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International Miles Ahead

Shifting Fortunes

by Marco Beghetto
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If you’re an auto parts hauler you can be forgiven for feeling a little nervous these days. All the talk about the Big Three’s declining fortunes would have anyone in the industry – especially after recent announcements of GM plant closures and shift cutbacks across the continent – feeling a little iffy about their future carrying freight for domestic automakers.

GM, the largest U.S. automaker, recently announced it would close 12 plants and cut 30,000 jobs in North America over the next few years – including two plants and 3,900 jobs in Canada. And Ford, whose production fell 40 percent last year, announced similar measures in a restructuring plan in January. Dozens of Tier 1 and Tier 2 suppliers – from instrument panel providers to tire makers – have reacted by announcing everything from production slowdowns to bankruptcies.

On the other hand, if you happen to be hitched to a Honda or Toyota load, things are considerably rosier. These “New Domestics,” as the auto analysts call them, are leading the Ontario auto sector these days, and the local auto assembly industry has them to thank for keeping the province in the number one spot for North American auto production.

“Ontario has been the number one auto producer in North America for the past two years and absolutely that’s going to continue over the next five years,” says leading industry guru Dennis DesRosiers of DesRosiers Automotive Consultants Inc. “Ontario is picking up plants, Michigan is closing plants. We have some issues, but the growth in the new domestics far outweighs any declines with GM, Ford, and Chrysler.”

Toyota, which has one plant in Cambridge, recently announced it was going to increase capacity by 50 percent at its yet-to-be built Woodstock plant, and Toyota’s Hino division has just committed to build a medium-duty truck plant in Woodstock. Honda already has two plants running full tilt and is apparently considering another North American location, with Canada almost certainly on the list as a possible location.

Gerry Fedchun, president of the Toronto-based Automotive Parts Manufacturing Association, sees his business as stable, but evolving. “Certainly for a couple years out, the total volumes in Ontario look relatively stable,” he says, adding that for parts suppliers and their carriers, who’s making what is changing relatively dramatically, and there’s going to be a dramatic realignment where deliveries are going and to whom.

New routes? New Customers?
Both DesRosiers and Fedchun agree that any carrier that’s tied to one of the overseas parts suppliers, or to one of the Japanese OEMs, are swimming in business. The biggest complaint by these firms is finding enough trucks and drivers to haul product away.

North American 3PL giant Transfreight’s Manager of Business Development, Brian Ashinger, agrees that the new Toyota and Hino plants slated for Woodstock “will absolutely add some more freight to the mix. A lot of the parts are obviously brought in from Tier 1 supplier bases, and that trickles down to the Tier 2s, 3s, and 4s – though I wouldn’t speculate as to what kinds of freight volumes it will generate.”

“If we were to get a piece of the business we’d definitely be doing more hiring of drivers and owner-ops. We’d have to put a lot more trucks on the road.”
Transfreight is already highly integrated into the Toyota supply chain, especially in Kentucky, home to the automaker’s North American manufacturing headquarters, as well as the massive Georgetown facility. It also boasts an Ontario Cross Dock dedicated to Toyota Motor Manufacturing Canada (TMMC), which helps level the flow of incoming materials into the auto-maker’s Cambridge plant.

Carriers that have been focused on the Big Three and their related suppliers, “have had a negative adjustment to make,” says DesRosiers.
Larger carriers are generally careful about putting too many eggs in one basket, but a sizeable contingent of smaller firms and owner-ops could be feeling the pinch if they’re too heavily tied into a Big Three-related contract.

“If you have 70 or 80 percent of your business with the Big Three, you’re pretty much at overexposure,” says Norm Mackie, of Oshawa, Ont.-based Mackie Moving Systems. “The long-term planning is you need to try to shift to other markets.”

Mackie says about 30 percent of his business is with GM – still his largest customer, but that still allows enough flexibility to position the company in other markets. There’s no denying the desire to pick up other automotive business, both in Japanese auto business and other Big Three freight. “I’ve been trying for over a year to get my foot in the door at Chrysler,” says Mackie. “Obviously the plum of the business right now seems to point towards the Japanese, and we’re going to work at trying to get our foot in the door with those folks as well.”

“The GM and Ford announcements will definitely have an impact on freight volumes,” says Ashinger. “For whatever percentage reduction in vehicles produced, there is a direct correlation in freight volumes being moved.”

But, like DesRosiers, Ashinger believes that the “new domestics” are picking up the slack. There aren’t fewer vehicles being made in North America, it’s just shifting as to who makes them – and subsequently who moves the freight.