Auto industry braces as Texas prepares for ‘catastrophic floods’

on Aug27

UPDATED: 8/26/17 4:15 pm ET — adds details

The most powerful storm to hit Texas in more than 50 years killed at least one person and is threatening catastrophic flooding. Auto shippers, manufacturers and retailers all face potential disruptions.

Freight transportation in Texas could be severely disrupted by Hurricane Harvey — which hit the coast late Friday as a Category 4 storm and was reduced to a tropical storm later Saturday — potentially delaying deliveries of finished vehicles as well as auto parts to and from plants in Mexico and the Gulf region.

Harvey hit Texas, the heart of the U.S. oil and gas industry, late Friday as a Category 4 hurricane with winds of 130 mph, making it the strongest storm to strike Texas since 1961.

The storm has ripped off rooves, snapped powerlines, and triggered tornadoes and flash floods. It has weakened to a tropical storm, but is expected to lash Texas for days, bringing as much as 40 inches of rain. Texas utility companies said nearly a quarter of a million customers were without power.

One person died in a house fire in the town of Rockport, 30 miles north of the city of Corpus Christi, as Harvey roared ashore overnight, Mayor Charles Wax said in a news conference on Saturday, marking the first confirmed fatality from the storm.

Earlier, Texas Gov. Greg Abbott said he would activate 1,800 members of the military to help with the statewide cleanup while 1,000 people would conduct search-and-rescue operations.

In Rockport, which took a direct hit from the storm, the streets were flooded and strewn with power lines and debris on Saturday. At a recreational vehicle sales lot, a dozen vehicles were flipped over and one had been blown into the middle of the street.

“It was terrible,” resident Joel Valdez, 57, told Reuters. The storm ripped part of the roof from his trailer home at around 4 a.m., he said. “I could feel the whole house move.”

Valdez said he stayed through the storm to look after his animals. “I have these miniature donkeys and I don’t know where they are,” he said, as he sat in a Jeep with windows smashed by the storm.

Before the storm hit, Rockport’s mayor told anyone staying behind to write their names on their arms for identification in case of death or injury.

For more live coverage and video of the hurricane from Reuters, click here.

Gasoline prices soar

Utilities American Electric Power Co. and CenterPoint Energy Inc. reported a combined total of around 240,000 customers without power.

Several refiners shut down plants ahead of the storm, disrupting supplies and pushing prices higher. Many fuel stations ran out of gasoline before the storm hit, and the EPA loosened gasoline specifications late on Friday to reduce shortages.

AAA said pump prices rose 4 cents in four days in Texas to reach $2.17 a gallon on Friday.

Disruptions to fuel supply drove benchmark gasoline futures to their highest price in four months.

More than 45 percent of the country’s refining capacity is along the U.S. gulf coast, and nearly a fifth of the nation’s crude is produced offshore in the Gulf of Mexico.

Automotive impact

It was too early to tell on Saturday how much the storm would impact automotive manufacturing, parts shipping and retailing in Texas. 

On Friday, the Kansas City Southern railroad, a primary transport mode for vehicles shipped to the U.S. from Mexican assembly plants, said on its website that it has suspended train operations between Kendleton and Laredo, Texas. The company warned customers to expect delays of at least two to three days as it evaluates its network for damage before resuming operations. The railroad has extra crews assigned to monitor and react to developments.

The other major cross-border railroad, Union Pacific, said it is moving rail cars in yards prone to flooding to higher elevations and has curtailed operations in the path of the storm.

Vehicle imports and exports also will be temporarily stalled at the ports of Houston and Galveston. Port Houston handled 85,600 vehicles last year. Volkswagen has a facility at the port, and third-party processor Auto Warehousing Co. handles vehicles for Fiat Chrysler Automobiles.

Nationwide Auto Transport Inc., a small auto hauler based in Oklahoma, already has rerouted trucks out of the storm region and put shipments on hold, President Julie Delp said.

Her company operates eight trucks and primarily hauls vehicles purchased by dealers from auction houses or dealer-to-dealer trades. Vehicles bought from Manheim auction houses in San Antonio, Dallas and Houston are sitting, as are shipments in Plains states destined for Texas, she said.

Dealers prepare

Mitchell Dale, co-owner of McRee Ford in Dickinson, Texas, just south of Houston, said even though his area is under voluntary evacuation, his dealership closed before noon Friday to allow employees the opportunity to leave town.

“There’s only so much you can do,” Dale said. “Our main concern is our employees, and making sure they had time to leave if they want to.”

Dale said this is the worst storm event the dealership has seen since 1979, when a similar tropical hurricane swept more than 30 inches of water into the building.

“We were totally shut down for about two weeks,” he said. “We had to replenish inventory and it just creates a real mess.”

While flooding remains his main concern, Dale said the store recently finished a new building higher than the previous one.

The hurricane is forecast to slam first near Corpus Christi, Texas, drop flooding rains along the central Texas coast and potentially loop back over the Gulf of Mexico before hitting Houston, Reuters reported. Photo credit: Reuters

Toyota prepares

Toyota canceled its Saturday overtime shift there as a precaution. The plant has been operating the single weekend shift since March 2016 due to high demand for the Tacoma and Tundra pickup trucks.

“All team members are encouraged to prepare for the weather,” a Toyota spokesperson said Friday. “Currently there is no impact to production or logistics.”

A storm in May of last year blew a hole in the roof of the San Antonio plant and knocked out power, taking the plant off-line for several days and causing Toyota to cancel a half-dozen shifts. The factory produces about a thousand trucks per day.

Toyota’s big regional distributor, Gulf States Toyota, was putting a storm plan into place to avoid as much disruption as possible. “We are working with our suppliers and logistic partners to ensure contingency plans are in place to provide minimal impact to our customers and dealers,” the distributor said in a statement.

Volkswagen Group of America is moving vehicles away from at-risk areas at Port Houston, picking up debris and other potential hazards that can be carried by the wind, and making sure employees and service providers are out of harm’s way. The company is also expediting parts processing and shipments, both inbound and outbound, at its Fort Worth Parts Distribution Center, which services dealers in the Gulf region, spokeswoman Jeannine Ginivan said.

Nissan Motor Co. is not expecting any supply chain problems and can reroute shipments around affected areas, spokesman Parul Bajaj wrote in e-mail.

A General Motors spokesman would say only that the automaker is monitoring the situation and will respond as necessary. GM’s plant in Arlington, Texas, is a key assembly operation for large SUVs, such as the Cadillac Escalade and Chevy Suburban. 

Reuters, Jackie Charniga and Laurence Iliff contributed to this report.

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