In 1946 Lima's Class 1 market prospects were bleak unless it could enter the diesel-electric locomotive field quickly, but they couldn't afford a full-scale development program.
The General Machinery Corporation management wanted to terminate steam locomotive production, while the Lima management was still committed to the development of a 4-8-6 super steam locomotive, nicknamed "double-bubble" for its unique firebox, designed with poppet valves, to be a true competitor in the diesel market, the design of which began in 1929.
Chief Mechanical Officer Bert Townsend resigned in protest of the decision to scrap the plans to build steam locomotives.
Former ALCO engineer F. J. Geittman was hired by General Machinery Corporation prior to the merger with Lima to oversee their diesel locomotive project.
#1000 became Toledo, Peoria and Western #300, #1001 became American Rolling Mill Company #707, #1002 and 1003 became Wabash #400 and 407 respectively, and #1004 became Indian Hill and Iron Range #302.
Baldwin's primary interest was Lima's shovel and crane business which was expected to do well with the upcoming highway building boom.