Caterpillar locomotive market share may fall far behind GE

Due to new stricter U.S. locomotive emission standards, freight train manufacturers are facing pressure to update their product lines by January 1. The result of the new legislation may lead Caterpillar (NYSE:CAT) to fall far behind GE (NYSE:GE) in the race to produce locomotives that comply with the new standards.

Caterpillar's famous Electro-Motive Diesel unit announced that its freight trains will not be ready until 2017, paving a clear path for GE to obtain an increased market share.

GE is already testing locomotives that conform to the new regulations, and is looking to snatch Caterpillar's customers during its two-year absence from the market. GE already has an estimated 60% to 70% of the domestic freight train market.

The concerns don't particularly bother Caterpillar, which expects companies to delay buying new locomotives until the technology is perfected. "History indicates that the railroads are slow to adopt new technology until it is fully proven in the field," says a Caterpillar spokeswoman. Caterpillar will also have overseas sales, which reached $2.5B last year, to make up for the time it will be locked out of the U.S. market.

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Comments (12)
  • JD in NJ
    , contributor
    Comments (1635) | Send Message
    Let's say, for the sake of argument, that it takes two years to prove the technology in the field... Does this mean that GE will begin to generate big sales while CAT begins testing?
    14 Jul 2014, 09:28 AM Reply Like
  • rgperrin
    , contributor
    Comments (1683) | Send Message
    I wonder why railways don't try steam locomotives fuelled by clean-burning natural gas (as opposed to the coal or oil of years past).


    Long on UNP, CXS, and NSC.
    14 Jul 2014, 09:31 AM Reply Like
  • JD in NJ
    , contributor
    Comments (1635) | Send Message
    Perhaps because of the egregious maintenance requirements that steam engines bring with them.
    14 Jul 2014, 09:58 AM Reply Like
  • mdanderson99
    , contributor
    Comments (6) | Send Message
    You don't need steam. You can run diesel engines directly on natural gas, and both GE and Caterpillar are making engines to do so.

    14 Jul 2014, 01:42 PM Reply Like
  • Retired CFA
    , contributor
    Comments (331) | Send Message
    Very good article. Thanks!
    14 Jul 2014, 01:52 PM Reply Like
  • rado403
    , contributor
    Comments (150) | Send Message
    Wow- Yes CAT stock is up---But this is another example of the CAT board not operating very well-- Asleep at the wheel
    14 Jul 2014, 11:44 AM Reply Like
  • see2xu
    , contributor
    Comments (7) | Send Message
    Deja vu, all over again. Twelve years ago, CAT couldn't get ready for the new on-highway standards, and paid non-compliance penalties until their technology was "ready". At that time, Cat was the leading producer of on-highway heavy-duty engines for trucks and buses in NAFTA.


    Five years later, tails between their legs, they withdrew their products from the market. Recently, they settled with a large group of irate customers out-of-court for an undisclosed amount.


    Lessons not learned?
    14 Jul 2014, 01:42 PM Reply Like
  • JD in NJ
    , contributor
    Comments (1635) | Send Message
    That's a valid point. I was lucky enough to find myself on the right side of both of those situations, as I hold both Cummins and General Electric.
    14 Jul 2014, 01:51 PM Reply Like
  • JayXu
    , contributor
    Comments (266) | Send Message
    I don't understand why GE is not 30+
    14 Jul 2014, 05:05 PM Reply Like
  • toomuchgas
    , contributor
    Comments (1045) | Send Message
    Another great job killing regulation from the DEP and Obama.
    14 Jul 2014, 10:11 PM Reply Like
  • The Average Investor
    , contributor
    Comments (102) | Send Message
    CAT share price 7/17/09 $33.99 CAT share price 7/14/14 $110.09 Up 224%
    GE share price 7/17/09 $11.65 GE share price 7/14/17 $26.66 Up 128%


    CAT dividend yield 2.56% & cash dividend $0.70
    GE dividend yield 3.30% & cash dividend $0.22


    GE is a Dow dog. Too big to manage. Immelt should be fired for incompetence.
    15 Jul 2014, 01:13 PM Reply Like
  • rado403
    , contributor
    Comments (150) | Send Message
    Interesting how CAT's failure to be active vs. Reactive has moved the discussion to GE.
    16 Jul 2014, 08:44 AM Reply Like
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