Figures quoted at last week's Finished Vehicle Logistics North America conference forecast auto sales in 2012 finishing at their highest level since 2007. According to Michael Robinet, managing director at IHS Automotive Consulting, the figure will hit around 14.3m this year compared to 12.7m last year, and move to just below 15m in 2013. As the industry welcomes a return to the 17m average which characterised the 15 years prior to the recession, others are warning of an impending transport capacity crunch and a need for collective action on rail and road asset utilisation if vehicles are not to be left stockpiled at factories, storage yards and ramps around the country.

 
Dennis Manns, vice president for logistics at American Honda, along with Nancy Davies, vice president of logistics at Toyota Logistics Services, both said that their companies had seen capacity struggles as their factories ramped up production this year following recovery from the earthquake in Japan and flooding in Thailand. GM's global director for logistics, Christine Krathwohl, was among those most dissatisfied in the current market. "I'm envisioning a scenario where hundreds of thousands of cars are sitting at ports because of railcar shortages by the end of this year," she said.
 
With almost 2m new drivers being added each year in the US, exports to foreign markets also up and a vehicle fleet older than 10 years, carmakers are pushing the limits in North America, with many facilities going to three shifts, adding weekend work and cutting summer shutdowns to meet demand. Chrysler, VW and Toyota have jointly added nearly 3,000 jobs recently as production increases.
 
The growth is driven by a range of factors including new driver demographics, an aging vehicle fleet and lower-than-expected inflation in the US. According to IHS figures, sales will finally surpassing pre-recession levels at 16.2m in 2015. The demand for available capacity to meet such volumes will mean an $875m investment for the road haulage sector alone according to Mike Riggs, chairman of Jack Cooper Transport, one of North America's leading car carriers (pictured).
 
"If the facts are true and it gets up to 17-17.5m production, we need another 3,500 trucks and trailers in this industry to meet demand and that means an investment of $875m," said Riggs, but he recognised that there were unlikely to be too many customers willing to raise the money for the hauliers.
 
Instead, he said the industry needed to come together are "more intelligent ways" to solve the problem which involved a more productive use of resources.
 
"I'm not just talking about the OEMs and the car carriers, I'm talking about the railroads and shipping lines. From our perspective it is imperative to do this because I don't see any other solution to restrictions that might get dropped on us within the next six months," warned Riggs.
 
From the rail perspective GM's Krathwohl estimated a current shortage in the order of 5,000-6,000 rail wagons. For GM, the situation appears to be approaching near crisis level. Despite having global responsibility for inbound and outbound logistics, Krathwohl revealed that she has been spending about 75% of her time focusing on North American rail distribution for finished vehicles over recent months because of issues around delays and increasing dwell time, particularly in Michigan, Ontario and Mexico. At one point she said that GM had around 6,000 cars backlogged in Mexico because of rail shortages, which the company was unable to book as revenue until they crossed the border to the US.
 
"That meant that we were held back from hundreds of millions of dollars on our books, which drew the attention of our top management," she said.
 
The total cost of restoring wagon capacity back to pre-crisis levels was estimated to be $2 billion. However, there are no such plans to expand the fleet at anything close to this rate. Dave Sellers, assistant vice president for automotive at TTX, the company responsible or allocating the pool of wagons across North America, said that the industry is currently planning to build 3,000 new wagons over 2012 and 2013, including 965 tri-levels in 2012, although this does not necessarily mean a net gain to the fleet, as some wagons are likely to be decommissioned as well.
 
In the trucking sector there were estimated to be around 12,500 truck and trailers in the industry back in 2006 at the peak 17m production but since then the industry has lost some 1,500 trucks through liquidation. Taking into account the additional expiry of assets after an average six-year lifespan and the fact that companies have not been buying new trucks, the total fleet of car carriers in North America is now somewhere between 8,500 and 9,000 trucks.
 
Speaking from his perspective as a member on the executive committee of the American Trucking Association, Riggs said that the industry could expect an increase in demand for capacity of 38%, which has either got to be found in an additional 3,000-4,000 trucks and trailers or an increase in productivity.
 
However, it is not simply a question of growth constraints. According to the Auto Carrier Council there are other stresses on capacity that factor in above market growth.
 
These include a driver shortage that could see a deficit of at least 200,000 workers across all trucking by 2014 because of an aging pool of labour in which the average age is now 54, hindered by the introduction of new stringent rules on safety and performance introduced by the FMCSA, is also taking its toll.
 
There is also the need for extra capacity to account for OEM production surges, something Riggs said is not likely to change, at a time when financing has become particularly difficult.
 
He went on to describe that in his entire time in the automotive industry - he joined GM in 1972 - he had never seen it so difficult to borrow money, related to stress from the capital markets.
 
"It used to be you could put 10% down and order a quarter million dollar truck/trailer rig and drive it out of the lot. That just doesn't happen now," said Riggs. "Now you can probably count on two hands the number of car haul carriers that have more than 100 trucks and trailers."
 
Summing up the impact of the various constraints on trucking industry Riggs said, "it comes to the carrier like the perfect storm".
 
As a response he outlined a number of propositions, which included the upgrading of existing equipment or the buying of new equipment, an attempt to stimulate investment which has been lacking during the last four to five years.
 
He also called for a greater embrace of available technology, including tablet computing, to improve productivity through the provision of information.
 
Another solution was to create a national load sharing database, where carriers could share information and optimise load and routes to eliminate empty backhauls.
 
Significantly, Riggs also said that the road hauliers needed to partner with the railroads.
 
"The bottom line is, you need us," he told the rail providers present. "We shouldn't be battling each other. It's not a David and Goliath thing. We are the spoke in your hub and spoke, and we're hurting. We need to work together and see if we can't come up with a creative solution that legislatively fixes what is an archaic and obsolete set of rules for us. I'll meet anybody but we are going to need help and there is not point trying to deny it."
 

Topics