Progress Rail buying EMD

[nanaimo73]

It was reported this morning on LocoNotes that Progress Rail is buying EMD.

Details can be found here-
http://www.breitbart.com:80/article.php?id=xprnw.20100601.CG12502&show_article=1

[eolafan]

VERY interesting...we'll see very soon how General Electric reacts to this news.

[Paul_D_North_Jr]

The linked news release says the price is $820 million, and that EMD will become a wholly-owned subsidiary of Progress Rail - which itself is a wholly-owned subsidiary of Caterpillar, Inc.

This acquisition makes a lot of sense to me.  I was wondering what EMD was going to do for some 'deep pockets' to keep itself going and remain a competitior to GE.  Cat has wanted into this market for years, but few of its efforts seemed to gain sufficient traction [pun intended].  This is the classic U.S. business alternative - "If you can't beat them - buy 'em !".

Thanks for posting this, Dale. 

- Paul North.  

[samfp1943]

Paul_D_North_Jr

The linked news release says the price is $820 million, and that EMD will become a wholly-owned subsidiary of Progress Rail - which itself is a wholly-owned subsidiary of Caterpillar, Inc.

This acquisition makes a lot of sense to me.  I was wondering what EMD was going to do for some 'deep pockets' to keep itself going and remain a competitior to GE.  Cat has wanted into this market for years, but few of its efforts seemed to gain sufficient traction [pun intended].  This is the classic U.S. business alternative - "If you can't beat them - buy 'em !".

Thanks for posting this, Dale. 

- Paul North.  

It would seem to be another facet to the old saying about " Change being the one constant in life.."

The one question that springs to mind about this acquisition is " Is there any relationship between the entity of Warren Buffett's Berkshire Hathaway group and this entity that is Berkshire Partners,LLC. or to include; Greenbriar .??? 

If there is, it would sure bode changes in the BNSF equipment area(?).  One thing about it it will sure make some ultimatye changes in the 1' to 1' Scale railroad environment.

Be interesting to see how this all shakes out ,over time.

[carnej1]

samfp1943

Paul_D_North_Jr

The linked news release says the price is $820 million, and that EMD will become a wholly-owned subsidiary of Progress Rail - which itself is a wholly-owned subsidiary of Caterpillar, Inc.

This acquisition makes a lot of sense to me.  I was wondering what EMD was going to do for some 'deep pockets' to keep itself going and remain a competitior to GE.  Cat has wanted into this market for years, but few of its efforts seemed to gain sufficient traction [pun intended].  This is the classic U.S. business alternative - "If you can't beat them - buy 'em !".

Thanks for posting this, Dale. 

- Paul North.  

It would seem to be another facet to the old saying about " Change being the one constant in life.."

The one question that springs to mind about this acquisition is " Is there any relationship between the entity of Warren Buffett's Berkshire Hathaway group and this entity that is Berkshire Partners,LLC. or to include; Greenbriar .??? 

If there is, it would sure bode changes in the BNSF equipment area(?).  One thing about it it will sure make some ultimatye changes in the 1' to 1' Scale railroad environment.

Be interesting to see how this all shakes out ,over time.

Berkshire Partners and Berkshire Hathaway are two completely distinct companies (this subject came up on the boards numerous times when GM sold EMD):

http://en.wikipedia.org/wiki/Berkshire_Partners

So Cat finally gets it's prize.. Many may recall that Caterpillar was the winning bidder when General Motors put EMD on the auction block, the deal was nixed by the labor union representing the workers at the London,Ont. plant. Wonder what has changed on that front? Maybe the Union is more reasonable given the economy?

 Also, I wonder what the future holds for the EMD 710 Engine? That product line competes with Cat's own medium speed designs in the marine and power markets. How long will Cat keep making them?...

[Victrola1]

Interesting speculation on whose engine technology will be used.

Blade and/or backhoe optional locomotives soon?

 

[beaulieu]

carnej1

 Also, I wonder what the future holds for the EMD 710 Engine? That product line competes with Cat's own medium speed designs in the marine and power markets. How long will Cat keep making them?...

 

Simple answer, whichever sells better. Likely the Marine and power products segments will be combined, at least will have a common sales force.

[YoHo1975]

I would imagine that Caterpiller would have a hard time ending the 710 engine for Railroad purposes. The question is which design is better in marine and power apps and which has a bigger install base.

Is Caterpiller the type of company that would nix and outside design over their inhouse design? or would they choose the best?

And of course the other question is what of the Diesel engine designers.

EMD hasn't been doing much lately, so maybe it's a non-issue, but I would expect there is a lot of redundancy there...Of course, EMD seems capable of making an engine used in Rail Applications where as Cat seems to be less capable there.

Anyway, I've been expecting EMD to somehow combine with a manufacturer of Gensets and used engine sales. It makes a lot of Synergistic sense.

I don't see GE doing anything in the face of this news. Why should they?

[Paul_D_North_Jr]

 

Victrola1

[snip] Blade and/or backhoe optional locomotives soon?

No - it's just that a different kind of 'track' might be used under those future SD's . . .

[creepycrank]

One benefit that comes to mind for EMD is financing locomotive sales through CAT. GE has had a big advantage because of their commercial financing branch.

[YoHo1975]

I assumed that EMD leasing was equivalent...when backed by GMAC.

[jrbernier]

  EMD's marine/power generation sales of 710 based units is much larger than the GE marine/power plant applications.  Since the 710 still has some 'growth' left in it, and it is Tier II certified - it will be around for the near future.  This will allow the CAT/EMD engineers to develop a new power plant of the future.  Sales have been poor since the recession(GE sales have been just as bad, but they have other revenue sources).

  CAT has tried to get into locomotive power plants several times, but their higher speed engines have been considered 'rough' running.  This could be a very good marriage of resources.

Jim

[YoHo1975]

Don't forget the H-Engine which I understand to be not unpopular in Marine and power applications.

It also represents a shift away from the 2-cycle Diesel that was EMD's bread and butter.

The question is does Cat give EMD the resources to build the successor to the 710? Or do they give them the technology and stability to develop off of the H-Engine or off Cat products in the 4 cycle arena. Or do they just RIF a bunch of people form one or both organizations and call it good?

I wonder how many Engine design Engineers EMD still employs?

[beaulieu]

YoHo1975

I wonder how many Engine design Engineers EMD still employs?

 

More than you might think. It has taken a lot of engineering expertise to take the 710G engine that didn't meet Tier 0 emissions standards to one that meets Tier 2. Just because they still call it a 710 engine doesn't mean that there are many parts that are the same as those installed on the first 60 series locomotives.

[YoHo1975]

I have no doubt, but most if not all of that work was done when they were still a division of GM, I'm wondering if in their quest for profitability, how many of those people were let go in the past 5 years. And what of the H-engine design team which I assume was a separate group. Probably all RIF'd. Does EMD, today have the staff to build the replacement for the 710/H-engine Or is it just skeletal?

[creepycrank]

Its a funny thing that in the EMD engineering department there a lot of people that use to work for "Harvester" now International Truck and Engine in Melrose Park and visa versa.

[YoHo1975]

Used to live a few miles east of their place. What were they called after International Harvester, but before the current name?

Did EMD poach these people to replace retirees or restaff after cuts or just natural attrition? I would think that those 2 are your best options if you work on that type of product and want to stay in Chicago.

[carnej1]

YoHo1975

Don't forget the H-Engine which I understand to be not unpopular in Marine and power applications.

It also represents a shift away from the 2-cycle Diesel that was EMD's bread and butter.

The question is does Cat give EMD the resources to build the successor to the 710? Or do they give them the technology and stability to develop off of the H-Engine or off Cat products in the 4 cycle arena. Or do they just RIF a bunch of people form one or both organizations and call it good?

I wonder how many Engine design Engineers EMD still employs?

The 710 is one of the most popular medium speed diesel engines in the world especially in heavy haul locomotive applications so I expect it to stay around for the foreseeable future and quite probably go through further development.

As far as possible 4 cycle developments while the 265 H engine will have support for some time due to the large locomotive order being built in China,It makes no sense at all for CAT to develop a clean sheet engine just for EMD locomotive applications. I would strongly suspect that future 4 cycle EMD engines will be developed from the CAT C280 and/or C175 engine families.

Some seem to be of the opinion that CAT can never built a decent locomotive prime mover of it's own design due to the MK5000C (CAT 3612 engine) flop but I would point out that the EMD H engine was not successful in the North American Market either...

I wonder what will happen with the EMD ECO power 710 rebuild program for medium horsepower locomotives given that CAT/Progress Rail have been very active in developing repower packages using iin-house engine designs, the 3500 series in particular. These medium horsepower engines actually have had some decent marketshare in the Global locomotive market and recently have made some in-roads in the US...

 

[YoHo1975]

They haven't really made any inroads in the US. There has been some testing on the NS and no further orders.

The 710ECO has the advantage of being an EMD 710 which as you rightly point out is popular and has parts commonality and design similarity to a huge install base of EMD locos the world over. I don't see how the Cat powered product stands a chance.

As for the H engine, it's my understanding that not all of the SD90s problems were related directly to the prime mover.

I don't know enough about Diesel engine manufacture to be able to give an educated opinion, but Cat's problems aren't just the MK5000, they have been involved in various and sundry attempts to enter the market that have largely failed. EMD seems to simply know what a locomotive needs out of a diesel engine. So I wouldn't discount the work that they did on the H engine. It's equally plausible that that work will influence all of Caterpillar's designs.

[BT CPSO 266]

 Wonder if they will move the assembly plant into the states?

[cx500]

The British Columbia Railway seemed to be quite successful with their fleet of RS-18s re-engined with Cats.  Once CN bought BCR, they were retired fairly fast, but I believe that is more because they were oddballs in the larger fleet.  The BCR shops were closed and they became unwanted orphans in the CN environment.

In the past there were a number of railroads whose fleet came from mostly one manufacturer.  While they might order a handful of locomotives from another company they rarely lasted long or created repeat orders.  Some mechanics couldn't be bothered to understand a new engine, and keeping enough parts in stock for only a few locomotives was expensive.  This was also likely an issue with the various Cat re-powerings on other roads.

Anyway, it will be interesting to see how this evolves.

John

[edbenton]

You also are forgeting the 800LB Gorilla in the room.  Pretty soon the RR's will have to meet Teir 3 and then Teir 4 Emissions standards on New Orders.  There is No Way a 2 Stroke could Ever meet that.  Cat however has been meeting those in the Heavy equipment market in some of the Off Road 400 Ton Dump trucks that are Diesel Electric powered.  CARB and the EPA tell you what you do anymore in the USA not the workers.  Look for Caterpiller to droip in the C175 or C280 class motor into the SD70 carbody real soon.  The 710 is DEAD and you are going t hate it no more 2 cycle EMD's

[beaulieu]

edbenton

You also are forgeting the 800LB Gorilla in the room.  Pretty soon the RR's will have to meet Teir 3 and then Teir 4 Emissions standards on New Orders.  There is No Way a 2 Stroke could Ever meet that.  Cat however has been meeting those in the Heavy equipment market in some of the Off Road 400 Ton Dump trucks that are Diesel Electric powered.  CARB and the EPA tell you what you do anymore in the USA not the workers.  Look for Caterpiller to droip in the C175 or C280 class motor into the SD70 carbody real soon.  The 710 is DEAD and you are going t hate it no more 2 cycle EMD's

 

You would be surprised Ed. Word that I am hearing is that EMD has Tier 3 licked with the 710G engine, and that they are very, very close on Tier 4 without the need to resort to Urea. By contrast what I hear is that GE isn't looking good on Tier 4 without Urea aftertreatment. If this comes to pass it would give a tremendous boost to EMD.

[CSSHEGEWISCH]

It would be interesting to find out how PTRA in Houston is doing with its all CAT-powered fleet and how well NOPB is doing with mostly CAT-powered switchers.

Has anyone heard if the Department of Justice has weighed in with antitrust issues in this acquisition?

[edbenton]

Cat is known as a 4 stroke ONLY company however the 710 series would be a Stepchild that No one wants in HQ.  No one there wants the 710 series.  What Cat wanted and this is from Years ago is Access to the RR's to be a Locomotive BUILDER and that only.  Now that they own EMD the 710 is DEADER than Blagos Political Career in IL.  I tested for a Job at Mossville in 2003 were they were running a Head to Head comparison of a 710 16 clyinder motor and their 3516 series.  The 3516 lasted longer at full load by 2000 Hours following standard Maintance Procedures.  This was a 24 hr a day FULL LOAD test at max HP the 710 blew a connecting rod thru the block.  Both engines were Brand new fresh off the line and EMD LOST. 

There is no way in HADES EMD was going to make Tier 4 without Urea and DPF Aftertreatment.  CAT Tried and Failed in the OTR industry to meet the same standards in OTR without EGR and FAILED.  It was so bad Cat Bailed out of the OTR industry all together.  There is no way you can get .2 Grams NOX per HP per Hour without Urea and DPF aftertreatment.  Sorry this is the Standard in Europe for 10 years and they have been running it for years there.

[Paul_D_North_Jr]

CSSHEGEWISCH

  It would be interesting to find out how PTRA in Houston is doing with its all CAT-powered fleet and how well NOPB is doing with mostly CAT-powered switchers. 

Well, as to PTRA, perhaps ed blysard has some insights that he can share.

CSSHEGEWISCH

  Has anyone heard if the Department of Justice has weighed in with antitrust issues in this acquisition? 

Probably too early for that yet.  Offhand, I don't see a problem with it - yes, it involves one of the major locomotive-building competitors in the US rail industry, but for EMD it's really just a name and ownership change.  It's not like one competitor is swallowing and killing off another - as it would be if GE was acquiring EMD - because neither Caterpillar nor Progress Rail have anywhere near the market share that EMD does.  A fair argument could be made that this acquIsition will improve competition by strengthening EMD's financial position and resources, which in recent years has been the runner-up to GE as No. 1.

- Paul North. 

[carnej1]

YoHo1975

They haven't really made any inroads in the US. There has been some testing on the NS and no further orders.

The 710ECO has the advantage of being an EMD 710 which as you rightly point out is popular and has parts commonality and design similarity to a huge install base of EMD locos the world over. I don't see how the Cat powered product stands a chance.

As for the H engine, it's my understanding that not all of the SD90s problems were related directly to the prime mover.

I don't know enough about Diesel engine manufacture to be able to give an educated opinion, but Cat's problems aren't just the MK5000, they have been involved in various and sundry attempts to enter the market that have largely failed. EMD seems to simply know what a locomotive needs out of a diesel engine. So I wouldn't discount the work that they did on the H engine. It's equally plausible that that work will influence all of Caterpillar's designs.

UP also ordered a small number of Cat engined repowered units from Progress..The 710 ECO does seem to be garnering considerably more interest with the KCS and UP orders so they may very well they will continue to market it. I would bet the 710 engine line will be around for some time..

While you are correct about Cat's previous attempts to gain marketshare in the North American locomotive market if you look around the world you will find many low to intermediate horsepower locomotives with Cat engines. They also had engines in many US industrial locomotives in years past..

 As far as the 265 H neither UP nor CP (the only buyers of the SD90MAC) were very happy with it and the 12 cylinder 265H powered SD89MAC(which was supposed to replace the SD70 series in the EMD catalog) did not garner any orders. Perhaps EMD and their Chinese partners Dalian will be able to come up with major improvements. I wonder if CAT will sell the rights to the H engine design to Dalian and someday we could see a North American loco (from Bombardier maybe, or NRE) with a Chinese made 265 H powerplant..

[beaulieu]

Whoa Ed, first off the standards for locomotives and off-road equipment is not the same as for truck engines, or Cat would be dead completely. Second if they went into a Class I railroad with a take it or leave it attitude, they better be prepared for the door shutting in their face. GE could certainly build enough locomotives to replace the modest numbers that EMD is producing. They will now need the railroads a whole lot more than the railroads need them.

[YoHo1975]

Cat is 4 Cycle only... Are their ANY other Diesel Engine manufacturers besides EMD that are 2 Cycle primarily?

Saying Cat is 4 Cycle only seems to me to be saying not much of anything. Nobody was sure how EMD would make the 710 a tier 2 engine and they did it. I wouldn't count them out quite yet. In either case, this is an interesting discussion. I'd love to see more engineering info sprinkled among the vitriol.

[Paul_D_North_Jr]

Small article on this in today's June 2, 2010 Wall Street Journal - 'Marketplace' section, Page B1 - "Caterpillar, GE in Iron-Horse Race", by Robert Guy Matthews.  The only significant new info or analysis that I saw in it was that EMD has the largest existing customer base - 33,000 locomotives installed worldwide, as compared to GE's 15,000. 

Here's the best I could do for the links to it - may be only the 1st few lines - if so, you'll have to do a Google Advanced News Search to get a link to the entire text of the article.

- Paul North. 

http://online.wsj.com/article/SB10001424052748704875604575280263343200050.html?

http://online.wsj.com/article/SB10001424052748704875604575280263343200050.html?mod=WSJ_hpp_LEFTWhatsNewsCollection#articleTabs%3Darticle 

See also the WSJ's "UPDATE: Caterpillar Unit To Buy Locomotive Maker For $820M", dated June 1, 2010, by Bob Tita, at either -

 http://online.wsj.com/article/BT-CO-20100601-708117.html?mod=WSJ_Deals_LEFTLatestHeadlines 

or  http://online.wsj.com/article/BT-CO-20100601-708117.html?