José Zozaya
President, General Manager and Executive Representative
Kansas City Southern Mexico (KCSM)

Communication Key to Keeping Concession on Track

Tue, 11/01/2016 - 22:30

When Mexico privatized its beleaguered railroads two decades ago, Kansas City Southern (KCS) saw an opportunity. With its joint venture partner Transportación Maritima Mexicana (TMM), the U.S. rail operator pursued and won a concession to run the Northeast line, that runs downthemiddleofthecountry,fromNuevoLaredotoboth the port of Lazaro Cardenas and Veracruz. Today, Kansas City Southern Mexico (KCSM) is one of the country’s most important railway freight transportation operators.

KCSM’s President, General Manager and Executive Representative José Zozaya says Mexico now accounts for 48 percent of the parent company’s business. The two operate not as separate networks but as one unified system in an effort to boost efficiency. He says that Mexico’s reforms have provided a new opportunity for growth while the company continues to focus on established segments. “In the last 18 months, we have been capitalizing on the opportunities brought about by the Energy Reform and the booming automotive market to serve those segments, but we also continue to foster growth in our traditional sectors of grain, minerals, metals, steel and petrochemicals,” says Zozaya. Keeping a close relationship with the authorities is imperative, he adds. “I interact with the President, ministers, governors and mayors because we have a concession that we must maintain. To meet our obligations under this concession, open lines of communication are vital.”

Spending in key areas is also essential and KCSM is in the midst of a considerable investment for the company. In 2015, it spent US$324 million in Mexico - US$160 million for railroad rolling stock, US$108 million on infrastructure and tracks and US$56 million for business development. The outlays will continue this year, says Zozaya. “We have made an investment commitment of US$154 million to the Mexican Revenue Service (SAT), while also negotiating with the government about the possibility of KCS constructing the remainder of the Celaya Rail Bypass, which would mean further investment.” The Celaya, Guanajuato bypass is one of the country’s biggest railway bypass projects, including over 30km of new mainline, according to the website of TransDevelopment, which provided conceptual planning for the venture.

For the mining industry specifically, Zozaya believes 171 the company can compete on efficiency, lower costs and greater capacity, offsetting the advantages its competitors may have. “Some of our competitors have an advantage in that they not only own the railroads but also the mines, whereas we simply render services where they are required,” he says.

KCSM also offers a high degree of vigilance to ensure security, a problematic issue, especially in mining. To guarantee the safe delivery of the goods it transports, KCSM stays in close contact with federal, state, and municipal authorities. “We also work with intelligence agencies in Mexico and the US and we have an internal security team that works 24 hours a day and is constantly monitoring our cargo and carrying out preventive surveillance,” Zozaya says.

No company moves forward without innovation and Zozaya says KCSM keeps that idea at the forefront of its development, and this extends to its staff. “We want to hear about improvements that can be made, not only to equipment or machinery but also in working conditions and problem solving,” he says. It is an approach that has reaped benefits. “We have been extremely successful in building a more efficient operation, thanks in part to the experience of the US railroad as well as the valuable experience of our Mexican employees who previously worked for Ferrocarriles Nacionales de Mexico.” These actors, he says, provide ideas on grid operations, for example, that save time and money, savings KCSM can then pass onto clients.