General Electric's secret boot camp

(Fortune Magazine) -- When you think of hotspots for grooming corporate leaders, the bustling skyscrapers of Manhattan or the sprawling office parks of Los Angeles easily come to mind. But Erie, Pennsylvania? That's right. Turns out, the mid-sized industrial town marked by squat factories and windowless pubs is ground zero for some of corporate America's fast-rising stars.

The reason: GE Transportation, an unheralded division within the General Electric (Charts, Fortune 500) juggernaut that makes the world's most expensive locomotive engines. The unit's business is booming, thanks to surging demand from countries like China, Kazakhstan and India. Annual revenues at Transportation have tripled, to $4.2 billion, since 1999.

John Dineen is the CEO of GE Transportation, where many future company leaders cut their teeth.

Dineen says working so close to the factory floor gives aspiring leaders invaluable experience.

Fueled by surging demand overseas, GE Transportation's revenues have increased threefold in eight years.

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Transportation is also prime training ground for GE's up-and-comers. While GE managers used to learn all they needed to know about leadership at the company's corporate university in Crotonville, N.Y., textbook learning is no longer enough for an increasingly-diverse company that generates half of its $163 billion in yearly sales overseas (see correction). CEO Jeff Immelt now prizes plenty of hands-on experience in a tough business.

"Crotonville is still really important," says Jeff Bucklew, GE's manager of executive development. "But the biggest way to develop someone is put them in a variety of situations in one operating business with some global exposure."

Enter Transportation. Among the division's alumni are John Krenicki, who now heads the $19.1 billion GE Energy division; John Rice, who is corporate vice chairman and chief of the $47.4 billion umbrella Infrastructure group that includes Transportation; and Charlene Begley, who ran the company's $6.7 billion Plastics unit until it was sold this year. Given GE's track record for cultivating some of the country's most powerful business leaders, these stars are likely still rising.

Today the head of Transportation is a 44 year-old named John Dineen, who works out of a small corner office overlooking a locomotive test track. A 21-year veteran of GE, Dineen has climbed the corporate ladder with stints in London and Hong Kong, where he spent years working for the company's appliances unit. With his experience in manufacturing and working with unionized labor in China, General Electric promoted him in 2005 to take over as Transportation's chief after Begley left.

While a far cry from world centers of commerce and culture, Transportation has a vibe more akin to Silicon Valley than Rust Belt, says Dineen. "When you drive here, you see an old factory," he continues, looking every bit the part of a Web 2.0 engineer in khakis and a fleece pullover, slightly unshaven and with his long hair combed back.

"But when you hang around for a week, it feels more like a software campus," he says. "If you close your eyes and don't pay attention to the ugly carpets, you'd think we'd have a foosball table."

Dineen says managers get more on-the-ground training at Transportation than at other company divisions. "There's a sense of touch here," he explains. Earlier in the day, Dineen stood under a large tent on Transportation's 26-building campus in Erie and spoke to the company's 3,800 unionized workers ways to speed up locomotive construction. Later, he stopped by a production floor where a dozen locomotives were in various stages of assembly.

"With the production right here, you can get your arms around the people, the product, and the technology," says Dineen. "In this business, you're a CEO, but you're also a COO."

Young managers are also given a lot of responsibility. Gina Trombley, a West Point graduate with little private-sector experience before joining GE, was managing a multimillion dollar account with railroad giant CSX (Charts, Fortune 500) after just three years on the job. At GE, the 36-year-old is considered a "HIPOT," or high potential employee. But even for a HIPOT, Trombley's rapid ascension was unusual for GE, says Dineen.

"When GE assigns you to Transportation," says Trombley, "they're putting you right where the action is."

Dineen sets a high bar for his deputies. His goal is to turn Transportation into a $10 billion business within the next few years, which isn't farfetched. In recent years, the company has branched out into mining equipment and wind turbines, which now represent about 40 percent of the division's revenues.

Transportation has also built more rapid-development prototypes than any other division within GE in the last five years, which has led to new products like a wind turbine and a high-performance tugboat engine. These and other non-locomotive inventions now comprise 60 percent of Transportation's revenues, up from 10 percent in the late 1990s.

The most successful of those experiments spawned the Hybrid Locomotive -- so named not because of any Toyota Prius-like battery, but because it can harness the energy of hundreds of railcars to boost efficiency. The engine has been such a hot seller overseas that about one-third of Transportation's sales now come from abroad.

Globalization has meant exporting talent too. Walter Amaya started his career at John Deere in Monterrey, Mexico before jumping to Transportation in 1999. A Mexican citizen, Amaya spent two years working in Erie before returning to Monterrey to run one of Transportation's engine repair facilities there. On his first day in his new management role, Amaya had a one-on-one meeting with the then-CEO of Transportation.

"That's what happens in this relatively small corner of a huge structure," says Amaya. "It's an incredible way to learn."

Correction: An earlier version of this story incorrectly stated that Crotonville is in Connecticut. Return to story.