Kansas City Southern Railway - History

History

Arthur Edward Stilwell began construction on the first line of what would become the Kansas City Southern Railway in 1887, in suburban Kansas City, Missouri. Together with Edward L. Martin, Stilwell built the Kansas City Suburban Belt Railway, which was incorporated in 1887 and began operation in 1890, serving the Argentine District in Kansas City, Kansas; Independence, Missouri; and the riverside commercial and industrial districts of Kansas City. While the Belt Railway was a success, Stilwell had a much bigger dream. Over the ensuing decade, the line grew through construction and acquisition of other roads, such as the Texarkana and Fort Smith Railway, to become a through route between Kansas City and Port Arthur, Texas, with the final spike being driven north of Beaumont, Texas, on September 11, 1897, the Kansas City, Pittsburg and Gulf Railroad Company (KCP&G) was completed. In 1939, another mainline between Dallas and New Orleans, via Shreveport, Louisiana, was added through the acquisition of the Louisiana and Arkansas Railway (L&A). From 1940 to 1969, Kansas City Southern operated the Southern Belle passenger train between Kansas City and New Orleans, along with regular freight transportation.

In 1940 KCS reported 1345 million net ton-miles of revenue freight; L&A had 778 million. Together they operated 1760 miles of road at the end of 1940, not including Arkansas Western and Ft Smith & Van Buren; at the end of 1970 KCS/L&A operated 1672 miles of road on 2695 miles of track.

In 1962, under the name Kansas City Southern Industries, Inc. (KCSI), the company was formally organized as it began to diversify its interests into other industries under the CEO William Deramus III. The new KCSI focused primarily on the financials industry, along with the rail industry. In 1969 KCSI started the two largest companies that came out of the diversification, DST Systems and Janus Capital Group, which was known as Stilwell Financial at the time. DST Systems is a software development firm that specializes in information processing and management, with the goal of improving efficiency, productivity, and customer service. Janus Capital Group is a finance firm that provides growth and risk-managed investment strategies.

The core KCS rail system changed little until the 1990s, when the purchase of MidSouth Rail extended KCSI's reach east from Shreveport into Mississippi and Alabama. Combined with existing KCSI routes this created an east-west mainline marketed as the Meridian Speedway. Another acquisition, the Gateway Western Railway, extended KCS's reach from Kansas City to St. Louis, Missouri and Springfield, Illinois.

The 1990s also saw KCSI expand into Mexico with the acquisition of partial interests in the Texas Mexican Railway (TM) and Grupo Transportación Ferroviaria Mexicana (TFM). TFM was created when Kansas City Southern Industries and Transportacion Maritima Mexicana (TMM) purchased a government concession to operate a rail system in Mexico. It was the most sought after portion of the Mexican railroad concessions, called the Northeast Railroad, that was purchased by KCSI and TMM. The concession was also bid on by many other major companies, including the United States' largest railroad, Union Pacific Railroad. KCSI and TMM bid on, and won, the concession for $1.4 Billion USD, paying 49% and 51%, respectively. TMM already partially owned the Texas Mexican Railway through a previous concession from the Mexican government. TM was particularly important to KCSI because they held the link from KCSI tracks to TFM tracks via trackage rights over the Union Pacific line. Shortly after acquiring the Mexican government's concession, KCSI entered into another joint venture to purchase a government concession. On June 19, 1998 the government of Panama turned over control of the Panama Canal Railway to Kansas City Southern Railroad and the privately held Lanigan Holdings, LLC. This created the Panama Canal Railway Company (PCRC).

After these large capital outputs, KCSI needed new capital to improve the Mexican and Panamanian concessions they had purchased, and to continue to make capital expenditures in the future. To build this needed capital, KCSI spun off all assets that were not essential to the rail businesses. Doing this essentially paid off the purchase of their two existing concessions and freed up capital to improve them. The first major improvement that took place was in 2000 and 2001 when the PCRC upgraded the railway to handle large, intermodal shipping containers, along with passenger transport.

In 2002 the Kansas City Southern Industries formally changed its name to Kansas City Southern (KCS) after spinning off many subsidiary businesses that were not directly related to the railroad business (the largest of which were Janus Capital Group and DST Systems). In 2005 Kansas City Southern purchased TMM's share in TFM and TM, giving them full ownership of the companies. TFM was officially renamed Kansas City Southern de México, S.A. de C.V. The Texas Mexican Railway retained its original name and is a subsidiary of KCS.

In June 2009 the Kansas City Southern began operating on new trackage between Victoria and Rosenburg, Texas, known as the Macaroni Line . The line was built in 1882 and was called the Macaroni Line because the main food for the workers constructing the line was macaroni. In 1885 it was acquired by Southern Pacific, which operated the 91-mile line until 1985; by the early 1990s the tracks were mostly torn out. In 2006 KCS announced they would rebuild the Macaroni Line (through subsidiary Tex Mex) to end the need for trackage rights on a circuitous Union Pacific route. Construction began on January 2009 and the line opened for the first trains in over 20 years by June 2009. The line now operates daily trains and has CTC signaling.