reorganization, Guggenheim Investment Management LLC owns about 48% of Lionel while Train Acquisition LLC owns about 28%. Senior management owns the rest.
In 2008, just in time for the holiday shopping season, Lionel released a new line in conjunction with New York's Metropolitan Transportation Authority (MTA). The models, a locomotive and three cars, are exact replicas of New York's Metro-North line, which ran from 1960 to the 1990s. The company's first subway cars made under a licensing agreement with MTA, with working doors and a real subway conductor announcing stops, are available at Transit Museum shops in select stations.
After years of less than stellar results, sales have picked up thanks in large part to Lionel's willingness to make high quality trains at lower prices. The strategy, plus selling at retailers like Toys 'R Us, has made it easier for beginning collectors to join the fun. The company still courts savvy collectors with expensive, intricate models and by maintaining relationships with hobby stores.
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