DETROIT -- General Motors is near a deal to sell its locomotive unit to two private U.S. equity firms, ending more than two years of negotiations, but any agreement is contingent upon a new union contract, sources familiar with the negotiations said on Tuesday.
GM agreed to the terms of a joint purchase agreement for its Electro-Motive unit with Greenbriar Equity Group, a $700 million equity fund run by former Chrysler Corp. Vice Chairman Gerald Greenwald, and Boston-based Berkshire Partners, a $3.5 billion buyout fund, said the sources, who asked not to be named.
"I think it's just a matter of time, days rather than weeks," for the deal to be announced, one of the sources said.
The deal is pending ratification by the United Auto Workers union on a new contract for the approximately 800 workers at Electro-Motive's operations in LaGrange, Ill., the source added.
The source declined to give details of the terms, but said GM would sell the business for less than $1 billion.
Officials with GM, Rye, N.Y.-based Greenbriar Equity and Berkshire Partners declined to comment.
Electro-Motive, which employs about 3,000 workers, is the world's largest manufacturer of diesel-electric train locomotives with operations in LaGrange and London, Ontario. It also builds diesel power engines for boats, oil rigs and power generators. GM does not disclose financial results for the company, which it has owned since 1930, but financial analysts said it has lost money the last few years.
The new union contract is expected to be similar to deals reached earlier this year at automotive parts suppliers Delphi Corp. and Visteon Corp., which allow the companies to hire new workers at a lower pay and benefit scale compared to current employees, one of the sources said. In addition, many employees who had been classified as temporary will now become full-time, the source said.
"It really puts the company in an opportunity to compete in the market. It's not been a core business for GM for a number of years," the source said.
UAW spokesmen at the union's headquarters in Detroit were not immediately available for comment
GM has steadily sold off non-core assets the last few years to raise funds to cover its mounting pension and health care costs. Last year, GM raised more than $4 billion in cash and stock when it sold off its stake in DirecTV parent Hughes Electronics Corp., and about $1.1 billion from the sale of the bulk of its defense business to General Dynamics Corp.
Greenbriar and Berkshire Partners have worked closely together in the past, having jointly invested in Active Aero Group, an air cargo company, in 2000 and Hexcel Corp., a maker of lightweight structures for the aerospace industry, in 2003.
The equity firms have earmarked more than $1 billion to acquire companies in the transportation sector, Berkshire said on its Web site.
Berkshire has acquired other railroad companies in the past, including Wisconsin Central Transportation Corp., New Zealand Rail and the rail freight operations of British Rail.
Private equity firms typically buy, upgrade and sell companies in a three to seven year timeframe, applying management skills to cut costs and expand their businesses.