Siemens AG (SI) has won a $466 million order to build 70 electric locomotives for Amtrak’s Northeast and Keystone Corridor lines in the U.S.A. The locomotives will be built at Siemens’ existing light rail manufacturing facility in Sacramento, California.
The locomotive platform has been configured for improved reliability, sustainability and safety. The design meets the latest Federal Railroad Administration requirements of front-end strength by providing a crumpling zone for collision with heavy, large objects in addition to incorporating a refurbished safety cage equipped with anti-climber functionality. The delivery schedule of the locomotives starts in 2013.
Siemens is a global leader in most of its key businesses, including industrial automation, power generation, medical equipment and transportation. Given its product breadth and geographical diversity, the company should be a major beneficiary of increased spending as developing nations build up their infrastructure. Its core businesses have seen a pick-up in demand and the company is well positioned in areas such as Brazil, Russia, India and China, where growth is the fastest.
Its major competitive strength lies in emerging markets. In the first half of 2010, 30% of businesses were in the emerging markets, which compares to 19% during the downturn of 2001. The company has built out its headcount in low-cost countries. In 2001, it was only 14% of its global headcount base. Today, it is 25%. It is increasing not just its physical presence from a distribution and marketing standpoint, but also its manufacturing footprint, allowing it to optimize its global cost structure from a global supply chain standpoint. Roughly 20% of its global sourcing requirements are generated by low-cost countries.
Global macroeconomic and financing conditions continue to reduce consumer spending, business confidence and capital expenditures. This was particularly evident in such short-cycle industries as automotive, manufacturing and lighting. Longer-cycle energy and infrastructure customers have postponed new businesses.
Siemens AG is a German industrial conglomerate with interests in information services, automation and controls, medical equipment, power generation, transportation systems, automotive electronics and lighting, among others. With a focus on electronics and electrical engineering, the company is a major multinational with over 405,000 employees in more than 190 countries.
We currently have a long-term Neutral recommendation on Siemens.
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