Bankruptcy
In an effort to turn around the company, Harry Ives relinquished his presidency in 1927, becoming chairman of the board and bringing in an outsider, Charles R. Johnson, as president, but problems continued and Ives' largest creditor sued in 1928. Ives filed for bankruptcy, reporting liabilities of $188,303.25. As Ives already had $245,000 in Christmas sales lined up, Johnson petitioned for a private sale and a quick settlement. The motion for a private sale was denied.
On July 31, 1928, Ives was purchased by Lionel and American Flyer for $73,250. The low price in comparison to the company sales was presumably due to liens on Ives' assets. Lionel and Flyer then operated Ives as a joint venture, retaining Johnson and Harry Ives as president and chairman, respectively. Harry Ives left the company in September 1929, and within seven years he was dead.
Ives' new owners immediately discontinued the line of toy boats, and much of Ives' train product line was replaced with relabeled American Flyer or Lionel product, and most new designs were carried out using Lionel and American Flyer parts, even though Ives' own designs were usually more realistic. There are several reasons for this. When Lionel and American Flyer bought Ives, they did not buy the factory or tooling, which they then had to rent. It may have been less expensive for the parent companies to supply their own parts than to rent the old Ives tooling. Some historians have speculated that the Ives tooling was worn out and no longer suitable for use. A third factor was that Lionel's and Flyer's manufacturing process was less labor intensive, which made their designs less expensive to manufacture than the Ives designs they replaced.
A notable exception was the Ives 1122 locomotive, first produced in 1929, which was the first near-to-scale model of an existing locomotive to enter the marketplace. Although it had a 4-4-2 wheel configuration, it was otherwise a recognizable copy of the Baltimore and Ohio Railroad President Washington Class 4-6-2 locomotive.
Whatever the reasons, the Ives product line after 1928 inherited many recognizable traits from three different companies' product lines.
Read more about this topic: Ives Manufacturing Company
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