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Although The American Flyer model trains were at their peak in popularity from the 1940's to the 1960's, they actually had a long history before that while their popularity seems to be on the rise again today. William Hafner, working as a toy maker in Chicago, developed a clockwork motor for toy cars and by 1905 was making toy trains using his clockwork motor.
With a friend, William Coleman, and using a small hardware manufacturing business known as the Edmonds-Metzel Hardware Company, Hafner began producing toy clockwork trains during 1906-7. These Edmond-Metzel trains were sold successfully through some major retailers with the brand name The American Flyer and by 1910 the name of the hardware company was changed to American Flyer Manufacturing Company.
The American Flyer model trains proved very popular because they were lower priced than other makes popular at that time and also because their detailing made them more realistic than other low budget model trains.
Hafner left the partnership in 1913 to start his own company and Coleman's American Flyer trains did extremely well during the First World War as they had no competition in the US from the German companies. By 1918, the first of the American Flyer electric trains were in production and business boomed during the 1920s but declined sharply during the Great Depression.
In 1938, William Coleman Jr, son of the company's founder, who had taken over the business following his father's death in 1918, sold the American Flyer to the A C Gilbert Company. Gilbert had been manufacturing and selling an extensive range of toys but not toy trains. He moved the company from Chicago to New Haven, Connecticut and immediately began to re-design the trains. He re-developed the American Flyer as S-scale in 1939 , a scale which was a modification of the very popular O gauge model trains then on the market. The S scale, which scales trains to the 1:64 ratio and made them smaller than the O scale trains, had a number of major advantages in terms of the track and track layouts.
In 1946 Gilbert made another major change to the American Flyer. Until that stage model electric trains had run on three rails with the center rail carrying the current. Gilbert developed a two rail system for running the American Flyer. This two-rail track, which had seven-eighths inches between the rails, made the track layout, and hence train operation, more realistic as the track now looked like 'real train track'.
With the advent of television, together with the rise of the discount chain stores which undercut prices and demanded lower wholesale prices, A C Gilbert Company ran into trouble and in 1962 was sold to Wrather Group. The new owners produced lines of toys, including model trains, which were of very poor quality and sales dropped sharply until in 1966 production of the American Flyer ceased. By 1967 the Company was bankrupt.
At this time, Lionel Corporation, which was itself in financial trouble although it had been the leading model train manufacturer for many decades, bought the rights to the American Flyer. However, by 1969 Lionel Corporation itself was bankrupt and sold the rights to the manufacture of its model trains, including the American Flyer, to General Mills.
General Mills began selling some of the original Gilbert designed American Flyer trains by 1979 but in 1984 sold its Lionel Company section to a toy manufacturer, Kenner who on-sold the company to Richard Kughn in 1985.
Kughn was very successful for over 10 years with the Lionel and American Flyer trains but sold in 1996 to Wellspring Partners who set up the company Lionel LLC, which operates today selling a range of model trains, including the S-scale American Flyer. Initially Lionel LLC concentrated on promoting the O and O27 scale model trains of its original lines but since 2002 has been releasing more and more American Flyer models.
The American Flyer then, is now more that 100 years old, and has gone though a number of owners and fluctuations in popularity. Dedicated S-scale enthusiasts now believe that this renowned model train is once again making a resurgence.