EMD set to build manufacturing base, supply hub in India

Written by Anandita Singh Mankotia | Chicago | Updated: Aug 14 2010, 05:48am hrs
Electro-Motive Diesel Inc (EMD) is set to establish a manufacturing base and supply hub in India. We hope to win the bid for the public-private partnership (PPP) project with Bihar government. It will help us not only establish a unit but also increase our sourcing from the country, EMD Locomotive president & CEO John Hamilton, said.

As a part of its PPP initiatives, the government plans to set up a diesel locomotive manufacturing unit at Marhowrah, in Bihars Chhapra district. The railways ministry expects the Rs 2,720-crore unit to manufacture 130 diesel locomotives every year. Spread over eight years, the government estimates to source close to 1,000 diesel locomotives.

Currently, GE is the other company in race for the project. The private sector entities entrusted to set up the units would be responsible for maintaining the locomotives for a period of 25 years. According to the railway officials, the government is currently in the process of expediting the process so that the capacities can be up and running within three years.

The $1.5-billion company, EMD, currently sources close to $20 billion of supply material from India. Our turnover from India has doubled in the past two years and the country is the most dynamic market for us, Hamilton said. Around 10% of the companys revenue is generated through its India operations.

Out of the Rs 2,720 crore required for setting up Marhowrah factory, Rs 667 crore would have to be raised from the private entities while the remaining will be infused by the government. However, of the entire public sector investment in the project, only Rs 29 crore has been approved till date. In spite of the delays in the project, Hamilton appeared confident of it. Projects which involve government decisions are subject to some time and this is common across the globe, he said.

Progress Rail Services had acquired EMD for $820 million in cash and a net working capital adjustment subject to post-closing finalisation, currently estimated at approximately $108 million. Progress Rail is a wholly-owned subsidiary of Caterpillar Inc. Caterpillar bought the company from private equity firms Berkshire Partners and Greenbriar Equity Group. The final deal will include a net working capital adjustment.

(Travel for this story was sponsored by EMD Locomotive)