Lionel, LLC
Encyclopedia
Lionel, LLC is a designer and importer of toy train
s and model railroads, based in Chesterfield Township, Michigan
. Its roots lie in the 1969 purchase of the Lionel product line by cereal conglomerate General Mills
.
Although Lionel, LLC now owns all of the trademarks and most of the product rights associated with Lionel Corporation, the original producer of Lionel trains founded in 1900, there is no direct connection between the two companies.
According to its reorganization papers filed as part of its bankruptcy plan on May 21, 2007, about 95 percent of the company's sales come from O gauge trains. The plan estimated that about $70 million worth of O gauge trains are sold each year, and that Lionel accounts for about 60% of that market, making it the largest manufacturer of O gauge trains.
Due to General Mills' cost-cutting measures, production of Lionel-branded toy and model trains returned to profitability, but sometimes at the expense of quality. Detail was often sacrificed, and most of the remaining metal parts were replaced with molded plastic. A number of MPC's changes to the product line endure to the present day, the most noticeable being the use of needlepoint axles and trucks made of Delrin, two changes made to reduce friction
and allow longer trains. Also starting in 1973, MPC experimented with a line of cars it called "Standard O," which were scaled to 1:48 (most postwar Lionel and MPC production was undersize for O scale
). The experiment's failure is generally blamed on MPC's lack of a 1:48 locomotive and caboose to go with the cars; when it was repeated again in the 1980s with locomotives of appropriate size, it proved more successful.
An internal reorganization after 1973 caused Lionel to become part of General Mills' Fundimensions group. Although Lionel's tenure with MPC was relatively short, "MPC" is the most commonly used term for the 1970-1985 era.
In 1979, General Mills resurrected the American Flyer
brand and product line, which Lionel Corporation had purchased from its bankrupt competitor (The A. C. Gilbert Company
of New Haven, Connecticut) several months prior to its own bankruptcy in 1967. American Flyer products by Gilbert made after World War II are scaled roughly to a 1:64 proportion and are known as S gauge; their most distinctive feature, however, is that they operate on two-rail track as opposed to Lionel's three-rail trackage system.
With so many years of absence from the market, Gilbert American Flyer S gauge trains were no longer considered a direct competitor to Lionel's 1:48 proportion O gauge trains. To this day, Lionel markets American Flyer S gauge in limited quantities as collectibles.
The year 1982 brought General Mills' ill-fated move of train production from the United States to Mexico
. Some Lionel fans were angry simply because the trains had been made in the United States for more than 80 years, while others criticized the quality of the Mexican-produced trains. Lionel production returned to the United States by 1984. During this time, corporate offices were retained at the company's Mount Clemens (later, Chesterfield), Michigan, location.
When General Mills spun off its Kenner-Parker
division in 1985, Lionel became part of Kenner-Parker. Lionel was sold again in 1986, this time to toy-train collector / real estate developer Richard P. Kughn of Detroit, Michigan
and was known as Lionel Trains Inc (LTI).
, an avid model railroader, created Liontech, chartered to develop exclusive new model train control and sound systems. Liontech's RailSounds II debuted in 1994. This all-new digital system captured a real-life locomotive's actual sounds, and propelled Lionel to the forefront of model train technology.
Also debuting in 1994 was the brainchild of Neil Young, Lionel's Trainmaster Command Control
, a technology similar to Digital Command Control
which permits, among other things, the operation of Lionel trains by remote control
. Richard Kughn sold Lionel in 1995.
(a longtime fan of model trains and of this brand) and the holding company Wellspring Capital Management
, which was headed by former Paramount Communications chairman Martin Davis (he had left the board of Viacom
, which bought Paramount the previous year). The new company became known as Lionel LLC. The company continued marketing reproductions of its vintage equipment, and the trend towards producing new equipment that was ever-more-detailed (with a correspondingly higher price) continued. Neil Young now had a 20% stake in the company.
In order to proliferate Trainmaster Command Control as a standard, Lionel has licensed it to several of its competitors, including K-Line
. Lionel, LLC continued to manufacture and market trains and accessories in O scale under the Lionel brand and S gauge under the American Flyer brand. While most of the American Flyer product comprises re-issues using old Gilbert tooling from the 1950s, the O scale equipment is a combination of new designs and reissues. Lionel also ventured into HO scale
at times during its history, with limited success.
In 2001, Lionel closed its last manufacturing plant in the United States, outsourcing production to Korea
and China
. While this move proved unpopular with some longtime fans, the backlash was minor in comparison to the failed move of production to Mexico in the 1980s. The company also licensed the Lionel name to numerous third parties, who have marketed various Lionel-branded products since 1995.
The 2004 Christmas
movie Polar Express, based on the children's book of the same name, provided Lionel with its first hit in years. Lionel produced a train set based on the movie, and stronger-than-anticipated demand caused highly publicized shortages. Various news stories told of a reporter's quest to locate a set, and some dealers marked the prices up above the suggested retail price of $229. Sets turned up on eBay
with buy-it-now prices of $449 as Lionel ordered an additional production run but said it would not be able to deliver the additional sets until March of the following year. Although many criticized Lionel for not producing more sets, Lionel's management called the set a great success.
In 2006, the Lionel electric train was inducted into the National Toy Hall of Fame
, along with the Easy Bake Oven. It was the first time an electric toy had ever been inducted. That same year, Lionel made a bigger push to sell its train sets outside of hobby shops, selling them in stores such as FAO Schwarz, Macy's
, and Target
. By November 2006, the company had turned a $760,000 profit on sales of $55 million.
This era was marked by legal troubles. In April 2000, competitor and former partner MTH Electric Trains
filed a trade secret
misappropriation lawsuit against Lionel, LLC, saying that one of Lionel's subcontractors had acquired plans for an MTH locomotive design and used them to design locomotives for Lionel. Additionally, on May 27, 2004, Union Pacific Railroad
sued Athearn
and Lionel for trademark
infringement because both companies put the names and logos of UP, as well as the names and logos of various fallen flag
railroads UP had acquired over the years, on their model railroad products without a license. While Athearn quickly settled and acquired a license, Lionel initially resisted, arguing that it and its predecessor companies had been using the logos for more than 50 years and had been encouraged or even paid to do so. On September 13, 2006, Lionel and UP settled the suit for $640,000 plus a royalty on future sales.
The misappropriation lawsuit by MTH eventually went to trial, and on June 7, 2004, a jury in Detroit, Michigan
found Lionel liable and awarded MTH $40,775,745. On November 1, 2004, a federal judge upheld the jury's decision. Lionel announced it would appeal, and two weeks later filed for bankruptcy, citing the judgment as the main reason. On December 14, 2006, the judgment was overturned on appeal, citing legal mistakes in the jury trial, and a new trial ordered.
In September 2004, the troubled company dismissed its CEO, Bill Bracy, and replaced him with Jerry Calabrese, a former Marvel Comics
and NASCAR
executive. Along with Bracy, another 17 high-level employees were also dismissed.
In July 2005, Lionel sued competitor K-Line for theft of trade secrets. The two companies settled out of court but the settlement quickly fell apart, leading to K-Line declaring bankruptcy and selling its assets to Sanda Kan, a Chinese subcontractor who did manufacturing for both K-Line and Lionel. In January 2006, Sanda Kan licensed the K-Line name and intellectual property to Lionel.
On March 27, 2008, a bankruptcy judge approved Lionel's reorganization plan, including a settlement with MTH. Although the specifics were to remain sealed, the Associated Press reported that Lionel settled with MTH for $12 million.
A move from Michigan to Ohio in the summer of 2009 affected operations, prevented replacement parts from being shipped until at least the end of August.
Subsequently, on March 27, 2008 Judge Burton R. Lifland, of the U.S. Bankruptcy Court in New York, approved Lionel LLC's Chapter 11 reorganization plan, clearing the way for the company to exit bankruptcy. According to Lionel Chief Executive Jerry Calabrese, the plan called for the company to pay all its creditors in full with interest, whilst the company itself would also obtain up to $40 million in loans to fund its exit from Chapter 11, pay off its creditors and fund its working capital
needs in the future.
In regard to MTH lawsuit, recent filings revealed Lionel agreed to pay MTH $12 million in cash to settle the lawsuit and a separate spat involving patented smoke-puffing technology. Calabrese and MTH lawyer Alec Ostrow declined to comment on the settlement.
Lionel's Chapter 11 plan also called for private-equity firm Guggenheim Partners
to contribute $37.1 million to the reorganized Lionel company, which consequently would now own 48.6 percent of the new Lionel. Similarly, the plan also called for the estate of the late Martin Davis
(former chairman of Paramount Communications Inc.) to provide $21.9 million to Lionel, and the Davis estate would now have a 28.6 percent share in the reorganized company. Guggenheim Partners
's and the Davis estate's funding totalled $59 million for the reorganization plan; they would also loan Lionel an additional $10 million in second-lien debt. As a result, Calabrese expected the company to be out of bankruptcy "within a week".
Following the reorganization plan, Neil Young
was no longer a minority shareholder in the Lionel company; however, Calabrese insisted that the company wanted Young to remain involved, claiming that Neil would have an "ongoing role in the company", but that this role would be "up to [Neil]". The pair had organized a meeting on March 28, 2008, although any formal findings from this meeting are yet to be announced. As of May 1, Lionel was fully out of bankruptcy.
While the company's website identifies it as Lionel, LLC, its press releases refer to it as Lionel Electric Trains, headquartered in New York, NY.
The MPC era is often derided, especially by fans of recent-production Lionel products that have better scale fidelity than the majority of MPC production and by fans of Lionel Corporation's postwar era. These critics often call MPC an acronym for "Mostly Plastic Crap," due to the flimsy and low quality plastic used at that time. MPC has a small following due to the quality of the graphics, variety of roadnames produced, and play value. Others are attracted to MPC because of its low cost and the ease of finding MPC-produced train sets and accessories, often barely used, in its original packaging.
Toy train
A toy train is a toy that represents a train. It is distinguished from a model train by an emphasis on low cost and durability, rather than scale modeling. A toy train can be as simple as a pull toy that does not even run on track, or it might be operated by clockwork or a battery...
s and model railroads, based in Chesterfield Township, Michigan
Chesterfield Township, Michigan
Chesterfield Charter Township is a charter township of Macomb County in the U.S. state of Michigan. As of the 2000 census, the township population was 37,405. The 2008 census estimate places the population at 44,612. The township was organized in 1842, formed out of a portion of Macomb Township...
. Its roots lie in the 1969 purchase of the Lionel product line by cereal conglomerate General Mills
General Mills
General Mills, Inc. is an American Fortune 500 corporation, primarily concerned with food products, which is headquartered in Golden Valley, Minnesota, a suburb of Minneapolis. The company markets many well-known brands, such as Betty Crocker, Yoplait, Colombo, Totinos, Jeno's, Pillsbury, Green...
.
Although Lionel, LLC now owns all of the trademarks and most of the product rights associated with Lionel Corporation, the original producer of Lionel trains founded in 1900, there is no direct connection between the two companies.
According to its reorganization papers filed as part of its bankruptcy plan on May 21, 2007, about 95 percent of the company's sales come from O gauge trains. The plan estimated that about $70 million worth of O gauge trains are sold each year, and that Lionel accounts for about 60% of that market, making it the largest manufacturer of O gauge trains.
The MPC/General Mills era (1969-1986)
The bankrupt Lionel Corporation sold the tooling for its then-current product line and licensed the Lionel name to General Mills in 1969, who then operated Lionel as a division of its subsidiary Model Products Corporation. General Mills did not buy the company, however. The Lionel Corporation became a holding company and invested in a number of ventures, including what would eventually become an East Coast chain of toy stores known as "Lionel Leisure World."Due to General Mills' cost-cutting measures, production of Lionel-branded toy and model trains returned to profitability, but sometimes at the expense of quality. Detail was often sacrificed, and most of the remaining metal parts were replaced with molded plastic. A number of MPC's changes to the product line endure to the present day, the most noticeable being the use of needlepoint axles and trucks made of Delrin, two changes made to reduce friction
Friction
Friction is the force resisting the relative motion of solid surfaces, fluid layers, and/or material elements sliding against each other. There are several types of friction:...
and allow longer trains. Also starting in 1973, MPC experimented with a line of cars it called "Standard O," which were scaled to 1:48 (most postwar Lionel and MPC production was undersize for O scale
O scale
O scale is a scale commonly used for toy trains and model railroading. Originally introduced by German toy manufacturer Märklin around 1900, by the 1930s three-rail alternating current O gauge was the most common model railroad scale in the United States and remained so until the early 1960s...
). The experiment's failure is generally blamed on MPC's lack of a 1:48 locomotive and caboose to go with the cars; when it was repeated again in the 1980s with locomotives of appropriate size, it proved more successful.
An internal reorganization after 1973 caused Lionel to become part of General Mills' Fundimensions group. Although Lionel's tenure with MPC was relatively short, "MPC" is the most commonly used term for the 1970-1985 era.
In 1979, General Mills resurrected the American Flyer
American Flyer
American Flyer was a popular brand of toy train and model railroad in the United States in the middle part of the 20th century.- The Chicago era, 1907–1938 :...
brand and product line, which Lionel Corporation had purchased from its bankrupt competitor (The A. C. Gilbert Company
A. C. Gilbert Company
The A. C. Gilbert Company was an American toy company, once one of the largest toy companies in the world. It is best known for introducing the Erector Set to the marketplace....
of New Haven, Connecticut) several months prior to its own bankruptcy in 1967. American Flyer products by Gilbert made after World War II are scaled roughly to a 1:64 proportion and are known as S gauge; their most distinctive feature, however, is that they operate on two-rail track as opposed to Lionel's three-rail trackage system.
With so many years of absence from the market, Gilbert American Flyer S gauge trains were no longer considered a direct competitor to Lionel's 1:48 proportion O gauge trains. To this day, Lionel markets American Flyer S gauge in limited quantities as collectibles.
The year 1982 brought General Mills' ill-fated move of train production from the United States to Mexico
Mexico
The United Mexican States , commonly known as Mexico , is a federal constitutional republic in North America. It is bordered on the north by the United States; on the south and west by the Pacific Ocean; on the southeast by Guatemala, Belize, and the Caribbean Sea; and on the east by the Gulf of...
. Some Lionel fans were angry simply because the trains had been made in the United States for more than 80 years, while others criticized the quality of the Mexican-produced trains. Lionel production returned to the United States by 1984. During this time, corporate offices were retained at the company's Mount Clemens (later, Chesterfield), Michigan, location.
When General Mills spun off its Kenner-Parker
Kenner
Kenner Products was a toy company founded in 1947 by three brothers, Albert, Phillip, and Joseph L. Steiner, in Cincinnati, Ohio, United States, and was named after the street where the original corporate offices were located, which is just north of Cincinnati's Union Terminal.Kenner introduced its...
division in 1985, Lionel became part of Kenner-Parker. Lionel was sold again in 1986, this time to toy-train collector / real estate developer Richard P. Kughn of Detroit, Michigan
Detroit, Michigan
Detroit is the major city among the primary cultural, financial, and transportation centers in the Metro Detroit area, a region of 5.2 million people. As the seat of Wayne County, the city of Detroit is the largest city in the U.S. state of Michigan and serves as a major port on the Detroit River...
and was known as Lionel Trains Inc (LTI).
Lionel Trains Inc/Richard Kughn era (1986-1995)
In 1986, Detroit-based real estate developer (and railroad enthusiast) Richard Kughn bought the brand and established Lionel Trains Inc. In 1989, Lionel rolled out RailSounds, heralding an era of high-tech audio realism, and trumpeting better things yet to come. In 1992 Richard Kughn and musician Neil YoungNeil Young
Neil Percival Young, OC, OM is a Canadian singer-songwriter who is widely regarded as one of the most influential musicians of his generation...
, an avid model railroader, created Liontech, chartered to develop exclusive new model train control and sound systems. Liontech's RailSounds II debuted in 1994. This all-new digital system captured a real-life locomotive's actual sounds, and propelled Lionel to the forefront of model train technology.
Also debuting in 1994 was the brainchild of Neil Young, Lionel's Trainmaster Command Control
Trainmaster Command Control
Trainmaster Command is Lionel's electronic control system for O scale 3-rail model trains and toy trains. Conceptually it is similar to Digital Command Control , the industry's open standard used by HO scale and other 2-rail DC trains...
, a technology similar to Digital Command Control
Digital Command Control
Digital Command Control is a standard for a system to operate model railways digitally. When equipped with Digital Command Control, locomotives on the same electrical section of track can be independently controlled....
which permits, among other things, the operation of Lionel trains by remote control
Remote control
A remote control is a component of an electronics device, most commonly a television set, used for operating the television device wirelessly from a short line-of-sight distance.The remote control is usually contracted to remote...
. Richard Kughn sold Lionel in 1995.
The Wellspring era (1995-current)
Lionel changed hands again in 1995, when Kughn sold controlling interest in the company to an investment group that included Neil YoungNeil Young
Neil Percival Young, OC, OM is a Canadian singer-songwriter who is widely regarded as one of the most influential musicians of his generation...
(a longtime fan of model trains and of this brand) and the holding company Wellspring Capital Management
Wellspring Capital Management
Wellspring Capital Management is a private equity firm focused on leveraged buyout investments in middle-market companies across a range of industries....
, which was headed by former Paramount Communications chairman Martin Davis (he had left the board of Viacom
Viacom
Viacom Inc. , short for "Video & Audio Communications", is an American media conglomerate with interests primarily in, but not limited to, cinema and cable television...
, which bought Paramount the previous year). The new company became known as Lionel LLC. The company continued marketing reproductions of its vintage equipment, and the trend towards producing new equipment that was ever-more-detailed (with a correspondingly higher price) continued. Neil Young now had a 20% stake in the company.
In order to proliferate Trainmaster Command Control as a standard, Lionel has licensed it to several of its competitors, including K-Line
K-Line
K-Line Electric Trains is a brand name of O gauge and S gauge model railway locomotives, rolling stock, and buildings. Formerly the brand name under which Chapel Hill, North Carolina-based MDK Inc. sold its products, K-Line was then acquired by Sanda Kan, a Chinese toy manufacturer that formerly...
. Lionel, LLC continued to manufacture and market trains and accessories in O scale under the Lionel brand and S gauge under the American Flyer brand. While most of the American Flyer product comprises re-issues using old Gilbert tooling from the 1950s, the O scale equipment is a combination of new designs and reissues. Lionel also ventured into HO scale
HO scale
HO or H0 is the most popular scale of model railway in the world.According to the NMRA standard S-1.2 predominantly used in North America, in HO scale, represents 1 real foot ; this ratio works out to about 1:87.1. According to the MOROP standard NEM 010 predominantly used in Europe, the scale is...
at times during its history, with limited success.
In 2001, Lionel closed its last manufacturing plant in the United States, outsourcing production to Korea
Korea
Korea ) is an East Asian geographic region that is currently divided into two separate sovereign states — North Korea and South Korea. Located on the Korean Peninsula, Korea is bordered by the People's Republic of China to the northwest, Russia to the northeast, and is separated from Japan to the...
and China
China
Chinese civilization may refer to:* China for more general discussion of the country.* Chinese culture* Greater China, the transnational community of ethnic Chinese.* History of China* Sinosphere, the area historically affected by Chinese culture...
. While this move proved unpopular with some longtime fans, the backlash was minor in comparison to the failed move of production to Mexico in the 1980s. The company also licensed the Lionel name to numerous third parties, who have marketed various Lionel-branded products since 1995.
The 2004 Christmas
Christmas
Christmas or Christmas Day is an annual holiday generally celebrated on December 25 by billions of people around the world. It is a Christian feast that commemorates the birth of Jesus Christ, liturgically closing the Advent season and initiating the season of Christmastide, which lasts twelve days...
movie Polar Express, based on the children's book of the same name, provided Lionel with its first hit in years. Lionel produced a train set based on the movie, and stronger-than-anticipated demand caused highly publicized shortages. Various news stories told of a reporter's quest to locate a set, and some dealers marked the prices up above the suggested retail price of $229. Sets turned up on eBay
EBay
eBay Inc. is an American internet consumer-to-consumer corporation that manages eBay.com, an online auction and shopping website in which people and businesses buy and sell a broad variety of goods and services worldwide...
with buy-it-now prices of $449 as Lionel ordered an additional production run but said it would not be able to deliver the additional sets until March of the following year. Although many criticized Lionel for not producing more sets, Lionel's management called the set a great success.
In 2006, the Lionel electric train was inducted into the National Toy Hall of Fame
National Toy Hall of Fame
The National Toy Hall of Fame is an American hall of fame that recognizes the contributions of toys and games that have sustained their popularity for many years...
, along with the Easy Bake Oven. It was the first time an electric toy had ever been inducted. That same year, Lionel made a bigger push to sell its train sets outside of hobby shops, selling them in stores such as FAO Schwarz, Macy's
Macy's
Macy's is a U.S. chain of mid-to-high range department stores. In addition to its flagship Herald Square location in New York City, the company operates over 800 stores in the United States...
, and Target
Target Corporation
Target Corporation, doing business as Target, is an American retailing company headquartered in Minneapolis, Minnesota. It is the second-largest discount retailer in the United States, behind Walmart. The company is ranked at number 33 on the Fortune 500 and is a component of the Standard & Poor's...
. By November 2006, the company had turned a $760,000 profit on sales of $55 million.
This era was marked by legal troubles. In April 2000, competitor and former partner MTH Electric Trains
MTH Electric Trains
MTH Electric Trains, formerly Mike's Train House, is an American toy train and model railroad designer, importer, and manufacturer, based in Columbia, Maryland...
filed a trade secret
Trade secret
A trade secret is a formula, practice, process, design, instrument, pattern, or compilation of information which is not generally known or reasonably ascertainable, by which a business can obtain an economic advantage over competitors or customers...
misappropriation lawsuit against Lionel, LLC, saying that one of Lionel's subcontractors had acquired plans for an MTH locomotive design and used them to design locomotives for Lionel. Additionally, on May 27, 2004, Union Pacific Railroad
Union Pacific Railroad
The Union Pacific Railroad , headquartered in Omaha, Nebraska, is the largest railroad network in the United States. James R. Young is president, CEO and Chairman....
sued Athearn
Athearn
Athearn is a United States manufacturer of model railroad equipment, produced and distributed by American hobby manufacturer Horizon Hobby, Inc. of Champaign, Illinois, USA.-History:...
and Lionel for trademark
Trademark
A trademark, trade mark, or trade-mark is a distinctive sign or indicator used by an individual, business organization, or other legal entity to identify that the products or services to consumers with which the trademark appears originate from a unique source, and to distinguish its products or...
infringement because both companies put the names and logos of UP, as well as the names and logos of various fallen flag
Fallen flag
A fallen flag is a North American railroader and railfan term referring to railroad company no longer in existence due to bankruptcy or merger.-Background:...
railroads UP had acquired over the years, on their model railroad products without a license. While Athearn quickly settled and acquired a license, Lionel initially resisted, arguing that it and its predecessor companies had been using the logos for more than 50 years and had been encouraged or even paid to do so. On September 13, 2006, Lionel and UP settled the suit for $640,000 plus a royalty on future sales.
The misappropriation lawsuit by MTH eventually went to trial, and on June 7, 2004, a jury in Detroit, Michigan
Detroit, Michigan
Detroit is the major city among the primary cultural, financial, and transportation centers in the Metro Detroit area, a region of 5.2 million people. As the seat of Wayne County, the city of Detroit is the largest city in the U.S. state of Michigan and serves as a major port on the Detroit River...
found Lionel liable and awarded MTH $40,775,745. On November 1, 2004, a federal judge upheld the jury's decision. Lionel announced it would appeal, and two weeks later filed for bankruptcy, citing the judgment as the main reason. On December 14, 2006, the judgment was overturned on appeal, citing legal mistakes in the jury trial, and a new trial ordered.
In September 2004, the troubled company dismissed its CEO, Bill Bracy, and replaced him with Jerry Calabrese, a former Marvel Comics
Marvel Comics
Marvel Worldwide, Inc., commonly referred to as Marvel Comics and formerly Marvel Publishing, Inc. and Marvel Comics Group, is an American company that publishes comic books and related media...
and NASCAR
NASCAR
The National Association for Stock Car Auto Racing is a family-owned and -operated business venture that sanctions and governs multiple auto racing sports events. It was founded by Bill France Sr. in 1947–48. As of 2009, the CEO for the company is Brian France, grandson of the late Bill France Sr...
executive. Along with Bracy, another 17 high-level employees were also dismissed.
In July 2005, Lionel sued competitor K-Line for theft of trade secrets. The two companies settled out of court but the settlement quickly fell apart, leading to K-Line declaring bankruptcy and selling its assets to Sanda Kan, a Chinese subcontractor who did manufacturing for both K-Line and Lionel. In January 2006, Sanda Kan licensed the K-Line name and intellectual property to Lionel.
On March 27, 2008, a bankruptcy judge approved Lionel's reorganization plan, including a settlement with MTH. Although the specifics were to remain sealed, the Associated Press reported that Lionel settled with MTH for $12 million.
A move from Michigan to Ohio in the summer of 2009 affected operations, prevented replacement parts from being shipped until at least the end of August.
Bankruptcy
On November 15, 2004, Lionel, LLC filed for Chapter 11 bankruptcy protection, citing the $40 million-plus judgment in the MTH lawsuit as the primary factor. In the filing, it listed $55 million in debt and $42 million in assets. The largest secured creditor was PNC Financial Services Corp., owed $31 million. The MTH judgment was not included in the $55 million figure. On July 26, 2006, Lionel's bankruptcy judge ordered that Lionel submit a plan for emerging from bankruptcy within 75 days of the appeals court's verdict on the MTH lawsuit. On December 14, 2006, a federal appeals court determined that the company was entitled to a new trial, and that their reorganised plan should be filed by March 1, 2007.Subsequently, on March 27, 2008 Judge Burton R. Lifland, of the U.S. Bankruptcy Court in New York, approved Lionel LLC's Chapter 11 reorganization plan, clearing the way for the company to exit bankruptcy. According to Lionel Chief Executive Jerry Calabrese, the plan called for the company to pay all its creditors in full with interest, whilst the company itself would also obtain up to $40 million in loans to fund its exit from Chapter 11, pay off its creditors and fund its working capital
Capital (economics)
In economics, capital, capital goods, or real capital refers to already-produced durable goods used in production of goods or services. The capital goods are not significantly consumed, though they may depreciate in the production process...
needs in the future.
In regard to MTH lawsuit, recent filings revealed Lionel agreed to pay MTH $12 million in cash to settle the lawsuit and a separate spat involving patented smoke-puffing technology. Calabrese and MTH lawyer Alec Ostrow declined to comment on the settlement.
Lionel's Chapter 11 plan also called for private-equity firm Guggenheim Partners
Guggenheim Partners
Guggenheim Partners, LLC is a privately held, diversified financial services firm that engages in investment banking, capital markets services, investment management, and investment advisory. The firm is headquartered in Chicago and New York with over 1,400 professionals located in 20 cities...
to contribute $37.1 million to the reorganized Lionel company, which consequently would now own 48.6 percent of the new Lionel. Similarly, the plan also called for the estate of the late Martin Davis
Martin Davis
Martin David Davis, is an American mathematician, known for his work on Hilbert's tenth problem . He received his Ph.D. from Princeton University in 1950, where his adviser was Alonzo Church . He is Professor Emeritus at New York University. He is the co-inventor of the Davis-Putnam and the DPLL...
(former chairman of Paramount Communications Inc.) to provide $21.9 million to Lionel, and the Davis estate would now have a 28.6 percent share in the reorganized company. Guggenheim Partners
Guggenheim Partners
Guggenheim Partners, LLC is a privately held, diversified financial services firm that engages in investment banking, capital markets services, investment management, and investment advisory. The firm is headquartered in Chicago and New York with over 1,400 professionals located in 20 cities...
's and the Davis estate's funding totalled $59 million for the reorganization plan; they would also loan Lionel an additional $10 million in second-lien debt. As a result, Calabrese expected the company to be out of bankruptcy "within a week".
Following the reorganization plan, Neil Young
Neil Young
Neil Percival Young, OC, OM is a Canadian singer-songwriter who is widely regarded as one of the most influential musicians of his generation...
was no longer a minority shareholder in the Lionel company; however, Calabrese insisted that the company wanted Young to remain involved, claiming that Neil would have an "ongoing role in the company", but that this role would be "up to [Neil]". The pair had organized a meeting on March 28, 2008, although any formal findings from this meeting are yet to be announced. As of May 1, Lionel was fully out of bankruptcy.
While the company's website identifies it as Lionel, LLC, its press releases refer to it as Lionel Electric Trains, headquartered in New York, NY.
Collector value
The collector value of "modern era" Lionel trains has been limited compared to the trains produced by Lionel Corporation prior to 1969. Although, it is currently getting better, there has been only limited collector interest in trains produced by this succession of entities, from MPC through to Lionel Trains Inc. and Lionel, LLC, especially if the items are in less than mint condition and do not include the original box. In addition, Lionel's reissues have somewhat decreased the collector value of even vintage Lionel and American Flyer equipment.The MPC era is often derided, especially by fans of recent-production Lionel products that have better scale fidelity than the majority of MPC production and by fans of Lionel Corporation's postwar era. These critics often call MPC an acronym for "Mostly Plastic Crap," due to the flimsy and low quality plastic used at that time. MPC has a small following due to the quality of the graphics, variety of roadnames produced, and play value. Others are attracted to MPC because of its low cost and the ease of finding MPC-produced train sets and accessories, often barely used, in its original packaging.