Remembered for the S gauge trains of the 1950s that it made as a division of the A. C. Gilbert Company, American Flyer was initially an independent company whose origins date back nearly a half century earlier.
Chicago, Illinois-based toymaker William Frederick Hafner developed a clockwork motor for toy cars in 1901 while working for a company called Toy Auto Company. According to the recollections of William Hafner's son, John, he had developed a clockwork train running on O gauge track by 1905.
Initially American Flyer—aka "Chicago Flyer" -- was something of a budget brand, undercutting Ives, which was (at the time) the market leader.
In 1918, American Flyer introduced its first electric train, an O gauge model with an electric motor in place of the clockwork motor.
In 1925, American Flyer began offering Wide Gauge electric trains at a premium price, attempting to compete with the Lionel Corporation at the high end of the market. Like most of its competition, American Flyer did well during the 1920s, selling more than half a million trains in its best years, but suffered through the Great Depression, during which the focus shifted back to more economical O gauge trains.
In 1928, American Flyer's competitor Ives went bankrupt. American Flyer and Lionel jointly purchased and operated Ives until 1930, when American Flyer sold its share to Lionel. During this time of joint operation, American Flyer supplied Ives with the car bodies and other parts.
During the early part of the Depression, American Flyer struggled against increased competition, especially at the low end of the market. In 1931, Flyer announced it would not produce an electric train set for less than $4 like its competition had. However, within three months, it relented and released a train without transformer that sold for $3.95, and in 1932, it released a set with transformer that retailed for $3.50. Sales increased, but the company was not profitable. Expansion into other toy markets also failed.
In December, 1937 American (Chicago) Flyer was sold to Alfred Carlton Gilbert by its owner, W. O. Coleman. The two toy magnates had just finishing shooting on Gilbert's game reserve in New Haven when Gilbert casually mentioned he was thinking about manufacturing toy trains. Instead, Coleman said he'd give his struggling American Flyer Co. to Gilbert in return for a share of the profits. Gilbert quickly agreed.
Gilbert moved the company to New Haven, Connecticut, and re-designed segments of the product line. The initial changes included substitution of the 'slot & tab' couplers with link and pin semi-automatic couplers on the higher priced 10" freight cars and steam engine tenders. Three significantly detailed & overall scale length O gauge steam engines were introduced in the 1938 catalog: an Atlantic (4-4-2), a Pacific (4-6-2-) and an 0-6-0 switcher. The years 1938 through 1941 saw the production of Gilbert's "Tru Model" 3/16" O gauge trains. The engines offered in this line were fairly accurate scale replicas of the locomotives they were modeled after: an Atlantic, a Pennsylvania K5 Pacific, a NYC Hudson, a Pennsylvania Torpedo (Royal Blue), a Northern (4-8-4) and an 0-8-0 Switcher. This line would later become the postwar 3/16" scale or S gauge line with two rail tracks. Also, its HO product line was introduced in the 1938 catalog. The design of the initial version of the HO track was significantly different from that of typical electric trains: the rails were mounted on lithographed roadbed.
Gilbert was not the first American company to offer 3/16" 'S' scale trains. The Cleveland (Ohio) Model & Supply Company had been offering theirs (known as "C-D") by '37. But the smaller scale (1:64) became much more prominent with its introduction in the 1939 catalog.
The relatively expensive, heavy and highly detailed engines and cars had had diecast zinc alloy bodies. As were the HO rolling stock, the engines and cars were offered in assembled and kit forms. Additional engines, cars and accessories were added in the 1940 catalog. These included less costly engines with tinplate tenders, and freight and passenger cars also made of painted tinplated steel. The 3/16 scale trains were designed to run on O gauge track whose curved sections had 20" radii. Importantly, the trains featured fully automatic coupling and uncoupling that were functionally comparable to Lionel's. Unlike Lionel's costly and sophisticated design (each truck contained a solenoid and electrical pickup shoe), the A.F. 'link & pin' (a.k.a. 'harpoon') couplers were gravity based.
In May 1967, Lionel Corporation announced it had purchased the American Flyer name and tooling even though it too was on the brink of financial failure. 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 any American Flyer trains.
Within two years, Lionel Corp. was bankrupt and 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. 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.
American Flyer Wikipedia entry.