Downer and EMD, which is owned by Progress Rail, a Caterpillar company, have worked together for more than six decades supplying and maintaining locomotives in Australia.
Downer uses locomotive components manufactured by EMD (including diesel engines, traction motors, turbo chargers, generators and related software) to manufacture Downer designed locomotives for sale to customers in Australia. Downer also purchases locomotives manufactured offshore by EMD for sale in Australia.
As a result of the growth in mining and the ageing Australian fleet, the long term demand for new locomotives in Australia will remain strong. The market, however, is changing with increased offshore competition, customer requirements for lower capital costs and shorter lead times for delivery.
The Chief Executive Officer of Downer, Grant Fenn, said that under the new agreement, Downer and EMD would transition to a competitive locomotive supply model that will provide significant benefits for its customers.
“Downer and EMD have taken action to ensure we have a sustainable business model that will give our customers an advantage,” Mr Fenn said.
The CEO of Electro-Motive Diesel, Billy Ainsworth, said: "This agreement is yet another example of our continued responsiveness to rail customers globally. We are proud to work with Downer on delivering the highest quality products and services, with the best life cycle cost, to our customers in Australia.”
Under the new agreement, EMD will manufacture all locomotives for the Australian market with Downer continuing to sell EMD locomotives and after-market products, including spare parts. EMD will manufacture the locomotives at one of its new low cost overseas facilities.
During the transition period, which is expected to take between 12 months and two years, Downer will continue to manufacture locomotives in Australia.
“The demand for locomotives in Australia remains strong and this new agreement with EMD means Downer will be better positioned to meet our customers’ demands for better value and shorter lead times,” Mr Fenn said.
“We will have a sustainable locomotive business as we exit high cost manufacturing and concentrate on sales, repairs and maintenance and whole of life asset management.”
Downer is the largest provider of outsourced freight maintenance services in Australia, with a national network of over 20 maintenance centres. Downer provides customers with frontline maintenance, locomotive overhauls, remote help desks and derailment recovery and repair.
As a consequence of the new agreement, a number of Downer Rail employees working on locomotive projects will be transferred over time to other rail projects while it is expected there will be a small number of redundancies.