“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.”
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…
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.
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.
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.
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.
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.
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
