The Greenbrier Companies has agreed to cut nearly in half the number of railcars it will manufacture for its largest customer, General Electric Railcar Services Corp., the Oregonian reports.
Instead of building 11,900 tank and hopper cars for GE, Lake Oswego-based Greenbrier will manufacture 6,000. Greenbrier also made another concession to GE, agreeing to extend the delivery time for the first 3,800 cars by 27 months over the original contract.
The deal ends a very public dispute between Greenbrier and GE. William Furman, Greenbrier president and CEO, went public last spring blasting GE for unilaterally backing away from its contractual obligation to buy the 11,900 cars. GE officials said it needed a break from the contract in light of the recession.
GE is by far and away Greenbrier's largest customer.
The settlement announced Tuesday is not all bad news for Greenbrier. GE agreed to pay a slightly higher price for the next 3,800 cars it buys from Greenbrier. Mark Rittenbaum, Greenbrier CFO, said in a conference call that the price increase is less than 5 percent.
GE also inked a five-year railcar maintenance contract with Greenbrier naming the company one of its preferred maintenance providers. The contract is worth a minimum of $25 million to Greenbrier.
Work on the new maintenance contract will get underway in the first quarter of 2010 at Greenbrier's Gunderson facility in Northwest Portland. Crews will modify existing 48-foot long double-stack platforms, cutting them down in size to 40-feet in length.
While Greenbrier agreed to a major concession in the near-term, it got in return a significant promise from GE for future work. GE granted to Greenbrier, under certain conditions, the right of first refusal to manufacture all new railcars for GE through December 2018 and railcar maintenance through March 7, 2015.
"We were able to work out a win/win solution to the difficult position faced by both parties in the present economy," Furman, Greenbrier's CEO, said in a press release. "We acknowledge and appreciate GE Railcar's willingness to stand by its commitment and help maintain family-wage manufacturing jobs in North America."
Greenbrier's stock closed at $11.30 Tuesday, down 20 cents per share.
(This item appeared Dec. 16, 2009, in the Oregonian.)
