Wabtec Reported Interested in GE Transportation

Wabtec Corporation is said to be talking with General Electric about buying GE Transportation.

Bloomberg News said the potential transaction size is $6.8 billion.

GE would not acknowledge the talks, saying only that it was “evaluating a range of strategic options for our business and do not comment on rumors or speculation.”

Wabtec also did not respond to a request for comment.

Railway Age quoted Cowen and Company analyst Matt Elkott as saying the $6.8 billion figure is is too high “given what we see as Wabtec’s enviably strong position at the negotiating table.”

Last year reports surfaced that GE was looking to sell its transportation division. However, a more recent report in the Wall Street Journal said GE might want to keep control of the transportation division in some manner.

“GE Transportation would likely be too large for many private equity investors,” Elkott told Railway Age. “Alternatively, a spin-off of a locomotive business into public equity markets may not be well-received by investors, in our opinion.

“The rail equipment industry can be brutally cyclical, and companies operating within the space tend to target a high degree of diversification.”

Elkott said GE Transportation might be better suited as a potentially synergistic addition to an existing diversified platform such as Wabtec’s but it cannot be ruled out that it would be acquired by a large investment conglomerate or international entity.

Wabtec, which is based in suburban Pittsburgh, is valued at $8 billion.

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

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.

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.

NS Now has 28 Tier 4 ET44ACs on Hand

Twenty-eight of the 47 Tier 4 locomotives that Norfolk Southern has ordered from General Electric Transportation have been shipped to the carrier.

Thus far GE has released Nos. 3601-3614, 3616-3628, and 3630 from its Fort Worth, Texas,  plant.

The units move over the BNSF to Memphis, Tennessee, where NS takes possession of them.

Trains magazine reported that the assembly of the rest of the units, which are the first NS has purchased from GE to be built in Texas, is largely complete.

The ET44ACs will have roster numbers 3601 to 3647. NS accepted the first of the order in late May.

NS To Take Delivery of Tier 4 Locomotives

General Electric Transportation expects to deliver Tier-4 compliant locomotives to Norfolk Southern this spring, making it the fifth Class I railroad to receive ET44ACs.

The units are being built  in Fort Worth, Texas, and are part of a 47-unit order.

Tier 4 emission standards were issued by the U.S. Environmental Protection Agency and took effect last year.

The first of the locomotives, No. 3600, will be tested by the Southwest Research Institute in San Antonio before being delivered to NS. The units will have roster numbers 3600-3646.

NS also has on order three ES44AC locomotives that meet Tier 3 emission standards, but are permitted under existing regulations by having the builder apply emission credits already banked toward the locomotives.

Those credits were earned by applying energy-saving design technologies to locomotives already built and in operation.

Carrying roster numbers 8166-8168, those units are being built in Erie, Pennsylvania.

Canadian Pacific and Kansas City Southern are the only North American Class I railroads that have yet to buy Tier 4-compliant locomotives.

GE Pushing Internet Connectivity in Locomotives

General Electric expects that more than 3 million locomotives and other GE-built products will be connected to the Internet by 2020.

The company said in a recently published report that digital interconnectivity plays a critical role in its newer locomotives and industrial vehicles developed and produced by its transportation division.

“By the end of 2016, we expect it to have 200,000 assets under management, 100 GE applications and 20,000 developers creating many more applications,” said GE CEO Jeffrey R. Immelt.  “Our aspiration is to offer with every GE product a pathway to greater productivity through sensors, software and big-data analytics.”

GE estimates that more than 700 of its locomotives that meet Environmental Protection Agency Tier 4 emission standards have digital components that have saved their railroad owners $197 million in fuel expenses.

Digital components also have reduced the amount of time needed to make a diagnosis of problems and to make repairs.

Norfolk Southern began to adopt in 2010 GE’s Movement Planner software to streamline train operations.

In its factories, GE uses Predix software, a cloud-based productivity management system that may have applications for the railroad industry.

GE Transportation, which has an assembly plant in Erie, Pennsylvania, produces the majority of locomotives for the North American market.