(The following story by Anya Sostek appeared on the Pittsburgh Post-Gazette website on January 23.)
PITTSBURGH, Pa. — If a high-tech railroad company seems like an oxymoron, Al Neupaver can understand.
Prior to joining Wabtec as the company’s president and chief executive officer, his impression of railroads was of “an industry that’s slow and old. You know, you get upset just waiting for the train to go by at the crossing.”
But as Mr. Neupaver closes in on his first year at the helm of the Wilmerding-based rail supply company whose roots date back two centuries, he’s learned that railroad technology is very 21st century — and these days, very profitable.
Indeed, Wabtec’s stock has jumped 60 percent in the past two years, fueled by a “rail renaissance” that includes increased tonnage on freight trains and expansion of transit systems across the country. In 2006, the company’s cash on hand surpassed its long-term debt for the first time, revenue exceeded $1 billion for the second year in a row and profits, to be reported soon, will again increase by the double digits.
“It’s a high-tech company,” says independent New York-based rail analyst Anthony Hatch, “serving an industry that’s viewed incorrectly as low-tech.”
Wabtec sits on the same plot of land in Wilmerding that it has since the late 1800s, when it was known as the Westinghouse Air Brake Co.
Ever since George Westinghouse started manufacturing the air brake in 1870, it’s been a business built on finding modern ways to improve upon the age-old business of railroads. Today, the company has more than 5,400 employees worldwide, including about 500 locally.
One of its most talked-about products, the Electronic Train Management System, tracks trains using global positioning systems and allows them to be stopped automatically and remotely if they are not operating as planned.
The system is still in a pilot program, but it reflects just one of the ways that railroads have changed considerably over the years. In part, said Mr. Hatch, the general public doesn’t realize the impact of technology on the industry because passenger travel is now so minimal on rail lines.
“Railroads have always been big tech spenders, but that’s not really been well known,” said Mr. Hatch, noting that railroads were big customers of IBM in the 1960s when computers were in their infancy. “They rode out this decades-long decline by becoming more efficient over time.”
The level of technology currently in railroads rivals any other industry, said Mr. Neupaver. “If you get on that locomotive and sit on that cab, it’s like you’re in a cockpit,” he said.
And he should know. He spent five years as an officer on a nuclear submarine after graduating from the U.S. Naval Academy with an engineering degree in the 1970s, and stayed active in the Naval Reserves until 2002.
His office is full of books like “Physical Metallurgy,” and before taking the job at Wabtec he led a division of AMETEK Inc. that developed electronic motors for fields as diverse as aerospace engineering and medicine.
A 56-year-old native of Belle Vernon, he jokes that he wouldn’t even have taken the call about the job at Wabtec if the headhunter hadn’t been an old Navy buddy. Even so, “he said ‘railroad’ and I said ‘You’ve got to be kidding me.’ ”
Now a believer in cutting-edge rail technology, he said, his challenge at Wabtec is to move the company from a mindset of cash generation to one of growth.
The company got the name Wabtec after the 1999 merger of the Westinghouse Air Brake Company and the MotivePower locomotive manufacturer. That event, combined with a leveraged buyout in 1990, left the company with hundreds of millions dollars in long-term debt — a peak of $562 million in the fourth quarter of 2000.
Six years of prudent financial management resulted in cash on hand surpassing debt for the first time in 2006, said Mr. Neupaver, who subsequently announced a major growth initiative: The company would try to double its size within five years.
To do so, Wabtec is making acquisitions and aiming to expand its international business considerably. And while both the freight and transit industries are now “hitting on all eight cylinders,” Wabtec also is trying to expand its after-market offerings to guard against possible downturns in the future.
“There comes a time in every business where you can’t just generate cash,” said Mr. Neupaver. “My job is to take this company and show the leadership so that we can grow.”