(The following story by Joe Ruff appeared on the Omaha World-Herald website on September 3, 2010.)
OMAHA, Neb. — Union Pacific Corp., which began shipping used cars in 2006 and expanded that business last year, now will manage shipments of used cars overseas for vehicle auction and rental car companies.
U.P. will market a logistical service that combines the use of rail, truck and ship transport in one cost quote.
“There’s quite a market for U.S. used cars outside of this country,” said Roland Fortner, president of ShipCarsNow.com.
Primarily a shipper of new vehicles, U.P. expanded into the used-car sector in 2006 with the creation of a subsidiary, Insight Network Transportation, based in Auburn Hills, Mich. The company established the ShipCarsNow website in 2009 to expand the business.
Business customers supply Insight Network Transportation with price and timing requirements, and it lines up service along Union Pacific’s 23-state network in the western U.S. with railroads in the East and with trucking companies.
Before the creation of the Insight Network Transportation and ShipCarsNow.com, Union Pacific handled more than 75 percent of the automotive carload business in the western United States. But the business was mostly new cars and trucks from domestic manufacturers or imports into West Coast and Houston ports.
The trucking industry dominates the used-vehicle market, which is roughly three times larger than the new-vehicle market, U.P. officials said.
Brandon Borgna, a spokesman for the American Trucking Association, said the used car market tends to be small shipments of two or three cars over relatively short distances, which gives trucking an advantage.
“These are really smaller shipments,” he said. “They don’t justify moving by rail.”
Union Pacific said it developed tracking and logistical systems in 2008 that make mingling cars easier and less costly.
Changes included loading vehicles onto rail cars in order based on final destination, tracking vehicle identification numbers of mingled loads and setting up a pricing structure for used vehicles based on the type of car, points of origin and destination.
The used-car subsidiary signals to auto dealers and other potential customers that the railroad can handle both small and large loads of vehicles, U.P. officials said. In many cases, they said, the railroad can charge less than a full-load price by shipping even one vehicle with a larger load.
Union Pacific also has partnered with a separate company, Dependable Auto Shippers, to move cars and trucks for individual owners. Eventually, U.P. expects to handle each step of the process for individual auto owners, without working through an intermediary.
Union Pacific’s primary rival, BNSF Railway, which also operates in the West and is owned by Berkshire Hathaway Inc., offers domestic used-car dealers a similar program called “Cars on Track” through subsidiary BNSF Logistics, but it doesn’t manage overseas shipments, said Krista York-Woolley, a spokeswoman for the company.
“We just haven’t seen a big demand for used cars overseas,” York-Woolley said.
Fortner said U.P.’s overseas service will begin this month. Along with getting vehicles across the country and onto ships, the service includes working with customs officials to clear shipments, Fortner said.
Union Pacific’s auto business generated about 6 percent, or $854 million of its $14 billion in revenue last year, said company spokesman Tom Lange. The used-car segment is a smaller part of that revenue stream, but the company doesn’t release the dollar amount of that business, Lange said.
U.P. expects to move about 90,000 used cars and trucks in 2010, more than double last year’s volume, he said. International shipping could increase business by 20 percent by 2012, Lange said.
The railroad began its used-vehicle effort before the recession started in December 2007, and the service provided a new market during the economic slowdown, Lange said.
Other new markets sought by the railroad in recent years include shipping wind turbines and parts for wind power companies and hauling pipeline equipment for natural gas firms, he said.