TOLEDO, Ohio -- Add another potential drag on vehicle deliveries to U.S. showrooms: railroads.
As automakers struggle to meet rising demand as the economy recovers and in the aftermath of the Japan earthquake, the last thing U.S. auto dealers want to hear about is an emerging logistics problem.
But North American railroads have been cautious about returning sidelined auto carriers and other freight movers to their lines, and haven't kept up with rising domestic automotive manufacturing, according to data compiled by the Federal Reserve and the Association of American Railroads, an industry trade group.
That has meant added delays at some dealerships as ordered vehicles line up outside assembly plants waiting to be transported.
"We've had some delays on Explorers, some of it from rail, some of it from the high demand for that vehicle," said Kevin Blake, new car sales manager at Towne Ford in suburban Buffalo, N.Y. "But most people that order Explorers right now know that it's going to take some time to come in, and they expect that."
Bottom falling out
When the bottom fell out of the global economy in late 2008, railroads across North America parked hundreds of thousands of freight cars and locomotives in storage yards and on sidings -- and cut thousands of employees.
In July 2009, more than 500,000 rail cars -- nearly one of every three on the continent -- hadn't carried a paid load in more than 60 days, according to economist Frank Hardesty of the Association of American Railroads. At the same time, automotive sales were coming off their worst monthly sales results in decades, with an annualized sales rate that bottomed out at just over 9 million in February 2009.
While auto sales have generally increased since the federal government's cash-for-clunkers program in July and August of 2009, railroads have taken a slower, more deliberate road to recovery. As of March 1, North American railroads had returned fewer than 200,000 of their stored rail cars to active duty, and as of April 1, still had almost 19 percent of their rail cars, or nearly 284,000 units, in storage, Hardesty said.
During peak times, railroads keep just 2 to 3 percent of their freight cars in storage, according to the association.
The potential for rail delays was exacerbated by contract disputes last month between vehicle hauler Allied Systems Holdings Inc. and General Motors and Chrysler Group.
GM and Chrysler each filed a lawsuit against the Atlanta hauler alleging that Allied was holding more than 2,000 vehicles hostage in Windsor, Ontario; Fort Wayne, Ind.; and suburban Detroit after Allied unsuccessfully tried to charge higher rates.
But so far, the impact of rail delays has been limited. Some automakers said they had not been affected. Others declined to comment. Still others said the issue was minor.
"We're not immune to the effects of the rail car shortage," said GM spokeswoman Katie McBride. "It's forced us to park some vehicles for a very short time. But this isn't a GM issue or a [Detroit 3] issue; it's a North American issue."
Dealers in some of the nation's largest automotive markets -- California, Texas, and Florida -- said they hadn't noticed significant delays in getting vehicles because of rail service.
"Over the last several months, I haven't seen any delays," said James McGovern, new car sales manager at South Pointe Dodge-Chrysler-Jeep in Austin, Texas. "But everybody always wants their vehicles faster."
Slow ramping up
Anthony Hatch, an independent railroad analyst in New York City and owner of ABH Consulting, said railroads "may have been a little slow" in ramping back up after the recession, but said most of the problems can be fixed quickly.
"Norfolk Southern found itself short of crews, and that takes a little time to catch up, in terms of training," Hatch said, adding that when railroads have service problems, "auto companies are usually the first customers to see it."
Norfolk Southern Corp. declined to comment. CSX Corp. spokeswoman Carla Groleau said the railroad has "added back resources to meet the additional automotive demand and are committed to serving our customers safely and reliably."
She said CSX had been "impacted by winter weather, a surge in demand, new model launches, and structural changes in trucking services used by many automakers." In its earnings announcement on Tuesday, April 19, CSX said its automotive-related business was up 20 percent for the first quarter over 2010.
"The shipment capacity issues will largely be solved in coming months," said Paul Taylor, chief economist for the National Automobile Dealers Association. He said limited imports from Japan and the continuing effects on domestic production because of parts shortages from the earthquake will give railroads a chance to catch up.
"While that is a solution to shipment problems," he said, "it leaves franchised new car dealers with too little selection on the ground."