December 18, 1989 12:00 PM

It was Christmas morning in 1938 when 9-year-old Dick Kughn first felt that explosion of happiness known best to generations of small boys. “I came down in my flannel pajamas, and there it was, all set up under the tree,” he remembers. “It was a gray tin Vanderbilt locomotive with a yellow boxcar and a Shell tank car and a red caboose and track laid out in an oval loop. As soon as I could figure out where to plug in the transformer, I was down on the floor—that’s what’s fun—to lie nose-to-nose with the train.”

Santa came through for the lad with what he wanted most—a shiny new toy train set made by Lionel. And now, 51 Christmases later, the magic of that moment has hardly dimmed. Although Richard P. Kughn (pronounced “Koon”) is now a hugely successful businessman in Detroit and a millionaire many times over, he still plays with model trains—oh, boy, does he! Over the years Kughn’s accumulation of trackage, replica rolling stock and accessories has reached hundreds of thousands of items, a collection so large that his own private, 30,000-square-foot museum in Motown can’t hold it all.

Then in 1986 Kughn chugged full-throttle into toy train heaven: He bought the Lionel company. “It was a romantic thing; I just thought it would be fun to own Lionel,” he says. “Then I found out it was a good business opportunity as well.” As America’s leading purveyor of toy trains, Lionel expects to turn out 2.5 million train-related items during the current year to mark up total sales in excess of $50 million. “Well,” says Kughn with his quick, characteristic laugh, “I certainly know the product.”

In a real sense, Kughn arrived at his expertise from the inside out. Born in Detroit, he moved with his parents—his father was a real estate title examiner; his mother, a housewife—to Cleveland when he was 3. And two years before the boy would be given a Lionel of his own, he had rescued a discarded train set from a neighbor’s trash can. The train wouldn’t run, “so I took it apart, cleaned everything and, by golly, it worked,” he recalls. “I guess I was always a tinkerer.”

He did a lot of other things, such as play the clarinet with a group of 6th-grade friends including George Steinbrenner, now the principal owner of the New York Yankees. Kughn was also a semipro magician who performed in local theaters between matinee movies. The one place where he didn’t shine was in the classroom. He graduated in the bottom 5 percent of his high school class and lasted but one semester at Ohio University before withdrawing for eye surgery. Kughn suffers from diplopia, commonly called double vision, that makes it difficult for him to read. This was one reason, he says, for his stumbles in school.

No one, however, doubted Kughn’s eye for a business deal. Starting at the bottom in the construction business, he rose quickly from laborer to foreman to material inspector, field engineer and estimator. In 1955, by then returned to Detroit, he joined the firm of builder A. Alfred Taubman. As Taubman’s nuts-and-bolts man, Kughn became company president in 1969 and prospered mightily along with his boss in the nationwide shopping-mall building boom. Kughn eventually retired as vice chairman of the board in 1983 because, he says, “I wanted to express myself in other activities.”

By that he means Kughn Enterprises, an umbrella organization of 81 separate business and community ventures, including radio stations, a film production company, real estate and a luxury restaurant in Detroit. Other activities also relate to his hobbies; Kughn the collector tends to buy everything—from antique coin banks to vintage automobiles—in wholesale lots. In 1976 he acquired a Detroit building that formerly housed a bowling alley, tavern and sporting goods store and converted it to Carail, a private museum displaying about 50 of his 180 classic cars and roughly half of his vast model train accumulation.

“I’m not a bank,” says Kughn. “I’m a hands-on investor.” And clearly the thing he’s happiest to get his hands on is Lionel Trains, headquartered in Mount Clemens, Mich. As is his custom, Kughn refuses to reveal the price he paid Lionel’s former owner, Kenner Parker Toys Inc. (An outside estimate put the figure at $25 million.) Nor does he assign a money value to the things he collects. He is proud to point out, however, that Lionel’s sales have tripled since he took over three years ago.

In 1984 Kughn married Linda Stebbins, the second marriage for both. Between them they have a son, four daughters and eight grandchildren from their previous marriages. The Kughns alternate between four homes—a high-rise apartment in Detroit and two adjoining condos in the suburbs, another condo in a Cleveland suburb and their “retreat paradise,” a palatial 19th-century Victorian cottage with 10 bedrooms on Mackinac Island, Mich. Wherever he is, though, Dick Kughn is never far from a model train setup, and Linda, 46, sometimes joins him at the rig. “I didn’t have a train as a kid,” she says in a mock pout. “Santa never brought me one, because I was a girl.”

Lionel, Kughn quickly adds, did attempt to expand its market with a “Lady Lionel” set in 1957. It had a pink locomotive, lilac hopper, boxcars of robin’s-egg blue and buttercup yellow and a sky blue caboose. But the patronizing approach proved to be a marketing disaster, and the factory recalled most of them. Kughn, of course, has kept a complete “girl’s set.” It is, he says with a knowing smile, a “real collector’s item.”

—Dan Chu, Julie Greenwalt in Detroit

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