Texas Mexican Railway: bridge to opportunity

Railway Age, March, 1997 by William C. Vantuono

Tex Mex is the shortest link in "The NAFTA Railroad," but for many reasons, it may be the most important.

Not long ago, 126-year-old Texas Mexican Railway, the 167-mile short line linking Corpus Christi, Tex., with Laredo/Nuevo Laredo on the U.S./Mexico border, was in danger of becoming another fallen flag. Aside from controlling a critical railroad gateway into Mexico, interchanging with Union Pacific and Ferrocarriles Nacionales de Mexico, Tex Mex, says President and CEO Larry Fields, was running few of its own trains.

Business was down. It had dropped off sharply (50% in the space of three weeks) when Mexico's economy went south after the peso devaluation, and dropped even more after the Burlington Northern-Santa Fe merger. Making matters worse was a poor safety record with one of the highest rates of FRAreportable injuries for a short line. Then, the Union Pacific-Southern Pacific merger reared its head.

But the little railroad deep in the heart of Texas persevered, and today, Tex Mex's fortunes have improved dramatically. Now, it is in the rather enviable position of being the allimportant link between Kansas City Southern Railway and Mexico in what has been aptly tagged "The NAFTA Railroad" (RA, January, p. 49).

What's more, local business is up, and the safety record--one reportable injury in 1996, down from 65 in 1994--1s good enough to make Tex Mex a serious contender for the Harriman Gold Award in the short line category. Employee training, much of it at BNSF's Overland Park, Kan., facility, helped. So did changing over to the General Code of Operating Rules used by Class I railroads.

"Things were looking pretty dreary," says Larry Fields, "but we knew what had to be done: fix the railroad, improve our facilities, and grow our own business. Thankfully, we had a lot of customer support." One major piece of new business, acquired with the Port of Corpus Christi's help, is now bringing in $2 million of annual revenue: an 80-mile move of rock that previously was all-truck.

Then came the stunning award of FNM's "crown jewel," the Ferrocarril del Noreste (Northeast Railroad) to Transportacion Ferroviaria Mexicana (TFM), the consortium of Kansas City Southern Industries and Transportacion Maritima Mexicana S.A. de C.V. (TMM), which owns Tex Mex. In forming their partnership, KCS acquired a 49% interest in Tex Mex from TMM.

With some well-placed pressure from the Texas Railway Commission--a vocal opponent of the UP-SP merger--the Surface Transportation Board awarded trackage rights to Tex Mex on UP lines between Beaumont, Houston, Flatonia, Robstown, and Corpus Christi as a condition of merger. The only such rights granted under the UP-SP combination, they completed the NAFTA Railroad picture, and made Tex Mex a 550-mile railroad.

A TWIST OF FATE?

Fields says that Tex Mex "was in the right place at the right time," but the railroad's good fortune didn't come about by accident or a twist of fate. The ongoing FNM privatization has been a high-stakes game for some time, and all the players have taken great pains to come to the table prepared. "I've been involved in a lot of it personally," says Fields, a career railroader who has spent much of his time with KCS--and whom many credit with being the brainchild behind TFM and its successful bid.

Did TFM, as some in the industry believe, pay too much for the Northeast concession? "Absolutely not," says Fields. "If we are able to do over the next few years in Mexico what the industry has done in the U.S.--improve service and productivity--business is going to explode. The customers are looking for it, and there's more value there than many people realize. Tex Mex has been in the right place for a long time. It just took NAFTA a while to catch up with us."

Traffic on Tex Mex, by Fields' estimate, is expected to triple within one year of TFM start-up. And even though UP didn't win the Northeast line, its Mexican interchange traffic is expected to grow dramatically as well, as is that of BNSF, which now connects with Tex Mex and KCS at Beaumont.

"There are no 'losers' here," says Fields. "Our job is to service our interchange railroads as well as our own customers. We're not here to take advantage of anyone--that doesn't work, it only serves to run customers off the railroad. The real competition is on the highway. More than 4,000 loaded trucks cross the border into Mexico every day at Laredo. That's a lot of business we need to be handling."

Service? With TFM, "you'll see a lot more through (single-line) billing," says Fields. "Traffic can originate on KCS, UP, BNSF, Norfolk Southern--wherever-and we MIl be an important part of the billing process right through to Mexico. For freight forwarding, we can originate and handle the paperwork. We can, acquire and process information immediately through EDI (electronic data interchange)."

GEARING UP

Will Tex Mex be up to the task? "You bet," says Fields. The railroad, now in its third year of capital improvements, plans to spend approximately $23 million in 1997. Last year, the railroad improved the international bridge across the Rio Grande, installing new bridge supports, walkways, and ties. This year, Tex Mex will continue a major rail and tie replacement program, installing 75,000 wood ties and 17 miles of welded rail. This will bring most of the main line up to 49-mph operating speed. Full grade crossing warning systems (gates, lights, bells) will be installed at 21 new locations, as will seven hotbox/dragging equipment detectors. There are no immediate plans for a signaling system (track warrant control is currently used), but it is possible that, under TFM, the Northeast line's centralized traffic control system will be expanded to include Tex Mex.