GE Plans Texas Locomotive Plant Near Buffett’s Burlington

General Electric Co. (GE) plans to open a locomotive plant employing more than 500 people in Fort Worth, Texas, the hometown of Warren Buffett’s Burlington Northern Santa Fe, as demand rises for railroad shipments.

GE Transportation will invest as much as $96 million at the first U.S. factory outside its Erie, Pennsylvania, base in more than a century. That hiring and 250 new jobs in Erie will push the unit’s global workforce to about 10,000 employees, said Lorenzo Simonelli, the business’s chief executive officer.

“Since April, we’ve announced hiring nearly 1,000 employees,” Simonelli said today in a telephone interview. “North America we feel good about, but we also feel good about emerging markets. We see a good runway ahead.”

Expanding into Texas gives GE Transportation a manufacturing base in the state with the most railroad route miles in the U.S. Texas is served chiefly by Union Pacific Corp. (UNP), whose Union Pacific Railroad is the nation’s biggest by sales, and Burlington Northern, owned by Berkshire Hathaway Inc. (BRK/A)

The state of Texas is committing $4.2 million in incentives for the plant, which has the potential to hire as many as 275 more positions after the initial 500 by 2012, Fairfield, Connecticut-based GE said in a statement today.

Freight, Passengers

The Texas factory will be able to make freight and passenger locomotives as GE Transportation lobbies for new Amtrak and high-speed passenger-rail contracts, as well as other vehicles used in industries like mining, Simonelli said. Union Pacific operates about 8,000 locomotives, and Burlington Northern has about 6,000, according to their websites.

GE Transportation settled on the Texas location after reviewing options that included existing company factories in Massachusetts, Simonelli said.

“What it came down to really was the aspects of the facility itself, which allows for flexibility,” Simonelli said. Connections to existing rail lines also played a role in the decision, he said.

GE is reworking an existing building and expanding it to almost double the facility’s size to about 900,000 square feet, said Michelle Frith, an outside spokeswoman for the Fort Worth Chamber of Commerce.

“As a major transportation hub, North Texas is the perfect location for GE Transportation’s new locomotive manufacturing facility,” Texas State Senator Jane Nelson said in a statement released by Governor Rick Perry’s office.

Demand for freight shipments in North America is improving as the U.S. economy recovers, Simonelli said. From outside the U.S., GE Transportation has logged orders in the past two years from markets such as China, Kazakhstan, South Africa and Brazil.

Rail Volumes

U.S. rail volumes excluding grain and coal shipments rose 7.9 percent to 4.6 million carloads in the quarter ended March 31, according to data compiled by the Association of American Railroads in Washington. It was the second-highest increase in a first quarter, after last year’s 9.3 percent advance.

Locomotive demand is climbing, too. GE Transportation’s first-quarter backlog was about $4.1 billion, 40 percent more than a year earlier, GE Chief Financial Officer Keith Sherin said in an April 21 conference call. First-quarter orders for rail cars, which GE doesn’t make, rose to the highest since 1997.

Texas’s 10,405 railroad route miles (16,741 kilometers) outstrip the 7,313 miles of No. 2 Illinois, according to the Association of American Railroads. The seven largest railroads in the U.S. operate a total of 139,679 route miles.

GE Transportation accounted for $3.37 billion of the parent company’s $150.2 billion in 2010 sales. The unit’s competitors include Siemens AG (SIE) of Germany and Electro-Motive Diesel, which was once a division of the former General Motors Corp. Caterpillar Inc. bought Electro-Motive in 2010.

“We just feel good about the outlook and we’re taking steps to really have a good position industry,” Simonelli said. “We’re going to have increased flexibility and a high-tech facility.

To contact the reporter on this story: Rachel Layne in Boston at rlayne@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net

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