GE Engines to Lose Steam If High-Speed Rail Judged Too Slow

U.S. taxpayers have spent $1.5 billion to allow Union Pacific Corp. (UNP)’s tracks between Chicago and St. Louis to carry faster passenger trains, one of the biggest projects in President Barack Obama’s high-speed rail program.

Now a panel advising the same agency that oversaw the work may require it to be re-done so trains can go even faster, to the potential benefit of Caterpillar Inc. (CAT) and Siemens AG (SIE) and the detriment of General Electric Co. (GE)

“In a time of great fiscal constraints, why should taxpayers pay more money to save a fraction of travel time that can’t even be achieved unless states spend billions of dollars more to undo work they have already done?” Rob McKeel, general manager of global locomotive operations for GE, said in an e- mail.

A committee with representatives from states, U.S. regulators and Amtrak, the U.S. national passenger railroad, is developing specifications for train engines to be bought with high-speed rail money from Obama’s 2009 stimulus bill. About $1 billion awarded to states in August 2011 for locomotive purchases has been held up until those standards are issued.

The group, called the Next Generation Equipment Committee, must decide whether to require equipment to run at top speeds of 110 miles per hour (177 kilometers per hour), the standard for the Federal Railroad Administration’s work with Illinois on the Union Pacific tracks, or 125 mph. It also could allow either standard or permit states to choose.

Photographer: Jeff Roberson/AP Photo

Train travel for Missouri residents will get faster after the Obama administration announced grants of $1.1 billion for development of a high-speed rail line between Chicago and St. Louis and $31 million for upgrades between St. Louis and Kansas City, Mo. Close

Train travel for Missouri residents will get faster after the Obama administration... Read More

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Photographer: Jeff Roberson/AP Photo

Train travel for Missouri residents will get faster after the Obama administration announced grants of $1.1 billion for development of a high-speed rail line between Chicago and St. Louis and $31 million for upgrades between St. Louis and Kansas City, Mo.

Higher Speed

The higher speed, while cutting travel time between Chicago and St. Louis, would require more spending on track work for the trains to run at full speed, as 125-mph corridors can’t have grade crossings across roads under U.S. regulations. Grade crossings would have to be replaced by overpasses or underpasses, or closed.

The faster train would shave 20 minutes off the travel time on that route, assuming it ran at maximum speed for the whole time and didn’t stop for passengers.

The higher standard could also cost sales for GE, the biggest seller of freight locomotives in the U.S. market, because its engine produced now only reaches 110 mph.

Deputy U.S. Transportation Secretary John Porcari said the decision has to consider future needs.

Track Upgrade

“Passenger rail tends to evolve in stages,” he said in an interview. “You have to upgrade both the track and signal equipment and the rolling stock. What you don’t want to do is buy something with a 30-year lifespan that doesn’t serve you for all 30 years.”

Committee members, he said, “were unanimous in their belief that 125 mph is important for the future” and his agency supports that.

Amtrak’s Acela, the fastest U.S. passenger train, can go up to 150 mph, though it averages around 80 mph between Washington and Boston.

Without naming GE, Caterpillar’s Progress Rail Services unit, in a May 8 letter to U.S. Congress members, said a 110-mph standard would exclusively benefit one company. Executives from Siemens and Tognum AG (TGM), both German rail-equipment manufacturers, also signed the letter.

“A diesel-electric locomotive built to a state-of-the-art, 125-mph design delivers benefits even in advance of track upgrades that will let it travel faster than 110 mph,” wrote William Ainsworth, chief executive officer of the Caterpillar unit; Thomas Koenig, president of Tognum America; and Michael Cahill, president of Siemens Industry rail systems.

Creating Jobs

Caterpillar has designed a locomotive that can go up to 125 mph and is ready to sell it when there’s demand, Rusty Dunn, a spokesman, said.

Chicago Mayor Rahm Emanuel, Obama’s former chief of staff, is urging the speed be kept at 110 mph, saying that decision would immediately create jobs, the intent of the stimulus package. The slower locomotives would cost less and are available now, he said.

“The high-speed rail program should put people to work sooner, rather than later, and states like Illinois shouldn’t have to spend billions of dollars to undo track upgrades they have already made,” Emanuel said in an e-mailed statement.

Michigan, Missouri, Washington and Oregon, like Illinois, have spent billions of dollars to upgrade tracks to the 110-mph standard, GE’s McKeel said. The railroad administration today announced it’s giving $74.8 million to improve 11 miles of track carrying commuter trains in Virginia to accommodate speeds up to 110 mph.

Running Faster

“It doesn’t make sense to insist that these states now purchase locomotives that run at 125 miles per hour,” he said.

Running trains faster uses more fuel and wouldn’t provide benefits as great as it might appear, Joe Boardman, chief executive officer of Amtrak, said in an interview.

“Amtrak doesn’t need any more than 110,” he said.

The Illinois Department of Transportation said in a June report that it doesn’t plan to upgrade the tracks again.

Donna Kush, a spokeswoman for Union Pacific, had no comment.

Market Share

The higher-speed locomotives would use 17 percent more fuel for a comparable trip than a locomotive with a top speed of 110 mph, according to a 2011 report by the Next Generation Equipment Committee, the advisory panel.

In another report, the panel said a diesel locomotive capable of reaching 125 mph “will cost more” than one topping out at 110 mph, saying quantifying the cost difference “is very difficult.”

Most long-haul locomotive purchases in the U.S. are for freight hauling. Caterpillar is based in Peoria, Illinois, the hometown of U.S. Transportation Secretary Ray LaHood.

GE, based in Fairfield, Connecticut, has about 70 percent of the U.S. freight locomotive market, said James Husband, president of RailSolutions Inc., an Alexandria, Virginia-based rail consulting firm.

GE has increased its market share advantage over Caterpillar’s Electro-Motive Diesel unit as the North American freight-locomotive market has shrunk from about 900 sales per year to about 300 for the past two or three years, Husband said in an interview.

“Over the last 10 years or so, GE has been winning the market share by 62-to-64 percent and the remainder EMD,” he said. “In the last two, three years, the market’s been pretty slow.”

GE shares rose 4 cents to $22.28 at 9:43 a.m. in New York trading.

To contact the reporter on this story: Angela Greiling Keane in Washington at agreilingkea@bloomberg.net

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net

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