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UPDATE 1-Union Pacific orders 175 locomotives from GM unit

By Michael Ellis

DETROIT, Nov 21 (Reuters) - General Motors Corp.'s train locomotive unit said on Friday it won an order to build 175 locomotives for Union Pacific Corp. , while a top union official said that talks to sell the GM business has cleared a major hurdle.

"We have been communicating internally with employees and suppliers about (the deal with Union Pacific) this week," Curt Swenson, a spokesman for GM's Electro-Motive told Reuters. Delivery of the locomotives is scheduled to start in the second quarter next year, he said.

Swenson and Union Pacific spokesman John Bromley declined to reveal terms of the contract for the SD70M diesel locomotives.

The deal is the largest between the two companies since GM won a contract to supply 1,000 train locomotives to Union Pacific in 1999, spokesmen for the companies said. A GM spokeswoman said that deal, which was the largest contract ever for both the GM unit and Union Pacific, was worth at least hundreds of millions of dollars.

"It'll raise some eyebrows," Jeffrey Kauffman, a railroad analyst with Fulcrum Global Partners, told Reuters. "Rails haven't added a lot of locomotive equipment in the last couple of years because of the economy."

But rather than reflecting optimism of economic growth, Kauffman noted that Burlington Northern Santa Fe Corp. and Union Pacific recently placed orders for new locomotives to take advantage of tax breaks.

Meanwhile, a top official with the Canadian Auto Workers (CAW) union, which represents workers at a GM Electro-Motive plant in London, Ontario, told Reuters on Friday that efforts by GM to sell the train unit to a private equity firm had cleared a hurdle.

"We heard yesterday that one of the major stumbling blocks had been overcome," said John Scanlan, the CAW's national representative for GM workers.

CAW President Buzz Hargrove and a person close to the talks told Reuters in September 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.

Scanlan said some issues in the sale talks that remain to be settled include concerns by the United Auto Workers union, which represents workers at Electro-Motive in LaGrange, Illinois.

"There was some outstanding issues at LaGrange between the UAW and the potential buyer," he said, declining to comment further on the problems.

Officials at the local UAW and Greenbriar were not available for comment. Electro-Motive's Swenson declined to comment on any sale talks.

Scanlan said Berkshire has made it clear that it is not interested in Electro-Motive unless it can buy both the Ontario and the Illinois plants.

(Additional reporting by Dane Hamilton)