Wabtec Looking Overseas for Business Growth

Locomotive builder Wabtec said falling rail freight traffic has had an adverse effect on its business but the company remains optimistic about other rail-oriented aspects of its portfolio.

Pittsburgh-based Wabtec acquired GE Transportation last February and has committed to keeping open its locomotive assembly plant near Erie, Pennsylvania.

Among the factors affecting the locomotive business is railroads using fewer locomotives as they adopt the precision scheduled railroading operating model of running fewer and longer trains.

That has led Class 1 carriers to sideline large numbers of their locomotives.

However, Wabtec CEO Rafael Santana said his company has seen gains in the market for locomotive parts, multiyear service agreements and international markets.

Two-third of Wabtec locomotive manufacturing is now oriented toward railroads in India and Southeast Asia.

In 2020, Wabtec expects half of its revenue from its former GE Transportation operations will come from international markets.

“Across our international installed base, we continue to see strong opportunities for growth, including regions like India, where we will be delivering over 100 locomotives this year as part of our 1,000-locomotive contract,” he said during a third quarter earnings call.

Santana said a new 6,000-hp WDG-6G locomotive for India is in testing and is expected to soon be in revenue service.

The international market is also yielding a substantial international business in locomotive upgrades.

If U.S. freight traffic were to uptick in 2020, Santana said that might not be enough to help Wabtec.

He said that even if there were modest increases of 1 percent to percent in domestic freight business next year, there is a lag time before new locomotive orders began arriving.

With so many U.S. carriers storing locomotives, they could be expected to tap the storage fleet before looking to buy new units.

Another bright spot for Wabtec is transit cars.

“Aging [transit] fleets across Europe and U.S. need to be upgraded, presenting unique opportunities for growth,” Santana said. “And increased growth and infrastructure spending in emerging economies, like India, is driving tremendous growth opportunities for our business.”

Wabtec’s overall third-quarter 2019 sales were $2 billion with about $1.3 billion from the locomotive segment and about $700 million from the transit segment.

Overall corporate net income for the quarter was $90 million.

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