GE Continues Rebuilding Locomotives in Erie

Although the future of the GE Transportation locomotive assembly plant in Erie, Pennsylvania, remains murky, the facility continues to rebuild and test locomotives.

This week Canadian Pacific AC4400CW No. 8200 was seen on the test track being evaluated.

It is the first of 30 AC4400CWs to begin testing after being rebuilt at the plant in Lawrence Park.

The units are known as AC44CWMs and are nearly identical to other rebuilt CP locomotives in the 8000 and 8100 series.

The 8200 series, though, features software and other minor changes. The rebuilding of the CP locomotives is expected to be completed in the coming months.

GE Transportation, Wabtec to Merge

Wabtec has agreed to acquire GE Transportation in a transaction valued at $11.1 billion, which includes a $1.1 billion net tax benefit.

The merger will make GE Transportation a wholly-owned subsidiary of Wabtec, which is headquartered in Wilmerding, Pennsylvania.

Wabtec will become a Fortune 500 company with revenues of more than $8 billion. The combined company is expected to have 27,000 employees.

It is not clear what effect the merger will have on the Erie locomotive assembly plant where production of new locomotives is winding down as the facility transitions to an as-yet unspecified new role.

A spokesman for the union that represents workers at the facility in Lawrence Park expressed hope that Wabtec would reverse that decision.

GE Transportation also has engine plants in Grove City, Pennsylvania.

Wabtec, which got its start as Westinghouse Air Brake and is now formally known as Westinghouse Air Brake Technologies Corporation, will become a major player in the global railway equipment and services market with operations in more than 50 countries.

General Electric and Wabtec said in a statement on Monday that they expect synergies of around $250 million by 2022.

The merged company will operate as Wabtec and more than 23,000 locomotives in its global installed base and components on virtually all North American locomotives and freight cars.

GE is to receive at the closing of the deal $2.9 billion in cash for a 9.9 percent stake in the new company, while its shareholders will receive a 50.1 percent stake. Wabtec shareholders will hold the remaining 49.9 percent stake.

Wabtec Chairman Albert Neupaver will be the executive chairman of the merged company with Raymond Betler serving as president and CEO.

The company will have its headquarters in Wilmerding, which is a Pittsburgh suburb. GE Transportation is currently headquartered in Chicago.

GE Transportation President Rafael Santana will become president and CEO of Wabtec’s freight division, which will be based in Chicago.

Wabtec Chief Operating Officer Stephane Rambaud-Measson will become president and CEO of Wabtec’s transit segment, which is based in Paris.

GE will designate for nomination three independent board members.

The locomotive assembly business is prone to cyclical swings, but GE Transportation’s earnings before interest, taxes and depreciation is expected to grow from about $750 million this year to between $900 million and $1 billion in 2019.

The company has a backlog of about $18 billion including about 1,800 new locomotives and another 1,000 units to be rebuilt and upgraded.

In the past two quarters, GE Transportation has received orders worth $3.6 billion.

The merger is not expected to be completed until early 2019 and is subject to approval by the U.S. Securities and Exchange Commission.

GE Transportation spokeswoman Deia Campanelli said the GE Transportation name is expected to continue in some fashion, but those details have not been worked out.

Scott Slawson, president of Local 506 of the United Electrical, Radio and Machines Workers of America, which represents about 1,500 employees at the GE Transportation plant in Erie, told the Erie Times-News that there remain many matters for the union to work through between the time the deal closes and when the union’s contract expires in June 2019.

“If Wabtec is going to be a new employer to us, there are a lot of benefits to employees that we currently have with GE,” he said. “We have to bargain those things away from GE and make sure everyone gets what is in the contract. There is never anything easy. It means a lot of work. You have to be on your toes.”

However, Slawson said he is trying to see the merger as a positive. “At this point we have no reason to look at this any differently.”

GE Transportation said in summer 2017 that it planned to phase out production of new locomotives in Erie by the end of 2018.

The company has a newer and non-union assembly plant in Fort Worth, Texas, that is expected to continue building new locomotives.

“I think a fresh set of eyes might look at things differently,” Slawson said. “Mistakes are made. Hopefully our new employer is willing to listen.”

Slawson told Trains magazine that perhaps a Pennsylvania-based company might be willing to return some work to the Erie plant.

Raymond E. Grabowski, the president of the Lake Shore Historical Society in North East, Pennsylvania, said his group’s museum might be able to incorporate into its exhibits the technological advances made by Wabtec.

“One day, we hope we can look back and tell future generations that these too were proudly developed and made in Erie.,” he told Trains.

GE Wants to Retain Control of Transportation Division

General Electric wants to maintain some form of control of its GE Transportation division, either by making it a separate public company or merging it with another company controlled by GE shareholders.

The Wall Street Journal quoted unnamed sources as saying that GE views its transportation unit as a model for restructuring other divisions.

GE had been looking to sell its transportation division in the face of pressure from some investors to break up GE in the wake of years of declining profits. There also have been concerns expressed about questionable accounting practices.

GE Transportation has a locomotive assembly plant in Lawrence Park, Pennsylvania, (Erie) that is winding down the production of new locomotives and transitioning to an as yet unspecified new role.

It also has two engine plants in Grove City, Pennsylvania, one that build engines and another that refurbishes them.

Erie, Grove City Plans to Benefit From GE Order

GE Transportation has signed deals worth $900 million to build 300 switch engines for the Kazakhstan national railroad.

The agreement is expected to boost the fortunes of GE Transportation’s Grove City, Pennsylvania, engine plant and, to a lesser extent, its Erie assembly plant.

The order is not expected to have a major effect on the Erie plant, which GE has said will cease assembling locomotives by the middle of next year.

However, a GE spokeswoman said that engineers based in Erie will work on the order.

The engines for the Kazakhstan order will be built in Grove City. Final assembly of the locomotives will take place at a GE plant in Kazakhstan.

Kazakhstan Temir Zholy, the state-run railroad of Kazakhstan is GE Transportation’s largest international customer.

Aside from the 300 switcher locomotives, the contracts call for GE to maintain and repair 175 Evolution™ Series passenger locomotives.

The first two switchers are expected to be delivered in 2019, with the remainder to be delivered over the next 10 years.

GE to Sell its Transportation Division

As had been speculated, General Electric will put its transportation division up for sale in a move to focus on three core businesses of aviation, power and healthcare.

The sale is expected to occur within two years. It means GE will no longer be in the locomotive building business.

A GE spokesman said the divestiture is in the early stages and is part of a program to cut $20 billion in assets.

GE Transportation has a locomotive assembly plant near Erie, Pennsylvania, but the company said last July that it would shift all locomotive production by the end of 2018 to a newer factory in Fort Worth, Texas.

At the time of that announcement, GE said the Erie plant would continue to be open and fulfill a function that has not been specified in much detail.

The company also has two engine plants in Grove City, Pennsylvania.

GE May Get Out of Locomotive Business

The Wall Street Journal reported Thursday that General Electric is considering getting out of the business of building locomotives.

The newspaper cited unnamed sources as saying GE is considering a move to “partner, spin off, or possibly sell” GE Transportation.

GE has declined to comment on the report. Aside from building locomotives, GE Transportation also makes heavy-duty diesel engines and mining equipment.

Headquartered in Chicago, GE Transportation has locomotive assembly plants in Fort Worth, Texas; and Erie, Pennsylvania, the latter of which has been making locomotives and parts since 1911. GE also has an engine plant in Grove City, Pennsylvania.

The discussion about GE selling its transportation division comes amid disappointing third quarter earnings and a plan to cut $20 billion in businesses over the next two years.

GE Transportation Likely to Take a Hit

GE Transportation may be among the business units of General Electric that will see an aggregate $20 billion worth of businesses cut from the GE’s portfolio within the next two years.

The Wall Street Journal reported that third quarter earnings statements from the locomotive and jet engine maker will reduce the company’s cash-flow outlook by $5 billion  to $7 billion.

GE managers have slashed $1.2 billion in costs from business units so far this year, surpassing the original $1 billion goal.

Earlier this year, GE Transportation said it will move locomotive production from its Erie Assembly plant in Lawrence Park, Pennsylvania, to a newer plant in Fort Worth, Texas, by the end of 2018.

The Erie plant will remain open producing parts and working on unspecified non-locomotive projects.

GE CEO John Flannery has ordered a review of every business unit and business practice, including expensive annual retreats to Florida and the company’s fleet of executive jets, both of which have been reduced.

GE Transportation Seeking New CEO

GE Transportation is seeking a new CEO after Jamie Miller was promoted to chief financial officer of parent company General Electric effective Nov. 1.

Miller replaces Jeffrey S. Bornstein, GE vice chair and chief financial officer.

In a news release, GE said that Miller became president and CEO of GE Transportation in October 2015 and led the business through difficult cycles in the mining and railroad industries.

As CEO of GE Transportation, she helped oversee GE Transportation’s Brilliant Factory initiative, the business’s digital transformation, and opened markets around the world and revenue opportunities outside the traditional verticals.

“Leading GE Transportation the last few years has been one of the greatest honors in my career,” Miller said in a statement. “We developed products and services our customers needed to move goods more efficiently, reliably, and safely in today’s challenging marketplace. The business also opened up exciting commercial opportunities in markets with tremendous growth potential like Egypt, India, and Kazakhstan.”

GE Transportation has a locomotive assembly plant in Lawrence Park, Pennsylvania, near Erie, and two engine plants in Grove City, Pennsylvania.

A new CEO of GE Transportation will be named in the coming weeks. In the interim, Pascal Schweitzer, GE Transportation’s global services leader, will serve as acting CEO.

GE to Cease Making Locomotives in Erie

GE Transportation said this week that it would end locomotive production at its Erie assembly plant by late 2018.

The company said that the design and develop center at the plant will remain open. The plant will also make prototypes and spare parts. Approximately 575 workers will lose their jobs.

The announcement cited downturns in freight traffic and a global market for locomotives. Locomotive production once done in Erie will be consolidated in an assembly plant in Fort Worth, Texas, which opened in 2013.

Opened in 1910, the Erie plant, which is located in Lawrence Park township, once employed 2,000. The workforce has been steadily reduced in recent years.

Aside from the Erie plant being old, it was also more costly to operate.

The Erie Times-News reported that the average salary of a production worker in Erie is more than $30 per hour where new hires at the Fort Worth plant are paid about $17 per hour.

The Erie plant was unionized but the Texas plant is not.

Earlier this year, GE Transportation CEO Jamie Miller said the the company would focus on the global new locomotive market.

In the past year GE has landed an order for 1,000 locomotives to be built for Indiana and 133 for South Africa.

In North America, GE is going to emphasis re-manufacturing older locomotives and upgrading the technology on those units to monitor performance.

Orders for new locomotives in North America have all but vanished with Class 1 railroads mothballing more than 4,000 locomotives in response to a freight recession that began in 2015 and management practices that are seeking to move tonnage in fewer trains.

General Electric itself has been in turmoil in the past few months with CEO Jeffrey Immelt stepping down an activist hedge fund pushing GE management to step up its cost cutting.

GE said earlier this year it would reduce expenses by $2 billion over the next two years.

GE Erie Finishes First Locomotive for India

Broad gauge locomotives being built by GE Transportation at its Erie, Pennsylvania, locomotive assembly plant were shown last week in Erie.

GE has a contract to build over an 11-year period 1,000 of the Evolution Series locomotives to a 1,676-mm gauge for the Indian Railways.

The contract for the locomotives is valued at $2.5 billion. The order includes 700 4,500-horsepower and 300 6,000-hp six-axle locomotives.

The first 100 locomotives will be built in Erie and shipped fully assembled or as kits, while the remaining 900 units will be constructed at a new joint venture production facility at Marhoura in the Indian state of Bihar.

The Indian assembly facility is set to open later this year.

The joint venture between GE and IR also calls for the two to share maintenance of the fleet for a period of 13 years from the start of production.