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May16, 2016

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www.joc.com THE JOURNAL OF COMMERCE 55 Mexico related to the shutdown of automotive plants and the weak peso. The railway, which has been struggling to maintain healthy intermodal growth, reported a 7 percent year- over-year decline in overall intermodal volume to 225,200 units. Related revenue also fell 10 percent, to $85.1 million. In addition to the weakness in Mexico, intermodal volume was hurt by heavy storms in March that pushed the waters of the Sabine River dividing Louisiana and Texas to historic highs and forced the closure of KCS's main lines south and east of Shreveport, including its Shreveport, Beaumont and Alexandria subdivisions. The retooling and shutdowns of several automobile plants KCS serves also hurt the railway's intermodal business, according to Brian Hancock, executive vice president and chief marketing officer. KCS President Patrick Ottensmeyer, however, said he's confident the company's auto business will bounce back. "After the retooling is complete, there will be a gradual ramp-up period before all of the quality and new model issues are resolved, but we continue to be optimistic about our automotive business," he said. More long term, Ottensmeyer said KCS will continue to face stiff competition from over-the-road competitors, in the U.S. and Mexico. "Certainly, we have seen additional competition from truck in certain markets, primarily in the intermodal market," he said. "There is a lot of capacity out there, much the same as there is in the U.S. and it continues to have an impact on us." For the past several quarters, the railroad has been reporting weaker results as the peso has depreciated and the energy segment has softened, offsetting once- strong chemical and intermodal revenue. The Mexican peso hit a new low against the U.S. greenback this year, and is currently trading at 1 peso to about 5 cents. JOC IN BRIEF "There is a lot of capacity out there."

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