Transportacion Maritima Mexicana is the largest multi-modal transportation company in Latin America, as you claim to be, and you provide transportation services by sea to over 60 countries via 150 ports in the Americas, Europe and Asia. Could you define your concept of multi-modal transportation and how successful have you been in deploying a door to door service?
Asa matter of fact, over the past few months we have had a radical change in this corporate business. Basically what we offer our clients and what we have been offering them for the past 45 years is a quality service for the transportation of their goods as the needs of the clients have been evolving, what we are doing now is we are tailor-making solutions, so that rather than just offering a specific transportation service, we are offering a logistic solution to our client, being by road transport, by rail, through our railroad, which is TFM, whereby sea transportation. The sea transportation basically through an extremely agreeable relationship we have retained with our former container services which are operated by Americana ships, we continue to offer door to door service to our clients from Mexico to over 60 countries. On the other hand, basically we are concentrated now in the north-south quarter, which is basically the Mexico-US-Canada operation for trucking services as well as our rail operations, our railroad TFM basically runs through Laredo and connects with our own railroad in the US, which is called the Texas-Mexico railroad, and through which 80% of Mexican rail traffic goes to the US. Trucking operations are basically geared also towards crossing along the Texas border to connect with an American joint venture, called JB Hunt Transportation Service, JB Hunt Trucking, which is one of the US's largest transportation companies and we offer co-ordinated services and this month, as a matter of fact, we initiate a new service called the road-railer service, whereby clients who do not have railroad spurs on their docks will be able to load trucks on their docks, and these trucks will be carried on to rail road stations where the trucks will in effect become rail road cars through the coupling of a unit called the bogy, which is basically a rail road wheel, and the trucks become rail road cars. We are beginning this service with one or two daily runs north town, and two daily runs south town with trains with approximately 125 units of these trucks, this is going to facilitate transportation of goods from the US and Canada to Mexico, to many clients who previously did not use the rail road because they did not have the railroad spur but they used the truck, this offers a service which is 10 to 15% cheaper than normal trucking operations. Additionally, we have also diversified into the providing of line feeding operations to various car manufacturers, we have as part of our company, currently close to 3000 employees, within the Volkswagen plant in Puebla, we receive all their raw material for manufacturing of the automobiles, the spare parts, we run the warehouses, and supply along the production lines, on a daily basis, their daily needs, we pick up the cars which are finished at the end of the production line, we inspect them and if necessary send them back for retooling, inspect them and then ship them to their final destination. This has been going on currently at Volkswagen Puebla Plant, additionally, we have approximately one thousand employees at General Motors in Saltillo, where a brand new model is being manufactured now called the Aztec, and we're doing exactly the same thing, we receive all goods many of which are transported by our transportation units to warehouses which we run and we supply on a daily basis the GM Plant in Saltillo, in Northern Mexico, their daily requirements of parts for the manufacturing and the assembly of cars. Additionally, in Ford, in Hermosillo, we are doing a similar logistic solution, but not quite the same, we basically receive the cars at the end of the production line over there, we inspect them and then we ship them to the final destination, but in addition to that we run an in bond steel warehouse whereby we receive steel coils from foreign manufacturers, that is from the Far East or from the US, in bond and supplying on a daily basis to the stamping plant for the stamping of the chassis of the cars. So basically we have been moving towards providing other types of services rather than just transportation services to our clients. This can be done for an IBM computer plant in Guadalajara, or it can be done for television set manufacturers in Ciudad de Juarez.
Before analysing each of the sectors you are involved in, we would like to know what are the factors behind these diversification strategy that you started a few years ago?
Well, clients, particularly manufacturing clientswant to develop their aptitudes and their capital into manufacturing, they want to leave distribution of their final product to specialists, and they want to leave the warehousing of the material just in time operations basically to specialists in those fields. So being in the transportation business, we felt that we had to offer a tailor made solution to our clients; for example, in the case of Mexico City, we have Domecq, which is one of Mexico's largest liquor distribution and manufacturing operations, those trucks you see in the streets which have the Domecq name painted on their signs, are basically our trucks which are dedicated 100% to Domecq's transportation needs, thereby Domecq no longer runs its distribution, we run the distribution for them, they dedicate themselves to manufacturing and selling the product, we run their distribution. In the case of the largest chains, such as Wall Mart here in Mexico, we have exactly the same thing, most of the trucks you see in town with Wall Mart painted on the signs, are our trucks which are part of a dedicated service to Wall Mart and the Aurrera retail chains. So in some cases we distribute, in other cases we warehouse, in other cases we line feed through the production lines but basically this is all part of the process of the logistic chain which starts from the moment the purchase of the raw material is done until the final delivery of the product. What we are then offering to manufacturers is to dedicate themselves specifically to manufacturing.
Although you sold your stake in the container shipping business in December 1999, you still keep two divisions, one is the specialised maritime transportation and the second one is ports and land transportation services. Can you give us some more details about these businesses?
In our specialised maritime division, basically we are providing a service, an extension port logistic service to car manufacturers for example, we have a fleet of seven large car carriers which operate on the north-south access, on both coasts from North America to South America and the Caribbean as well as from Europe to Central and South America and occasionally from the Far East to North America for the exclusive transportation of up to 5600 vehicles per boat load. These are basically roll on roll off car carriers whereby they can go along the coasts or within the Caribbean and pick up or drop off vehicles. We are currently shipping cars from Mexico to Central and South America in the Caribbean but we are also bringing cars up from Brazil, Chile and Ecuador to Mexico, we are moving cars from the port of Zeebrugge in Belgium to Brazil, Argentina and Chile; we are moving cars from Mexico to Europe also, so basically this is part of a specialised transport operation. Additionally, we are running parts of tanker operations for the transportation of chemicals as well as regular bulk liquid tankers for the service of Pemex for the transportation of petroleum products, in addition to that we have a strategic alliance, a joint venture with a company called Seacore Marine from the US whereby we provide offshore services for the oil platforms in the Golf of Mexico. In ports of terminals, we have invested heavily through the privatisation process that began taking place 4 or 5 years ago, and we bid successfully on the Manzanillo container terminal in the Pacific coast because we are betting heavily that Manzanillo will become one of the most important ports in the Pacific basin, offering services not just to Mexico from the Far East but basically will be used as a transhipment port for goods coming in from the Far East to Central and South America, in addition to that through an efficiency of operations which we have achieved, we are beginning to offer services for Far Eastern shippers to ship through Manzanillo to the east coast of the US.
What do Far Eastern operations represent in the whole of your activities; and do you expect the volume of shipping cargo being traded through Manzanillo to increase significantly in the years to come?
Manzanillo doubled its capacity within the past year and merely due to the goods coming in from the Far East to Mexico and to Central and South America; we went from a little bit over 200.000 TEUs to over 400.000 TEUs; this is 120 feet equivalent unit of a container. In addition to that, I would say that some of our most important car carrier clients are Asian companies, such as Nissan and Hundai and some of the other manufacturers, mainly Japanese and Korean manufacturers. There is also an interest to increase trade in the Americas for Far Eastern manufacturers who have set up plants in Central and South America to move their goods back and forth along the north-south access,; for example Suzuki's GM operation in Ecuador is now shipping cars north bound and south bound, and other car manufacturers serving in the same thing. In addition to that, we feel that the other ports that we run, which are Acapulco, Tuxpan and Cozumel; Acapulco and Cozumel being mainly tourist facilities for cruise terminals, have seen a very large increase in Far Eastern customers on the cruise lines, especially in the Caribbean. As you know Cozumel is the n.2 or n.3 destination world wide for cruises, with over a million passengers per year. This has become very important for us. In the case of Acapulco, which used to be from the early 1500's the prime shipping port of the Americas for the Far East; once again has picked up. We are using it for general cargo as well as for car transportation. It is not as important as Manzanillo but it is increasing its operations with Far Eastern clients.
In which manner do you expect to benefit from the signing of the Free Trade Agreement with the European Union; is the triangulation of trade, being Mexico in the centre of it, something that you expect will increase the volume of your operations?
Well, I think that one of the important benefits of the signing of the Free Trade Agreement with Europe is basically going to be an increased trade of goods between Mexico and Europe, but I think that the by-product of this agreement will be increased investment for European companies along the Mexican border for shipment of goods to and from North America. The American market continues to be the largest one; it drives the rest of the world economy; and I think that by taking advantage of lower costs of labour in Mexico with a high quality labour pool and with a close advantage here geographically speaking through the North American market, many European, and by the same, many Asian companies are taking advantage of Mexico as a positioning base for shipments into the US and Canada.
Will you continue to expand your operations with ports? And if so how?
Yes, we are going to be expanding into the port
of Tuxpan, but in addition to that we are exploring
other possibilities of expanding our investment
into ports of terminals not just in Mexico, along
both the Pacific and the Atlantic coasts, but we
expect to invest, hopefully with new privatisation
schemes in the rest of Latin America, especially
along the Pacific. |
In Mexico, there are several ports coming on line to be privatised in the next few months, the port of Lazaro Cardenas, which is Mexico's largest port in terms of tonnage handled, the port of Puerto Vallarta, which is basically another tourist facility, the port of Guaimas, which is also a very large commercial port, as well as the port of Topolovampo, which is also very much geared towards the Far East. Certainly, we will be continuing to expand our operations with ports.
Is there any port from those you mentioned that you will be particularly interested in biding for?
We are going to be particularly interested in all of them.
Why are you moving away so decisively from shipping and into the Mexican railroad and trucking businesses? Perhaps to take the maximum advantage of the Nafta Agreement?
The Nafta Free Trade Agreement is probably the most dynamic, economic growth for the future in terms of benefit for us. The Nafta trade is growing at an average rate of over 10 to 12% a year, with Canada trade has been growing at 11% per year for the past 6 or 7 years, trade with the US is going by leaps and bounds, but additionally we move away from investing in container shipping for various reasons, the main reason is because we see that over the next few years the major players in the field of container transportation are going to be few and large, this is a trend which has been coming along over the past few years and we are looking for a consolidation of shipping companies; I would say that no more than a dozen large players will remain in the next few years; most of them from the Far East and Europe, very few lines from the Americas will remain as major players; there is a need for very large investments, and in addition to that container operations can be more balanced if you are a major player rather than just a niche player. That is why we decided to move away from container shipping, but we have remained with very close links with our shipping line as we had before; we have special agreements with them, whereby we continue to offer them special services for trade from the Far East to Mexico, from Europe to Mexico so they can continue to offer door to door service by using our facilities. The north bound operation when it comes to the railroad and with trucking, as I mentioned before, being so dynamic. 80% of Mexico's economy is within the sphere of influence of our railroad network, where we have tremendous opportunities for new locations for plants to be put close to the transportation links and where there is an enormous labour pool which can be utilised. Additionally, the trucking operations are going to continue to grow as there is more integration between the American and Mexican economies, including the Canadian economy. Nowadays, if you stand by the border for any given day, sometimes the line of trucks ready to cross in to Mexico when the border opens is over 8 ½ miles long. As we further integrate their economies, the Mexican customs facilities become more computerised and the American customs facilities develop more efficient inspection systems, we will have a hassle free border crossing such as we have in the area between the US and Canada, and trade will continue to grow. As of today, if you are a very large American company or if you are a very large European company you can take advantage very easily of the Free Trade Agreement. But many of the smaller companies have been left out; once the smaller companies begin to realise the benefits of the Free Trade Agreement, then we are really going to see this economic cross border operations booming even more than they are booming right now.
In fact, small to medium companies that survived the impact of the implementation of the Free Trade Agreement are generally speaking sound companies ready to take the advantage of this new phase of development in cross border operations, is that what you mean?
Exactly, not only that but if you see the recent comments that President Fox made to the effect that he is going to make a very important effort to strengthen and to support the growth of the small and medium size investor and their companies; this is going to be part of this new second boom which will take place once again along the north-south economic quarter.
A very important reason why the Mexican market became so attractive for many traders all over the world is for its proximity to the US, in this context time management is essential, you claimed that 80% of your trains run on time; in this respect, is the railroad a more reliable form of transportation than shipping today in Mexico?
When we took over the railroad three years ago, covering from the border into Mexico City, trade took an average of 90 to 91 hours, nowadays the average runs from the north, from Laredo into Mexico is just a little bit over 30 hours, additionally when the railroads were not privatised, they didn't have schedules, nowadays not only do we have a schedule but we have a printed schedule whereby a customer can know exactly at what time the train will departure just like a plane will depart. We have a computer tracking system in Monterrey, a staff by over a hundred professionals fully bilingual professionals working 24 hours a day where a customer can call and request the tracking of his product, which can be given within the kilometre where the product is and within 5 minutes he can be told exactly at what time the product will cross the border and at what time the product will reach any destination within North America including Mexico.
You had announced several investment projects for this year, such as the over 10 million USD investment in the Monterrey-Matamors line, as well as other projects to be accomplished over the next years, are this projects going ahead?
Yes, well over the past few years we have had large investment projects, as you know we purchased the railroad for over 1,400 million dollars, we received the trackage in relatively good condition but we immediately decided to invest in various things as we had to improve service to our customers. We invested 300 million dollars in the purchase of 150 brand new locomotives from the US, manufactured by General Motors, of which 75 are manufactured in the US and the last 75 are currently being manufactured here in Mexico. Additionally, we increased our operations by creating additional sidings, the reason why sidings are so important is because as we have a single line railroad, in order for us to run more railroads as we are doing right now, we need a train to go on the side, for the other train to come on so it can continue its road. To build one kilometre of siding costs a million dollars, and we have increased sidings by a tremendous amount; I would say our investment programs on the books are probably close to 900 million dollars over the next few years for the railroad itself. Basically we are doing this to provide the service which our customers are demanding. When the railroad was run by the government, every year you saw more people using trucks and less people using the railroad, nowadays, what we are doing is that we privatise the railroad, we have a large number of clients who are once again returning to the railroad.
By the time you took over the railroad, the network was almost obsolete, trains were very slow and inefficient. How would you describe the present situation as compared to American or European standards?
Right now, our efficiency rates for the running of the railroad are close to or equal or superior to European and American standards, and when it comes to theft for example, from the railroad our rate is lower than American theft standards. One of the principal products that we ship on the railroad are automobiles; automobiles are subject to various problems because if the train goes very slow the people get on the railroad very easily and take off the mirror, or some trims or open the doors and take out the stereo; this happens in the US, it happens in Europe, it happens all over, it happens here too, our rate is currently lower, small percentage, but lower than American rates when it comes to theft.
Deals with US transportation companies are vital for continued transportation but also for credibility, what are the agreements that you have already finalised with US companies, and do you envision further agreements in the future?
Definitely, we have a number of agreements, we have a joint venture with a railroad, with the Kansas City Southern Industries, we have a joint venture with Stibadoring Services of America, of Seattle, for the operation of ports and terminals; we have a joint venture with Seacore Marine for the operation of the offshore facilities offering shipping facilities and we will continue to have the best possible clients, suppliers of know how to be our partners in this type of process. In the case of the just-in-time operations, we are currently partnering with Schnelleck of Germany for the automotive sector as well as with auto warehousing from the US; also for final delivery of goods.
Transportacion Maritima Mexicana is listed in both Bolsa Mexicana de Valores and the New York Stock Exchange, how would you describe the performance of your shares in these two stock exchanges and what do you expect for the rest of the year considering the new projects that you have underway?
Well, I'd say that TMM shares are not heavily traded shares, they are lightly traded shares but as we become more aggressive in our information campaign to possible investors, and as we turn around the company and the financial resources of the company continue to improve as they are improving we see that this is going to be a much better year than last year, and the year after will definitely be a positive year; investor interest will perk up on us and I think we will see more investors in our company and we will see more trading of our shares, and I can only see a positive future for the price of our stock.
Finally, Mexico is going through a very exciting transition period towards democracy, may I have your assessment on this process and its repercussions on the economic situation of the country?
Yes, I think we are going to see an economic renaissance now with the recent election results, but this will also bring a different way of doing business in Mexico, and it is going to bring a different way for us, businessmen, of dealing with the Government, we are going to have to deal with the Government in a different way than we used to in the past, I think the bureaucratic processes will be stream lined and I think we are going to see a much more efficient way of doing things. |
Transportacion Maritima Mexicana