After the P-33's 25 inch diameter cylinders were too large for the boiler, they had to be downsized to 23.5 inches. To solve this problem, the P-40 class was designed by increasing the grate area from 45 to 63 square feet in order to generate more steam for larger cylinders. They could now even enlarge the cylinders to 25.5 inches and still have enough steam. Like the P-33, it was oil fired.

A passenger train consisting of twelve cars and weighing 900 short tons was chosen to determine the pulling power. A one percent steep, six-mile incline was begun at 35 mph and averaged 27 mph without the boiler pressure dropping. In contrast to the previous locomotives, it was not necessary to subsequently install a booster or thermic siphons.

In contrast to the P-33, the P-40 was not built by ALCO's Schenectady plant, but by ALCO-Brooks. With 30 locomotives, however, a smaller number was produced than with its predecessor. The first were retired in the late 1930s, the last in 1952.