News Column

On the Road to Excel

July/August 2006, HISPANIC BUSINESS Magazine

Keith Rosenblum

Excel's Eugene Constance
Excel's Eugene Constance

Eugene Constance, 67, remembers shaking hands with the client, a parts company in Mexico, consummating his first deal to lease 247 rail cars. The year was 1980.

Everything about the transaction was normal save for one detail. Mr. Constance didn't have 247 railcars. In fact, he didn't have one.

"They said to me, 'Where are the cars?'" Mr. Constance recalls. "I said, 'Don't worry, I'll come up with them'."

Thus began Mr. Constance's search fraught with rejections for a company in the United States that would have the same faith in him demonstrated weeks before in Mexico.

The hunt finally took Mr. Constance and his newly founded company, Excel Railcar Corp., to the doors of Pittsburgh & Lake Erie Railroad Co., which had 500 idle railcars, some of which had not moved in five years.

"They weren't generating anything idle," Mr. Constance explains. "I went in and made a presentation that turned out to be persuasive. I invited them to go with me to Mexico and when they realized with whom they'd be dealing, they were astonished."

Not only was Pittsburgh & Lake Erie Railroad Co. ready to offer Mr. Constance a lease-to-buy offer, but it was also willing to spend $1 million on refurbishing.

The arrangement between the U.S. transportation provider, Mr. Constance, and a Mexican parts supplier could not have turned out better. At the end of the lease period, Mr. Constancebought all of the railcars.

Twenty-six years later,Mr.Constance, whose roots are in Mexico, reaps the benefits of an entrepreneur who bet against prevailing wisdom, endured devaluations, saw his capital halved by a Mexican bank nationalization, and overcame a slew of naysayers to become not only a niche player in international rail transit, but soon a manufacturer of railcars as well.

"Being of Mexican heritage, I have the Aztec mentality," Mr.Constance says. "You build that pyramid one block at a time."

Excel, which recently moved from Naperville, Illinois, to Warrenville, Illinois, is rated No. 33 on the Hispanic Business Top 50 Exporters list with just more than $5 million in export revenue from a total revenue of about $8.43 million. It boasts an inventory today of 1,200 railcars used to transport commodities such as cement, glass, paper, agriculture products, and silica sand.

Currently, about half of the company's fleet is in Mexico while the other half is in the U.S. and Canada. Excel, spin-off enterprises Excel Railcar Services Inc., and Grupo Secafe, S.A. de C.V., are all owned by Mr. Constance but operated independently. Though he is a minority business owner, Mr. Constance said he has never been asked to use his minority status in preparing a bid. "I just present numbers that I know will be persuasive," he says.

About 60 percent of Excel's dollar volume last year came from Mexico, a proportion Mr. Constance expects to decline only because of projected increased revenue in the U.S.

Between August and the end of the year, Excel expects to begin to produce its own railcars in order to meet market demand. Mr. Constance said the company will take as long as necessary to produce its first few railcars but then expects to add between manufacturing and purchasing another 300 railcars in 18 months. "I've just come back from San Luis Potosi (Mexico) and I can use another 500 cars right away," he says. "I've got to do some buying because I can't make that many."

Like the men who built the railroads two centuries ago, Excel doesn't look a year or two down the track. It looks a decade or two ahead.

The future holds exciting growth potential for Excel. Mr. Constance sees promise in shipping to and from the same plant, such as hauling a covered hopper car with corn to a tortilla factory and then returning with byproducts used in making methanol or ethanol.

By 2020, Mr. Constance projects Excel will have 10,000 railcars. That is a fraction of the industry whose players include GE Equipment Services (with 125,000 railcars) and others including Wachovia's First Union Rail Corp., Citicorp, Wells Fargo, and Chrysler.

Excel's success in the U.S. and Mexico comes from scrupulous study of the marketplace and always having an exit plan, a tactic Mr. Constance learned while he was in the Marines.

"I walk into a hotel room and I instinctively look at how I will escape if there's a fire," he says. "When I look at a contract, it's the same way. There may be 20 different covenants, and I am dealing with how to protect and defend the company." Mr. Constance says he is "willing to give away bells and whistles" such as a $1 or $2 per ton in hauling charges in order to lengthen the time before a delivery is declared in default.

That same attention to detail has given Mr. Constance an important advantage over competitors. He learned years ago to overcome a problem that has vexed many foreign companies doing business in Mexico: securing transactions with collateral. "Twenty-five years ago, I worked for a major corporation and I spent lots of time with attorneys," he explains. "I have books upon books on the Mexican legal system. I found one way that is pretty close to the way we secure assets in the United States and I've used it and kept it a secret for years."

Mr. Constance attributes Excel's steady growth to the loyalty of its 26 employees.

His son, Keith, vice-president and chief executive officer of Excel Railcar Services, learned the business "by starting with all the dirtiest jobs." Father and son talk four or five times a week and are "generally quiet and respectful," Mr. Constance says. "But I raised him to be independent and, boy, can he be brutally direct and loud when he thinks he's right."

Turnover is rare because of what Mr. Constance calls "a family atmosphere." He travels constantly but the company functions "as if I were sitting right there," he explains.

"I look at each department as a company in and of itself and, in reality, employees are already making the best decisions themselves."

Far from slowing down, Mr. Constance speaks of his plans for the "next 25 years," which would make him a mere 92 years old. Lenders, however, like to look beyond gentrifying organizations built on the know-how of an individual.

Bankers, Mr. Constance says, have been impressed by the depth of expertise throughout Excel. "I've trained entrepreneurial thinkers," he says. "I use the word 'apprentice' all the time.We have apprenticeships where people learn. They can make mistakes and still be held up by the rest of the group."



Source: HISPANIC BUSINESS Magazine and Hispanicbusiness.com, Copyright (c) 2006 All Rights Reserved.


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