GE sees profit in producing trains in Brazilian territory

As Brazil strives to eliminate bottlenecks in transport, General Electric Co. believes it can profit by manufacturing locomotives in the country, even with the government’s demand that they must use Brazilian parts.


The transport division of GE is about to reach a minimum of 60% of locally purchased parts for trains that it produces in Brazil, as required by the government. Its first train with 61% of local content should be released in April.


After a boom in the early twentieth century, both passenger and freight Brazilian rail networks shrunk for decades, until a new wave of investment came after the privatizations of the 90s. Now the government wants to give new life to the industry, with plans to expand the railroads in the country – currently with 30,000 kilometers – by 11,966 kilometers.


There is a huge potential, said Guilherme Mello, director of GE Transportation Latin America, to The Wall Street Journal. He believes that GE can benefit from investment in the country’s infrastructure, developing engines capable of overcoming some of the geographic and economic challenges.


The railroad expansion faces some obstacles, he said. There are tunnels where the train is only five centimeters from the ceiling, he continued. Old rails and bridges are another challenge. Some of them support a maximum weight of 20 tons, including those seen in the south and west regions, where most of the country’s agricultural exports come from, said Mello.


The transport unit generates only 7% of GE’s earnings, according to Steven Winoker, analyst at the asset management firm Sanford C. Bernstein & Co. Inc. But Brazil is a very large market, with a lot of infrastructure projects […] and it will be profitable for GE, the analyst said.

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