Company That Relies on NAFTA and Supports the GOP Suddenly Regretting Both Decisions

 [Elections have consequences ---Bozo]

By Daniel Gross

Spare a thought for Kansas City Southern. One of America's great railway companies, based in the heartland, it is the self-professed “NAFTA Railway”: Its network consists largely of railroads that reach deep into Mexico, through Mexico’s industrialized northeast, and extending to the Pacific Port of Port of Lázaro Cárdenas and Gulf of Mexico ports like Tampico and Veracruz. On the U.S. side, Kansas City Southern’s lines wend from Texas into Louisiana and Mississippi, and straight up the spine of the country through Oklahoma and Arkansas to Kansas City.

Kansas City Southern’s business model is built on two things: economic integration between the United States and Mexico, and stability in the relationship between the two trading partners. When customers load grain in Kansas and send it to Mexico City or load car parts in Monterrey and send them to Alabama, the goods are precleared for customs at their points of origination. The long trains, whistles blowing in the lonely night, trundle across the border without paying tariffs. The company’s Mexican unit, which accounts for about half of the company’s revenues, collects much of it in pesos, which makes the parent company susceptible to volatility in the dollar-peso exchange rate.

Donald Trump’s election has threatened to erode both of the pillars underlying Kansas City Southern’s business. Trump has signaled his intention to tax outsourcers, to renegotiate NAFTA, and to build a massive, comprehensive wall between Mexico and the United States. Each of those policy initiatives would directly impede the current ease with which goods flow across the border.

In addition, Trump’s saber-rattling has shnitzeled the peso, whose value plummeted sharply against the dollar in November and December and is now near a record low.

This combination of events has been bad for Kansas City Southern. As it converts pesos into dollars, its results now look anemic. Last week, it reported earnings that were flat from the previous year. And the company used the dread “u” word when providing guidance to investors. “Looking ahead to 2017, the Company is aware of both economic and political uncertainty,” as CEO Patrick J. Ottensmeyer put it. Translation: Now that Trump is president, we have no idea what will happen with the peso exchange rate, with NAFTA, or with our business.

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http://www.slate.com/blogs/moneybox/2017/01/23/kansas_city_southern_railroad_company_relies_on_nafta_supported_gop_oops.html