As important as lightweight cars to the creation of the modern streamline train was the introduction of a successful diesel locomotive for mainline use. Gasoline, naphtha, and distillate engines had been tried in motorcars and small locomotives with limited success. Most had mechanical drivetrains -- much like a truck -- which weren't well suited to railroad service. The General Electric Company developed an electric transmission system that had the engine drive a generator. The resulting electricity could be easily controlled and used to power motors on the axles, like those fitted to electric streetcars. This system was applied to gas-electric motorcars and, later, to small locomotives.
GE built three unsuccessful diesel-electric locomotives in 1918, and in 1925 began to furnish electrical equipment for Alco diesel-electric switchers. These were moderately successful and pointed the way to the production of several hundred diesel-electric switchers prior to 1940. Developing a diesel powerplant capable of surviving the rigors of mainline service was another matter, and it was here that the upstart manufacturer Electro-Motive Corporation had the edge.
EMC had been purchased by General Motors in 1930, as was the Winton Engine Co. Winton perfected a practical two-cycle diesel engine light enough for service on a road locomotive by 1932, and these companies experimented with ways of matching diesel engines and electric transmission for mainline purposes. EMC furnished the propulsion equipment for the Zephyr and most other motor trains of the era. This experience allowed EMC to develop a design for full-size passenger locomotives, which were placed into production in 1937, The E-series passenger locomotives dominated the market and pulled most of the pre-war diesel streamliners.
EMC had also commenced the manufacture of switching locomotives in 1936, and had a road freight locomotive, the FT, in production by 1939. Diesel production exceeded steam locomotive production for the first time in 1938.
In January of 1941, with the technologies of EMC and Winton developed to the point that their products were proving to be of substantial commercial value, the two subsidiaries were consolidated and merged into the General Motors Corporation as the Electro-Motive Division. EMD's FT freight locomotives were the only diesel-electric freight locomotives allowed to be commercially manufactured during World War II under War Production Board restrictions. This helped establish market preeminence and meant that the competitors -- all of them established steam locomotive manufacturers -- were building an obsolete product.