General Electric wants to sell off its locomotive division. I was initially surprised since GE was doing a lot better with diesel locomotive orders than it's main competitor EMD, which is now owned by Progress Rail Services, which in turn is owned by Caterpillar.
I think GE's predicting that the slowdown on new orders of diesel locomotives by the American railroads is going to continue. I guess some of the slowdown might be due to the Class 1 freight railroads having a surplus of locos in storage and that Class 1's, especially Norfolk Southern, are rebuilding older GE's and EMD's for continued service.
http://www.railwaygazette.com/news/business/single-view/view/ge-looks-to-sell-rail-business.html (http://www.railwaygazette.com/news/business/single-view/view/ge-looks-to-sell-rail-business.html)
Bad sign for the economy if GE is thinking there is less money to be made in this sector. But, who knows, maybe they're just selling to concentrate elsewhere, something GE frequently does.
An immediate cash infusion that temporarily increases your stock price is better than keeping a profitable division. Classic 1980s MBA teaching in action.
Quote from: roadman on November 14, 2017, 01:58:56 PM
An immediate cash infusion that temporarily increases your stock price is better than keeping a profitable division. Classic 1980s MBA teaching in action.
This.
+ 1.
Quote from: roadman on November 14, 2017, 01:58:56 PM
An immediate cash infusion that temporarily increases your stock price is better than keeping a profitable division. Classic 1980s MBA teaching in action.
I wonder if it might still work? Let's see if the lightning strike twice on the same location.
A few things to keep in mind:
1. The big class 1 roads have upgraded their fleets enough that they have surplus locomotives sitting around taking up track space. These upgraded fleets are relatively young and won't need too many more new motors (from GE or EMD) in the near future.
2. It is cheaper to rebuild than to buy new. Parts are plentiful so rebuild prices will remain lower than new motors.
3. Teir 4 regulations have kept EMD from selling any new motors in the US. (If this has changed, let me know) GE succeeded at attaining Teir 4, but imagine how much $$ was spent to get that. If there ever is Teir 5+ in the future, it could put both builders in a financial head-lock.
The last time that I was out in Erie most of the locomotives there were not for US railroads.
Quote from: cjk374 on November 15, 2017, 06:16:47 PM
A few things to keep in mind:
1. The big class 1 roads have upgraded their fleets enough that they have surplus locomotives sitting around taking up track space. These upgraded fleets are relatively young and won't need too many more new motors (from GE or EMD) in the near future.
2. It is cheaper to rebuild than to buy new. Parts are plentiful so rebuild prices will remain lower than new motors.
3. Teir 4 regulations have kept EMD from selling any new motors in the US. (If this has changed, let me know) GE succeeded at attaining Teir 4, but imagine how much $$ was spent to get that. If there ever is Teir 5+ in the future, it could put both builders in a financial head-lock.
Any further tightening of those Tier whatever limits would likely require the USA to wholesale convert its railroads to straight overhead catenary electric power.
:-o
I don't even believe that it is physically possible to build a diesel engine of any kind that would pass.
Mike
Remember the GTELs?
Quote from: roadman on November 14, 2017, 01:58:56 PM
An immediate cash infusion that temporarily increases your stock price is better than keeping a profitable division. Classic 1980s MBA teaching in action.
I don't know the railroad industry or the particulars of GE, but selling a profitable division in order to use the capital to expand a more-profitable division seems like it could make sense.
Quote from: cjk374 on November 15, 2017, 06:16:47 PM
3. Teir 4 regulations have kept EMD from selling any new motors in the US. (If this has changed, let me know) GE succeeded at attaining Teir 4, but imagine how much $$ was spent to get that. If there ever is Teir 5+ in the future, it could put both builders in a financial head-lock.
Actually, EMD has a Tier 4 engine developed, and a few demonstrator units are now on the rails (with UP also having bought some), but from what I've heard, they preform terribly (especially compared to the GE ET44ACs and their derivatives), which has caused CSX to send their demonstrators back and UP to apparently not order anymore. It appears that NS has also sent their demonstrators back with no news as to if they're going to order any either. The SD70Ac-T4 seems to be EMD's biggest failure since the SD50, so you'd think that GE would take advantage of this to push their ET44AC some more.
Quote from: cjk374 on November 15, 2017, 06:16:47 PM
1. The big class 1 roads have upgraded their fleets enough that they have surplus locomotives sitting around taking up track space. These upgraded fleets are relatively young and won't need too many more new motors (from GE or EMD) in the near future.
Where I live (Grand Junction, CO), there was probably a good mile's worth of UP locomotives connected together on one of the inactive tracks. Most have been sitting idle there nearly 2 years up until last week when about a third of them left town.
And then there is the area along I-10 east of Tucson where (as of April) there were literally miles of parked UP locomotives that you could see from the interstate that were awaiting their next assignments.
The question is: who's got (a) the cash flow/capital reserves to buy the division, and (b) the corporate structure to fit it into their overall plans? I can think of only one American entity (Warren Buffett and his various holdings, including a ready-made customer, BNSF); but a more likely purchaser would be an overseas corporation like Siemens, Hyundai, or one of the myriad Japanese firms familiar with combustion-engine products. Siemens is already making passenger locomotives for a number of Amtrak regional services in Sacramento; acquiring a (primarily) freight locomotive producer might just be in their wheelhouse, so to speak (and give them a 2nd production site closer to some of their existing customers). It'll be intriguing to see how the sale shakes out in the end!
Quote from: sparker on November 17, 2017, 05:54:44 PM
The question is: who's got (a) the cash flow/capital reserves to buy the division, and (b) the corporate structure to fit it into their overall plans? I can think of only one American entity (Warren Buffett and his various holdings, including a ready-made customer, BNSF); but a more likely purchaser would be an overseas corporation like Siemens, Hyundai, or one of the myriad Japanese firms familiar with combustion-engine products. Siemens is already making passenger locomotives for a number of Amtrak regional services in Sacramento; acquiring a (primarily) freight locomotive producer might just be in their wheelhouse, so to speak (and give them a 2nd production site closer to some of their existing customers). It'll be intriguing to see how the sale shakes out in the end!
Siemens also took over Invensys Rail in 2014 (with Invensys Rail taking over Safetran around 2011), so Siemens also has their hand in the railroad crossing business already as well.
My grandfather worked at the Erie Plant (1934-1976) with the exception of WWII. Had a BSME from Penn State 1934.
Quote from: DJStephens on November 18, 2017, 09:25:30 PM
My grandfather worked at the Erie Plant (1934-1976) with the exception of WWII. Had a BSME from Penn State 1934.
If he retired in '76, he would have been in on the design and production of the C30-7; the locomotive that helped to leapfrog GE into position as the leading domestic locomotive manufacturer. Although nearly a decade behind EMD in regards to the (then) 3000hp "benchmark" freight locomotive, the C30-7's traction motors had a lot more torque than EMD's, and the 4-stroke engine supported a higher-capacity generator than the competition as well (although with a bit higher fuel consumption). Conrail, BN, and Santa Fe bought dozens of them, primarily to handle long heavy unit trains; BN used them almost exclusively for Powder River coal shipments to Texas and Louisiana power plants, while Conrail platooned them on their route over the Berkshires from Albany, NY to Boston (except for the Horseshoe Curve, the nastiest mainline grades on the system). Eventually C30-7 sales outstripped that of the SD40-2, EMD's mainstay, which resulted in the 1980 development of the SD50 -- which was an abject failure (too much HP expected from the EMD 645 prime mover; they tended to fail at speed), which by default put GE in the drivers' seat regarding locomotive production and sales by 1982; they never looked back!
Quote from: sparker on November 24, 2017, 03:59:50 PM
... they never looked back!
Well until, you know, now.
Quote from: qguy on November 24, 2017, 06:08:19 PM
Quote from: sparker on November 24, 2017, 03:59:50 PM
... they never looked back!
Well until, you know, now.
I was speaking in terms of GE's long-term dominance of the U.S. freight locomotive market. Not too long after GE ascended to #1, EMD decided to end locomotive production at their La Grange, IL facility (where they'd been making units since the '30's) and shift production to the smaller but more efficient London, Ontario facility. This decision came back to shoot them in the foot circa 2004, when UP placed an order for 1000 SD70 locomotives (UP had always split their orders between GE and EMD pretty equally since the '80's); whereas if La Grange had been operating at full capacity, the delivery would have taken 18 months; in this case, the last of the order rolled off the assembly line in early 2007 (by which time the model had undergone upgrades; UP got about 120 of the new model at no additional cost!). That order -- and the issues filling it -- were one of the catalysts for GM's sale of EMD to Caterpillar.
Quote from: roadman on November 14, 2017, 01:58:56 PM
An immediate cash infusion that temporarily increases your stock price is better than keeping a profitable division. Classic 1980s MBA teaching in action.
Yep.