Subaru of America is making important investments and additions to its US port and rail network following its recent growth. Subaru has been the most resilient carmaker throughout the downturn in the US, growing 15% in 2009 and 22% in 2010. The Japanese carmaker registered another 20% in growth year-on-year for the first two months of 2011.
The higher volume has made it possible for Subaru to add another west coast port of entry, according to Larry Strug, national traffic manager and Mike Lupacchino, logistics planning manager. In June, Subaru will add Richmond, California, joining American Honda, which moved to the port in 2010. Unlike Honda, which uses Richmond as a pass through for distribution with no portside processing, Subaru is setting up with Auto Warehousing Company (AWC) as processor (which it also uses at the port of Vancouver, Washington).
“We looked at a variety of options and were torn between several port processors, but it made sense for us to continue working with AWC,” says Strug.
The introduction of Richmond prompts changes in Subaru’s rail and road network. Currently it rails in vehicles produced at the carmaker’s plant in Lafayette, Indiana, which are then distributed locally by the haulier Selland. However, when imports begin arriving, Subaru is considering whether to use Selland or another carrier for regional distribution. United Road is Subaru’s carrier from Vancouver, from which it moves cars direct from port to dealers as far away as New Mexico. According to Lupacchino, distribution from Richmond will have a similar range, and United Road could be a candidate for that business. Subaru is still going to rail US-produced vehicles to Richmond, but they will now arrive directly at AWC’s facility.
Richmond will be the third entry port for Subaru of America besides Vancouver and Baltimore, Maryland which covers the east coast. Fuji Heavy Industries, Subaru’s owner in Japan, also retains two distributors in the northeast, each of which uses a port: Subaru New England uses the port of Davisville, Rhode Island (where Subaru also send vehicles by rail from Lafayette) while Subaru Distributors– responsible for sales in northern New Jersey and New York state– uses Charlestown, in Boston, Massachusetts.
Space to grow
The advantages of Richmond are its room for expansion, its rail links (served by BNSF), and its proximity to the northern California market for direct truck deliveries, all reasons why Honda moved a significant portion of its imports from San Diego to the port. According to Dennis Manns, head of sales and logistics planning, the move had been planned when San Diego was facing particularly heavy congestion. The recession has since eased this traffic, but Manns believes the port was the best decision for Honda in the long term. “It was, in effect, the right decision made at the wrong time,” said Manns. “But we are very happy with how the operation is progressing now.”
Other OEMs are rumoured to be investigating use of the port. A Toyota Motor Sales spokesperson confirmed that the carmaker was studying Richmond, but has yet to make any decision.
Investing in rail
Subaru has also added a rail destination to the southeast at Jacksonville, Florida, serving that state, Alabama and Georgia. “We’ve always looked at railing out of Lafayette to the southeast, as we struggled to get decent road service there, but the volume never dictated that until now,” says Lupacchino.
Subaru is expanding capacity at Lafayette by 30,000 units per year (a growth that will be shared with Toyota, which also builds Camrys there) thanks to a change to its paint shop. Furthermore, it has approved the expansion of two more rail tracks at the plant.
Lafayette currently produces 700 Subarus each day, with about 53% moving by rail, according to Lupacchino. “Our current track doesn’t support that volume unless we do a midday spot everyday, so those extra tracks will support growth on the rail.” Subaru will also expand the processing shop at the plant, which is outsourced to WWL (which is also the processor in Baltimore), while it is considering expanding the truck yard. “With our growth, there is quite a bit of overtime work and it is putting stress on the logistics network, so we are building for the future,” says Strug.