GE sees Indonesia as regional locomotive assembly hub

The Jakarta Post | Mon, 10/05/2009 1:52 PM

General Electric is considering making Indonesia its assembly hub for locomotives for the Asia market, hoping to capitalize on the rising demand in the country and other countries in the region.

CEO Jeffrey Immelt said last week that the assembly plant would be developed in cooperation with local partners which already had long experience and a track record in the locomotive business.

“I think Indonesia could become a center of excellence for the locomotive business in the [Asian] region. It could be a great location from which to export to other countries in the region,” he said, after addressing a discussion entitled “Innovation as the driving Force for Economic Transformation”.

He said Indonesia was capable of functioning as a locomotive assembly hub as it already had railway-related industries, with have long experience and good quality human resources, plus the technological capacity to develop the business.

Recently, GE, which was ranked no. 4 in BusinessWeek’s 2008 among the world’s most innovative companies, has secured an order from the state-owned railway operator PT Kereta Api to make 20 new locomotives at the total price of US$40 million. The locomotives will be delivered between 2010 and 2011.

Satya Heragandhi, GE Transportation’s Southeast Asia Sales Director, said that for the next five years the state-owned operator would need about 150 locomotives valued at $300 million to improve its railway services in Java and Sumatra, following the government’s decision to liberalize the railway business, which has previously been a PT Kereta Api monopoly.

In the period 2004 to 2009 PT Kereta Api had ordered 10 locomotives from GE and all had been delivered, he said.

“As the railway industry would be liberalized by 2010, and there is a commitment on the part of the Indonesian government to rejuvenate the railway services in Indonesia, particularly in Sumatra and Kalimantan, so there will be a boom in railway-related businesses,” he said.

He said the locomotives were not completely made in the US at Erie.

“Only the engines and some key parts are made there. The other components are made and assembled by PT INKA.

“I think the local content of locomotives [assembled in Indonesia] has increased from just 15 percent five years ago to more than 21 percent now,” he said.

Kereta Api’s President Director, Ignasius Jonan said recently that the company was committed to improving its services, including safety, comfort and the punctuality of its train services.

He said his company’s development would be directed in future more towards freight services rather than towards passenger services as was the present case.

Satya noted that the growing investments in the locomotive sector were partly the results of a meeting in 2006 between Immelt, his company’s CEO, and President Susilo Bambang Yudhoyono.

They had discussed the possibilities for GE investing in the country’s infrastructure, particularly in the railway sector.

GE Transportation is a subsidiary of the widely diversified business group GE, which is a leading global player in railroads, marine and shipping, mining and drilling and in turbines and wind generation.