Good morning. My name is Jennifer, and I will be yourconference Operator today. At this time, I would like to welcome everyone tothe GATX Q3 Earnings Call. All lines have been placed on mute to prevent anybackground noise. After the speakers’remarks, there will be a question and answer session. (Operator Instrutctions) I would now like to turn the call over to our host, RhondaJohnson, Director of Investor Relations. Ms. Johnson?

Thank you Jennifer, and good morning everyone and thanks forlistening in to our third quarter conference call. With me today are BrianKenney, President and CEO of GATX Corporation, and Bob Lyons, Senior VicePresident and Chief Financial Officer. I’ll provide a brief overview of resultshighlighted in our press release earlier this morning, and then we’ll open upfor your questions. First, I’d like to remind you that any forward lookingstatements made on this call represents our best judgment as to what may occurin the future. We’ve based these forward looking statements on informationcurrently available and disclaim any intention or obligation to update orrevise these statements to reflect subsequent events or circumstances. Thecompany’s actual results will depend on a number of competitive and economicfactors, some of which may be outside the control of the company. For moreinformation I’ll refer you to our 2006 form 10-K filing. Now let’s review the numbers. Today we reported net incomefrom continuing operations of $63.9 million, or $1.21 per diluted share for Q32007, which included a $9.4 million, or $0.17 per diluted share tax benefitfrom a change in statutory tax rates in Germany. In Q3 2006, we reportednet income from continuing operations of $43.6 million, or $0.76 per dilutedshare. Year-to-date, we reported net income from continuing operations of$144.4 million, or $2.63 per diluted share, including net benefit from theGerman tax rate change that I just mentioned. This is compared with $122.7million, or $2.13 per diluted share in the same period in 2006, which includesa $5.9 million, or $0.10 per diluted share tax benefit from a change inCanadian statutory tax rates. Our third quarter results were exceptional, benefiting inparticular from very high remarketing income in both rail and specialty. Asnoted in our press release, the areas we have highlighted in the past year, inparticular the markets for construction related…

(Operator Instructions) Your first question comes from JohnHecht with JMP Securities.

Good morning guys, thanks for taking my questions. I justwanted to drill down into the pricing increase during the quarter. It was upfrom last quarter, and it was a prettyhealthy number. In thinking about the change from last quarter, some of yourcomments about, you know, getting, you know I guess comps if you will, aregoing to become tougher. What should we expect going forward, and then alsowhat happened in the market to cause an increase from last quarter?

John, it’s Bob Lyons. I think that it’s driven more by the17% in Q3 versus the 14% in Q2, is actually driven a bit more by the level ofthe expiring rates, and was particularly low in Q3 versus Q2. So you see thepercentage increase between the two quarters, that’s really the main driver ofthe change. Going forward, as Rhonda mentioned, you know, we expect through, aswe get through 2008, the expiring rates will continue to move up, and thenwe’ll be renewing cars that have been put on during a better environment, sothe comparables will get a bit more challenging, but you know, that’s thephenomenon we’ve been talking about for quite some time.

I’d add that if you talk about general pricing, you have tosay general because it is, it does differ on a car type basis, but generallyfreight car absolute lease rates have been coming down over the last couple ofquarters, and tank car rates are hanging in there, if you want to think aboutit on an absolute basis on renewal.

And the other deep type I’d like to get from you guys onthis, you know, I guess, headlines out there talking about some of the ethanolglut, and how many idle cars might be associated with that, is that taking itstime, is that working through the system in an orderly fashion, or would thatcause potential bit of volatility in pricing in the coming months?

I think it will cause some volatility in pricing in thecoming months. If you look, if we take a minute here and look at the productionand how it’s ramped up over the last five years, say, I mean, in 2001, ethanolproduction was 1.7 billion gallons, that’s tripled by 2006, and 2007 will be upclose to 7, so a lot of production, a lot of capacity coming on, there’sanother, depending on what you listen to, 120 plants under construction withanother $6 billion at capacity, so a lot of supply, a lot of capacity beingbuilt, and demand certainly hasn’t kept pace for a variety of reasons, and seenthe price of ethanol fall because of that. In addition, if you look at our ethanol customers, theircosts have been going up, cost of core and cost of energy, cost of building aplant for that matter has gone up. So you see the reaction of the last couplemonths has been for them to delay constructions of all those plants that Imentioned being under construction. And we’ve seen it with our customers, yousaw some public announcements like Vera Sun canceling their plant. So yeah,it’s going to be a rocky year or two for ethanol producers, and obviously thatwill work its way through to the manufacturers that build the cars as well asleasers that lease them. And that’s why we’re seeing, you know our estimateabout, maybe 4,000 cars in the industry are idle right now. But if you go toour fleet, which is about 5,600 cars, 30,000-gallon cars that carry ethanol,about half of those are in ethanol service, utilization is still pretty high,and in fact we only have 19 new cars that are idle right now. So we feel prettygood about our strategy, which has been to lease to the very large players inthe industry, because we kind of expected there might be this shakeout. Ifthere’s a consolidation or some kind of restructuring in the industry, I thinkwe’ll all feel like our strategy will be in pretty good shape. We do have cars delivering next year, though, and we havecars renewing, so, I think pricing will definitely be impacted there, but wefeel pretty good about our ability to place those cars. And longer term we feelgood about the market, because we do think this will work its way through.

And on that, with respect to the idle cars and maybe some ofthe capacity in certain markets, are you seeing any changes with pricing fornew cars, for instance if you go to (inaudible), is pricing shaken out at allor has it been pretty consistent?

On the freight car side, yes, we definitely, I coulddefinitely say that if you go look at spot, first of all, there’s a lot of idlecapacity for freight cars right now, and there wasn’t a year or two ago, andyes, those new car costs would come down if you placed an order now, but youhave to put that in perspective. For most of those freight car types that weparticipate in, car cost was up 40% or more over the last couple of years, andnow it’s probably down 10% from that peak, so it’s not as if you’d want to rushout and place a big order on freight cars. It really hasn’t come down to theextent it went up. On tank cars much less so, because there’s more backlogthere, and prices have not generally come down on the new car side.

Even with the idle cars out there you haven’t seen any....

Yeah, you know, I don’t want to get too specific, I mean,there’s some instances of availability, and I think if you actually went outand tried to capture some of that, you’d get a better cost, but it’s nowherenear the reduction, I think, that you’ve seen on the freight car side.

Okay, I’ll get back into the queue. Thanks very much.

Your next question comes from Rick Shane with Jefferies.

Hi guys, thanks for taking my question. Can you help usunderstand a little bit better. Rhonda talked about the fact that goingforward, you’re going to try to control the costs on the wheel set replacementsa little bit better. Can you explain the mechanics of the way it’s working nowand what you expect to do, because my understanding was these were full-serviceleases, and I assumed that that meant you were actually replacing the wheelsets yourselves. But it doesn’t sound necessarily that way, so can you help usunderstand that.

Well, it’s both. The railroads are able to replace it forus, they have a bunch of readers across their network, and if it exceeds acertain reading, they can take that wheel out themselves, and they charge usfor that. And that cost of that wheel that the railroad replaces for a newwheel has gone up literally 50% over the last couple of years. You’re seeingthat reflected in the volume, in the cost of wheel changes done by therailroad. So obviously we don’t like that, and what we’ve tried to do over the lastcouple of years is get out ahead of that, both by changing wheels ourselves andusing reconditioned wheels, as well as working short line and switchingrailroads to get out ahead of that, and use our reconditioned wheels. So we’reattacking it that way. We’re also challenging a lot of those readings in therailroad side, but let’s be serious, that’s a pretty tough thing to do. Soyeah, we are trying to proactively deal with it, but it’s been a cost that’srisen dramatically over the last couple of years, and we’re not happy with theprogress there, we’re still seeing a high volume of wheels changed and costscontinue to go up.

And just to be clear, those are not just cars re-leased torailroads that they can change out, that’s any car that’s going down theirrails, no matter who it’s leased to or who owns it.

Okay, I understand, got it. The other question is, and Ijust want to circle back on a comment, Bob, that you’d made, if we were to lookat the, assuming that the leases that are, the cars that are being re-leasedright now, based on the history were on sort of five to six year leases, andwhat you’re saying is that those carsare being re-leased up about 17% this quarter, and that was a good metric,especially given where it was last quarter. How much, you’ve made the commentthat car prices are up about 40%, is that on sort of an apples to apples basis,because you talked about a four to five time frame, so car prices are up about40% over that time frame, and lease rates are up about 17% or 18%?

The reference to the 40%, Rick, was a car cost number, andin general, if you’re thinking, have lease rates kept pace with car cost, theanswer to that is no, they have not.

Okay, that’s exactly what I was trying to figure out. Thankyou, that’s it.

Your next question comes from Art Hatfield with MorganKeegan.

Good morning everyone, this is Logan in for Art. A lot of my questions havebeen answered, I just wanted to see if I could drill in on kind of theguidance, that’s kind of implied for Q4, and I know if you back into it lookslike kind of a $0.44 to $0.64 number, and I know you said you expect to comeinto the, high into that range, so somewhere $0.60 to $0.64. Can you tell mewhat kind of assumptions are included in that number, what kind of assetremarketing, what kind of remarketing in your share of affiliates, because it’sbeen pretty high for the last couple quarters, and I just wanted to see whatyou’re kind of expecting for Q4.

Sure, Logan, and I think that the short answer to that iswe’re anticipating very little remarketing activity in Q4, either on whollyowned assets or through our joint ventures, or through managed assets. What wesee going forward we always talk about that number can be a bit volatile butbased on what we see right now the balance of the year we don’t see very muchremarketing activity at all.

So from a kind of core earnings x3 marketing it’s kind ofsimilar to what you saw in the third quarter.

Right. Assuming, that also assumes American steamshipcontinues to operate fully through the fourth quarter and some of that isweather dependent. Now the big number there, the big variance number would beon the remarketing line.

Okay great. Thanks guys.

Your next question comes from Paul Bodner with LongbowResearch. Paul Bodner – LongbowResearch: Hey. One quick follow up to that. Why is the remarketedincome going to drop off so much this fourth quarter? You see little activityin the marketplace, or kind of what’s doing on behind that?

Sure. The remarketing activity, just to remind folks toowhen we look at for example, you know this quarter generating almost $29million in remarketing income, that’s from a handful of very discreet events,discreet remarketing events. We don’t undertake hundreds or thousands ofremarketing events in a quarter so these tend to be lumpy and very large andbased on, for example, in the third quarter some of that activity was generatedto lessees exercising their purchase rights at the end of a lead, particularlyon marine vessels. So we don’t, we can look forward at least a few months andsee what we think may be coming up for renewal and based on what we see wedon’t see that remarketing opportunities or events occurring here in the fourthquarter. Paul Bodner – LongbowResearch: Okay and secondly, on the other line just sharer affiliateareas in terms of the quarter came in but on the higher side. Is that a numberto kind of look at going forward that you’re going to start operating at ahigher level, is that the income for the Rolls Royce joint venture, kind ofwhat’s going on behind that too.

Actually the largest item I wouldn’t use that as a run rategoing forward because there was a remarketing event in one of our jointventures. People who’ve been around GATX for years may remember the Pitney Bowsjoint venture we did years ago. That partnership is in the process of beingwound down, so assets were sold out of that partnership and generated a prettysizeable almost $9 million pre-tax gain through that partnership so that wouldnot be a recurring item. Paul Bodner – LongbowResearch: Thanks. And I also just wanted to kind of follow up on someof the impact from the ethanol cars and the excess in the market. If you look athe backlog there’s more coming online here in the next year to eighteen monthsand going into a situation where there’s already excess cars, is there a threatthat those cars can change from say a 30,000 gallon tanker to a car to transfercoin or something, and really spelling the weakness more broadly across tankcars. Do you see that as a real threat?

Not really. No I think it’s a good question and it remainsto be seen on how people react who have these large orders outstanding for30,000 gallon tank cars. I mean there are other uses for that car by itself.They can carry light petroleum products and some other commodities. So itdoesn’t just carry ethanol but whether they have the ability with themanufacturer or the ability to place different types of cars. It remains to beseen if orders start getting cancelled or switched. You don’t really know, butit’ll be interesting to watch, which is one of the reasons why this market is alittle bit unsettled and probably will remain so for the next year or two. Paul Bodner – LongbowResearch: Okay thanks a lot.

Your next question comes from Michael Cohen with SunovaCapital. Michael Cohen –Sunova Capital: Hi thanks for taking my question. What’s the outlook in Europe for lease rates? Are you expecting those to beginto see double digit rates at some point or, I know their market tends not to beas ours through the cycle?

That’s exactly right. It hasn’t been as aggressive we arestarting to see larger lease rate increases, actually on both sides, tank andfreight, larger increases on the freight side. In general that market is doingoutstanding. We think that the investment there, very strong across our coreindustries of petroleum and mineral oil and chemicals and on the intermodalside. So very good performance, very solid investment volume and rate are goingup, utilization is high. It has not experienced the weaknesses that you see inthe USat all. In fact it’s going in the other direction. Michael Cohen –Sunova Capital: Right. Would you anticipate beginning to see double digitincreases or is that sort of a year away or knowing just the historicaldynamics to that marketplace?

We’ve seen some double digit increases I think on thefreight side, but they’re a little more careful over there. This is a growingand developing market, not to alienate customers. So I can’t really answerwhether we’ll have that ability to push everything to double digits. Michael Cohen –Sunova Capital: Okay. And then not to sort of belabor the remarketing. WhatI was wondering, given some of the dynamics that you’re talking about in termsof to some degree lower lease rates and sort of increasing supply. Is itlogical to assume that remarketing income is likely to be sort of lower overthe course of the next two to three years, over the cycle, is that normallywhat happens?

Right now I would put this year in the extraordinarycategory in terms of remarketing income. Total year to date of 56+ all of lastyear was in the 47 48 range, unusually high and I wouldn’t anticipate that thatkeeps pace going forward over the course of the next couple of years.

The other thing that we’ve talked about in the past is thefact that in rail the asset remarketing income is coming primarily from carsthat we don’t feel good about longer term. So we analyze the fleet, take a lookat those cars that are at the bottom tier that we don’t feel are going to holdup during the next cycle and those are the cars that we’ve been selling overthe last couple of years. Eventually you run out of those kinds of cars, sothat’s where we’ve been in terms of remarking in rail. Michael Cohen –Sunova Capital: So in addition, this is sort of a lumpy kind of cyclicalhigh. You also have sort of the dynamic within the context of your own fleetoptimization. It’s unlikely that you’ll get quite the same benefit in thefuture.

That’s a fair statement. A lot of what, as Rhonda mentioned,a lot of what we focused on in the last couple of years is optimizing thefleet, positioning an affluent run and taking out the cars, you know a lot ofthat heavy lifting is done. Michael Cohen –Sunova Capital: Great. Thank you for taking my questions.

(Operator instructions) Your next question comes from BobFitch with Abbott.

Good morning. In regards to the investment in the JV for thegas vessels can you elaborate how much has been invested, how many vessels,were they going to be put to use and what sort of returns you expect on that?

There’s four multi gas vessels being constructed with ourpartner. They are being constructed at a shipyard that our partner controls in China. We’retaking that risk to achieve a much more attractive vessel cost relative toother places to build it in the market. Projected returns are very high. It’s avery strong market for LPG and ethylene in the shipping industry and it lookslike it’s going to be strong for quite some time. In addition these vesselshave the capability to carry LNG which we think could be an interesting marketover the next couple of years.

The other point I would add to that is this co investment iswith an existing partner who we’ve had tremendous success and high level ofconfidence in Scalgan organization has been an excellent, the existing jointventure we have with them has been a tremendous return generator for GATX formany years past

So the funding for the vessels will be when and how much?

We haven’t disclosed the total amount f the funding for thevessels, it’ll be essentially done with construction financing through thejoint venture and then with equity contributions from the partners but wehaven’t specifically or publicly laid that information out nor would we want togiven the competitive nature right now in that marketplace for new builds.

And how about the delivery dates?

The first one is scheduled early…

Third quarter.

I’m sorry, the third quarter of 08 and then thereafterspaced out probably three four months thereafter.

Ok, sorry. Are they being built sequentially or are theybeing, in terms of

They won’t all deliver at once.

Ok. In regards to your fleet, some expectations on yourbacklog of orders and deliveries over the next 12 to 18 months

In railcars?

Yes

Well right now our committed purchase program that we’ve hadin place for a number of years essentially winds down in early 08, we havelayered in as we’ve announced early this year an order for 1000 cars a yearwith ARI with an option for more beyond that. But we have not been a bigspeculative order, or carry a big speculative order book right now. So if youlook at the total backlog of railcars to be delivered were not a substantialpiece of that by design.

Understood. I know you folks have been talking about thecost of cars and you’ve been conservative in terms of running head on anyspeculative orders particularly at the prices cars have been offered at inrecent periods.

The strategy there has been to place enough orders tofulfill our customers' base needs and not get speculative beyond that. To theextent we had an earlier question about car costs coming down on the freightcar side and the tank car side to the extent they do come down since it lookslike a weaker market. We’re certainly positioned to take advantage of that now.

So to a degree you are out marketing aggressively foradditional business or customers, would you then by definition with not much inyour backlog yet to be built would you need to simultaneously go out then andpurchase cars around the same time?

Right now on the freight car side that would be pretty easyto do, on the tank car side it’s a little more challenging in terms ofavailability although there certainly is all of a sudden in the last six monthsor so body availability has come about and we expect that to probably increaseif that market continues. So I guess the answer is yeah, we would have, to theextent we see significant new business we’ll have to go out and order morecars.

And on the remarketing program did that include any tankcars?

There were tank cars included in the rail cars that weresold during the course year to date, nothing of note or of particular type todiscuss, the older sub optimal cars, smaller cars.

Okay, and just an update of your fleet. How many are nontank cars?

It’s about 60% tank cars and about 40% other.

And that means their ethanol is a little less than 10% ofthe tank cars I guess.

Actually in ethanol service would be about 5%.

Okay. Do you see that number changing much at all in thenext few years?

Part of the order we have outstanding has some ethanol cars.So depending, it’s hard to tell because it depends on what else we do in themarket in terms of additional orders or secondary market acquisition but Iwouldn’t expect a huge increase, no.

Are your terms on the ethanol cars are they generallydifferent in terms of term than your average?

I would say no, not to my knowledge, as we place new cars wetry to extend everything out as we’ve talked about in such, certainly over thelast year or two in the strong market we’ve tried to place them out, longethanol cars were included in that.

And your typical term has been rising on say the last six tonine months, the new contracts. What’s the actual length of the term that’senabling you to increase it to your size and a half year average now?

Sorry I didn’t really understand the question. The averageof each term on a renewal from the third quarter was almost 80 months, 78months.

Okay, so that was a renewal number

The overall fleet remains somewhere around four years. It’s reallyhard to move that needle on an 111,000 car fleet. Typically at the bottom ofthe cycle you'd see it below four and now it’s probably a bit above four.

Okay, so you would still expect in the course of a cyclethere’d be points in time where it’ll be difficult to get to get more than fouryears?

There may be points in the cycle where you want to go lessthan four years.

Certain of the freight car types that have become reallycompetitive and we want to keep utilized we’ll get as aggressive as anybody butyou want to keep that short.

Okay so you don’t see any particular secular dynamics thatover time ought to necessarily change the term of the average car that you’releasing.

Well to Bob’s point we’ll try to go shorter to the extent wethink that makes sense but then to Rhonda’s point it’s hard to move the needledramatically. It didn't come out the last couple of years because we haveextended so far on the renewal but it's been slow so it will be slow if you gothe other direction too .

And outside of the wheels that you have been replacing andyou talked about those expenses. Are there any other foreseen expenses theresomewhat out of the ordinary that you are looking at the next six to twelvemonths?

Well nothing on the order or the magnitude of the wheel setchange outs that we have seen today. I would note that over the course of thenext few years there will be a higher number of cars that are due for their tenyear compliance or their fifteen year, excuse me, and that is based on the highlevel of cars that we bought from the mid 1990’s through the late 1990’s so alot of those will be coming up for their compliance review over the course ofthe next few years.

And if you could just remind me what was your utilizationlow at the last cross and do you have any expectation on where it mightactually be over the course of the next twelve, eighteen months?

The last low at the bottom of the cycle was 90%. And thatdoesn’t sound too bad. And it sounds like a B+ or an A-, but it is actually10,000 idle cars that you have to put back out on lease. So it can be a very expensive and ratherpainful process to do that. And all ofthe steps that we are trying to take right now, expanding the lease terms,optimizing the fleet by selling cars that we don’t think will hold up duringthis cycle, trying to capture some of the higher lease rates, are all thingswhere we are trying not to find ourselves at 90%, at the bottom of the nextcycle.

And would you expect the next few quarters’ utilizationshould still continue to trend down as the last few?

Well a lot of that is dependent on the amount of cars signup for renewal and everything else. ButI would say that in general it will be a bit more of a challenge in utilizationmarket. Over the course, certainly overthe course of the next year where that plays out, we don’t know yet. But, you know as Rhonda mentioned, we have taken a lot of steps totake some of the volatility out of the portfolio, But I want to be clear and straight witheveryone that as we said in the release that it is a more challengingenvironment right now. So it is logical that we would see some tickdown on those numbers.

Okay, then the last two questions. Number one, do you expectto be instituting a further repurchase program?

Well, we just completed here in the third quarter theauthorization from earlier this year. Obviously, that’s a Board level decision and one which we will continueto look at repurchase alternatives right along with all of the other capitalallocations alternatives we have in front of us. But, I would not comment any further on thatright now.

And then on American Steamship give us some comments on thepricing for that business and what do you expect the income to be up next year?

I wouldn’t comment yet on anything we are going through obviously we are in budgeting and planningprocess right now. So would not commentspecifically where we are expecting to be next year. But generally with the environment on thelakes is very positive. In terms ofdemand and also it is being reflected in rates not just within ASC but Ibelieve kind of across the Great Lake shippingindustry. You are seeing rates moveup You know the one challenge that Ronda alluded to is that there is the lowerlake levels, water levels on the lakes and that does have an impact on Americansteam shipping. And anybody operating onthe lakes, but in general I would statethat it is a favorable environment, and we are pleased with the rate increasesthat we have seen today.

Okay and actually, one more question – as far as strategicinitiatives. With the gas vessels thatyou are in a venture with are you looking to expand your lease portfolio oryour operating portfolio in other areas beyond the existing, as you plan outthe next two to three years?

I would not expect a change in business mix. No. Right now, we are in long life widely used assets that have a servicecomponent – marine and rail share a lot of the same commodities, a lot of thesame customers and a lot of the same service characteristics. We like that business mix. We like industrial equipment finance, and they are long life widely used assetsfocus. Well, I do not see getting intonew asset classes. No, I see moreexpansion of what we do geographically.

And remind me are these the first class vessels you havebeen (inaudible)?

No we have existing LPG ethylene carriers with Skaugen.

Okay, thank you.

Your next question comes from Bob Napoli of Piper Jaffray

Good afternoon. Wellnobody asked any of my questions. I do have a few left I guess. I would like in Europe- if you can give it may give some more information in your Q’son European business. But can you sizeup that business for me relative to the overall rail business?

In terms of the number of cars it is about it's about25% of the overall fleet. And in terms of revenues it is starting toget closer to match what it does in terms of the overall fleet numbers.

Last year in K we also laid out European revenue which was just north a $100 million total. So it’s a sizeable, very sizeable business forus.

What is the growth of that fleet now? What do you expect to be the growth rate tobe on that fleet?

Well, the freight cars side we have been adding a couplethousand cars per year . It's been less on the tank car side. But, it was actually a lot in the lasteighteen months. I mean things arepushing 1500 cars on the tank car sidebecause we saw an opportunity there. Butin general it has been a few thousand cars a year. And I would expect that tocontinue and hopefully accelerate. It istrue that new car costs are going up over there. And we are starting to think past the issuesover there. The good part is I think onboth the tank car and the freight car side, we get out in front on that and weare pleased with our order growth position there.

What do you have ordered in Europe?

I don’t think we can disclose that. Unfortunately it is a little tougher to befully transparent there because of partnership issues and others. But I wouldexpect the same type growth over the next couple of years.

I mean you see that becoming 35% of the total fleet or 50%over the next five years or what ?

You know if you had asked me that a year ago I would haveprobably said yes – if current trends continue because it was getting so hardto invest in the US. And it was relatively attractive in Europe. Nowprices in Europe are going up in the Statesthey are coming down as far as new cars. We will do what makes sense from a new car cost perspective and amargin perspective.. So it's kind of anon-answer but I would love to grow bothfleets.

Ok. On the marine side, I mean it seems like maybe you areramping up investment or looking harder at that business. And obviously there has been a skyrocket inthe values in that area in demand and in shipping and trade. What is your strategy on the marine business overthe long term?

I would expect current market conditions to continue andmost of the forecast you read which of course doesn’t mean that much. Look justthat will continue. It's going to beawful difficult to invest in blue watermarine. What we have done was start with these LPG ethylene and L&Gcarriers with a unique opportunity to get a very attractive cost by buildingthem in China. So I was happy with that. Other investments are very difficult to dobecause of the asset price. And you knowin most case we don’t see an end in sight there. Once again good firm operatingresult in upper investment.

I would add to that, coming in at the year where for we arevery pleased with the Skaugen joint venture but overall the marine investmentline is running well below what we thought it would because of the asset price.

Okay. Now on theshare side what did you say that you acquired during the quarter. How many shares did you buy back, and howmany are left on the authorization?

The authorization is done.

Okay and you finished at the end of the quarter?

We completed it during Q3, correct, so a full $300 for 6.39 million shares.

Okay. Then, you talked about trying to put some size on thevariable of the remarketing piece and this share obviously being well aboveaverage. But, its always been a part ofyour business – I mean that if you think about next year, I think some peoplemay walk away thinking that next year is going to be 25% of what 2007 is and, Ijust don’t know if you can try that. Would half of this year’s level be kind of a normal level? Though it seems that the asset values youhave are - if you did a mark to marketit would be the good story is that the mortgage business of your asset value,so if you sell anything you are getting pretty sizeable gains.

I think the key point is, that we've talked about here is,you know, we don't just sell things to generate gain. You know, we sell thingsbecause the market opportunity presents itself and the economics are attractivefor us holding the asset. And, you know, by and large in rail, a lot of thatfleet optimization as we've talked about here, you know we feel good aboutwhere we have the fleet today. You know, there's likely still to be some moresales to take place there in rail, but probably not to the extent they haveover the course of the last couple of years. I don't want to put a band on where we expect remarketinggains to come in because that would be dramatically wrong one way or the other,but you're right, at some level we do generate remarketing income every year.Its core to what we do.

I think that the difficulty with the comparisons of the lastfew years is we've had some unique remarketing events in now each of the lastthree years, in 2005 and 2006 we had, you know, $12 million and $14 millionfrom a single transaction in the managed portfolio and now this year we havethe additional early buyout in the marine vessels, and those are large and ofunusual magnitude. So that's making the comparisons a little bit difficultthinking about going forward.

Okay and the German tax rate deal. Does that have any longterm effect on your tax rate and what is, is there any change to the outlook,long term outlook for your tax rate. We're using 35.8% as kind of a long-termtax rate.

And that won't be, that's a reasonable number Bob and itwon't be affected by the change in the German tax rate which is from, you know,they changed the rate from 41% to 33% effective in 2008, although we reversepart of our deferred tax liability right away. That's the impact you see here.On a go forward basis, obviously it's a benefit to us to have a lower tax rate,but I wouldn't put it in the material category.

Okay. And on the freight cars in the weaker car types, whatpercentage of your portfolio is in freight cars today?

It's - 40% is freight and 60% tank.

So freight is a very broad. I mean certain areas of freightare much weaker than others.

On each of our presentations on the website, we break outthe freight car fleet and show you that we've got, you know, the majority ofthose, about 25% are in covered hoppers. The next largest is in open hoppersand gondolas and then you have a very small piece that's 'other.'

Okay, and last question on the maintenance. Well actuallytwo questions. But the maintenance expense on the, I mean would you expectmaintenance expense to flatten out next year versus this year, decline becauseof the unusual increase you've had, or what would be your outlook formaintenance expense?

I would expect it to increase due to a larger fleet and whatBob had referred to earlier about this compliance bubble on the tank car side.So, in addition until we figure out a way to control railroad repairs moreeffectively, I expect that to increase too. So in general, no, I'd expect it tobe up next year.

And last question on the, I mean your leverage obviously issomething we talk about every quarter. But you know, you really, your leverageeven with the buy back hasn't gone up. You're still leveraged two to one andyou can probably leverage four to five to one, at least four to one?

2.8 to 1 is actually at quarter end. Just shy of three toone. But you know the point is taken Bob and I think it's, you know we have hadthis conversation on a probably running basis for the last couple of years.

Do you have any updated thoughts.

Our strategy has not changed and our thought on that has notchanged. We have capacity obviously. We're looking to do that, to utilize thecapacity in the best way long term for the shareholders, whether that bethrough more attractive investment opportunities, which may be presentingitself. That's why we've been holding some of that capacity obviously. We feelgood about the position we're in right now, to capitalize on those.

Thank you.

Your next question comes from Tom Clegg with UBS

We seldom talk about the electromotive LLC side and canBrian, you and Bob give me some color there about, is there a cycle there wherewe could increase invest there or not. And also, does the application on theelectromotive side to Europe.

That answer would be no, we have some locomotive experiencein Europe but there's not, you know, anoverlap between those two markets. The business you're referring to, as youknow we bought out our partner a couple of years ago to take 100% ownership ofthat fleet of locomotives. We've done some additional investment there thisyear and are happy about the investment level we've seen there, but there isn'tany large fleet per se that we have our eye on or that would be a particularlygood fit.

It's not a needle mover then, huh Bob?

No. Tom Clegg – UBS: Thank you.

And our next question is from Phillip Walker with White Mountain.

Hey guys, good morning. Yeah, I'm glad we finally got therequisite question about leverage. I always get a kick out of that and you guysare doing the right thing, saving up some dry powder to hopefully get some ofthe best investment opportunities that you have over the next cycle in theshort term. A couple of quick things I wanted to ask about is specific to thesix and a half years as far as the lease is pushing out on the rail business.What outs are there available to the lessees and if they can't cancel thesetype of financial enumeration would GATX get?

In general Phil there is no out. It's a fixed term, monthly,payable lease rate and there aren't early outs in the leases.

I would say most of our, not most of our, some of our verylarge customers who are relatively sophisticated, push for those kind of outsand generally we try to make it have a decent penalty for when that happens.But I would say that's accurate, in most cases those are solid term leases.

Okay, that sounds good. The other thing I wanted to talkabout, I think Brian, you mentioned this that , you know, new car prices, youknow, from say a few years ago to last year rose by 40%, they climbed by maybe10% in the last year or so.

On the freight car side, yeah.

On the freight car. And you know, the expectation is that,you know maybe there's more decline. I just want to understand as to how muchreal decline is there potentially given the trends in global raw materials.

That's a great question. You know, I think at some point itreally depends on what you think of the price of steel and components, right,and a lot of that increase has been due to the cost of raw materials and a lotof it has been due to increasing margin at the manufacturers. I would think inthis type of market that we're seeing, for instance, on the freight car side,their margin's coming down but their costs aren't necessarily coming down atall, so there's a lot of thought internally to when you capitalize on thereduced car costs and it's probably not waiting for it to go all the way downif you think the cost of raw materials is going to stay where they are. It'sprobably just to the point where you think the margin is at an absoluteminimum.

Okay, gotcha. Thank you very much and good work.

Your next questions comes from Barry Haimes from Sage AssetManagement.

Yes, hi. Just had a question within rail. Do you have anumber for the year projection for what the CapEx will be on new cars and doyou have any thoughts as to where that number might be in '08 or what the rangeof possibility might be in '08? Thanks.

Well, you've got the number right, I believe for where weare year to date in the press release. You know, last year we did just north of$500 million I believe, $540 million in rail. You know we would hope to besomewhere in that same range, probably slightly below that this year and muchof what happens in 2008 given that we don't have a big advance order book willbe dependent on what we see in the marketplace, to the extent that Brian eludedto, if prices continue to creep down and we see opportunities, we'll capitalizeon those by stepping up the investment levels.

Just a quick follow-up. If you just took the current '08commitments, I mean roughly how much would that be of CapEx?

You're only talking about, you know, like a thousand cars,so it's not going to move the needle on that.

Maybe in the $100 million range.

Thanks very much. Appreciate it.

Your next question is from Majid Khan with Cobalt Capital.

Hi. Just to follow-up on the question about themanufacturers. What do you think a reasonable margin to pay is for themanufacturers and, you know, how far from it are you? You know, I'm just tryingto get at where do things have to go before you come into the market with a bigorder?

That's probably a little too sensitive to talk aboutactually. But I think generally speaking, margins were probably double digitsand you know, you want to see that, I mean I'd like to see it go away, but--

I think the other thing you can look for, the guide postsfrom (inaudible) is when we've announced orders, and you know you haven't seenfrom us yet any very big spec orders.

Also, another follow-up on ethanol. I'm wondering, you know,what's your outlook on the market in general. Like, what do you think the current situation in the marketis versus how many cars are needed to serve the build out, how many cars exist?

You know, it's a great question. It's one we, everybodyrustles with a lot, but as I look at all the industry data and plants underconstruction, and all the capacity coming on and then you see, you know, theState of the Union address which says 35 billion gallons by 2017, and differentnumbers thrown around, you know, it's hard to tell. So, the chart I like tolook at is the one that ADM actually uses in their public presentations wherethey talk about gasoline consumption in the U.S. being about 140 billiongallons a year, at 10% ethanol blend, that's 14 billion gallons. And that seemslike a pretty reasonable number. That's twice the capacity that's out thereright now. Even if all those other plants were built, it wouldn't quite getthere, so it certainly seems like this market will rationalize, it will justtake a while, so that's why I think our customers still remain bullish andtherefore we are too on the long term outlook. There's a lot of noise around that. You have a lot ofpolitical pressure starting for the first time, what they call, I think, thebarnyard lobby with meat and poultry producers and the cost of their feeds. Imean there are so many factors. There's Brazil and their imports andobviously we don't allow that now, but if that were to happen that would changethe cost and the pattern of how ethanol flows as well. There's differentethanol types, switch grass and others that are being considered. So there's alot of, a lot of things to consider, a lot of noise. But I come down towhatever form it takes, I come down to, you're going to need a lot morecapacity than you have now and you're going, for the, for most of those optionsyou need rail cars to transport that product.

What does 14 billion gallons mean for rail car needs?

The kind of difficulty that you have is that if you look atlast year, we transported about 4.6 billion gallons using an ethanol fleet of12,500 cars. You know, you can try and do the math there and calculate whatthat gets you up to at 14 billion gallons, but the thing to remember is thatthat ethanol was not being transported that efficiently by the rails. Youdidn't see unit trains, for example, where every single car would be an ethanolcar. That's a much faster load and unload when you have that kind of a train.So there's a lot of different things that could happen that could decrease thenumber of cars that you need per millions of gallons. So that's another hotlydebated issue in the marketplace these days.

So the answer is we don't have the perfect crystal ball viewthere. But what we do have, I think, is a sound strategy we've had for quitesome time which is to stick with the large established producers that to theextent that there's any industry shake-out, I think they're the ones that arearound and they're the ones that tend to renew leases, and they're the onesthat have generally pretty strong credit quality.

Got it. So it seems like a car is turning about 12 times onaverage per year and you think that's not very efficiently used right now.

No.

Okay. Your strategy to stick with the big producerscertainly sounds like a good one. Thank you for taking my questions.

Thank you.

Ms. Johnson. Are there any closing remarks?

No. Just to say thank you everyone and I'll be availablethis afternoon for any additional follow-up questions.

This concludes today's conference call. You may nowdisconnect.