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GE Transportation, one of the operating segments of General Electric Company (NYSE:GE) , recently inked a 10-year framework agreement with Ukraine. Under the agreement, GE will supply 30 Evolution Series freight locomotives including additional locomotive kits and long-term maintenance services to Ukrzaliznytsya or Ukrainian Railways. The deal is valued at more than $1 billion and is considered to be one of the biggest signed by GE in Ukraine so far.
The agreement is seen as part of Ukraine's efforts to establish itself as a key player in the European rail hub and trade corridor. It will help the Ukrainian government to improve its rail infrastructure and bring products to market faster and more efficiently, giving a boost to the country’s economic growth. The project will launch a large-scale modernization of Ukrainian Railway's locomotive fleet. In addition to addressing Ukraine's needs for greater mobility, the strategic partnership with GE will provide a powerful impetus to developing domestic manufacturing in the country.
Production of the locomotives is expected to start at GE’s Erie plant in Pennsylvania in 2018 with the first delivery to be made in the fourth quarter of the year. The agreement outlines that certain part of the work would be undertaken locally in Ukraine, which will lead to new jobs and contribute to the economic development of the country. Also, the deal is likely to play an important role in strengthening United States-Ukraine relations and will give an excellent opportunity to GE to strengthen its local ties. The company is likely to gain from its increased businesses which will help it to protect the interest of stakeholders.
GE has underperformed the industry in the last three months, with an average loss of 21.5% compared with a decline of 3.1% for the latter. Moving forward, the company intends to focus on three core segments — power, aviation and healthcare — which require advanced hi-tech products with a high degree of reliability. These products often generate higher margins and are likely to contribute to higher long-term growth, which would likely improve its sagging shares.
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