Does it still make sense to manufacture in relatively high-wage locales such as Erie, Pa.?
It’s a very competitive site for assembly and systems integration. There’s a lot of technology in putting these engines together. Customers’ No. 1 need is to have a reliable product, and systems integration is key to that reliability. Significantly less than half the cost of a locomotive is from things we manufacture, so we source components from the lowest-cost places around the world. In some cases, that’s the U.S. In others, it’s Mexico or China. We’re also globalizing the intellect. We have over 100 engineers working on product and software in India. In terms of where we assemble our locomotives, though, we don’t see any reason to move that. Q: In selling abroad, you’re often dealing with subsidized and heavily politicized customers and competitors. Is that an obstacle in getting through the door? A: We’ve been talking about locomotives, which is one piece of the business. In that area, a lot depends on the economic condition of a country and the willingness to really pay for first
