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Monday 25 September 2017
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Ford, Toyota Struggle With Rail Deliveries

Ford, Toyota Struggle With Rail Deliveries

Railroad companies are struggling to keep up with surging U.S. demand for trucks and SUVs, frustrating Ford Motor Co. and Toyota Motor Corp.

The shortage of rail cars is particularly acute for double-deckers big enough to fit taller trucks and SUVs stacked on top of one another. BNSF Railway Co., owned by Warren Buffett’s Berkshire Hathaway Inc., will buy almost 1,900 this year, more than its combined total purchase of both bi-level and tri-level rail cars during the last two years.

Toyota, whose production system is renowned for avoiding overproduction and inventory build-up, is paving over space at two U.S. plants to park models including the Highlander SUV during times when there aren’t enough rail cars available.

Carmakers are finding it harder to get vehicles to dealerships as demand for trucks and SUVs extends the U.S. auto market’s longest expansion since World War II.

“Am I happy with the total allocation of equipment that’s in the pool? No,” Bill Mikkelsen, a manager of North American vehicle logistics at Ford, said by phone. “I don’t think any manufacturer is.”

Americans bought 7.2 million trucks and SUVs last year, up 11 percent from a year earlier and the most in a decade, according to researcher Autodata Corp. Demand rose to a record for Ford’s Escape utility vehicle and reached an all-time high for Toyota’s entire SUV line and Honda Motor Co.’s set of light truck models.

The rail industry’s struggle to keep up with the car industry’s growth was felt last year, when unusually harsh winter weather forced companies to slow down locomotives and run shorter trains. That led to backlogs for commodities that make up a bigger share of cargo, including fuel, coal and grain.

The disruptions left automakers with as much as about 250,000 vehicles waiting to be shipped by rail, according to TTX Co., the rail-car pooling operator. The typical industry standard is having about 70,000 shippable vehicles on the ground and waiting to move.

“I know from talking to other manufacturers, everybody’s having their challenges with rail cars,” Brian Mason, national manager for Toyota Logistics Services, said by phone. “If we on the logistics side cannot move every single vehicle out of that factory yard and keep that space clear so the plant can keep producing vehicles, then we start constraining production.”