Creating the True "NAFTA Railway?"

The Freight Perspective

By Kevin Ruble
Board Member
KevinR@TexasRailAdvocates.org

For some time now, Kansas City Southern CEO Mike Haverty has referred to the KCS and its two sister railroads, the Texas Mexican in south Texas and TFM in Mexico, as the “NAFTA Railway.” On April 21st, KCS announced that it intends to “make it official,” placing all three railroads under common control and renaming it NAFTA Rail, headquartered in Kansas City, Missouri. This agreement between the boards of KCS and Grupo TMM, S.A. is subject to approval by shareholders, the Surface Transportation Board and Mexico’s Competition Commission and Foreign Investment Commission.

While Kansas City Southern’s investment in TFM has performed better than many industry observers might have wagered, it still remains somewhat of a wallflower at the Class I railroad dance. Its revenues categorize it as a Class I railroad, yet it is by far the smallest of the seven members of the category in terms of route-miles and revenues. Therefore it has long been rumored to be a takeover candidate, and at least two Class I railroads have looked at the KCS within the past few years. The best fit, however might come with an acquisition by Canadian National, which says it is not interested, or Canadian Pacific. An acquisition of KCS by one of the Canadian roads would create a true NAFTA Railway, stretching from Canada through the U.S. and into Mexico. Only time will tell.