VEQ & MUAR Updates Moderator: Kelly Smith, Kansas City Southern

Speaker: Wesley Hitt, Nissan/WWL

Mexican Automotive Production Growth

• 7th Largest Automotive Manufacturer

• 4th Largest Automotive Exporter

• In 2014 80% of Finished Vehicles Exported

• No. 2 Supplier of Vehicles to the U.S.

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Mexico Finished Vehicle Production Forecast(in millions)

2010 2011 2012 2013 2014 2015 2016 2017 2018

2.32.7

2.9 3.03.2

3.5

3.9 3.94.0

“Overall, the reality is that production growth is estimated to reach upwards of 5 Million Units in Mexico by 2010”

Finished Vehicle Logistics

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Automotive Production 4

Pesos Per Hour

Theft and Vandalism Initiatives Org Chart Mission Statement Identified Supply Chain Gates and Actions Idea Sharing

Web Portal developed for improved communication flow Chock Series Codes OEM In-Op procedures to support theft and vandalism initiatives

http://www.aar.com/standards/OEMInopProcedures.html Under review: Various US rail ramp procedures

Created OEM Teams to meet with Mexican governments Individuals for each OEMs identified for expedited adjudication Mexican Railroads coordinating timely communication to create an

immediate response and resolution to theft and found gaps Tag initiated for data collection at rail ramps

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MUAR Theft & Vandalism Sub TeamOEMs & Railroads

Wesley Hitt / Scott Crail

Sub Team Leaders

Scott BoucherStewart Kessler

VW

Gavin MendozaHonda

Omar MendozaHonda

Mark OwenNissan

Jorge EspirituNissan

Ronald ThomasToyota

Mauricio RiosToyota

Mike RobinsonMazda

Raul LopezMazda

Jon UrbanFCA

Mauricio FavillaFCA

Brent WillisGM

Carlos MonsivaisGM

Eric Humphrey Union Pacific

Kelly SmithKCSM

Leslie Garth Union Pacific

Nick Archuleta

BNSF

Marlon Escamilla

KCSM

Jorge Fernandez

FXE

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Mission Statement

Collaboratively work to address best practices and opportunities to reduce multi-level theft and vandalism for Mexico shipments. Develop processes and support timely communication and remediation of vehicles on rail cars with theft and vandalism issues.

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Developed Improvements for Gates/Checkpoints for Supply Chain

Portal to Share Ideas and Documents for implementationTemplate to Standardize Trials and Results Rail Road and OEM Meetings established

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Gate Actions Implemented

Metal detectors and wanding of employees

Use of poly carbonate shoes instead of steel toe

Elimination of aluminum foil in lunchboxes. Replaced with clear plastic bags

Individual tracking of handling of vehicles

Random inspection of employees and lockers

Eliminated pockets on uniforms

Prior to DepartureOrigin Handling Loading Process Border Interchange InspectionRailroad Intransit to Border Destination

Data collected and used for results in various actions to support reduced theft

VEQ Tag developed to collect theft and vandalism data for measured results

Created unit trains for improved velocityHot zones

identified for improved security

Exterior wiring added to reduce top deck door clearance

Special locks designed to prevent top deck entry

Under consideration: technology improvement with positive alert of train breach

Adjudication process developed and involvement of local government affairs

Interior wiring added in areas of large gaps

Roof closure assembly fastener nuts must be tack welded to bolts

Keys mailed to destination where applicable

Relocation of keys to alternate location

Hiding of one key

Expedite closing of rail car doors after vehicles have been loaded

Trunks sealed for better visual of vehicle entry

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These Railcars are Susceptible to Vandalism

Propose to SEFCC alternative to change 14

A motion was made, seconded, and approved to add another bullet to M-970 Section 2.5.8 as follows: 2.5.8 Radial End Doors• Inspect, repair, or replace components of radial end doors as follows:• Roof Closure Assembly fastener nuts must be tack welded to bolts.

A motion was made, seconded, and approved to add another bullet to M-992, Section 2.5.1 as follows:2.5.1 Radial Style End Doors• Inspect, repair, or replace components of radial end doors as follows:• Roof Closure Assembly fastener nuts must be tack welded to bolts.

15SEFCC – Radial Style End Doors

SEFCC – Radial Style End Doors

So basically, we now have wording in place for M-941, M-970 and M-992 to help reduce theft into Multi-levels and help provide more secure equipment.

Theft in Mexico has been targeted mostly to multi-level type doors whichmay have wide side opening between the ladder and the side panels as wellas those which have openings where a roof closure assembly or chain canbe removed.

49.9% (8,777 tri-levels and 18,797 bi-levels) of the Reload Fleet is equippedwith the radial door design; we know not all cars can be diverted, but tryingto identify those with the greatest propensity for theft because of design.

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AAR Communication Web Portal

http://www.aar.com/standards/OEMInopProcedures.html

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Adjudication Process

Adjudication ProcessSuccess Dependent Upon Timely, Accurate Filing

Capture Criminal OEM or Power of Attorney Notified

OEM Files Charges• Property Linked to

Crime• Denuncia Filed• KCSM or FXE Support

Authorities Review CaseOEMs Follow up on with Authorities

Within 2 hours Within 12 hours

1 to 2 DaysOn-going

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VEQ Data Collection

VEQ TAG- Destination Theft and Data Collection

Today

Not all Units get inspected at interchangeClaims Data does not always reflect true impact of theft

VEQ Tag Group

Rail Road QualityOEMsVarious Inspection Companies

Future Objective

A more reliable and accurate recording of theft and vandalism as units arrive at destination ramps.

PURPOSE

Key Goals of VEQ TAG

Data

Collection

Recording of Codes Example – 28-08-06 08 being Theft Key in Coding

DPU – Defects per Unit Units received against

number of vehicles with theft or missing items

AAR to aggregate data AAR to report Metrics

Consistency

Metrics

1 - Country of Origin – to country of Destination by Ramp 2 - OEM – country of origin

destination by ramp

Presentation of Data ?