Wednesday, June 2, 2010

Caterpillar Demonstrates Belief In The Future Of Rail Freight

More Investment for Machinery Giant
Shipping News Feature

US – Like Warren Buffett before it the Caterpillar Corporation clearly wish to ensure they are at the forefront of any expansion of rail freight services across the country. Rationalisation and modernisation of the rail infrastructure in the US is the target of government and the company are clearly riding the wave having invested over $2 billion of their $32 billion annual turnover in rail related businesses in the past four years.

In 2006 Caterpillar bought the Progress Rail Services Corporation as a building block in its Vision2020* programme. Last month Progress Rail Leasing Corporation, a wholly-owned subsidiary of Progress Rail Services bought up FCM Rail Ltd, which leases out ‘maintenance-of-way’ rail track maintenance equipment.

Now it seems Caterpillar are to buy Electro-Motive Diesel, a manufacturer of, unsurprisingly, electric and diesel powered locomotives with a reported turnover of almost $2 billion. Yesterday Caterpillar filed their intent to purchase with the Securities and Exchange Commission and have to await approval of the deal, which may take several months. The estimated cost of the deal is circa $800 million.

These moves clearly indicate the company intends to diversify from its traditional business of producing and managing construction and mining equipment, diesel and natural gas engines and industrial gas turbines. Whilst the group may not directly carry freight from point to point, the size and scope of infrastructure investment made will signal a clear opinion and intent as to the progress of rail transport in the US in the coming decade and beyond.

*Vision 2020 is the latest Caterpillar management plan, the first of which was launched in 2007. The primary aims of the 2020 programme are to reduce customer greenhouse gas emissions by 20% whilst increasing customer energy and material efficiency by the same margin and to provide leadership for safety for all involved in producing or using caterpillar products.