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Kansas City Southern Message Board

  • ldbert1 ldbert1 Sep 14, 2009 10:24 PM Flag

    LC line -gummint owned

    First off, I was a shareholder in KSU, but now I am a bondholder in the company.

    I am a shareholder in Genesee & Wyoming and I feel that I need to report to you the trouble GWR had in Mexico, for those who do not know. The GWR ran the FCCM, Ferrocaril Chiapas & Maya, in the southernmost part of Mexico and even a toehold into Guatemala. The government owned the roadbed, the GWR owned the rolling stock. The same week as Hurricane Katrina hit Nor'leans a cat 5 hurricane hit southwest Mexico taking out 50 miles of track and several trestles. The government dragged its feet on fixing the roadbed until the GWR decided to throw in the towel and quit the contract because Mexico refused to honor the part about fixing the roadbed in case of disaster. Before the GWR could bring the rolling stock north, the government attached everything under breach of contract AND THERE IS NO MEXICAN LAW THAT WOULD ALLOW THE GWR TO GET THEIR EQUIPMENT BACK.
    Law of eminent domain does mot exist down there, from my readings. I also think this may have had something to do with the GWR not being willing to grease some palms.
    Now, IF the Mexican government owns the line to Lazaro Cardenas and IF there is a major problem the KSU will be in real trouble trying to get the Mexican government to make repairs on that track, if the government does not want to do anything, unless the KCS is not going to bribe somebody and get in trouble with Uncle Sam.

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    • LD,

      No "if" on that one. The government of Mexico owns the roadbed of all concessions originating in Nacionales de Mexico. I believe that is all trackage in Mexico, but there may be some short stretches which were privately owned before the breakup which are excluded.

      The difference for the Lazaro Cardenas line (and KCSdeMexico's main stem from Mexico City to Nuevo Laredo for that matter) is that the Mexican government very much WANTS top quality rail service on it. It had been investing money in the trackage before the leases were made available to private operators.

      The electrified but not energized double track mail line between Queretaro and Mexico City was built in the late 1970's and early 1980's as a greenfield line to shorten the distance and increase capacity. The line to LC had been under improvement as well, because Mexico wants LC to supplant Manzanillo for Pacific shipments. As Beagle Badge has noted, Manzanillo is a resort and having the port in the middle is um "distracting" from the Margaritas and Mariachis.

      So don't expect a refusal to fix a flooded roadbed on any of the KCSdeMexico's lines. If the Mexican government has the money, they'll spend it. But do also remember that the concession has only about twenty years left until it comes up for renewal by re-bid. If FXE is unable to mount decent competition with KCSM by that time, UP will blow KCS out of the water. They won't be fooled again.

      However, that should not affect the stock until a couple of years before the renewal auction.

      What WILL influence the stock is Puerto Colonet going forward. If it does, the moment the track is connected to UP at Yuma Lazaro Cardenas will be abandoned for US-bound shipments. It will still be the dominant port for Mexico-bound business, but Colonet will connect with the Sunset Speedway instead of the Infernillo Inferno.

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