Union Pacific signs record $1B deal with Wabtec to modernize locomotives

Union Pacific has signed a deal worth more than $1 billion for Wabtec Corporation to modernize 600 of its locomotives. The companies called it “the largest investment in modernized locomotives in rail industry history” in a Wednesday news release.

The locomotives will receive a makeover including digital solutions and innovations. It’s part of UP’s (NYSE: UNP) strategy to improve the efficiency and sustainability of the way it moves freight.

According to Wabtec (NYSE: WAB), the locomotive modernizations will:

• Improve fuel efficiency by up to 18%.
• Increase reliability by more than 80%.
• Increase haulage ability by more than 55%.
• Extend the life of the engines.

“Union Pacific is taking thoughtful, deliberate steps to reduce our environmental impact and to help our partners improve theirs,” Lance Fritz, chairman, president and CEO of UP, said in the release. “Wabtec’s modernization program helps make our existing fleet more fuel efficient, capable and reliable. The resulting increased tractive power enables us to move more freight with fewer locomotives, which improves efficiency and reduces emissions.”

The efforts also are expected to reduce carbon emissions by 350 tons per locomotive per year. That adds up to 210,000 tons of carbon emissions avoided annually, which is the equivalent of removing nearly 45,000 passenger cars from the road each year, according to UP.

Such emissions reductions will help UP move closer to its target to reduce scope 1 (direct) and scope 2 (indirect) greenhouse gas emissions by 26% by 2030, using 2018 as a baseline. The company aims to reach net-zero emissions by 2050.

Wabtec will modernize 525 of UP’s AC4400 and AC6000 locomotives, as well as 75 Dash-9 locomotives. The modernized engines will be given FDL Advantage engine upgrades and Modular Control Architecture technology.

About 70,000 tons of steel will be reused and recycled, which represents more than half of the locomotives’ weight and supports a circular economy. 

“Modernizations are a game changer for our customers, offering the ability to realize significantly more value out of existing locomotive assets,” Rafael Santana, president and CEO of Wabtec, said in the release. “By customizing these solutions for our customers and installing state-of-the-art technology, we are helping our customers realize outcomes including increased tractive effort, fuel efficiency, reliability and adhesion, which reduce maintenance, repair and overhaul expenses. These fleet benefits will support Union Pacific’s sustainable service improvements and long-term growth strategy.”

The deal is the third major order Wabtec has received from UP for locomotive modernization since 2018. More than 1,030 locomotives will be modernized by the end of 2025. The deliveries of the 600 modernized engines are expected to begin in 2023.

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Source: freightwaves - Union Pacific signs record $1B deal with Wabtec to modernize locomotives
Editor: Alyssa Sporrer