News Column

Caterpillar's missed deadline good news for GE, but for Erie?

July 27, 2014

By Jim Martin, Erie Times-News, Pa.



July 27--Caterpillar Inc., often described as a fierce competitor for GE Transportation in locomotive sales, suddenly doesn't look so formidable.

That's likely to be good news for GE Transportation.

What isn't clear yet is whether that will be a big deal for workers at GE Transportation's plant in Lawrence Park.

Caterpillar's 2010 purchase of Electro-Motive Diesel had prompted GE Transportation to take notice of its well-financed competitor and to carefully examine its cost structure.

Recent months, however, have brought news that EMD won't meet a government deadline of Jan. 1 for rigorous new Tier 4 emissions standards for locomotives.

And it won't miss the deadline by just a little. Caterpillar officials said earlier this year they don't expect to have a compliant engine ready before 2017.

Executives at Illinois-based Caterpillar have shrugged off the importance of this delay, saying the railroad industry is slow to adopt new technology anyway.

Industry analysts don't see it that way.

In a recent edition of the Motley Fool, Neha Chamaria writes: "It's a big business opportunity for locomotive makers, and the first mover will naturally enjoy a significant competitive advantage. Unfortunately for Caterpillar investors, it looks like GE will take the cake."

Ed Hall, senior general manager for engine technologies at GE, put the delay in perspective during a recent interview.

"(Caterpillar) can repair older (locomotives) and refurbish them," he said. "But until they have a Tier 4 solution, they won't be able to sell a new one."

Months before the mandate, there are already signs of what the near-term future might hold.

During what was otherwise a tough second quarter -- revenues at GE Transportation were down 18 percent and profits fell 14 percent -- new orders jumped 35 percent.

In fact, the company already has contracts to deliver 250 Tier 4 locomotives in 2015 and 2016.

But those orders and others that might follow won't necessarily mean more jobs in Erie, where GE Transportation is the county's largest employer with about 4,500 employees. That outlook is complicated by the company's new plant in Fort Worth, Texas.

Jennifer Erickson, a spokeswoman for the company, said, "Fort Worth is positioned to be the primary North American Evolution Series manufacturer for Tier 4. Erie will focus on export and systems production, and will support manufacturing of Tier 4 as necessary."

What's more, she expects Erie-based employment to remain steady.

However, Scott Duke, president of Local 506 of the United Electrical, Radio and Machine Workers of America, said he's hopeful that this newfound advantage could be a more substantial boon to the Erie plant.

And he's also hoping the company will step back from a plan announced in April 2013 to cut 950 hourly and 100 salaried workers.

About half of those hourly job cuts already have taken place.

In recent weeks, however, 91 of those employees have been called back to work and another six are in the process of returning to their jobs, Duke said.

The company had said it planned to lay off hundreds more in the next two years, but Duke doesn't expect to see that happen.

"No, I do not," he said. "As far as I am concerned, it's a very positive (jobs) outlook, a very bright outlook. We are before the game compared to anybody else."

Barbara Chaffee, president of the Erie Regional Chamber and Growth Partnership, said she believes beating Caterpillar to the punch could mean good things for the company. But it's not certain, she said, that it will mean new jobs in Erie.

"With any luck it would be great to have some recalls of former team members at GE," she said.

But the company, which employs about 500 people at its plant in Fort Worth, does have another option, she said.

Erickson hinted, as the company has before, that Erie employment could hinge on the union's flexibility.

"Overall employment is tied to the competitiveness of the facility and market demand," she said. "We need to continue to find ways to improve our overall competitiveness, including cost and workforce flexibility to deliver on our commitments to customers."

JIM MARTIN can be reached at 870-1668 or by e-mail. Follow him on Twitter at twitter.com/ETNmartin.

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(c)2014 the Erie Times-News (Erie, Pa.)

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Source: Erie Times-News (PA)


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