GE Said to Keep Rail-Car Unit as Auction Dropped on Demand

General Electric Co. (GE) ended an auction for its rail-car leasing unit after concluding the business was doing better than expected as demand rises for freight shipments, a person familiar with the decision said.

The unit is being run by GE Capital’s Americas division after once being listed as a “red asset” targeted for review, said the person, who wasn’t authorized to speak publicly. GE opted to keep the unit after GE Capital fared better than projected on its plans to shrink assets, the person said.

After pulling the plug on a 2008 auction, GE restarted the sale of the rail-car business this year as Chief Executive Officer Jeffrey Immelt works to shrink dependence on the finance division for profit. Earnings from GE Capital peaked last decade at about half the parent company’s total.

Keeping the rail unit echoes a move by CIT Group Inc. (CIT), which like Fairfield, Connecticut-based GE tried to sell its rail-car leasing business in 2008. New York-based CIT reversed course and is now expanding the division, ordering 3,500 rail cars in February and 5,000 more today.

Rail-car orders rose to the highest level in more than 13 years in the first quarter as leasing companies, railroads and industrial users refreshed their fleets. Shipments excluding grain and coal climbed 7.9 percent, according to data compiled by the Association of American Railroads in Washington.

Chief Financial Officer Keith Sherin said July 22 that GE Capital’s ending net investment, a measure of total assets, was ahead of schedule at $457.3 billion as of June 30, excluding cash. GE’s goal is to shrink that total to $440 billion in 2012.

Reuters reported the end of the GE auction earlier today.

To contact the reporters on this story: Rachel Layne in Boston at rlayne@bloomberg.net; Natalie Doss in New York at ndoss@bloomberg.net.

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

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.