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; email@example.com;