General Electric plans to cut 950 jobs at a locomotive plant in Erie, Pa., wiping out most of the site’s recent employment growth, as it shifts some production to a lower-cost Texas factory.
The reductions are slated to start in six months pending a 60-day period of talks with union leaders, said Lorenzo Simonelli, head of GE’s transportation unit.
The new plant in Fort Worth, Texas, also the headquarters for Burlington Northern Santa Fe railroad, is about 20 percent more efficient than the Erie facility, which is more than 100 years old.
“Cost is becoming more and more of a factor,” Simonelli said in an interview. “We’ve got to match our competition, and that’s what we’re trying to do.”
GE had expanded its workforce at Erie by about 1,000 in the past two years to 5,500 today as it increased output of locomotives and mining equipment.
The plant in Fort Worth, which employs a fraction of that number, began some production in June and started building locomotives in January.
Transportation and other manufacturing businesses like health care and energy have been a focus of Chief Executive Officer Jeffrey Immelt’s growth strategy. He’s shrinking the finance unit after credit-market disruptions in 2008 jeopardized the company.
Industrial sales accounted for more than 65 percent of GE’s $144.8 billion in revenue last year, with $5.6 billion coming from GE Transportation. The Fairfield, Conn.-based company is the world’s largest builder of locomotives.
Simonelli said production of Evolution-series locomotives will be increased in Fort Worth, along with wheels for mining equipment, as output in Erie is reduced. About 10 percent of the work now handled at the Pennsylvania site will be moved to Mexico and third-party manufacturers, he said.
Approximately 200 of the Erie job cuts, more than 20 percent, are linked to declining coal demand, Simonelli said. GE’s railroad customers have parked about 3,000 locomotives as utilities that once relied on coal carried by trains to produce electricity began switching to cheaper natural gas from shale formations.
“The outlook for the volume on the locomotive side as well as from the coal-mining equipment is down versus what we anticipated,” Simonelli said.
The number of reductions at Erie may change depending on negotiations with the union, he said. Since 2011, GE has spent about $140 million upgrading the Erie plant to boost capacity and add research and testing technology.
Erie remains the global headquarters for GE Transportation’s locomotive business, and will continue to build locomotives as well as components for the Fort Worth plant and overseas factories.
Simonelli said the Fort Worth factory, which began production of mining components in June, is more efficient than Erie based on “a number of different attributes,” including the plant’s layout and workforce rules. GE plans to boost employment there to 550 workers over the next 18 months from 330 now.
The Fort Worth plant’s lack of union employees wasn’t a consideration in the decision to cut jobs in Erie, Simonelli said. Texas, a right-to-work state, forbids requiring union membership as a condition of employment.