Wednesday, June 2, 2010

How have the mighty fallen.

According to Fox Business News, the Caterpillar company will buy the Electromotive Division (EMD) from a pair of vulture capitalist firms for a measly $820 million. EMD is the company that made the diesels that replaced steam locomotives on US railroads in the 1950s. EMD started out in the 1920's making gas electric rail cars. They were what we would call a system integrator today. They bought the car bodies, the electric traction motors, the generators and the Winton distillate engines from suppliers and put them together to make self propelled rail cars. Gas electrics sold pretty well, plenty of railroads had thinly traveled routes that a single car train could serve. Compared to getting down to the roundhouse four hours before train time to light the fire and raise steam, a gas electric was simplicity to operate, you just hit the starter button and it was running.
As the Winton engine people squeezed more power out of the engines, the gas electrics gained enough oomph to pull a trailer car, yielding a two car train. Then in the middle 1930's the Electromotive Corporation built the two prototype streamline trains, the Burlington's Zephyr and the Boston & Maine's Flying Yankee. These were sensational trains, all stainless steel, ultra modern styling, fast, great looking interiors and they gained a lot of publicity. Somewhere along the line, the Electromotive Corp was bought by General Motors and became the Electromotive Division (EMD).
In the late 1930's, just before WWII, EMD introduced the first passenger and freight diesel road locomotives. In 1941, after Pearl Harbor, the War Production Board, faced with endless demands for guns and tanks and aircraft and all the logistics needed to supply American, British and Russian armies, decided that the scarce and high tech diesel engines should go into submarines, landing craft, transportable electric plants and other munitions. The railroads were told to haul the wartime traffic with steam engines. Of which there were plenty, and Baldwin, Alco, and the railroads own shops were all set up to make plenty more. Net result, EMD's road diesels ran through out WWII and by VE day all the bugs had been worked out.
After VJ day, the traditional steam locomotive makers, Baldwin and Alco, along with GE and Fairbanks Morse introduced road diesels, but they didn't stand a chance against the seasoned and debugged EMD models. In less than 15 years the railroads scrapped all the steamers and replaced them with new EMD diesels. That was a tremendous piece of business. EMD, and parent company GM, made money hand over fist doing it, and EMD dominance of the US locomotive market lasted well into the 1980's.
For reasons unclear to me, competitor GE stayed in the locomotive business and gradually pulled ahead of EMD by the mid 1980's. Could be of course that brain dead GM senior management screwed things up, I don't know that story, but it is likely. In 2005, as GM was sliding down the tubes, they sold EMD to couple of vulture capital firms. And now the capital firms sold out to Caterpillar.
I wish the new owners every kind of luck. They have a great name, 33000 locomotives in service, and $1.8 billion yearly sales. Caterpillar bought the place for only 1/2 the yearly sales numbers.

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