CHESTERFIELD TOWNSHIP, Mich. -- After chugging along for more than a century, Lionel LLC, the venerable maker of model trains, is struggling in an era of fast-paced video games and Wal-Mart-style retailing that seems to value price above all else -- including tradition.

	Carlos Osorio, Associated Press TAndrew Kekel, 3, plays with the switches on the train display at Lionel in Chesterfield Township, Mich. After chugging along for more than a century, Lionel LLC, the venerable maker of model trains, is struggling to stay on track following a nearly $41 million judgment that has pushed it into bankruptcy.. Click photo for larger image.

That it is coping with these pressures against the backdrop of a recent Chapter 11 bankruptcy filing -- a result of a $41 million judgment against it that the 104-year-old toy train maker is contesting -- only adds to the concerns over the future of a train that was on almost every child's Christmas wish list a generation or two ago.

"The hobbyists today are mostly men in their 50s" who "grew up in the 1950s (and) had Lionel trains and American Flyer trains, and that was their prized toy,'' said Neil Besougloff, editor of Classic Toy Trains magazine. "They are to some extent reliving the joys of their childhood."

Lionel's current troubles date back at least to 2000 when MTH Electric Trains, formerly known as Mike's Train House, sued what once was the world's largest toy maker. MTH, a one-time Lionel contractor based in Columbia, Md., accused the company of selling trains based on designs stolen from a South Korean manufacturer working for MTH.

In June, a jury in U.S. District Court in Detroit ruled that Lionel should pay $38.6 million to MTH and Lionel supplier Korea Brass Co. should pay $2.2 million. Lionel denies the accusations, and new Chief Executive Officer Jerry Calabrese says he is confident the court decision will be overturned or the award reduced on appeal.

In the meantime, he said, the Chapter 11 bankruptcy that Lionel entered last month protects the company from having to post a bond while the appeal is pending. Calabrese insists the court decision is the only reason for the bankruptcy, and that, overall, the company is in good financial health.

"Lionel is having a better year this year than it had last year, which is something I dare any other train company to say," Calabrese said in an online chat held three days after the company filed for bankruptcy -- an effort to slow the rumor mill and assuage fears that Lionel might go under.

Calabrese -- who became CEO in October and previously worked for comics heavyweight Marvel Enterprises Inc., a similar hobby-driven business -- promised to hold such sessions regularly, an unusual tack for a private company that does not release earnings information.

Lionel and other toy train companies enjoyed a boom that peaked in 2000. But business slumped as a result of overproduction and post-9/11 economic uncertainty, said Besougloff, who estimates there are about 100,000 to 125,000 toy train hobbyists in the United States and Canada and that his 60,000 subscribers spend an average of $1,400 to $1,500 a year on the hobby.

George Hoffer, an economist and toy train enthusiast who has studied the industry and testified on behalf of MTH at the trial, said Lionel is partly to blame for the market glut because it produced trains similar to MTH's from stolen designs at a time demand was waning.

Andy Edleman, vice president of marketing at MTH, said MTH had just about caught up to Lionel in market share before 2000. He said Lionel began to slip because it continued to put out the same old models while MTH was pioneering new technology and enhanced realism, with such high-tech features as sophisticated sound and digital remote control systems. "They have lived off their reputation," he said.

Calabrese contends Lionel has made more than its share of innovations over the years, but he agreed that MTH and other competitors have forced it to become a better company. "Lionel is at least 50 percent of the business," he said. "It's very easy to become complacent when you're that big."

With a culture of game playing that seems increasingly inclined to embrace gadgetry, movement and rapid change, today's generation of children don't have the same fascination with trains that children used to have, industry observers say.

The popularity of train-themed stories and toys for preschoolers, such as Thomas the Tank Engine and wooden railroad sets from Brio, has not carried over into electric trains. "There are so many more items competing for children's attention today than there were back when we were kids," Besougloff said.

One of the marketing difficulties for Lionel and others is that their products are sold mostly in independent hobby shops and not where most people buy toys. Wal-Mart Stores Inc., Toys R Us Inc. and other mass retailers don't carry train sets because they're too expensive.

But linking a train to a popular children's character or movie is one way to help revive interest in trains. Lionel won the license for "The Polar Express," the Christmas movie starring Tom Hanks currently in theaters.

The Polar Express sets, priced at $250, have been a hit, but few have made their way into the hands of kids because established hobbyists snatched them up. The hope is that the movie -- and by extension the train -- will live on as a perennial favorite.

Matthew Kekel, 36, got his first train set as a Christmas present from his father when he was 7 or 8. Today, he shares his hobby with his own son, 3-year-old Andrew, who eagerly pounded the buttons on the intricate display at Lionel's visitors center during a recent visit.

"It keeps the dad grown down and allows the kids to grow up," said Kekel, of Chesterfield Township.

As for Lionel's present difficulties, Kekel said he's confident the company will survive. "They've changed owners four times since I've been buying their product," he said. "I'm just not that worried about it."