US locomotive makers: EMD fighting to regain ground

Amid the gleaming, freshly painted diesel locomotives in the test shop of General Electric’s Erie, Pennsylvania, locomotive plant, it can be hard to spot the workers. They spend most of the time inside the vehicles using laptop computers plugged into the locomotives’ electronics to check for faults. The reliance on computer testing underlines how, while the newest of North America’s tens of thousands of freight diesel locomotives outwardly resemble their decades-old predecessors, the technology inside has been transformed.

Engines, motors and control systems have all been modernised as GE and Electro-Motive Diesel (EMD), the two companies that share a duopoly, compete to meet railroads’ demands.

GE has established a clear lead in sales in North America – much the world’s largest rail freight system – in the last 10 years. GE’s executives attribute their control of around 70 per cent of the market to a design revamp to reduce fuel consumption and boost hauling power.

John Hamilton, EMD’s chief executive, blames his company’s position on the malaise under the ownership of General Motors, the struggling carmaker. His company is working on reviving its position under the private equity owners that bought it from GM in 2005.

The presence in the Erie test shop of new locomotives in the livery of MRS Logistica, a railway operating in south-eastern Brazil, is a reminder that both companies also compete fiercely outside North America.

EMD, which makes around half its sales outside North America, claims until recently to have had a higher share of the export market for freight diesels than GE, but faces stiffening competition.

Mr Hamilton says he expects a “softening” in North American orders for 2009, the start of a recovery in 2010 and 2011 and a return to historic average order levels in 2012. The US slowdown is less severe for the North American railroads than previous crises because of continued strong demand for rail-hauled coal and wheat and because trucking lines increasingly use railroads for long-haul trips.

“Look at the cost of trucking with the fuel price as it is,” Lorenzo Simonelli, GE Transportation’s chief executive, says. “You’re much better on freight rail.”

Despite the big changes to the electronic systems, both producers’ locomotives rely on principles established more than 80 years ago. A huge diesel engine drives an electric generator that powers motors on each of the locomotive’s six axles.

In the last 15 years, the biggest change has been from direct current-driven traction motors towards alternating current. AC motors, which are controlled by complex electronic equipment that varies the current’s frequency, are more expensive but need less maintenance.

Most railroads favour AC motors for tough duties such as hauling heavy coal trains. DC locomotives are sometimes used for lighter duties.

Other changes have been driven by tightening US Federal emissions standards. GE’s Evolution class locomotive, first introduced in 2005 and now its main model, uses a 12-cylinder engine engineered to produce the same power as its previous, 16-cylinder engine.

It produces 40 per cent less nitrogen oxide and needs between 3 and 5 per cent less fuel, GE says. EMD met the same requirements through modifications to its existing 16-cylinder engine.

“We wanted a locomotive that would be around for the next two to three decades,” Brett BeGole, general manager of GE’s global locomotive operations, says.

He attributes GE’s lead to its technology. As an example, he explains how GE fits an inverter – the controller for AC traction motors – to every axle separately: if some wheels are on slippery track and others on dry, the power supplied to each can be varied to ensure the train still has maximum pull. EMD, by contrast, has one inverter for each set of three axles at the front and rear.

John Hamilton of EMD admits that GE has a head-start on his company and that it will take some time to close the gap.

But it will have to catch up amid a fast-developing market. GE last November announced an order for 30 locomotives from Freightliner, the UK’s second-biggest rail freight operator, for a new locomotive type able to operate under the low bridges and tunnels of the UK’s rail network. It is the same path that EMD – previously the only American supplier to Europe – took with its Series 66 locomotive.

GE is also working on a hybrid locomotive whose batteries are charged by the power generated by the brakes. This power – currently dissipated as heat – will be used to reduce fuel consumption when accelerating or for running the locomotive in built-up areas.

However, EMD is doing everything that would be expected of a company trying to make up such lost ground, Mr Hamilton says.

EMD’s labour agreements, which used to be the same as those for GM’s automotive business, have been renegotiated to suit the more cyclical locomotive business, for example.

“Our capital investment is triple on an annual basis what it was under General Motors’ ownership,” Mr Hamilton says.

“We’re working on our costs; we’re working on our product and we’re working to innovate.”

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