The Kughn Era
Kughn was a prolific toy train collector who said that his friends joked that the only thing his collection lacked was the company who made them. Kughn believed that if he moved production to Detroit, it would be possible to improve quality to a level characteristic of the original Lionel Corporation and still maintain profitability.
After his purchase, Kughn founded a company called Lionel Trains to continue the brand, and Lionel Trains Inc. opened a plant in Chesterfield, Michigan. In 1989 Lionel Trains introduced a locomotive featuring realistic electronically-produced sounds.
During this time frame, Lionel began producing new products based on designs from the Post-War era, when its popularity was at its peak. Additionally, some offerings began to depart from Lionel's toy-like design and place more emphasis on scale realism and detail.
Additionally, Lionel began selling reproductions of its designs that dated from the period before World War II. These products were made by MTH Electric Trains using original Lionel Corporation tooling, which had been sold at bankruptcy in the late 1960s after sitting unused for decades. This arrangement ended in the early 1990s after a disagreement between Kughn and MTH owner Mike Wolf.
The year 1993 brought Kughn's Lionel an opportunity. The original Lionel Corporation had recovered after the sale of its trains and survived as an entirely separate entity, operating a successful chain of retail toy stores for 24 years and becoming for a time the second-largest toy retailer in the country. However, it went bankrupt in the early 1990s under increased competition and liquidated in 1993, allowing the train manufacturer to purchase the Lionel trademark after years of operating as a licensee.