“Our performance this quarter did not meet our own expectations,” CEO Patrick Ottensmeyer told investors and analysts on the railroad’s earnings call on Friday morning.
“We will get better,” Ottensmeyer says.
Congestion is centered in Monterrey and Nuevo Laredo, Mexico, as well as Laredo, where terminal dwell has risen sharply as the number of cars on line jumped about 15 percent on KCS de Mexico lines.
Chief Operating Officer Jeff Songer says the problems developed over the past six months.
In the spring and early summer, KCS trains got tangled up in congestion on Union Pacific in the Houston area. The congestion on trackage-rights routes cleared over the summer, sending a heavy backlog of traffic into Mexico.
The volume was compounded by strong growth in cross-border traffic, which was up 13 percent in the second quarter and 20 percent in the third quarter. Cross-border intermodal traffic grew 30 percent in the third quarter, while energy products shipments to Mexico more than doubled.
To restore fluidity, KCS has leased 30 locomotives and shifted additional crews to northern Mexico, Songer says. KCS also shifted switching work from its complex Monterrey terminal to Sanchez Yard in Nuevo Laredo.
Songer says KCS is working with customers and interchange partners to reduce the number of cars online.
Citing slow interchanges with KCS de Mexico, Union Pacific on Sept. 28 placed an embargo on certain types of merchandise traffic bound for Mexico via the Laredo gateway. The embargo exempts intermodal, auto racks and auto parts, gasoline, diesel fuel, liquified petroleum gas, propane, wheat, and corn.
Combined, these steps have helped drive down the number of cars online, which peaked in September. As productivity improves at Monterrey and Sanchez, dwell and train velocity will improve as well, Songer says.
The January arrival of the first of 50 new General Electric ET44AC locomotives will help KCS handle expected continued strong growth in cross-border intermodal, automotive, and petroleum products shipments, KCS executives said.
The railroad will purge the locomotive roster of of 33 low-horsepower and switcher locomotives in 2019.
As a KCS shipper; I’ve almost always had good things to say about them and their people so the problems in northern Mexico came as something of a shock to my system.
The issues south of the border actually began in August and I reckon my one criticism of KCS is it took them too long to react and begin taking steps to fix the problem.
I’ll add that while I understand why KCS has implemented the embargo; it kind of pours alcohol on an open wound by further penalizing shippers who have already suffered through several months of cars sitting in the same locations for as long as three weeks.
I am hopeful KCS can get this fixed quickly because it most definitely has been hurting our business on both sides of the border.