AAR DP & FC Seminar Nashville, TN July- 2018

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1 MUAR AAR DP & FC Seminar Nashville, TN July- 2018

2 MUAR Mission Statement Continuously improve the automotive rail process for Mexico related shipments that drives timely and damage free transportation of finished vehicles while ensuring the appropriate supply of empty multi-levels & railroad infrastructure to support Mexico demand.

3 MUAR Objectives Reduce Damage to Vehicles Increase overall Security Improve Mexico Infrastructure Reduce Mexico Empty Dwell Maintain Empty Supply Listen & Understand OEM Voice Increase Multilevel Velocity

4 10 Free Trade Agreements : 45 Countries Canada Japan United States Guatemala El Salvador Honduras Nicaragua Costa Rica Colombia Bolivia Chile Uruguay Peru Venezuela European Union Iceland Liechtenstein Norway Switzerland Israel SOURCE: DOC, Bloomberg Businessweek, World Bank, Mexico Today, J.P. Morgan, U.S. Bureau of Labor Statistics, SICE, Goldman Sachs, Boston Consulting Group, Reuters

5 PLANT TIJUANA TBD PLANT HERMOSILLO PLANT CHIHUAHUA PLANT MOTORS RAMOA ARIZPE PLANT SALTILLO PLANT SALTILLO 2013 PLANT RAMOS ARIZPE PLANT AGUASCALIENTES PLANT CIVAC PLANT PUEBLA PLANT S.L.P PLANT 2 AGUASCALIENTES 2014 PLANT EL SALTO PLANT AUDI 2016 PLANT SALAMANCA 2014 PLANT CELAYA 2014 PLANT SILAO PLANT MOTORS 2013 PLANT TOLUCA PLANT TOLUCA PLANT CUATITLAN

6 Source: INA, OICA 6

7 Source: INA, with information from IHS Markit 7

8 RR Efforts to Provide a Damage Free Transportation Security measures which are currently in place Rail Inspection Portal Scanning of Seals on Security Filters Technology Tools Used Door Protection Interaction and communication with Mexican Local, State, and Federal Officials

9 In some areas, trains pass through a system of digital imaging high speed. Using portals inspection, the rail cars are monitored throughout the route: and when delivered, RR documents the conditions of the cargo and its seals. Train Rider Detection System (TRIDS) automatically captures, inspects, and processes the images in real time of freight trains moving at speeds up to 70 miles per hour, looking for strange people, and vulnerable cargo, this is to reduce the need to stop the trains for inspections. And to keep the train speed along the route.

10 Central Intelligence Center Scanning of Seals on Security Filters Placement of Security Red Flag seals on Rail Cars. Scanning of seals Seals Monitor by Security Filters.

11 Incident Reporting Constant Security Improvement Remote Site Reporting Transport Supply Chain, Storage and End Point Security Asset Monitoring & Management Permanent Security Reports Advanced Security Analytics Mobil system or native mobile application Custom Reports & Analytics

12 Application Technology The Application of Technology Tools The National Dispatch Center in Monterrey, NL. allows a real tracking of trains along the line. VACIS scanning system running in Lázaro, Nuevo Laredo and Laredo - X-ray pictures of the cargo. - Radiation scanning. CCTV MCS System High-speed Digital Images System on the B-line in Saltillo And San Luis Potosi. DUOS System. Scanning of High Security Seals.

13 Application Technology Combine applications with human touch points and security filters Program management & training Report real time anomalies Immediate information flow with transparency Rapid Resolution Due Diligence

14 Security Door Protection Door Protection Wiring on upper vertical bars 50 cm Wiring on upper horizontal bars 95 cm Wiring on upper horizontal bars Wiring on upper vertical bars Wiring on lower vertical bars Wiring on left side panel Wiring on right side panel Amarre aldaba

15 Door Protection

16 Security Joint Efforts Vandalism Theft has been addressed in a joint effort with Plant Security, RR Security & Damage Prevention measures. OEM & RR communication to state and local government entities to improve security support in known problem areas in transit routes. Propose new engineering or design for securement of accessories inside vehicles or more difficult to remove. Upload unloading process to AAR web site. Include Seal Numbers on Waybills (This will allow inspectors to identify when seal has been removed and replaced)

17 SANCHEZ YARD PHASE III 17

18 Sanchez Yard 2018 Capital Spend: ~$20M Total Project Spend: ~$93M ( ) 2018 Projects: New state of the art freight car repair facility Expanded locomotive service facilities Expanded fueling facilities Separate leads within the yard Network Benefits: Sanchez will be the main switching terminal for both NB & SB traffic Supports a fluid border crossing Enhances train configuration / planning 8 new 9,000 ft. R&D tracks 20 new automated classification tracks Centralized location for all functions (yard services, mechanical, fueling) 18

19 CELAYA BY-PASS CIVAC

20 SUMMARY Intent: Seeks to create a safe corridor for rail Will increase safety for the community Will increase rail speed Will streamline the operation for both rail operators in a fast growing region (Bajio Area) Issues: Slow land acquisition process caused land to escalate continues to escalate. Budget Reduction in 2015 delayed the project. No Federal budget assigned to this project in Change in Presidency. Our Role: Stay engaged with different levels of government to express importance of completing the by-pass. OEM s and the other customers should voice their support of the by-pass and engage with their government relations departments to push to speed up completion. FXE and KCSM are working with the SCT on potential alternatives to accelerate the project. 20

21 THANK YOU!! 21