GE Capital Rail Services

For GE's European rail leasing business see GE Capital Rail Services (Europe)
GE Rail Services
Subsidiary
Industry Rail transportation
Founded 1986 (acquisition)
Defunct 2015/2016 (sale)
Headquarters Chicago Title and Trust Center
Chicago, USA[1]
Key people
 CEO & President : Joe Lattanzio[2]
Services Rolling stock leasing
Parent GE Capital
Website www.ge.com/railservices

GE Capital Rail Services, also known as GE Railcar, or GE Railcar Services Corporation was a business unit of GE Capital, a division of General Electric. It is a distinct business unit from General Electric's railway locomotive manufacturer.

GE Rail Services offers leases and manages railcars (railway wagons) for the North American market; its product range includes all types of common freight wagon including box, flat, covered and uncovered hopper (gondola), and tank wagons.[3] The company also manages service and repair of wagons.[1]

In 2015 GE Capital announced the sale of its tank car and services business to Marmon Holdings, and the remainder of the business (other wagons, locos) to First Union Rail.

History

In 1986 GE Railcar Services Corp. acquired the assets of North American Car Corp,[4] a former rail leasing subsidiary of Tiger International which had become insolvent in 1984; GE acquired ~35000 rail wagons and 14 maintenance units in North America at a cost of $420 million.[5]

In 1989 GE acquired the railcar leasing and management business of Brae Corporation from holding company Leucadia National for approximately $180 million,[6] acquiring 15000 boxcars.[4] With the acquisition GE entered the per diem boxcar leasing business.[7]

In 1992 GE Capital Railcar reached an agreement to lease Itel Rail Corporation's (subsidiary of Itel Corporation) railcar fleet; in 1990 Itel Rail had ~70,000 rail vehicles, approximately one third of which were boxcars, another third covered hopper wagons, the remainder tank, open hopper, flat and speciality wagons.[7] The lease agreement was for 12 years with a purchase option - the agreement brought GE's for lease fleet to ~140,000 units.[8] The agreement moved significant accumulated debt off Itel Corporation's balance sheet; in the late 1989s Itel Corp had expanded aggressively into the North American railcar leasing business through a number of acquisitions, as well as acquiring interests in other related logistics and transportation businesses. GE would pay rental payments of $150 million pa (GE Capital had also acquired Itels container leasing business in 1990 for over $800 million.)[9]

In 1997 GE Railcar entered into a leasing agreement with manufacturer American Car and Foundry Company (ACF) to lease 35000 vehicles (over three quarters of its fleet), with purchase and supplementary agreements to use ACF's repair facilities.[10]

In 2008 GE attempted to sell the business - GATX Corp offered $3billion for the company but the deal was not completed due to difficulties raising funds due to the late 2000s banking credit crisis. In 2011 it was reported that GE had again placed the business up for sale - the assets were valued at $3 billion at the end of 2010.[11] The unconfirmed sale attempt was reported as having been cancelled in July 2011.[12]

In the late 2000s, due to a drop in rail vehicle leasing due the general economic recession initiated by the 2000s financial crisis GE Railcar attempted to alter the terms on a $1.2 billion contract (2007)for the acquisition of over 11000 rail vehicles from The Greenbrier Companies. The GE contract represented 84% of Greenbrier's ongoing railcar orders, and any reduction in the order volume was expected to cause job and revenue losses in addition to those already caused by the recession and the production slowdown for the GE order. On 15 December 2009 GE and Greenbrier reached a modified contract agreement in which Greenbrier would manufacturer up to 6000 units for GE. As terms of the contract Greenbrier gained the right of first refusal to manufacture any GE railcar order placed up to December 2018, and a similar right to any vehicle refurbishment up to 2015. Greenbrier also obtained maintenance co-partner agreement for GE's rail rolling stock over a 5-year period. The resultant contract gave Greenbrier an order book of at least 4900 units valued at $430 million plus an option for a further 2200 vehicles. The renegotiated contract represented approximately 40% of the North American freight car industry backlog.[13]

On 30 September 2015 GE Capital announced the sale its rail services division: Marmon Holdings (Berkshire Hathaway) acquired most of the businesses tank wagon fleet, and was to acquire the servicing activities in late 2015 - the business was to be managed by Union Tank Car Company and Procor; the remainder of the GE rail fleet, comprising c.77000 wagons and 1000 locos was to be sold to First Union Rail (Wells Fargo), expected closure in 2016. The total value of the sale to GE was $1.3 billion on a $4.0 billion net investment.[14][15]

See also

References

  1. 1 2 "General Electric Railcar Services Corporation", investing.businessweek.com, Bloomberg L.P., retrieved 10 January 2012
  2. ↑ "People - High Profile", Railway Age: 52, April 2009
  3. ↑ "GE Capital Rail Services Brochure 2011" (PDF), www.ge.com, General Electric, 2011
  4. 1 2 "GE Capital - Rail Services : History", www.ge.com, General Electric
  5. ↑ Sources:
  6. ↑ "Railcar Operations To Be Sold to G.E.", www.nytimes.com, Reuters via New York Times, 10 August 1989
  7. 1 2 "Equipment lessors - obvious options - 1990 Rail Finance Review and Directory", Railway Age, Simmons-Boardman Publishing Corporation / Gale Group , via findarticles.com, December 1989
  8. ↑ "GE Capital Railcar moves to acquire Itel Rail fleet", Railway Age, Simmons-Boardman Publishing Corporation / Gale Group , via findarticles.com, February 1992
  9. ↑ Sources:
  10. ↑ Sources:
  11. ↑ Soyoung Kim (3 May 2011), "GE railcar leasing unit for sale: source", www.reuters.com, Reuters
  12. ↑ Kim, Soyoung (26 July 2011), "GE pulls sale of railcar leasing business-sources", www.reuters.com, Reuters
  13. ↑ Sources:
  14. ↑ "Marmon and Wells Fargo buy GE Capital rail businesses", www.railwaygazette.com, 1 October 2015
  15. ↑ Barrow, Keith (1 October 2015), "GE sells wagon leasing business", www.railjournal.com
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