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Right direction(Erie Times-News (PA) Via Acquire Media NewsEdge) Oct. 11--Call it the locomotive division that could. Even as the stock market appears to be in a free-fall and against the backdrop of a disappointing earnings report released Friday by its parent company, Lawrence Park Township-based GE Transportation had something good to report. This time it was $1.3 billion in third quarter revenues, up 13 percent from the third quarter of 2007. Year-to-date results also showed improvement. In the first nine months of the year, Transportation racked up a $750 million profit, up 10 percent from the same date the previous year. Revenues through the end of the third quarter were also up, climbing 8 percent to $3.6 billion. But the news wasn't all good. Even though Erie County's largest employer added about 400 employees this year for a total of 5,600, Transportation didn't see the double-digit profits growth that had become commonplace. The quarterly profit for the Transportation business was $255 million, up 1 percent from the same quarter in 2007. "It's a challenging quarter, no doubt," said Stephan Koller, spokesman for the local division, which also makes drive systems for off-road trucks and gearboxes for wind turbines. "That we remain profitable is good," Koller said. "We have had a high degree of profit (growth) in previous quarters, and we hope to return to moving forward." But at least profits were growing. The same can't be said for GE Transportation's Fairfield, Conn.-based parent, which reported that third-quarter profits were down 22 percent. Both the company's profits and revenues were in line with revised projects made Sept. 25 to reflect market volatility. Still, GE Chief Executive Jeff Immelt sought Friday to reassure anxious investors. "We have taken a number of steps to protect investors from the downside risk in financial services, and we have ways to mitigate potential disruptions in infrastructure and media markets, but the environment remains challenging," he said. But that reassurance, which might have helped GE close up 13.1 percent to $21.50 Friday, came at a price. Financial analysts say the company agreed to very favorable buyer's terms when it recently sold $3 billion in preferred stock to Warren Buffet's Berkshire Hathaway. A report Friday in the online edition of Forbes concluded: "Buffet's cash, along with a $12.2 billion stock offering helped the company clutch its 'AAA' rating, one of six awarded to U.S. corporations." Despite good news from its infrastructure segment and a strong performance by NBC, General Electric was bit by the same bug that's been biting the rest of the economy. Profits at General Electric were hit hard by the performance of Capital Finance, where profits fell 33 percent. Even with its modest 1 percent growth in profits, GE Transportation looks pretty healthy by comparison. And there's hope the trend might continue. Transportation not only booked about $1 billion worth of new business in the quarter, but maintains a backlog of orders for 1,900 locomotives. "It is a bridge," Koller said of what amounts to a substantial order sheet for a company that expects to build 800 to 900 locomotives this year. "It certainly sustains the business for years to come." But is it a bridge the company can trust? Could some of those orders be canceled if the economy continues to sour? The company is keeping a close eye on that issue. "We are in very close contact with our customers around the world to see what their business models look like and how we can help sustain their business," Koller said. Lorenzo Simonelli, Transportation's new chief executive, makes clear that he won't abandon a game plan that looked heavily to foreign markets for growth potential. "Moving forward, we will capitalize on international growth opportunities, continue to accelerate our lean journey, strengthen customer centricity and focus on flawless execution," he said. Its corporate parent might be struggling, but GE Transportation doesn't seem to be conceding anything and certainly isn't writing off growth during a tough economic time. After all, Koller said, China has committed to investing $160 billion in upgrading its rail infrastructure and expects to buy 6,500 new locomotives. "The opportunity is still there," he said. JIM MARTIN can be reached at (814) 724-6397, 870-1668 or by e-mail. To see more of the Erie Times-News, or to subscribe to the newspaper, go to http://www.GoErie.com. Copyright (c) 2008, Erie Times-News, Pa. Distributed by McClatchy-Tribune Information Services. For reprints, email [email protected], call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA. |