Three decades ago, Mick Haverty and David Starling worked for competing railroads in Chicago. Keen competition surely leaves an impression: When Haverty joined Kansas City Southern in the mid-1990s, he didn’t forget Starling. In 1999, he brought Starling in as president of a joint venture, the Panama Canal Railway, then called him to Kansas City in 2008 as president and chief operating officer. That set him up to take over last summer, when Haverty relinquished the duties of chief executive. With a weather-induced baptism by crisis in 2010 now behind him, Starling took a few minutes to respond to Ingram’s questions about the transition and the prospects for KC Southern.
Q. Has the move into the CEO’s seat altered your views of organizational strengths and needs?
A. My view of KCS’ strengths has not changed in the last year. KCS’ cross-border network between the U.S. and Mexico is uniquely positioned to be one interchange away from any point in North America. In our marketing materials, we say we’re large enough to go anywhere and small enough to care. That’s because our network has the reach to connect shippers to any market in the world, yet we still take the entrepreneurial approach of a small company.
Q. Other strengths that define the company?
A. Our management team. My job as CEO is to set direction, foster teamwork and support the management team as we run the company and execute the corporate strategy. Very early on in my role as CEO, our management team was put to the test when we suffered a 23-day main line outage caused by flooding in Northern Mexico. We had two bridges taken out of service, in addition to more than 100 washouts across our network. The way everyone pulled together to get through that tragedy was truly a defining moment for our entire management team.
Q. In your first year at KCS, you helped reverse a first-quarter loss to get back in the black. How?
A. We had to move very quickly and aggressively to respond to the great recession. Being the smallest of the major railroads, we didn’t have the cushion or financial flexibility that our competitors had to withstand a severe decline in business. In addition, Mexico was hit harder than the U.S., and that represents about half of our business. We zero-based everything. Nothing was sacred. Coming out of the recession, we continued with that same level of scrutiny as we want to maintain a lean and efficient organization.
Q. What do you see as the biggest hurdles to realizing the full potential of your operations in Mexico and Latin America?
A. One of the biggest is educating our customers and investors about the realities of doing business in Mexico. By 2015, we expect to see a convergence of costs between Asia and Mexico. Wage inflation is rising more quickly in Asia than in Mexico. Freight from Asia reaches the U.S. Midwest in 20-plus days, and from Mexico can reach the Midwest in five days. Manufacturers can move goods more economically in 53-foot containers from Mexico to the U.S., than they can in 40-foot containers from Asia to the U.S. Mexico is becoming the new China and KCS’ cross-border network between the U.S. and Mexico is well-positioned to handle that growth.
Q. What does the region’s emerging role in distribution mean for the area and KC Southern?
A. Kansas City is well-positioned to gain significance as a distribution hub, and that the KCS network will help drive that. Any shipper in the Midwest that is doing business with Mexico will have an advantage using our network to move freight cross-border. The investment that KCS and CenterPoint Properties have made at [CenterPoint Intermodal Center-Kansas City] will allow shippers to have preferential access to our rail network. They will be able to reach any market in the Midwest, northeast or Canada through a direct connection to four other large railroads and the extensive highway system around Kansas City.
