Portland new car finance

In the boom-or-bust world of freight car building, the market has been showing encouraging signs that a two-year down cycle has finally come to an end. Suppliers contacted for this month's cover story by Norbridge Consulting are predicting that up to 30,000 cars will be delivered in 2003 (see p. 24). In this year's third quarter, orders were placed for 10,135 new cars, compared with 6,973 in the second quarter and 4,685 in third-quarter 2001. The backlog of new cars ordered and undelivered stood just shy of 14,500 as of Oct. 1, a 20% increase over 2001 (RA, November, p. 6).

As of late November the backlog had grown as TTX Company and GATX Rail announced major orders that would be filled over the next five years, possibly helping to smooth out some of the more prominent peaks and valleys that builders traditionally have experienced.

TTX's "sustained building program," as it's described by President and CEO Andy Reardon, got another boost when TTX added 700 cars to orders placed previously with Greenbrier and National Steel Car. TTX added 500 53-foot, 125-ton stand-alone well cars to an order from National Steel Car for domestic container service, bringing the total number to 800; and 200 three-unit, 53-foot, 125-ton intermodal well cars to an order from Greenbrier, bringing the total to 400 cars (1,200 platforms). These cars augment 1,000 60-foot, 100-ton Plate F boxcars (500 each from Greenbrier and National Steel Car); 60 five-unit, 40-foot, 125-ton well cars (300 platforms) from Greenbrier for international container service; and 400 89-foot, 100-ton flat cars from National Steel Car. TTX's grand total this year to date--with more orders possibly forthcoming--is 3,300 cars worth close to $200 million.

Trinity Industries, Inc., announced last month that its Rail Group subsidiary had reached an agreement to supply 1,000 cars a year for the next five years to GATX Rail. Deliveries will begin in next year's second quarter. This followed GATX's announcement in October that it would acquire 7,500 new cars during the period.

Meanwhile, Trinity Industries announced that the Rail Group's "improved results" helped the company post its first quarterly profit this year: net income of $6.2 million on revenues of $387.6 million for the three months ended Sept. 30, compared with a profit of $7.9 million on revenues of $372.9 million in last year's third quarter. "Our North American railcar backlog grew for the second straight quarter," said Trinity Chairman, President, and CEO Timothy R. Wallace. Improved performance by the Construction Products and Industrial Products groups also contributed to the second-quarter profit. Despite the third-quarter profit, which amounted to 18 cents per diluted share, Wallace said the outlook for the year "remains at a 25 to 40 cents loss per share," due partly to the seasonal nature of the construction business.

Greenbrier last month reported earnings from continuing operations totaling $1.9 million in its fourth fiscal quarter, which ended Aug. 21. This reversed "a trend of losses" for the first nine months of the fiscal year. A backlog of 5,500 cars valued at $305 million as of Sept. 30 was the highest level in two years. Greenbrier said that with only 15% of the carbuilding industry's production capacity, it won 38% of all industry orders in the quarter and had 34% of the total industry backlog.

In addition to the TTX orders, Greenbrier received orders from Canadian Pacific, Canfor, and other Canadian customers for 800 of its redesigned drop-deck center partition cars. Greenbrier said its design "is the first commercially available center partition car to have a depressed floor, increasing load capacity by 14% over other lumber carrying cars." (A patent-infringement suit recently filed by National Steel Car attacking features of this car "is believed by the company to be without merit," said Greenbrier.)

Greenbrier's Gunderson plant in Portland, Ore., and its TrentonWorks facility in Nova Scotia are operating at increased production rates and employment levels, though a joint venture manufacturing facility operated with Bombardier Transportation in Sahagun, Mexico, remains closed.

For its European operations, Greenbrier reported a backlog of more than 1,000 cars from customers in France, Germany, and Britain. Greenbrier received final certification in October for its ten-axle Rola (rolling highway) railcar, which hauls highway trucks, both tractors and trailers. An Austrian company, Okombi, operates 200 Greenbrier Rola units, which have accumulated more than 30 million miles in revenue service. Orders are possible for more Rola cars.

But emphasizing that it planned to concentrate on its core business in North America, Greenbrier said that its European facilities are "now treated as discontinued operations for financial reporting purposes."

Despite winning nearly 30% of the market, Greenbrier Europe "has not achieved desired levels of profitability." Discussions are under way with financial and strategic investors who, along with European managers, may participate in a new capitalization. The company said it "remains committed to its customers in Europe and will consult with customers, financiers, and employees before finalizing its plans."