When General Electric announced in 2011 it wanted to build a railroad locomotive plant in far north Fort Worth, government and business leaders rolled out the proverbial red carpet — and a plethora of financial incentives — to lure about 700 jobs to the region.
But last week, all that optimism was tamped down a bit after Boston-based GE’s chief executive officer, John Flannery, confirmed rumors that the company would sell or spin off its locomotive division, GE Transportation, as part of a broader plan to rid itself of $20 billion in assets.
The locomotive business includes the relatively new Fort Worth plant that opened in 2013 near Texas Motor Speedway as well as the company’s 125-year-old plant in Erie, Pa.
North Texas officials now say they are somewhat concerned the Fort Worth plant could be downsized, or eventually even shut down by whoever its new owner is — although generally, they remain cautiously optimistic that won’t happen. Instead, they hope the plant will remain open at roughly its current level.
They say the factory has some of the most modern equipment and efficient manufacturing methods in the world.
Some options for GE include spinning off the Fort Worth plant, known as GE Manufacturing Solutions, into a new company, selling it to one of just a handful of U.S. competitors or perhaps selling it to a foreign manufacturer, observers say.
“I have every hope they will be here for 100 years,” said Michael Morris, transportation director for the North Central Texas Council of Governments. His organization, and its subdivision the Regional Transportation Council, agreed in 2012 to contribute about $15 million to GE’s construction costs to help build a 3-mile-long test track for locomotives coming off the assembly line.
“That plant is part of a very heavy industry, and it makes locomotives that are low-emission and among the best in the world,” Morris said. “It’s a very sophisticated facility. They bring in steel plates in one end of the building and they drive a locomotive out the other end.”
For GE, the move is necessary as the company seeks to simplify its operations and become more profitable, an official said.
“The company is in the early stages of this process and exploring a multitude of possibilities that may include, among several options, creative approaches used to transition GE’s Consumer Finance business into Synchrony Financial or models like the Baker Hughes and GE Oil & Gas merger,” GE Transportation spokesman Tim Bader said in an email.
Getting GE to build in North Texas took a cooperative effort among state and local government. In addition to the RTC’s $15 million contribution, the Texas governor’s office kicked in $4.2 million from the Texas Enterprise Fund, which was created in 2003 to lure jobs to the state.
In Fort Worth, city officials approved an 85 percent abatement of city taxes to the property, which was expected to be worth $5.4 million over 10 years.
A $744,845 grant from the Texas Workforce Commission was awarded to cover training costs for new GE hires, who attended courses at North Central Texas College in Gainesville and the Tarrant County College South Campus in Fort Worth.
Not all of those incentives would have to be honored, if the plant failed to meet certain hiring and construction requirements, or failed to keep the plant operating at certain levels through a minimum number of years, according to terms of the various agreements.
Overall, the cost of building the plant — which was fashioned from an existing speculative property — was about $100 million, not including the test track.
Robert Sturns, Fort Worth economic development director, said he recently spoke with GE counterparts and was told it’s too early to determine the plant’s fate. Sturns said that if the plant was under new ownership but continued to meet the hiring and other requirements in the incentive agreements, it’s possible the new owner could continue to receive the incentives.
“If not, we would have to go back and look at the impact,” he said.
By early 2013 the plant near Texas Motor Speedway was up and running, and within about a year it was cranking out world-class, low-emissions railroad locomotives at a rate of nearly one per day for customers such as Fort Worth-based BNSF Railway and Omaha, Neb.-based Union Pacific Railroad.
The facility housed in two enormous but otherwise nondescript buildings near Texas 114 and Farm Road 156 was heralded as a harbinger of a new wave of manufacturing jobs coming to the region.
The fate of the Fort Worth plant depends upon who acquires it, said Morgan Swink, a business professor at Texas Christian University who closely follows supply chain management.
“If another U.S. based manufacturer is the buyer, then they will likely seek synergies and consolidation with their existing operations, which might mean that the GE facility could be moved and/or integrated with the buyer’s other operations,” he said.
“If the buyer is a non-U.S. manufacturer, they may want the GE plant as a foothold/entry to the U.S. market. Finally, if the buyer is private equity or a holding company that is looking to get into the business, then again I think the GE facility is probably going to stay where it is, at least for a few years
“GE has made big investments in this operation and it will be very costly to move.”
Jake Rouch, vice president of economic development for the Erie Regional Chamber and Growth Partnership, said he would like to see a company such as Japan’s Komatsu, which has a long history of building heavy machinery, buy and operate both the Erie and Fort Worth plants, as well as GE’s diesel engine plant in Grove City, Pa.
“Such a company would have the supply chains and cultural knowledge to run a global company like GE Transportation. Such a company would be able to recognize the design and engineering talent already in place in Erie, as well as the unique manufacturing talents and roles in Erie, Grove City (Penn.) and Fort Worth,” Rouch said.
But Rouch added that he would be less optimistic if private investors without such experience bought the operation.
“Should private equity acquire GE Transportation, the company — and all of the engineering and manufacturing locations — would face a dramatically different future,” he said in an email.
The Fort Worth plant employed about 700 people at its peak in 2015-16. Earlier this year about 250 employees were laid off and other employees saw their work week reduced to two hours as GE struggled with reduced orders from the major freight railroads.
In addition to building locomotives in Fort Worth, GE makes mining equipment.