Mexico: Pesos for progress - railroads

Railway Age, Oct, 1999 by William C. Vantuono

Capital investment at the rate of a half-billion dollars a year is bringing freight back to revitalized railroads.

Just over two years into privatization, Mexico's railroads are well on their way toward achieving first-class status among North American carriers. In 1999, the principal trunk-line carriers--Transportacion Ferroviaria Mexicana (TFM), Ferrocarril Mexicano (Ferromex), and Ferrocarril de Sureste (FerroSur)--will invest approximately $500 million in plant and equipment. That's about 7% of what U.S. Class I's will invest this year, but for U.S. suppliers, who are facing an uncertain future of decreased or flat capital spending by domestic customers, it's a dependable source of business.

TFM's growth in the past two years has been strong and steady. The railroad handles approximately 60% of all cross-border rail traffic, most of it through the Laredo gateway. Trucking rates are 20-30% higher than rail rates, and TFM says the amount of freight that could be diverted from truck to rail is greater than the total volume moved by rail in Mexico today.

TFM's five-year capital investment plan, which began in 1997, totals $731 million. Last year saw $195.9 million invested. Mechanical got $129.9 million, including $100 million toward new high-horsepower, a.c.-traction locomotives from GE and EMD; track, $58.3 million; C&S, $3.2 million; and miscellaneous items, $4.5 million. This year, investment will peak at $229.8 million. The years 2000 through 2002 will see investment of $96.7 million, $68.9 million, and $66.4 million, respectively.

Long-term lease agreements for 4,720 freight cars, of which 2,700 have been placed into service, will increase TFM's fleet by 69% to just over 11,000 cars by mid-2000. Bad-order cars now comprise just 6% of the total. Covered hoppers account for nearly 1,700 of the new units entering service, followed by gondolas (1,150), autoracks (830), boxcars (419) and hoppers (350). The remainder are intermodal platforms and fiat cars.

Installation of a Harmon-supplied CTC system between Nuevo Laredo and Monterrey is nearing completion, and a new dispatching center I Monterrey, from Alstom Signaling, is operational.

TFM now has 50 GE AC4400 locomotives in service, and in 2000 will take delivery on an additional 25, plus 75 EMD SD70MACs, which are being assembled at the Gunderson Concarril plant, Sagahun, in a joint venture with Bombardier.

These investments are paying off in a big way. TFM's operating profit through this year's second-quarter was triple that of a year ago. With construction of the 950-car-capacity Sanchez yard at Nuevo Laredo just south of the U.S. border (a $15 million investment), and a companion, 1,300-car-capacity, $18 million yard at Milepost 9 on the Texas-Mexican Railway (which is slated to be absorbed into TFM in the near future), bridge capacity at the Laredo gateway has increased 130%, from 1,300 cars a day to 3,000. TFM's overall volume in 1998 was 15% higher than in start-up year 1997-50% higher than in start-up year 1997--50% higher than in 1996.

System-wide, transit times have been reduced by an average of 36%, and average train speed has increased 44%, from 11.2 mph to 16.1 mph. On the 770-mile, single-track Nuevo Laredo-Mexico City main trunk, where 17 sidings have been extended to 10,000 feet, intermodal and automotive trains require just 34 hours, a 43% improvement from the previous 60. Merchandise trains take 44 hours. Train schedules maintain an accuracy of 85%, and equipment is properly assigned by type and number in more than 85% of customer requests. Yard delays of more than 48 hours have been reduced from 40% to less than 5%, and cargo theft has been reduced 80%, to a level close to that of U.S. railroads.

Ferromex, at 4,500 miles Mexico's largest railroad, will invest $218 million in 1999--$132.4 million for locomotives and cars, $45.1 million for infrastructure improvements, $31.3 million for C&S, and $9.6 million for such other purposes as security systems, office and warehouse modernization, and upgrading of the SICOTRA car tracing and billing system. In 1998, Ferromex's startup year, the railroad invested $131 million, the bulk of which went into mechanical ($51.4 million) and infrastructure ($38.3 million) programs.

The single-biggest mechanical item on Ferromex's 1999 shopping list is 50 AC4400 locomotives from GE, which are being delivered in the railroad's striking red, white, and green livery. GE is constructing a new locomotive shop at Guadalajara to service and maintain these units. Ferromex will also acquire 30 yard engines and 1,139 freight cars. Several car shops are being upgraded. Future plans call for establishment of a preventive maintenance program and quality and productivity programs for shops.

Ferromex in 1999 is rehabilitating 212 miles of track, installing 12 miles of siding extensions, reinforcing 78 bridges, and acquiring 56 maintenance-of-way machines. The infrastructure program will continue over the next few years, with expansion and improvements scheduled for several principal yards.