ERIE -- General Electric Co. keeps its massive locomotive manufacturing complex near Lake Erie's shore humming by spending millions on research and development -- and pursuing new customers overseas.
GE Transportation has been a fixture on the east end of this Erie County city for exactly 100 years. It once employed 20,000 workers who turned out products ranging from gun turrets during World War II to refrigerators. Employment has declined over the years, but the original business of building locomotives remains strong.
Its international business is booming. Traditionally, the company delivered about 70 percent of its finished locomotives to domestic railroads. But in the last two years, since the arrival of John Dineen as CEO of GE Transportation, international has increased to 40 percent of the mix this year and could rise to 50 percent in 2008.
"When I got here, this operation had a great legacy ... producing locomotives for the domestic market," said Dineen, who has spent 20 years with GE, much of it on international assignment. "We thought we could make it a more global business."
Employment in Erie is in the 4,900-person range, up 1,000 in the last four years, including 3,700 unionized workers.
One key is spending the money needed to make massive change. To develop its new Evolution diesel engine, introduced in 2005 and designed to exceed U.S. Environmental Protection Agency pollution standards, the company has spent more than $400 million in research, development and in changes to get the plant ready to produce the new engine.
By the end of this year, more than 2,000 Evolution engines, which feature 12 cylinders producing the power of 16, will be in service.
"In the 1960s and 1970s, General Motors (through its Electro- Motive Division) had about 80 percent of the locomotive business, while General Electric had about 20 percent," said David Taylor, president of consulting firm Taylor Raynauld Amar & Associates Inc., Montreal, Quebec Canada. "Now, that's entirely turned around. Why? Certainly they make a good product, and it's good marketing."
General Motors sold Electro-Motive in 2005 to private equity firms Greenbriar Equity LLC and Berkshire Partners LLC.
"Over the last 10 to 12 years, GE has been winning the locomotive battle and it goes back to them getting serious about building better locomotives," said James Husband, president of consulting company RailSolutions Inc., Alexandria, Va. "They got serious about being No. 1."
Husband added that with General Motors' sale of Electro-Motive, there's some question in the industry as to the research and development, the money, and commitment by the new owners.
"They don't have quite the deep pockets GE does," Husband said.
GE Transportation continues to perfect new uses for equipment developed for locomotives. For example, GE rapidly is becoming a player in windmill gearbox production, while diesel engines are being adapted for use in marine and stationary applications. Locomotive drive systems are being sold for giant off-road dump trucks.
Another key is …