Automakers' New Crisis - Rail Car Shortage

[ice-capades]

Automakers' New Crisis - Rail Car Shortage - Some 70,000 New Cars Are Stuck at Factories

https://www.freep.com/story/money/cars/general-motors/2023/06/16/gm-ford-stellantis-detroit-rail-car-shortage/70305532007/

 

 

Paul Zimmermann is feeling some deja vu these days. His new-car inventory at Matick Chevrolet in Redford last month was nearly as thin as it was during the semiconductor chip shortage two years ago.

 

Only this time the automakers have the parts they need to build their cars. They just can't get the finished vehicles from the factories to dealerships because of a shortage of railroad cars.

 

The autoracks are part of a pool, shared by multiple railroads and administered through a company called TTX, Union Pacific spokeswoman Robynn Tysver told the Free Press in an email. 

 

"Union Pacific is doing everything possible to provide customers with the rail cars they need," Tysver said.

 

"The actual rail car, the frame and the flat car is owned by TTX and the bodies are owned by the individual railroads and they all form parts of the pool," Little said. "The railroads have a system of charging each other when someone else uses one of their cars or needs a repair. It’s complicated.”

 

There is a huge network of 170,000 miles of rail in North America, making this shortage "a very big problem and a very complex matter," Little said. He said TTX acts as an intermediary and talks with railroads at least twice a year to ask how many autoracks they might need well in advance because it takes two to three years to manufacture new autoracks.

 

The problem has been escalating in recent months and has grown widespread, affecting food and grain shipments, too. In the auto industry, it slows domestic shipments from U.S. factories to dealerships as well as shipping vehicles made in Mexico to the United States, railroad experts said. There are currently "at least 70,000" new vehicles stranded across the industry unable to move to dealerships to be sold, according to one prominent regulator.

 

“What the factory is communicating is the supply chain got corrected, but now it’s logistics,” said Zimmermann, who is a partner in Matick Automotive, which owns Matick Chevrolet in Redford Township and Matick Toyota in Macomb. “We had gotten back up again. But then we sold 165 new cars last month (at the Chevrolet store) and we used to do twice as many. They’re in transit. If it’s not one thing, it’s another.”

 

Bozzella said in a typical year, freight rail moves nearly 75% of new vehicles purchased in the U.S. and carries 1.8 million carloads of motor vehicles and parts. The chronic shortage of rail cars is creating a backlog of finished vehicles and disrupting automotive supply chains still recovering from the challenges of the last couple of years, he said.

A shortage of autoracks

 

The specific problem is a shortage of autoracks — the rail cars that carry vehicles and look like they have aluminum siding, said Erik Gordon, of the University of Michigan's Ross School of Business. Shippers can put lots of different types of freight into a box car or onto a flatbed car, but vehicle shippers need the special-purpose autoracks, Gordon said.

 

Edited June 16, 2023 by ice-capades

[fuzzymoomoo]

This isn’t new, it’s been going on since well before the pandemic. I’ve been talking about it for years. 

[T-dubz]

I don’t understand how this is a problem. What happened to all the auto racks that were previously used to ship vehicles? Did they get rid of a bunch of them when Covid slowed production?

[Oac98]

If it’s not one thing it’s the other, I’m not one bit shocked anymore at this point. 

[Oac98]

31 minutes ago, fuzzymoomoo said:

This isn’t new, it’s been going on since well before the pandemic. I’ve been talking about it for years. 

It’s not new and i see ongoing disruptions going forward like Farley said.

[jasonj80]

Hunter Harrison, the allowing of mergers for 30 years and the way Conrail was handled was the death of the American Railroad. 

There's a reason that Auto-manufactures use very little rail from plant to plant when 30 years ago there was tons of local traffic. Reliably, timing and dealing with the railroads is just impossible. 

[rperez817]

49 minutes ago, T-dubz said:

I don’t understand how this is a problem. What happened to all the auto racks that were previously used to ship vehicles? Did they get rid of a bunch of them when Covid slowed production?

 

According to the Detroit Free Press article, the issues may stem more from utilization related factors for autoracks that have intensified post pandemic.

Examples.

• supply chain pattern changes such as customers routing vehicles through west coast ports instead of the east coast have resulted in rail cars traveling longer distances than forecast
• shift in consumer tastes from cars to pickups and SUVs in the last decade has had an impact. A railroad can load three levels of cars in an autorack, but only two levels of trucks and SUVs
• heavy import of Chinese-made cars into Mexico's ports ties up the trains in Mexico
• rise of Tesla's production at its factory in Fremont, California, in recent years and now a newer plant in Austin, Texas. Those vehicles are shipped in long West-to-East runs, again on autoracks

[fuzzymoomoo]

1 hour ago, jasonj80 said:

the way Conrail was handled

What do you mean by that? At the time it was broken up it was the best run and one of the most profitable railroads in North America, which is amazing considering the absolute dumpster fire they started with. 

[fuzzymoomoo]

1 hour ago, rperez817 said:

heavy import of Chinese-made cars into Mexico's ports ties up the trains in Mexico

 

To that end there’s only 2 railroad that traverse the US/Mexico border, Ferromex and CPKC, and the bulk of that traffic is CPKC. Ferromex doesn’t go much farther past the border. 
 

Also noteworthy CPKC serves all but 3 of the 14 (not including those currently under construction, but they will once those come online) assembly plants in Mexico 

Edited June 16, 2023 by fuzzymoomoo

[jasonj80]

2 hours ago, fuzzymoomoo said:

What do you mean by that? At the time it was broken up it was the best run and one of the most profitable railroads in North America, which is amazing considering the absolute dumpster fire they started with. 

While it was a dumpster fire with the deferred maintenance the route bones were actually very good. With the overall control congress/Conrail had the quest was for high profit; the unpopularity of the bailout of the system showed the creation was profitable and scored good political capital even though that long term it was a major detriment to the overall rail network. In the end Conrail abandoned very good routes that could have been used for separate (high speed) passenger service and keep towns linked to the rail network. It also could have pushed for the creation of national rail carriers. Now you have precision railroading that has made secondary routes that current railroad so the bare minimum on lines so they will eventually fail and be removed along with profit at all cost so much it is sacrificing safety, workers and network. 

[fuzzymoomoo]

1 hour ago, jasonj80 said:

While it was a dumpster fire with the deferred maintenance the route bones were actually very good. With the overall control congress/Conrail had the quest was for high profit; the unpopularity of the bailout of the system showed the creation was profitable and scored good political capital even though that long term it was a major detriment to the overall rail network. In the end Conrail abandoned very good routes that could have been used for separate (high speed) passenger service and keep towns linked to the rail network. It also could have pushed for the creation of national rail carriers. Now you have precision railroading that has made secondary routes that current railroad so the bare minimum on lines so they will eventually fail and be removed along with profit at all cost so much it is sacrificing safety, workers and network. 

Conrail’s main problem through the first half of their existence was the government control. It severely handcuffed management’s ability to really streamline operations. At that period up until

the early 90s they had way too many overlapping routes, a problem that I would argue still exists in much of the Northeast Corridor today. Where they abandoned many perfectly good, if in need of repair, lines was purely because Congress didn’t want to bother selling or spinning them off to a short line. It was easier to just abandon them and wash their hands of it. 
 

I agree with your point on PSR. Hunter Harrison (and Canadian National by giving him carte blanche to do whatever the hell he wanted in creating PSR in the first place) long term caused way more damage to the railroad industry in North America than we could ever possibly know. Nationalizing the rail system won’t help either, all that will happen is the government agency that will inevitably be created to oversee it will be hampered by Congress’ inability to agree on anything and crippling bureaucracy. The best solution is take all 6 of the Class 1 carriers private. Keep the Black Rocks and Vanguards of the world out of their corporate structure. 

[jpd80]

This is where growing inventory is wrongly perceived as waning  buyer interest because people see fewer monthly sales but the reality could be stranded customer ordered vehicles - money in the bank held up by lack of transport. The continuing lack of train space for delivery is yet another headache.

Edited June 17, 2023 by jpd80

[Rick73]

22 hours ago, Oacjay98 said:

If it’s not one thing it’s the other, I’m not one bit shocked anymore at this point. 

Yes, it’s always something, and not just with vehicles.  While I do not doubt there is a real shortage, I wonder if it’s being exaggerated to ultimately help justify higher prices, and therefore greater profits?

[Joe771476]

This country is a joke.

[akirby]

59 minutes ago, Rick73 said:

I wonder if it’s being exaggerated to ultimately help justify higher prices, and therefore greater profits?

Delaying shipment of retail orders does not help prices or profits.

[Oac98]

5 hours ago, Rick73 said:

Yes, it’s always something, and not just with vehicles.  While I do not doubt there is a real shortage, I wonder if it’s being exaggerated to ultimately help justify higher prices, and therefore greater profits?

Very possible that there is more going on than we know

[twintornados]

7 hours ago, Joe771476 said:

This country is a joke.

.

How?

[jpd80]

13 hours ago, Rick73 said:

Yes, it’s always something, and not just with vehicles.  While I do not doubt there is a real shortage, I wonder if it’s being exaggerated to ultimately help justify higher prices, and therefore greater profits?

I don’t know how Ford would get any advantage that way, it’s more likely that they have a long history of not booking enough rail transport volume early enough and then get jammed up when they ramp up deliveries. The way I see it is that there’s a whole bunch of threats and risks that are not being properly covered by executives and now chickens are coming home to roost.

Edited June 18, 2023 by jpd80

[ice-capades]

On 6/17/2023 at 11:07 AM, akirby said:

Delaying shipment of retail orders does not help prices or profits.

 

While retail orders are a priority, for loading rail cars the first priority is the destination so that rail cars headed to the same destination ramp can be filled as quickly as possible so that they can depart and actually be enroute.