Greenbrier Companies (NYSE:GBX)
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Greenbrier Cos. (GBX) blasted General Electric Co. (GE) for breach of contract Tuesday as the rail-car maker swung to a fiscal third-quarter loss on $55.7 million in goodwill write-downs and lower demand.

Greenbrier said GE, one of the nation's largest rail-car leasers, has told it to slow production of new cars to a point that "does not allow for efficient operations of our manufacturing facility." GE, which contracted for the cars in 2007 under a $1.2 billion, multiyear deal, currently accounts for about 84% of Greenbrier's rail-car backlog, or 11,800 cars.

Stephen White, a spokesman for GE Capital, the conglomerate's finance arm, countered that GE is living up to the deal but wants to renegotiate it because of the downturn in the economy since 2007.

The recession has sapped demand for all manner of goods, severely hurting the freight-transport sector. At least 25% of the U.S. rail-car fleet is believed to be sitting idle, depressing the market for new cars.

"Every rail car we take just goes straight into storage," White said.

He said GE is looking for "mutually acceptable solutions that possibly include modifying delivery schedules." Still, he maintained that GE has been honoring the contract in the interim.

But Greenbrier, which last month enlisted members of Congress in its dispute with GE, said Tuesday that the conglomerate has slowed acceptance of new rail cars and has been imposing "hyper-technical quality inspection practices" as part of its foot-dragging.

Greenbrier Chief Executive William A. Furman also blamed GE for further clouding his company's already hazy business outlook, and he reiterated that the unresolved issue could necessitate further "sacrifices" such as job cuts. The company said Tuesday that it will furlough an additional 550 workers amid weak overall demand and poor economic visibility.

"This limited visibility is exacerbated by GE's unilateral actions and the uncertainties surrounding our multiyear contract with them," Furman said in a prepared statement.

For the quarter ended May 31, Greenbrier reported a loss of $50.5 million, or $3 a share, compared with year-earlier earnings of $8.1 million, or 49 cents a share. Excluding the write-downs, Greenbrier said it would have had a 3-cent profit.

Revenue tumbled 36% to $244 million.

The results marked the third straight quarterly loss for Greenbrier amid the difficult environment for freight-transportation companies. Earlier this year Greenbrier suspended its dividend and unveiled cost-cutting plans. But the company recently calmed concerns about its debt, receiving a $75 million loan from distressed-asset investor W.L. Ross & Co. L.L.C. and lowering its credit line by two-thirds while easing its terms.

Analysts polled by Thomson Reuters most recently were looking for a loss of 5 cents on revenue of $269 million.

Gross margin fell to 10.9% from 12.7% amid lower volume and scrap metal prices.

Furman, noting that rail loadings in North America are down about 20%, said Greenbrier is continuing to trim operations and paid down $19 million in debt during the quarter.

The company's rail-car deliveries for the quarter fell 60% to 800 units, while backlog dropped to 14,100 units valued at $1.25 billion, from 15,100 units valued at $1.31 billion. Greenbrier said it expects about 900 deliveries in the fiscal fourth quarter, compared to 1,800 in the year-ago period.

Shares closed at $6.92 on Monday and didn't trade premarket. The stock is down roughly 70% in the past nine-and-a-half months, though it has nearly quadrupled since hitting an all-time low of $1.86 in March.

-By Bob Sechler, Dow Jones Newswires; 512-394-0285; bob.sechler@dowjones.com

(Tess Stynes contributed to this report.)