By Michael Ellis and Dane Hamilton
DETROIT, Sept 17 (Reuters) - General Motors Corp. is in discussions to sell its Electro-Motive unit, the world's largest builder of diesel train locomotives, to two U.S. private equity firms, the head of the Canadian Auto Workers union told Reuters.
"There's definitely been some ongoing discussions with this financial group and General Motors," Buzz Hargrove, President of the CAW, who said he has been consulted by GM on the deal, told Reuters in an interview.
A person close to the talks also confirmed that GM is in discussions on a joint bid by Greenbriar Equity Group, a $700 million private equity fund led by former Chrysler Corp. Vice Chairman Gerald Greenwald and Berkshire Partners, a $3.5 billion buyout fund.
The Canadian Auto Workers union represents workers at the Electro-Motive facilities in London, Ontario. The unit, which also builds diesel power engines for boats, oil rigs and power generators, is based in LaGrange, Illinois.
Hargrove said the interested buyers were studying the finances and structure of the unit more closely. But no deal was imminent, said Hargrove and the source close to the talks.
The source warned that talks were still months from any conclusion and could well collapse.
"It's no secret we've had some interest in that business over the last few years," said GM spokeswoman Sheri Woodruff, who declined to comment further.
Greenbriar officials declined to comment. A Berkshire spokesperson could not immediately be reached.
Wall Street analysts have long speculated that GM would try to sell its Electro-Motive unit. Two Wall Street analysts who declined to be named said the unit could raise over $1 billion.
GM has steadily sold off non-automotive units to raise funds to cover its mounting pension and health care costs. GM's U.S. pension plans ended 2002 underfunded by $19.3 billion and the automaker spent $4.5 billion on health care last year, making it the world's largest private provider of health care.
Earlier this year, GM agreed to sell its its stake in Hughes Electronics Corp. to Rupert Murdoch's News Corp. Ltd. which will raise about more than $4 billion in cash and stock once that deal is completed. GM also sold the bulk of its defense business late last year for $1.1 billion in cash.
Rye, New York-based Greenbriar and Boston-based Berkshire have worked closely together in the past, having jointly invested in Active Aero Group, an air cargo company, in 2000 and Hexcel Corp., an aircraft parts maker, in 2003.
Private equity firms typically buy, upgrade and sell companies in a three-to-seven year time frame, applying management skills to cut costs and expand their businesses.
If the firms were to acquire the division, they would jointly "put a total focus on getting the costs right and look for ways to grow the company profitably," the source close to the talks said.