Caterpillar Unit to Buy Locomotive Maker for $820 Million

[mahatmakanejeeves]

Source: The Wall Street Journal.

June 1, 2010, 10:41 a.m. ET
By Bob Tita

Caterpillar Inc. has agreed to buy locomotive maker Electro-Motive Diesel from private-equity firms Berkshire Partners LLC and Greenbriar Equity Group LLC for $820 million.

The deal deepens Caterpillar's penetration into the rail industry, pitting it against General Electric Co. in the North American locomotive market and putting Caterpillar in position to participate in the burgeoning rail industry in developing countries, such as China. Illinois-based Electro-Motive had sales of $1.8 billion in 2009. ... The deal is expected to close by the end of the year and comes as signs a recovery emerge in rail shipping volume.

....
Electro-Motive was originally owned by General Motors Corp., and it pioneered the use of diesel-electric locomotives in the 1930s. The technology replaced steam-powered locomotives by the 1950s. Caterpillar attempted to purchase the business from GM, but strong opposition to Caterpillar from the EMD's unions in the U.S. and Canada scuttled the deal, forcing GM to sell the unit to Berkshire and Greenbriar.

Electro-Motive dominated the North American locomotive market for decades before losing its market-leading share to General Electric in the 1980s. EMD is believed to have about 40% of the market, but its equipment remains popular with U.S. railroads. Demand for locomotives is highly cyclical with slumps lasting for several years. Demand in the U.S. has fallen significantly in response to lower shipping volume by railroads.

Write to Bob Tita at [email protected]

Read more: http://online.wsj.com/article/SB10001424052748704875604575280263343200050.html?mod=WSJ_Deals_LEFTTopNews

---

I try to read an article in the WSJ. every day. This upsets some people. Those who hate the WSJ. are free to ignore this thread. Thank you for your cooperation.

Disclaimer: I own shares of CAT. It was then and is now a good investment for me. This is not a solicitation for you to do anything, except to read the article.

Thanks to Trainorders.com for the news.

This is what put EMD on the map.

[seabeckind]

1. How come we're not one of them

"burgeoning rail industry in developing countries, such as China"

Maybe we ought to get us a rail system -- one that isn't 150 years old.

Ah, never mind. They probably just want the equipment so they can ship it to china.

Carry on, nothing to see here. BTW, will they get a tax break?

[mahatmakanejeeves]

5. "They probably just want the equipment so they can ship it to china."

Try as I might, I can't come up with a single reason why it's wrong for a company in the United States to manufacture a safe and legal product that the rest of the world wants to buy.

Would you prefer that we buy locomotives made overseas?

[seabeckind]

8. No, I would not

There are many empty factories in this US which were closed down and the manufacturing equipment shipped overseas. I watched a special a few years back that talked about the rubbermaid company in ohio. For various reasons they could no longer compete against foreign imports and finally closed down their factory. A group bought their extruding equipment (for 10 cents on the dollar), packed it up, and sent it to china.

NO!!!! I want our rolling stock made HERE!!! It was until the raygun era. That idiot who said those jobs aren't coming back is the idiot who is keeping them from coming back.

In Evansville IN the whirlpool plant is being shut down as we speak and the equipment will be sent to mexico. That is wrong.

Global economy my ass.

[madrchsod]

6. our rail system is always being updated and repaired

we have the best rail system in the world for moving commodities and general merchandise.

[seabeckind]

9. What about trucks?

If we have such a great rail system why are our interstates wall-to-wall semis?

And why can't this great rail system get me from Indy to Chicago in less than 4 hours?

[Richardo]

13. Each railcar displaces at least three trucks

Imagine the interstates if all those trucks were on the highway. Plus: diesel consumption. Plus: the emissions. Plus: congestion. Plus: Accidents. Plus: Truckloads of coal, petrochemicals, and hazmats co-mingled with school buses and minivans.



Here are 100 trucks that aren't in your way, just in one picture:

[Strelnikov_]

17. Because truck transport is heavily subsidized by the Goverment

That is, the highway system.

[BrightKnight]

19. A dedicated vehicle and driver for every container is very inefficient.

There is no good reason for long haul shipping via individual trucks. Time sensitive long haul produce shipments are generally sent via rail.

[Richardo]

11. The US rail system is a $50 billion/year industry, which employs 167,000 people...

...who make an average of $70,000 annually in salary, and $93,000 in total compensation. Each. Again, on average.

Just because you can't take a high-speed train from Chicago to St Louis does not mean we don't have a rail system.

http://www.aar.org/PubCommon/Documents/AboutTheIndustry/Statistics.pdf

[LiberalFighter]

2. Caterpillar are scum. They are the GE of transportation industry. nt

[SomeGuyInEagan]

3. Warren Buffet bought Burlington Northern in 2009 for $34B

Rail seems to be popular investment again.

http://www.msnbc.msn.com/id/33599744/ns/business-us_business/

[BR_Parkway]

4. Weren't they the one's laying off people and threatening more if healthcare

reform passed? But they can come up with $820M to expand?

[madrchsod]

7. cat is a suck ass place to work...

they have tried to bust the unions but they can`t get the job done. they know they have to have skilled union help but they can`t get it out of their system to try to break the worker`s backs.

[Populist_Prole]

10. Does EMD even manufacture in the US now?

Aren't most EMD locomotives built in London Ontario? I know they had a massive plant in LaGrange Ill but has been scaled back and last I heard they produced prime movers ( the actual diesel engine of a locomotive ) but I'm not sure they still do, or if the LaGrange plant is even there now.

A big order for SD-75Ms is actually being assembled in Mexico. So much for the much ballyhooed "exports" that were supposed to arrest ( forget about reverse ) the trade deficit.

I remember following the Cat strike back in the 90's and what bastards they were in the corporate media slinging BS.

[bossy22]

14. EMD still manufactures in the U.S.

they manufacture the prime movers, turbochargers, traction alternators, and electrical cabinets at LaGrange. London is more of an assembly plant

[Jazzgirl]

12. All the Engineers I know hated the Electro-Motive engines.

They said they were crappy. The railroad I work for quit buying EM and started buying GE many years ago.

[Tesha]

15. The news division of the WSJ is heavily fire-walled from the Editorial division (R&O).

Also, the people in the news division of the WSJ think the people in
the editorial division are a joke; I know this through first-hand contact
with those folks.

IMNSHO, you never need to defend news stories that appear in the WSJ.

Tesha

[Strelnikov_]

16. $820 M for a company with sales of $1800 M/yr?

In a sector on the verge of major expansion. Sounds like a deal.

[mahatmakanejeeves]

18. follow-up

Caterpillar to buy locomotive maker EMD

James B. Kelleher
Chicago — Reuters
Published on Tuesday, Jun. 01, 2010 5:44PM EDT
Last updated on Tuesday, Jun. 01, 2010 5:48PM EDT

....
Over the past four years Caterpillar, which is also a big maker of diesel engines and gas turbines, has spent about $2-billion in the rail sector.

It was an industry that was viewed as important but dull until last fall, when Warren Buffett’s Berkshire Hathaway Inc. bought Burlington Northern Santa Fe Corp. for $26-billion. It was Mr. Buffett’s biggest acquisition in the 44 years he has run Berkshire and one he characterized as “an all-in wager on the economic future of the United States.”

Please feel free to bet against Warren Buffett.