Railroad Forums 

  • GE to sell GETS (GE Transportation GE Rail) to WABTEC

  • Discussion of General Electric locomotive technology. Current official information can be found here: www.getransportation.com.
Discussion of General Electric locomotive technology. Current official information can be found here: www.getransportation.com.

Moderators: MEC407, AMTK84

 #1448002  by Allen Hazen
 
[b]ADMIN NOTE: Once the merger is complete, I will create a WABTEC forum.[/b]

Some things shouldn't even be joked about.
When I started this string back on April 1st, it was an April Fool's joke. But an item in today's paper…

From the "Globe and Mail" (Toronto) for Saturday 21.x.2017, page B5. (B is the business section of the paper.) Article by-lined Alwyn Scott, apparently syndicated by Reuters. GE has been seen as under performing for some years. In response…
First paragraph: "General Electric Co,'s new chief executive" [John Flannery] "vowed on Friday to shed more than $20-billion (U.S.) worth of assets…"
And final paragraph: "Analysts had clear ideas about what pieces GE could do without" "GE will likely sell transportation…"" [along with lighting and "anything else that isn't nailed down and very core," according to one quoted analyst].

(That's on an inside page of the business section. Story on front page about a former locomotive builder, Bombardier, selling much of its airplane business to Skybus.)
Last edited by Jeff Smith on Fri May 25, 2018 11:36 am, edited 4 times in total. Reason: Moving this to a GLOBAL. JP
 #1448185  by es80ac
 
Ah... those good for nothing analysts again. If they are really capable of anything, they should be in a corporate executive position making real decisions, instead of flapping their gum to pretend they are worth their overpaid salary.

GE Transportation has been a part of GE through out good and bad times, selling it will not turn around GE, it will just pretty much eventually destroy this business that GE has strived so hard to build and came on top of throughout all these years.
 #1448200  by Allen Hazen
 
Es80ac--
I think GE has put significant amounts of money into GETS in recent years (Tier-4 engine development, and lots of improvements to plants), which looks as if they were treating it as a "core" business. But I don't know enough -- about how their treatment of GETS compares to their treatment of other divisions, or of what the overall financial picture of the company is -- to be confident in making any comment.
Railroad supply has become an international industry, with leading companies (Siemens, Alstom, Bombardier, the Chinese) operating plants in multiple countries and selling to more. My impression is that GE has a solid position in the diesel locomotive corner of this business, but not in other parts of it (passenger trains, signalling…). It's a bit of a worry that the company that designed the PRR GG-1 doesn't seem to be offering ANYTHING in the way of electric locomotives!
 #1448246  by MEC407
 
GE also has a huge position in the digital areas of railroading, such as dispatching, crew management, rolling stock monitoring. All that stuff is invisible to most of us, but there are hundreds of railroads that use it, from small shortlines all the way up to the big Class I roads.

I think the argument could be made that GE is the #1 freight locomotive builder in the world right now.

But is that enough for current GE management? Freight locomotives currently aren't selling in the same numbers as jet engines, an area where GE is also #1. That could change, of course.

GETS has been able to borrow things from other areas of GE, such as using GE jet engine technology in their turbos, and other divisions such as mining have been able to borrow things from GETS. That synergistic relationship seems to work well, and it would be a shame to lose it.
 #1448360  by time
 
John Flannery is responding to activist investors. By breaking GE up, the stock price will increase through divesture of "underperforming" assets and by freeing up cash to maintain stock buybacks and/or increase dividends. The latest news is GE may leave the DOW, which also tends to hold the stock price of GE back.

The thing is... who would buy GETS? The best solution would be for a domestic firm to buy it as a subsidiary, and rebrand it a a global competitor for rail infrastructure and rolling stock. Ford Rail Products? GM Transit Power? Tesla Locomotive? Boeing Rail? :)
 #1448373  by es80ac
 
I am sure the folks at Progress Rail/Electro Motive are extremely looking forward to GETS getting divested. It is a sure bet that a divested former GE transportation will lose market share. Unfortunately all the years of effort invested to put GE on top of the domestic locomotive business will be lost with this move.
 #1448480  by Ira
 
So if transportation is sold, will they have to buy out the employees pensions they have earned? Lump sum?
 #1448495  by es80ac
 
Allen Hazen wrote:Es80ac--
I think GE has put significant amounts of money into GETS in recent years (Tier-4 engine development, and lots of improvements to plants), which looks as if they were treating it as a "core" business. But I don't know enough -- about how their treatment of GETS compares to their treatment of other divisions, or of what the overall financial picture of the company is -- to be confident in making any comment.
Railroad supply has become an international industry, with leading companies (Siemens, Alstom, Bombardier, the Chinese) operating plants in multiple countries and selling to more. My impression is that GE has a solid position in the diesel locomotive corner of this business, but not in other parts of it (passenger trains, signalling…). It's a bit of a worry that the company that designed the PRR GG-1 doesn't seem to be offering ANYTHING in the way of electric locomotives!
Allen, unfortunately I am afraid GE management is under such pressure that they will make unwise decisions. For example, GE selling GE Capital or NBC sure did not do the parent company much good in the last few years. GE's original philosophy was always been to be #1 or #2 in a field or get out of that field. GETS is currently a dominant #1 in the domestic locomotive field, I don't see that changing any time soon without any external shock event such as this. So by that measure, I really don't think selling GETS make any long term sense, other than it would probably look good to the short sighted activist investors and blood sucking analysts, it might give a moderate very short term boost to the stock (Wall Street loves sense-less M&A and divestitures)
 #1448530  by Gilbert B Norman
 
It may have been Mr. Hazen's idea of an April Fools joke, but the possible exit is confirmed today by The Journal:

https://www.wsj.com/articles/ge-explore ... 1509031146" onclick="window.open(this.href);return false;

Fair Use:
General Electric Co. is looking to exit from the railroad business, one of its oldest, as new Chief Executive John Flannery looks to streamline the conglomerate.

The Boston-based company is exploring options for the GE Transportation division, according to people familiar with the matter, as a major part of Mr. Flannery’s plans to divest more than $20 billion worth of assets in the next two years.

The company, the people said, is looking to partner, spin off or possibly sell the operations, which primarily produce diesel-powered locomotives and railroad equipment. An outright sale could trigger a big tax hit since GE has owned the business for a century, one person said.

Although GE is one of the world’s biggest makers of freight locomotives, the business is cyclical and has been suffering lately from slack demand. In the first nine months of 2017, the unit’s revenue slipped 8% and profits fell 15%. The division accounted for $4.7 billion of GE’s total revenue of $123.7 billion last year.

It isn’t clear what the transportation business may be worth or what other units GE is looking to jettison. The down cycle for the rail industry is a key factor in determining the best way to exit it, the people said. A GE spokeswoman declined to comment.
disclaimer: author holds long position GE, which is presently the poorest performing security in his portfolio.
 #1448536  by John_Perkowski
 
ADMIN NOTE:

This matters to all Class I and II roads as well as the various passenger services. I am making this a GLOBAL topic for a few days.

Allen and MEC407: I've removed the April Fool stuff, since this is 1) for real, and 2) going global. Sorry. :(

Click here for a link to Bloomberg. It's a secondary source (citing the WSJ article), but WSJ is, as usual, behind the paywall.
 #1448539  by pumpers
 
It seems GM/EMD was a frontrunner in this respect, for the right or wrong reasons...
 #1448588  by ccutler
 
I am sure a vast array of private equity managers will be interested in buying it and running it as professionally as ever.
 #1448612  by time
 
They should move everything to the cloud. It won't solve any issue, but it sounds good and investors will love it. Fluffy clouds.
 #1448613  by Backshophoss
 
All this due to activist investors? NS went down this road,was able with stand the challenge,and survive
CSX seems to be headed to a meltdown under EHH and "activist investors".
Hopefully GE will realize the Transportation Division is not the problem,the "activist investors" are the problem!
 #1448618  by BandA
 
They'll just move the manufacturing to China. Or someone else will. Then when the Chinese have a monopoly they will increase prices.