From Jim Cramer's "The Street" site:
"Among the possible divestitures at GE is Baker Hughes (BHGE) , which was reshaped after a combination with GE's oil and gas business, and is now well-positioned for a spinoff, analyst Jeff Sprague of Vertical Research Partners has said. Other Wall Street analysts have suggested GE may consider selling assets from lighting, which was part of retiring vice chair Beth Comstock's portfolio, to power conversion and even the locomotive division previously headed by new CFO Jamie Miller."
https://www.thestreet.com/story/14350885/1/ge-targets-20billion-spinoffs.html
So who would be interested in acquiring it; Bombardier? Alstom/Siemens?
"I Often Dream of Trains"-From the Album of the Same Name by Robyn Hitchcock
As has been said ad nauseam in business context: everything in business has a price. If someone can impress GE with a proposal, there’s no real institutional reason now for the company to hang onto locomotives in an increasingly arbitrarily regulated space...
(I would also say that the key corporate-policy strengths of the locomotive division really evolved under Jack Welch, and the current management does not seem as interested in every niche of potential competence as he was. So it will be about the money now, and not what can be done in compelling presence in (and for) the evolving future...
Berkshire Hathaway may have an interest ;)
rdamonBerkshire Hathaway may have an interest ;)
Wouldn't Berkshire Hathaway's ownership of BNSF bring up some Anti-Trust implications were it to purchase the GE Locomotives business?
Never too old to have a happy childhood!
Accordenting to several news items on CNBC this week (10/19 & 10/20) he new CEO stated there are no sacred cows that ALL business unites are under consideration. It was already announced on CNBC the consolidation of 5 research centers to just two world wide (US and India.) Can see what is left of the Erie facility becoming either a sub-divison or a rust field.
But, lets think good things. Are there an thing business elements from Baldwin, Lima, ALCO, Pullman around that would want to get back into the railroad business?
I highly doubt GE would cut the Transportation Division(that's what locomotive production is under) as it's one of the largest behind jet engines and health care...besides, when business is good it brings in to much money. Also, the new CEO wants to get bat to being an industrial conglomerate, the Transportation Division is just that, industrial.
Businesses that forget (or minimize) the things that made them great do so at their own peril. Getting away from the business's roots in many cases is the first step to bankruptcy.
I highly doubt they will get rid of their Transportation divison for one reason only. They would loose one of the biggest cash cows in the company with their jet engine business. GE is the largest maker of turbine engines in the world their joint venture with Pratt and Whitney powers the A380 they are the sole engine maker for the new 777 improved line they also power the 787 and have a 50 percent stake in CFM engines that power the 737 and A320 lines. They dominate the locomotive business and the CFO knows were the cash comes from.
The issue is more 'would they spin off Locomotive from the Transportation Division' and I think they could do this comparatively easily without much repercussion. Profitability is low enough that they choose not to keep Erie open, even after promising locally that they would; that doesn't spell much of a 'powerhouse' to me, and to my knowledge GE does not have an in-house high-speed engine project to match the C175 at Progress or the Cummins QSKs -- that hasn't mattered yet, but look at the next prospective round, sooner or later, of political NOx emissions reduction, which even the current administration has taken an interest in debunking on the facts. Game changes for any large medium-speed-dependent maker when even no practical amount of EGR can make the political 'numbers' at the extremes of the emissions test cycles...
As a heavy GE stockholder, yes, I hope they keep Locomotive, even if it winds up being extensively an export producer for a while. And no, selling it to Berkshire Hathaway isn't an antitrust violation if they keep producing for all customers at a fair and disclosed price, let alone try to undercut the other 'competition' in the locomotive industry. If they were to cut sweetheart deals with or for BNSF, that might be a different story... but I'd expect such a deal to be framed in very large replacement orders, similar to the one UP made for All Those SD70Ms, with "better" marginal terms per unit on paper, and I think this would pass even a tacit-collusion test if the 'savings' could be justified on volume production setup.
Shadow the Cats ownerI highly doubt they will get rid of their Transportation divison for one reason only. They would loose one of the biggest cash cows in the company with their jet engine business. GE is the largest maker of turbine engines in the world their joint venture with Pratt and Whitney powers the A380 they are the sole engine maker for the new 777 improved line they also power the 787 and have a 50 percent stake in CFM engines that power the 737 and A320 lines. They dominate the locomotive business and the CFO knows were the cash comes from.
While I agree with you that it would be a mistake for GE to do so - when regiems change sometimes the newly promoted have 'strange' ideas, that they have cultivated during the climb to the Ivory Tower - somehow they have viewed the company's main product(s) as a liability and not a profit center.
During my career, I had the opportunity to view several of these 'crackpots' - fortunately for the company they didn't last long and didn't get their 'crackpot' ideas implemented.
EHH comes to mind as that type of crackpot.
I'll tell you, I often wonder just where these crackpots come from and just where they get their Svengali-like powers to disseminate their nonsense and have people believe it.
Ever read that comic strip "Dilbert" by Scott Adams, and all the crackpot "business-fad-of-the-moment" ideas that go bouncing around the company Dilbert works for? The reason "Dilbert's" so funny is because it's so true.
Maybe GM could buy GE's locomotive business to get back into the rail sector. That would really liven up the debate of EMD vs GE.
Jeff
jeffhergert Maybe GM could buy GE's locomotive business to get back into the rail sector. That would really liven up the debate of EMD vs GE. Jeff
Be interesting for Siemens to get into the US freight game.
It's been fun. But it isn't much fun anymore. Signing off for now.
The opinions expressed here represent my own and not those of my employer, any other railroad, company, or person.t fun any
Firelock76 I'll tell you, I often wonder just where these crackpots come from and just where they get their Svengali-like powers to disseminate their nonsense and have people believe it. Ever read that comic strip "Dilbert" by Scott Adams? The reason "Dilbert's" so funny is because it's so true.
Ever read that comic strip "Dilbert" by Scott Adams? The reason "Dilbert's" so funny is because it's so true.
Some people probably had the same reaction when the rumors that GM was going to sell EMD started.
seppburgh2 . But, lets think good things. Are there an thing business elements from Baldwin, Lima, ALCO, Pullman around that would want to get back into the railroad business?
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National Railway Equipment owns the rights to the Alco locomotive name and provides support to the 251 engine family. NRE buying the GE locomotive business is an interesting although rather unlikely possibility.
This is the Harrison effect.
CP - parks 30% or so of its locomotive fleet and has not purchased any new since EHH took over.
CSX - parks 30% or so of its locomotive fleet and will likely not purchase any new while EHH is in control.
Throw in all the 2-Mile+ long trains that all railroads are operating as almost an emulation of EHH-run railroads, NS rebuilding anything it can get its hands on to avoid Tier 4, and the permanent decline in coal loads and you get a soft locomotive market.
carnej1 Firelock76 I'll tell you, I often wonder just where these crackpots come from and just where they get their Svengali-like powers to disseminate their nonsense and have people believe it. Ever read that comic strip "Dilbert" by Scott Adams? The reason "Dilbert's" so funny is because it's so true. Some people probably had the same reaction when the rumors that GM was going to sell EMD started.
You know, here's the thing. If you've got a division of the company that's making money, no matter how much, no matter how little, it makes no sense to get rid of it.
The outfit I work for dropped two profitable branches over the years, who knows why, and in the end it turned out to be a mistake in both cases.
If the divisions were losing money it would have been another matter, but that certainly wasn't the case.
Firelock76You know, here's the thing. If you've got a division of the company that's making money, no matter how much, no matter how little, it makes no sense to get rid of it.
More important for the decisions are the prospective development and eventually necessary investments.Regards, Volker
Firelock76 carnej1 Firelock76 I'll tell you, I often wonder just where these crackpots come from and just where they get their Svengali-like powers to disseminate their nonsense and have people believe it. Ever read that comic strip "Dilbert" by Scott Adams? The reason "Dilbert's" so funny is because it's so true. Some people probably had the same reaction when the rumors that GM was going to sell EMD started. You know, here's the thing. If you've got a division of the company that's making money, no matter how much, no matter how little, it makes no sense to get rid of it. The outfit I work for dropped two profitable branches over the years, who knows why, and in the end it turned out to be a mistake in both cases. If the divisions were losing money it would have been another matter, but that certainly wasn't the case.
It does if you mean to make a short term bump in your stock. I've seen a lot of companies large and small, sell divisions or parts of their business lines to raise cash. Sometimes the company was having trouble, sometimes the top management just wanted to show a quick inflow of cash. Sure, it may hurt down the road, but long term in the business world is the next quarterly report. Usually you're going to have to sell the parts that make money.
I really like it when a company sells off something and says it's to focus on it's "core" business. I remember one small telecommunications start up way back that, at the time, was making most of it's money from printing the yellow pages directory. (You know that's a while back.) They sold off that part of the company to concentrate on their core business. That core business must have been losing money because they were in severe financial trouble from their telecom activities. They needed cash and sold off what they could. It didn't help and they were eventually swallowed up by a large telecom company.
I've read that the new CEO says he wants to get back to GE's roots in manufacturing. But watching a national business show last week, I'm not so sure. Even if true, the manufacuring he means may not be some of the lines GE currently has. Even if the transportation division is let go, it might go piecemeal. A potential buyer may want the lines dealing with air planes but not railroads. Although I could see a foriegn buyer or private equity group buying the rail divisions.
We will just have to wait and see.
Oh...you mean like marriage! ( which actually is the most important economic decision you make in your lifetime ...who you choose to marry)
Or guessing about the future and using rationale thought to justify that and more often than not blows up in your face.
I’ve seen a few comments in this thread talking about aviation. Just to be clear - GE Transportation is rail, mining, and marine. Aviation was moved into its own business (GE Aviation) several years ago.
MiningmanMore important for the decisions are the prospective development and eventually necessary investments. Regards, Volker Oh...you mean like marriage! ( which actually is the most important economic decision you make in your lifetime ...who you choose to marry) Or guessing about the future and using rationale thought to justify that and more often than not blows up in your face.
Regards, Volker
Artists and Financiers see things in their minds that others don't Artists commit their visions to paint & canvas or movies or statuary - Financiers see things in numbers that others don't - successful ones profit, those without success go bankrupt. Any wonder that a high number of both meet their ends at their own hands. Seeing beyond reality must be maddening.
There was an editorial piece in Trains, I think by Ed King and I think around the early or mid '90's, that really stuck in my mind because at the time I felt that I was living with the result of what he was talking about. He mentioned that traditionally companies had promoted from within, and after working their way up through the ranks, by the time they reached the upper levels of management, they had a thorough understanding of the business. But many young people wanted to start right at the top, so colleges obliged by starting to teach management as a separate course. Now, many managers know about formulas (formulae?) and how to plug the numbers in, but don't understand the basic business. Think obsession with one formula like operating ratio.
That was a long time ago so my memory may be clouded a little, and I may have added to it a little with my own opinions, but I think it's close to what he said.
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"A stranger's just a friend you ain't met yet." --- Dave Gardner
Paul of Covington There was an editorial piece in Trains, I think by Ed King and I think around the early or mid '90's, that really stuck in my mind because at the time I felt that I was living with the result of what he was talking about. He mentioned that traditionally companies had promoted from within, and after working their way up through the ranks, by the time they reached the upper levels of management, they had a thorough understanding of the business. But many young people wanted to start right at the top, so colleges obliged by starting to teach management as a separate course. Now, many managers know about formulas (formulae?) and how to plug the numbers in, but don't understand the basic business. Think obsession with one formula like operating ratio. That was a long time ago so my memory may be clouded a little, and I may have added to it a little with my own opinions, but I think it's close to what he said.
Even when I was in college in the late 60's there was a theory floating around that if you were 'trained to manage' you could 'manage' any enterprise without having to understand the fundamentals of that particular enterprise. Can't say that I agreed with it then or now.
The same idea has been applied to OTR driving when it comes to dispatching. My senior drivers and my husband can tell you horror stories about their college educated ones that could not figure out why they got laughed right out of the drivers room with some of their demands. My husband had one that wanted my FIL and him to go overnight from LA to Chicago I am not talking Lousiana when my hubby asked where the cargo plane was for the truck to load it on the dispatcher said it was only 2 inches on the map they could be there by 9 am when it was 4 PM at the time. They were not loaded yet and 2000 miles away yet. What became of said moron he married the bosses daughter and now runs that company and wonders why he has a 400 percent turnover rate.
These kids that go to college forget that the people that have been in the real world know more than they ever were taught. I have a mechanic in the shop that can tear down an engine rebuild it in a week and that includes hot tanking it to remove the crud from a failed EGR cooler. We just hired his new apprentice fresh out of UTI which is supposed to be a good tech school. This kid doesn't know what the hell he is doing in the shop.
BaltACD Even when I was in college in the late 60's there was a theory floating around that if you were 'trained to manage' you could 'manage' any enterprise without having to understand the fundamentals of that particular enterprise. Can't say that I agreed with it then or now.
Shadow the Cats ownerWe just hired his new apprentice fresh out of UTI which is supposed to be a good tech school. This kid doesn't know what the hell he is doing in the shop.
I'm sure when that mechanic first hired with a shop the old timers complained he didn't know what the hell he was doing, either. Nobody is born into a vocation.
I've said it before, and I'm sure I'll have to say it again: I've known managers with experience, and those that hired out of college. There were ones from each avenue that were great, and others that sucked. It's not a condition for success or failure either way. So let's stop with the gross generalizations. They should be beneath us.
Per Paul of Covington's comment...
I think Ed King wasn't the only one saying that at the time.
It reminds me of my boss when I worked for a gun company. He had a lot of high-powered contacts who were always inviting him to buy into whatever enterprises they were looking at, and he always refused. Why?
Well, as he put it "I understand the business I'm in, at least I think I understand it. I don't understand these other things I'm invited to get into, so I'd rather not. Better to stick with what you know than try to learn something else the hard way."
It struck me as very wise. It's why I've never believed in the concept of the "interchangeable executive." Sounds good in theory, but doesn't necessarily work in practice.
How about a different angle, which I've been thinking about lately.
Quietly, China and India have been pursuing their own railroad technology, which would make sense, particularly for China. We can simply not expect a nation like that not to have their own suppliers and developers. Naturally, there is more competition than ever in the world for large industrial products: locomotives are no exception.
I think what we're seeing play out is a realignmnet from multiple western firms grinding it out amongst themselves to a pivot where they must face their new eastern competitors. GE and EMD can't rely on export contracts since China's firms are more than willing to bid, and bid low.
Recently, we learned at Altsom and Siemens are planning to merge their transportation businesses, creating one of the largest - if not the largest - railroad suppiers in the West - with the stated intention of doing it to go up against increasing competition from China.
I would not be at all shocked if there was further consolidation of the railroad supply business. EMD seems safe under Caterpillar, but if GE's locomotive business is about to be orphaned, I'd think Siemens is a likely pickup candidate, which would give them a firm foothold with which to battle it out with their new rivals.
Siemens is a proven railway suppier already, obviously, and as I recall, has been furnishing equipment for GE and/or EMD for years.
Could we be seeing the rise of a new signalling, train-control, and locomotive empire?
The market will decide, but I sure think it's sliding that way!
I would be quite surprised to see Siemens-Alstom going after GE Transportation, as they are quite busy trying to merge themselves until the end of 2018...
N.F.
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