CHICAGO North American
railroads say they are seeing the benefits of increased
shipments of motor vehicles and auto parts and are preparing to
service new factories in Mexico as they look to take advantage
of the automotive sectors growth.
"The growth rate of the
automotive industry continued to outpace that of the overall
economy during the first quarter," Eric L. Butler, executive
vice president of marketing and sales for Union Pacific
Railroad Co., said during the companys recent
first-quarter earnings call.
According to Butler, the
companys automotive volume grew 2 percent in the quarter,
which combined with an 11-percent increase in average revenue
per car drove a 13-percent rise in the railways total
revenue. The steady pace of total auto sales in the first
quarter "is expected to continue throughout the year, which
combined with declining dealer inventories, should be good news
for our automotive business," Butler added.
Kansas City Southerns
Mexican subsidiary is also seeing the benefits of automotive
exposure, as the company has been shipping Asian vehicles
landing at Mexicos Port of Lázaro Cardeñas,
executive vice president of sales and marketing Patrick J.
Ottensmeyer said on the companys own first-quarter
"We think were going to
get growth in parts, in steel," he said. "Were already
seeing it (with) steel plants that are being built in Mexico to
serve the new auto plants."
KCS expects to see
"unprecedented" growth as automakers Honda Motor Co. Ltd.,
Nissan Motor Co. Ltd. and Mazda Motor Corp. open new plants in
Mexico, followed by Audi AG and more in 2015, company president
and chief executive officer David L. Starling said. "No
railroad has ever before experienced the opening of multiple
new plants over a five-year period, to say nothing of the
expansion of the existing ones."
"A large number of Tier I and
Tier II suppliers are going in to support these plants,"
Ottensmeyer added. On a recent tour near the Honda and Mazda
factories, he said he saw "eight or nine buildings going up
simultaneously. So the ripple effect is pretty big."
Finished vehicle output at the
new Mexican assembly operations will represent a 35-percent
increase in Mexicos auto production, Ottensmeyer noted.
Eighty percent of those vehicles will be exported, mostly to
the United States and Canada.
"Laredo (Texas, where KCS has a
terminal) is the best gateway to move these vehicles to where
they ultimately want to go," he added. KCS will also ship parts
to those factories from the Great Lakes region and from Asia,
Norfolk Southern Corp. will also
look to capitalize on new vehicle capacity being built in North
America. "We also expect to benefit from new production that is
moving from Japan and from Europe to the U.S., where the U.S.
is being used as a manufacturing platform for both the domestic
U.S. market, as well as the export market abroad," chief
marketing officer and executive vice president Donald W. Seale
said during a recent earnings call.
"Toyota (Motor Corp.) just
announced theyre moving the ES300 Lexus production from
Japan to Georgetown, Ky. We serve Toyota at Georgetown, so that
will be a source of growth ahead," Seale said. "We continue to
have dialogue with other manufacturers with respect to
potential new auto plant locations."
"Weve got some major expansions with our current
automotive production base and more is coming from abroad,"
Seale added, citing expansion plans for BMW AG in Greenville,
S.C.; Mercedes-Benz U.S. International Inc. in Vance, Ala.; and
Honda in Lincoln, Ala.