Sales of the SD40-2 began to diminish after 1981 due to the oil crisis, increased competition from GE's Dash-7 series and the introduction of the EMD SD50, which was available concurrently to late SD40-2 production.

To suit export country specifications, General Motors designed the JT26CW-SS (British Rail Class 59) for Great Britain, the GT26CW-2 for Yugoslavia, South Korea, Iran, Morocco, Peru and Pakistan, while the GT26CU-2 went to Zimbabwe and Brazil.

The SD38-2 and SD40-2 shared the same basic superstructure, since they used the same 16-645 engine (in Roots-blown and turbocharged form respectively); the long hood was 18 inches (457 mm) longer than the SD38 and SD40, but since the increase in frame length was even greater, the SD38-2 and SD40-2 had even larger front and rear "porches" than the earlier models.

These empty areas at front and rear are spotting features to identify the Dash 2 models of both units.

Older SD40-2 units used in low-power modes such as yard switching or hump service have been de-turbocharged, resulting in the mechanical equivalent of a SD38-2.

[citation needed] There are several variations of the SD40-2 such as the SD40T-2s (Informally: T for tunnel motor; the actual EMD designation is "SD40-2 With Cooling System Modification", as stated on this model's EMD manuals) bought by the former Southern Pacific, and Denver and Rio Grande Western railroads; now operated by Union Pacific.

[citation needed] A variant of the SD40-2 was created for several western railroads for extended periods in tunnels and snow sheds.

[citation needed] Conversely, several other models of EMD locomotive have sometimes been rebuilt to SD40-2 standards, including the SD40, SD45 and SD45-2.

Normally, this consists of electrical upgrades (-2) and replacing the 20-cylinder prime mover with a 16-cylinder version, often built for GE Capital in Poland using EMD's manufacturing drawings and specifications.

One of the most notable rebuilds was SD40-2 8888, (now rebuilt to 4389), which in 2001 was involved in a runaway incident caused by the failure of the engineer to notice the train gradually accelerating during yard switching.

The resulting locomotive is rated at 2,150 horsepower (1,600 kW), and meets EPA Tier II emissions regulations.

The locomotive is rated at 3,000 horsepower (2,200 kW) and meets EPA Tier 0 emissions regulations.

[8] The ET23DCM is an EMD SD40-2 rebuilt by Wabtec, and repowered with a GE Evolution Series Inline 6 cylinder prime mover.

[12] In 2022, Dieselmotive of California saved Milwaukee Road SD40-2 156 from scrap and had it moved to the Oklahoma Railway Museum.

Later renumbered as MILW 156, it was painted as Milwaukee Road's Bicentennial unit in 1975 for the two-year celebration that began the following year.

The museum plans to restore the locomotive back into its Bicentennial paint scheme, as well as make it fully operational again.