The surge in automotive shipments in North America as carmakers ramp up production to meet demand has taken rail freight providers by surprise and resulted in a shortage in railcar availability amongst the region’s leading providers.
During the recession rail companies put a significant amount of their railcars and locomotives into storage and cut staffing levels, but the 11.4% surge in demand reported for railcars in the first quarter has given rise to a number of extra measures being taken to meet renewed demand.
According to one of the leading automotive rail providers, Union Pacific, which owns about 18,000 multi-level units, carmakers typically have around 70,000 shippable vehicles per week but that number spiked recently to about 95,000 vehicles. The US vehicle sales rate has increased more quickly than previously, with the recent months SAAR in excess of 13m annually.
A report in last week’s Wall Street Journal showed that roughly 13% of all rail cars in North America remained in storage, including multi-level rail cars used for finished vehicle transport, though the figure included coal and covered hoppers and flatbeds. Nevertheless, the shortage of multi-level railcars was shown to be forcing Ford, Chrysler and GM to stockpile finished vehicles at disused facilities.
“Of the roughly 1.5m rail cars in use, the US rail industry has a fleet of about 50,000 multi-level rail cars used to ship vehicles,” Union Pacific spokesman Thomas Lange told Automotive Logistics News. “These are the only rail cars used to ship vehicles,” he said.
It is estimated that there are between 41,000 and 42,000 in use, the majority being at least 10 years old.
Lange went onto say that the company was taking extra measures, such as opening up alternate train traffic routes, and bridging empty railcars to the required location to increase supply.
“In normal times, trains full of vehicles move from a manufacturing location to a staging area, where they are unloaded for local delivery,” he continued. “A computer program then routes the empty rail cars to the next nearest manufacturer's location for another load.
“We are currently overriding the computer program and sending the empty rail cars to where they are needed most urgently, sometimes 3-4 times farther than where the computer program would typically send those cars,” said Lange.
Nevertheless, carmakers are using extra storage space for vehicles, largely made up of pickup models, that await delivery, though the big three were cautious about going into details though according to Canadian rail provider, CN, “a shift to more fuel-efficient vehicles could increase the requirements for trilevels, which are used to handle passenger vehicles.”
As far as the carmakers were willing to comment on the situation Ford said that, like others, it was experiencing some difficulty in quickly transporting finished vehicles from its manufacturing facilities to dealerships around the country due to a shortage of rail car availability.
“We are working with our transportation partners to address the situation and we will continue to work aggressively to ship vehicles to our dealers and customers as quickly as is possible,” said a spokesman for the company.
Similarly GM would only say that it was keeping a close eye on the railcar issue and that it was “not immune to the affects of the shortage”.
“We are managing the situation and have maintained a timely supply of products to our dealers,” said a spokesman for the company.
More detail is expected when first quarter results are published but in the meantime Union Pacific further outlined what it was doing to tackle the situation.
“We are repairing multi-levels at loading/unloading sites to avoid having to take the cars out of service by moving them first to a maintenance facility for repairs,” said Lange. “In addition, we have pulled extra locomotives out of storage to make sure we have sufficient power available to move vehicles as quickly as possible. All these efforts improve rail car turnaround time and increase capacity.”
As for the other rail providers, like the carmakers, many are preparing for Q1 announcements and were not prepared to go into detail until then.
CSX would only state that it remains committed to serving all of its customers safely and reliably.
“Since the economic recovery began, locomotives and rail cars have been re-deployed to meet the additional automotive demand,” said spokesman Gary Sease.
“Early this year, our automotive distribution network was impacted by winter weather, a surge in demand, new model launches, and structural changes in trucking services used by many automakers. CSX and its automotive customers will continue to work together cooperatively to ensure timely, reliable shipments,” he said.
In other news, Union Pacific will begin construction on a rail facility near Santa Teresa, New Mexico in June this year. Construction of the facility, which follows a recently passed bill by the state's legislature granting Union Pacific a locomotive fuel tax deduction, is part of the company’s plan to invest approximately $3.2 billion in 2011 in services across its 32,000-mile network.