Kansas City Southern Mexico Rail June 16, 2015 Denver, Colorado 1
Top Industries for Mexico Nearshoring Opportunities Automotive Furniture Appliances & Electronics Aerospace Machinery Construction Equipment Rubber & Plastics High Tech Electronics Fabricated Metals Kansas City Southern 2015 2
10 Free Trade Agreements : 45 Countries The U.S. is Mexico s largest trading partner U.S. imports from Mexico have risen 23.5% since 2010 Canada Japan United States Guatemala El Salvador Honduras Nicaragua Costa Rica Colombia Bolivia Chile Uruguay Peru Venezuela European Union Iceland Liechtenstein Norway Switzerland Israel SOURCE: DOC, Bloomberg Businessweek, World Bank, Mexico Today, J.P. Morgan, U.S. Bureau of Labor Statistics, SICE, Goldman Sachs, Boston Consulting Group, Reuters
PLANT TIJUANA PLANT HERMOSILLO PLANT CHIHUAHUA PLANT MOTORS RAMOA ARIZPE PLANT SALTILLO PLANT SALTILLO 2013 PLANT RAMOS ARIZPE PLANT PESQUERIA 2016 PLANT AGUASCALIENTES PLANT CIVAC PLANT PUEBLA PLANTS AGUASCALIENTES 2017 PLANTS S.L.P PLANT 2 AGUASCALIENTES 2014 PLANT EL SALTO PLANTS S.L.P 2019 PLANT SAN JOSE CHIAPA 2016 PLANT SALAMANCA 2014 PLANT APASEO EL GRANDE 2018 PLANT CELAYA 2014 PLANT SILAO PLANT MOTORS 2013 2013 Kansas City Southern PLANT TOLUCA PLANT TOLUCA PLANT CUATITLAN
Mexico s Auto Production Growth (units in millions) 2.0 1.8 1.8 1.6 1.6 1.7 2.0 2.1 2.2 1.6 2.3 2.7 2.9 3.0 3.2 3.5 3.6 4.0 4.3 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: Autocast, April 2015 5
2014 Mexico Rail Infrastructure Projects 18-21 22-23 15 16 17 4 3 2 1 3 1) Sanchez 2) Sanchez yard 3) Salinas Victoria 4) Ruben Jaramillo 5) Vanegas 6) San Luis Potosi 7) Ahorcado 8) San Cristobal 9) Maravatio 10) Ixtlahuaca 11) Toluca 12) Corondiro 13) Los Chivos 14) Palm Island 15) Mezquital 16) Gavilán 17) Obayos 18) Sierra Azul 19) Ext. 20) Carlos Pereyra 21) Bajan 22) Venus 23) Hipólito 24) Rivas 25) Mezquitillo 26) Pimienta 27) San Jerónimo 28) Guadalupe 29) Carbonera 30) Ext. 31) Ext. 32) Doble 33) Las Cruces 34) Guanajal 35) Ext. 36) Endo Mexico railroads are aware of the incremental volume & preparations continue to focus on expanding infrastructure Mainline Sidings Bridges Yards 24-30 1 0 31-34 12 13 14 6 5 35 7 8 9 10 36 11 Kansas City Southern 2015 6
Rail Summary of CAPEX 2014 & 2015 (Million USD) Summary of CAPEX for KCSM and FXE Year 2014 Year 2015 Total CAPEX By Year $ 497 $ 559 2015 CAPEX BREAKDOWN Equipment $ 181 Infrastructure and Track $ 235 Business Development and others $ 143 2015 Capex Breakdown by Category 26% 32% Equipment 32% Infrastructure and Track 42% Business Development and others 26% 42% 7
Celaya By-pass Update Interchange Tracks Celaya Yard (FXE) KCSM delivers to FXE 300 & 301 Tracks (KCSM) FXE delivers to KCSM 8
KCSM NB Line Celaya Bypass Status 9
From Interchange Yard at Celaya to Aguascalientes FXE Silao GM Silao 105.44 Km (65.53 miles) Mazda Salamanca 57.14 Km (35.51 miles) GM Silao 105.44 Km (65.53 miles) Buchanan Lopez KCSM Irapuato Mazda Salamanca 57.14 Km (35.51 miles) San Luis Potosi KCSM Escobedo KCSM Salamanca Jocoqui KCSM Guadalajara FXE MEXICO 45 D Irapuato Highway Celaya Querétaro Freeway MEXICO 45 Queretaro Highway MEXICO 45 D Honda Kansas City Southern 2015 10
Bypass Construction Progress: FXE Line (AM) 0 to 5 100% Construction Completed. 5+000 to 8+440 0% Construction not started. Right of Way Issues Línea AM 8+440 to 11+320 100% Construction Completed 11+320 to 14+500 0% Construction not started ROW under Negotiation KM 15+500 24+300 100% Construction Completed. PSV Km AM 24+680 (Entronque Aeropuerto) 33.6% progress (ROW & some industry issues) AM Line (FXE) 67.59% Kansas City Southern 2015 11
Bypass Construction Progress: KCS Line (NBA) 17+220 to 22+000 100% Construction Completed Km 13+310 to 17+220 (Viaduct) 100% Construction Completed 8+700 to 13+310 68% progress Phase 1 @ 100% Phase 2 @ 0% (Lack of Budget) 5+330 to 8+700 0% advance Right of Way Issues 0+000 to 5+330 58% Progress Right of Way Issues NBA Line (KCSM) 64.00% Kansas City Southern 2015 12
The Celaya By-pass: In Summary Type of Program or Investment Project: Federal Location Amount Rail Infrastructure Project Total Cost of the Project Amount Assigned for 2015 Celaya Rail Bypass Guanajuato $ 5,468,972,018 $ 400,000,000 Expansion of the Electrified Urban Train System in the Metropolitan Zone of Guadalajara Jalisco $ 14,669,596,379 $ 5,442,370,772 Build Inter-Metropolitan Areas Passenger Train - Mexico - Toluca (first phase) Various $ 25,255,196,554 $ 7,883,742,800 Support the High Speed Train Project Between Queretaro and Mexico City Various $ 45,061,541,063 $ 1,798,407,200 Mass Transportation Rail System for the Eastern Zone of the State of Mexico - Extension of the A Line of the Mass transit System Metro Chalco - La Paz State of Mexico $ 11,907,732,503 $ 1,500,000,000 Investment Program for Track Maintenance of the Chiapas Mayab Railroad - Phase 2 Various $ 1,252,872,164 $ 564,971,366 Total $ 103,615,910,681 $ 17,589,492,138 Source: 2015 Federal Budget Allocation http://www.diputados.gob.mx/leyesbiblio/pdf/pef_2015.pdf 13
14 The Celaya By-pass: In Summary Intent: Seeks to create a safe corridor for rail Will increase safety for the community Will increase rail speed Will streamline the operation for both rail operators in a fast growing region (Bajio Area). Issues: Slow land acquisition process caused land to escalate continues to escalate. Budget Reduction in 2015 will delay project beyond 2015 Positive: The project continues under construction where land issues have been settled. Current government agencies are managing issues to move forward (some eminent domain). Steps Going Forward: Stay engaged with different levels of government to express importance of completing the by-pass. OEM s should voice their support of the by-pass and stay engaged with their government relations departments to push to speed up completion.
# of Rejected Cars 15 Rail Cars Rejected in Mexico 90 # of Rejected Cars by Month & by Plant 80 70 60 50 40 30 20 10 January February March April May June July August September October November December 0 CHRYSLER FORD VW NISSAN GM SILAO GM RAMOS MAZDA
16 Rail Cars Rejected in Mexico # of Rejected Cars by Month 191 204 157 156 143 163 157 165 156 118 125 120 January February March April May June July August September October November December
17 MUAR Vandalism/Damage Forum Mar-03-2015 Tactics - origin best practices to ensure origin is not the issue All loose items in one bag Verification of keys at each movement or handoff Line-off Accessorization Loading ~ Including tracking sheet ~ Include destination verification Security Measures Outsource Security Security Audits Personnel, including lunch box, backpack, etc. Lockers Receiving area (line-off) VPC yard Security and Quality departments
18 MUAR Vandalism/Damage Forum Mar-03-2015 Yard Access Single, secure ingress/egress Daily logbook Metal detectors No foil Other measures Rotation of shifts Close railcar doors ASAP after loading Breakroom security cameras storage for lunchboxes, backpacks, etc.
19 MUAR Vandalism/Damage Forum Mar-03-2015 Other issues raised: When vandalism is identified, waybilled so destination ramp is aware Claims vandalism counts do not match ramp counts; need to identify why different MUAR should consider a joint communication to state governments re impact of vandalism Next Steps - monthly conference call will: Pursue three issues above Track individual manufacturer origin activities and success thereof
THANK YOU! QUESTIONS? 20