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12/22/2004



Rail News: Rail Industry Trends

KCS to take control of Tex Mex on New Year's Day



On Jan. 1, Kansas City Southern will assume control of The Texas Mexican Railway Co. KCS will own 51 percent of Tex Mex and TFM S.A. de C.V., 49 percent.

KCS will obtain Grupo TMM S.A.'s ownership of TFM and Tex Mex after consummating a new deal with TMM announced Dec. 15. The transaction is subject to KCS shareholder approval — which is expected late in the first quarter — and U.S. anti-trust law scrutiny.

KCS will manage Tex Mex's operating, purchasing, and sales and marketing functions, accounting and financial reporting; legal and claims department; police and security activities, human resources; and information technology. KCS plans to honor all existing contracts and labor agreements; Tex Mex will retain separate legal status.

Gerald Davies, who will retire as KCS' executive vice president and chief operating officer at year end, will serve as a consultant and lead a team responsible for transitioning KCS and Tex Mex into one domestic railroad operating to the U.S./Mexico border at Laredo, Texas.

"While Tex Mex will continue to run its own trains with its own crews, the activities will be controlled by KCS," said Davies in a prepared statement. "The KCS and Tex Mex operating departments have been working together as one for almost three years. Now, we're able to market the two railroads as one route to the border at Laredo."

KCS has applied for a Railroad Rehabilitation and Improvement Financing program loan to upgrade some of Tex Mex's infrastructure. Proposed projects include building two and extending three sidings; and installing about 158 miles of new and second-hand continuous-welded rail, 170,000 ties and 200,000 tons of ballast.


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