If you think the collision repair industry is changing rapidly, spend a little time talking with the owner of your nearby auto salvage yard: 

Consolidation? Independent yards around the country are being gobbled up by larger corporations like LKQ Corporation and Ford Motor Company.

E-commerce and computer technology? Body shops can shop for used parts on-line at several websites, including iSalvage.com, NextPart.com, PlanetSalvage.com, and CarStation.com, and many yards are connected to each other by co-op networks such as United Recyclers Group.

Changing business demands? Savvy salvage yards are fighting for your business by improving delivery services, offering written warranties and learning how to better prepare and describe parts for shops. Some of the yards now have digital imaging capabilities, allowing them to e-mail you a photo of the part you're buying.

Want more proof that the yards are changing? Just look at the stringent guidelines for a yard to earn the Automotive Recyclers Association's (ARA) "Gold Seal" designation, a program designed to recognize those recycling yards that meet the highest standards for environmental law compliance and business practices; practices such as an accurate description of each used part and a fair returns policy.

"A lot of people in this industry still operate the way they did 50 years ago, and that's not acceptable," said Herb Lieberman, president of ARA. "We're taking the lead in changing that." About 100 of ARA's 2,000 members have earned the Gold Seal, according to Lieberman. Nationally, there are estimated to be about 12,000 recycling yards.

Problems for shops

As a direct result of the State Farm case in 1999 (now on appeal), many insurance companies have stepped back from their practice of writing estimates for non-OEM parts. Some insurers are now calling for "LKQ" parts, thereby elevating salvage yards and used parts to more of a mainstream role in collision repair. Most shop owners can tell you one or more "horror stories" about an attempt to use a salvage part - often at an insurance company's "request" - that led to a lot of lost time and money.

Mike West, owner of Southtowne Auto Rebuild near Seattle, Washington, articulated shop owners' frustrations: "In looking at the numbers, we found that when we worked on older vehicles, we used significantly more used parts, and when we used these recycled parts, the jobs were more labor intensive," West said. "Those jobs took more time, which we were often not compensated for. Cleaning and repair issues aside, even just the receiving of the part, inspecting it and verifying that it's correct, require additional time on the front end to avoid major delays after the job is in progress."

Those delays, he said, can occur when the shop discovers past repair work on the part; when welded-on hinges or other mechanical components on the part are worn or malfunctioning; when the part is from the wrong year or model of vehicle; or when the part is wrong because of an error in the "interchange manual" used by the salvage yard.

"After all the time you have invested in cleaning up the part, repairing minor damage and getting it in primer, you can go to install it and find that the welded-on hinge doesn't line up with the hinge half on the pillar," West said. "To use more recycled parts, there has to be more (financial) incentive, not just for insurers but for the repairers."

ARA's Lieberman agrees. "As a recycler, I have a responsibility to provide a savings to my insurance customer and an acceptable profit to my repairer customers, a profit that encourages the use of recycled parts."

Shop owners skeptical

"We had a used door last week that came in and fit perfectly. It was the exception," said Jerry Epstein, a former insurance adjuster and now a partner in Paramount Collision Specialists of San Mateo, California. "As a Service First shop for State Farm, we write our own estimates and we don't use many recycled parts, but when we do, they usually come in dirty, the molding is wrong, or they have holes. We're the one left doing the work to 'recycle' them. And we're not paid for it."

When Epstein does order a part, he does so through a yard he knows well. "The relationship is important. They know we'll do business again, and so they'll tell me the true condition of the part, and they'll take it back without a hassle if it doesn't work out," he said. Another common practice that irks Epstein is when a yard quotes on a part it supposedly has or can get, and then when he actually orders it, the part isn't available.

"Unfortunately, that's been common practice for too long," Lieberman reluctantly agreed.

Discounts vs. markup issues

Chuck Sulkala, owner of the Boston, Massachusetts body shop started more than 50 years ago by his father, may be on the opposite end of the country from Epstein, but he couldn't agree with him more. "We, as an industry, keep trying to tell insurance companies that we're not opposed to using salvage parts," Sulkala said. "But if you want me to use more salvage parts, make them better and more accessible. Make it worth my while to use those parts, and I will use them readily."

He believes that insurance companies must allow shops to make the same profit margin on a used part that they do on a new part. The discount on a new part can run up to 30%, instead of a 20% markup on a used part. And even if the percentage is the same, a 20% discount from a dealer on a new part produces a greater gross margin than does a 20% markup on the shop's cost of a used part.

Ed Milmeister, president of All Auto Parts in Fontana, California says he doesn't know why prices on used parts are quoted differently than OEM or aftermarket parts. "I've been in this industry since 1966, and it's always been this way. Would it not be better for recycled parts to be quoted the way all other parts are quoted?" Milmeister thinks so, and he thinks it would be better for everyone, including insurers. "It would be easier for the insurer to compare new and used. They would not have to argue with the collision repair shops over the markup and their 'puny' profit using recycled parts. The recycler could then negotiate a discount from list price based on the recycler's business relationship with the shop," suggests Milmeister.

Keeping wrecks for recycling

ARA president Lieberman also feels it is imperative that all rebuilt "total loss" vehicles have branded titles to show that they are rebuilt vehicles and that vehicles with a very high damage to value ratio should be declared non-repairable and be sold only to licensed salvage yards for dismantling and not to rebuilders for return to the road. These changes, he believes, would greatly increase the available pool of quality salvage parts.

Lieberman and shop owner Sulkala both said that branded titles also would reduce the selling price of salvage vehicles because the wrecked vehicles would be less valuable to rebuilders. Without the competition from rebuilders, recycling yards could acquire vehicles for less than they do today and would pass the savings through to insurers and shops.