Eastern Railroad Discussion > Any updates on if GE will be leaving the Railroad Business

Questions about GE’s Stock call is still going on ... Does anyone know if GE will be leaving the Railroad Business? Please no guessing.

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Viewliner2_Supporter Wrote:
-------------------------------------------------------
> Questions about GE’s Stock call is still going
> on ... Does anyone know if GE will be leaving the
> Railroad Business? Please no guessing.

Looks like it:

https://www.ft.com/content/8d8f601c-217d-33c8-99bd-cfdc300a8d2c

My gut reaction is that Tier IV really screwed up the locomotive marketplace. Does anyone concur or believe otherwise?

edit: sorry for posting a paid site. A Google search on 'GE locomotives' let me through.



Edited 1 time(s). Last edit at 11/13/17 08:46 by ts1457.

https://www.trainorders.com/discussion/read.php?2,4415951

I understand GE will be exiting the railroad business.
My belief is that the business will be parceled out; the sum of the parts is worth more than the whole.
Also, I do not believe the government will approve the sale of the US manufacturing business to Siemens.
ALLEN

Here is Today's Railway Gazette announcement:
http://www.railwaygazette.com/news/business/single-view/view/ge-looks-to-sell-rail-business.html

Peter Arnold

ts1457 Wrote:
-------------------------------------------------------
> Viewliner2_Supporter Wrote:
> --------------------------------------------------
> -----
> > Questions about GE’s Stock call is still
> going
> > on ... Does anyone know if GE will be leaving
> the
> > Railroad Business? Please no guessing.
>
> Looks like it:
>
> https://www.ft.com/content/8d8f601c-217d-33c8-99bd
> -cfdc300a8d2c


>
> My gut reaction is that Tier IV really screwed up
> the locomotive marketplace. Does anyone concur or
> believe otherwise?
>
> edit: sorry for posting a paid site. A Google
> search on 'GE locomotives' let me through.

Seriously? What confirming evidence would you have to even suggest that Tier IV "screwed up the locomotive marketplace? Wow!

The simple fact that the railroads seem far more interested in rebuilding their older power instead of buying new Tier IVs. With every new generation of locomotives, there was always something in it for the buyer; more power, more tractive effort, fuel efficiency, lower operating cost, better reliability etc. What's in it for the buyer THIS time?

junctiontower Wrote:
-------------------------------------------------------
> The simple fact that the railroads seem far more
> interested in rebuilding their older power instead
> of buying new Tier IVs. With every new generation
> of locomotives, there was always something in it
> for the buyer; more power, more tractive effort,
> fuel efficiency, lower operating cost, better
> reliability etc. What's in it for the buyer THIS
> time?

Thank you junctiontower. I concur with your thoughts.

Also, I think the orders ahead of Tier IV were abnormally high to lock in power with lower operating costs. In an industry like locomotive building, the manufacturers like steady growth. Now we have a new locomotive market in a lull because no one really needs many new locomotives.

Personally, I think GE might be making a mistake, but I am not the one looking at the numbers.

Tier 4 was/is a competitive advantage for GE with about a 2 year jump on the competition. The division is making money, during a down cycle (mainly due to the decline of crude by rail in the domestic market), but it just isn't making ENOUGH money.

Waybiller Wrote:
-------------------------------------------------------
> Tier 4 was/is a competitive advantage for GE with
> about a 2 year jump on the competition. The
> division is making money, during a down cycle
> (mainly due to the decline of crude by rail in the
> domestic market), but it just isn't making ENOUGH
> money.

Looks like locomotive production peaked out the year prior to Tier IV:

https://www.rita.dot.gov/bts/sites/rita.dot.gov.bts/files/publications/national_transportation_statistics/html/table_01_32.html

Remember some locomotives built after the effective dates were non-compliant units built under credits.

Yes, Tier IV screwed up the market. The bust for crude oil was not seen by a lot of people. The industry wasn't sure about the ready availability of new locomotives need for the crude after Tier IV so that added to the over-ordering.

Competitive advantage does not mean as much in a shrinking market.



Edited 1 time(s). Last edit at 11/13/17 21:48 by ts1457.

Waybiller Wrote:
-------------------------------------------------------
> Tier 4 was/is a competitive advantage for GE with
> about a 2 year jump on the competition. The
> division is making money, during a down cycle
> (mainly due to the decline of crude by rail in the
> domestic market), but it just isn't making ENOUGH
> money.

Interesting....a one man show but they couldn't make enough money!

ts1457 Wrote:
-------------------------------------------------------
> Waybiller Wrote:
> --------------------------------------------------
> -----
> > Tier 4 was/is a competitive advantage for GE
> with
> > about a 2 year jump on the competition. The
> > division is making money, during a down cycle
> > (mainly due to the decline of crude by rail in
> the
> > domestic market), but it just isn't making
> ENOUGH
> > money.
>
> Looks like locomotive production peaked out the
> year prior to Tier IV:
>
> https://www.rita.dot.gov/bts/sites/rita.dot.gov.bt
> s/files/publications/national_transportation_stati
> stics/html/table_01_32.html
>
> Remember some locomotives built after the
> effective dates were non-compliant units built
> under credits.
>
> Yes, Tier IV screwed up the market. The bust for
> crude oil was not seen by a lot of people. The
> industry wasn't sure about the ready availability
> of new locomotives need for the crude after Tier
> IV so that added to the over-ordering.
>
> Competitive advantage does not mean as much in a
> shrinking market.

It's a shrinking market for a number of reasons but a large factor is that the railroads don't know how to develop business any longer.  They focus on what is easy or what comes to them.  They worked harder at capturing business when they didn't have competition.  Now that coal has peaked and oil may move underground when the next boom hits, they are left without an easy path to securing traffic.  Even in intermodal, they stick to wholesale not retail.

Countless hours are spent debating the viscous "highway lobby".  Truth of the matter is that Corporate American and other users are part of the terrible group that merely demands consistent, predictable service.  The railroads inability to develop any kind of consistency is beyond belief.  Even the slowest steamship line can publish a schedule and stick to it.  Railroads are alone in their utter inability to publish a schedule and stick to it.  As a result, much of the railroads advantage is squandered by additional rail car cost and inventory tied up at the destination.

When production people ask me "how many days does it take to get a car from point a to B" and you say "the carriers claim 14 days but figure 10 to 21" they look at you like you are full of it.  No wonder Corporate America is the biggest highway lobby.

In theory, that's what Hunter Harrison has been saying all along. Provide predictable service, with schedules where possible, and charge for it.

The problem is no major railroad in the US other than Florida East Coast can do this on a consistent basis for a significant amount of its business. Even the NS 212 (Atlanta to NJ intermodal) or Chicago to NJ trains have a regular 3-4 hour "window". These are hot premium fares trains that usually see a lot of power on the head end, and green signals.

An argument can be made that the nature of FEC's business (strict cut off times, regular shippers, mostly end to almost end, few intermediate classifications) makes this a special case.

NYSWSD70M Wrote:
-------------------------------------------------------
> Waybiller Wrote:
> --------------------------------------------------
> -----
> > Tier 4 was/is a competitive advantage for GE
> with
> > about a 2 year jump on the competition. The
> > division is making money, during a down cycle
> > (mainly due to the decline of crude by rail in
> the
> > domestic market), but it just isn't making
> ENOUGH
> > money.
>
> Interesting....a one man show but they couldn't
> make enough money!

There is just no compelling reason for railroads to buy Tier IV locomotives at this time. They don't need MORE units right now, and the new ones don't do anything better than the old ones (probably worse) so they don't order them.

On the call yesterday GE mentioned being out of the locomotive business 1-2 years. My take, it could take up to 5 years. Even after a buyer is mentioned, to go past regulatory approval it could take some time, So be patient.

Here is another show stopper for GE. Just read a posted announcement that GE is no longer going to manufacturer light bulbs. Well, I suppose that makes sense. If you don't make locomotives then you have no need for headlights or the bulbs that light them! Makes sense.

Jim
Hatboro, PA

Chooch Wrote:
-------------------------------------------------------
> Here is another show stopper for GE. Just read a
> posted announcement that GE is no longer going to
> manufacturer light bulbs. Well, I suppose that
> makes sense. If you don't make locomotives then
> you have no need for headlights or the bulbs that
> light them! Makes sense.
>
> Jim
> Hatboro, PA

Yes, that one is interesting. I was under the impression that GE help engineer the demise of the tungsten filament bulb under the guise of environmentalism, but really with the intent of selling a product with a higher margin. Apparently other manufacturers, including some new entries, have been better with the development, manufacturing, and marketing of new technology bulbs than GE.

junctiontower Wrote:
-------------------------------------------------------
> NYSWSD70M Wrote:
> --------------------------------------------------
> -----
> > Waybiller Wrote:
> >
> --------------------------------------------------
>
> > -----
> > > Tier 4 was/is a competitive advantage for GE
> > with
> > > about a 2 year jump on the competition. The
> > > division is making money, during a down cycle
> > > (mainly due to the decline of crude by rail
> in
> > the
> > > domestic market), but it just isn't making
> > ENOUGH
> > > money.
> >
> > Interesting....a one man show but they couldn't
> > make enough money!
>
> There is just no compelling reason for railroads
> to buy Tier IV locomotives at this time. They
> don't need MORE units right now, and the new ones
> don't do anything better than the old ones
> (probably worse) so they don't order them.

I agree with you completely Junction.  This is the first time that the locomotive does not:

• Pull more
• Cost less to operate
• Cost less to built
• Extend or reduce maintenance
• Burn less fuel

Thus, the only reason to buy is need.  Need is low.  NS has bought a few to get fleet experience which is wise but otherwise very few.

(BTW - I didn't write the above comment.)

Lackawanna484 Wrote:
-------------------------------------------------------
> In theory, that's what Hunter Harrison has been
> saying all along. Provide predictable service,
> with schedules where possible, and charge for it.
>
> The problem is no major railroad in the US other
> than Florida East Coast can do this on a
> consistent basis for a significant amount of its
> business. Even the NS 212 (Atlanta to NJ
> intermodal) or Chicago to NJ trains have a regular
> 3-4 hour "window". These are hot premium fares
> trains that usually see a lot of power on the head
> end, and green signals.
>
> An argument can be made that the nature of FEC's
> business (strict cut off times, regular shippers,
> mostly end to almost end, few intermediate
> classifications) makes this a special case.

I agree he is saying that.  In practice, it seems like talk is cheap.

The three hour window isn't the issue.  In loose carload freight, they cannot even hit a three day window. 

I can honestly say that the railroads are the most despised transportation provider with the people I work with that depend on them for materials to run manufacturing plants.  The lowest rung ocean carrier commands more respect.  Railroads actually believe that a plant manager gives a $hit about the 10187 reasons why they can't deliver/place a car.

ts1457 Wrote:
-------------------------------------------------------

> Yes, Tier IV screwed up the market. The bust for
> crude oil was not seen by a lot of people. The
> industry wasn't sure about the ready availability
> of new locomotives need for the crude after Tier
> IV so that added to the over-ordering.
>
> Competitive advantage does not mean as much in a
> shrinking market.

The only thing Tier IV MAYBE did was create a very small increase in orders ahead of the deadline. If anything, certain people at GE believe that some roads actually delayed ordering Tier III units. Conventional wisdom in Erie/Chicago was that Tier IV didn't have any appreciable effect on orders.

Without Tier IV the loco market would still have peaked at roughly the same time, and declined for the exact same reasons. My point is that Tier IV has nothing to do with GE's decision to sell. If Tier IV had never come along they would still be trying to sell GET.

If anything, Tier IV has led GE to hold onto GET longer, since it extended the market dominance they so crave, and they've already sunk the R&D into Tier IV development.