KiwiRail says there will be redundancies as a result of the partial sale of its Hillside Workshops in Dunedin to global manufacturing company Bradken.
The state-owned enterprise has entered into a conditional agreement to sell the site's foundry to Bradken, which will continue to operate there including supplying parts to KiwiRail.
The sale is expected to be completed early next year.
KiwiRail chief executive Jim Quinn said while it was unfortunate the company couldn't find a purchaser for the whole business, he was pleased there would still be some operations continuing at the site.
"Despite a rigorous sales campaign there simply wasn't a buyer out there for the whole operation,'' he said.
"This will be very difficult for our staff and although some will be transferred to Bradken or the KiwiRail Freight business, there will be redundancies.''
There are currently 115 staff working at the Hillside site in south Dunedin.
KiwiRail said foundry staff would be offered employment by Bradken, some would continue to work for KiwiRail Freight in the heavy lift area, and there would be redeployment opportunities to its Hutt Workshop in Wellington.
"KiwiRail alone could not afford the future operating costs to keep Hillside open in the face of this decreasing work,'' Mr Quinn said.
"Hillside has made an important contribution to the development of rail in New Zealand since 1875 and this won't be forgotten. Many will be sad about its closure, however change is necessary as we continue to build a sustainable rail business for the challenges ahead.''
The Rail and Maritime Transport Union (RMTU) said the partial sale of Hillside would be "cold comfort'' to staff who would lose their jobs.
It said nearly 90 workers would face redundancy.
"KiwiRail was been trying to sell Hillside since April because ever since last year when the company decided to buy rolling stock overseas the viability of the workshops was thrown into question,'' said RMTU acting general secretary Todd Valster.
"The fact the foundry will remain open under the new owner ... is of some solace, and KiwiRail's decision to retain eight jobs to do heavy lift maintenance on the site makes sense, but the fact is that the closure of the manufacturing facility is a body blow.''
Mr Valster said it was ironic that even during the worst years of privatisation Hillside managed to survive and keep building trains and yet in the hands of a National Government it faces closure.
"Ever since then Transport Minister Steven Joyce went back on his May 2010 promise that Hillside would be building `hundreds of wagons', the clock has been ticking for Hillside and its workforce.
"Hillside is more than just a factory - it is a symbol of what New Zealanders once were: a practical, self-reliant and confident people who built a nation that once had the world's highest standard of living. This Government has chosen to destroy that heritage.''