DOW JONES NEWSWIRES
Greenbrier Cos. (GBX) has agreed with General Electric Co. (GE)
to at least halve a railcar contract amid lack of shipping
demand.
Greenbrier said in March that GE's railcar-services business
wanted to "substantially reduce, delay" or cancel delivery of what
at the time made up 75% of the company's backlog.
The amended contract calls for Greenbrier to produce up to 6,000
railcars--compared with the 11,900 new cars the 2007 contract
called for. Under the new agreement, Greenbrier will build the
first 3,800 tank and hopper cars by July 2013 at a higher price
than the original contract, and delivery of those units has been
extended by 27 months.
The remaining 2,200 cars are subject to the fulfillment of
certain conditions by both companies, with delivery over the
following five years. Greenbrier also has retained the right of
first refusal to make all new railcars for GE through December
2018.
Under the old contract, Greenbrier delivered about 600
railcars.
The contract modification leaves Greenbrier's total new railcar
backlog as of Nov. 30 at 4,900 units valued at $430 million,
excluding the contingent 2,200 cars. As of Aug. 31, the backlog was
13,400.
Greenbrier had previously said GE wanted the company to slow
production to a point that "does not allow for efficient operations
of our manufacturing facility." The contract was worth about $1.2
billion when signed in 2007. The recession has sapped demand for
all manner of goods, severely cutting into business in the
freight-transport sector.
Greenbrier also said it has delivered about 350 new railcar
units during the quarter ended Nov. 30, and about 2,000 backlogged
units are scheduled for delivery during the full year, which ends
Aug. 31.
Shares of Greenbrier closed Monday at $11.50 and were inactive
premarket. They are up 67% so far this year. Shares of GE finished
at $15.95 and was also static.
-By Nathan Becker, Dow Jones Newswires; 212-416-2855;
nathan.becker@dowjones.com;