Tuesday, 28 February 2006 09:00

Random thoughts on disposition of storm damaged vehicles

Written by Mike Kunkel

My beloved Steelers have won the Super Bowl and, on a personal front, all seems right with the world. However, a number of articles concerning the disposition of flood cars from Hurricane Katrina are causing me some concern. 

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Some auction facilities are complaining about losing the opportunity to sell storm-damaged vehicles because of a Louisiana state law requiring vehicles to be destroyed or sold for parts only. A compelling case can be made regarding how the laws are protecting the consumers from the people who are rebuilding irreparable vehicles.

It occurs to me that the auction facilities are probably more concerned with the loss of the $300-$600 sale fees. If you multiply that fee by the number of units that were damaged in the storm, it is a sizable chunk of change. People talk about protecting the consumer but sometimes it appears that is only important when the bottom line can profit.

Moving cars

Another thing I hear about is the consequences of moving flood damaged cars out of the area to be sold. The complaint centers on the buyer not knowing that the vehicle is a flood car. First of all, I have never seen an insurance company take the time and effort to clean up a vehicle before selling it. For various reasons, they are better served by selling the vehicle as it sits than risk the law suit about not properly portraying the vehicle. The real problem lies with someone steam cleaning and deodorizing a Katrina vehicle, then running through a sale in a different area.

The second issue is that simple economics will tell you that the costs of moving vehicles from one area to another is going to reduce the net return on the vehicle. This occurs when there is market proliferation, where the supply is so high that it becomes a buyer's market. Another scenario would be if the vehicle was not severely damaged and has a better chance of recouping the loss in another area of the country.

While some people find fault with this, it is not fair to the people that are paying for these losses not to be able to recover as much of their loss as possible. I have read some of the stances from the Automotive Dealership Associations. Naturally, they are adamantly opposed to any vehicles, regardless of damage, being repaired. I wonder if their investment in selling new and used vehicles to replace the lost vehicle has any impact on their views.

Some salvages can be salvaged

Many salvage facilities sell vehicles that can be rebuilt. Salvage yards also purchase flood and fire vehicles to sell for parts. One of my delivery trucks is a rebuilt burn unit. In many states, the titles are branded as salvage or flood vehicles. Though there are some states where the title laws are still lax, there are not many states left in which to wash a title. I do not think that any of the states surrounding Louisiana can be used to wash a title. In the case of my rebuilt delivery truck, it went through State and Department of Public Safety inspections. The vehicle still has a rebuilt title but it is safe and has well over 100,000 miles on it since being repaired. According to the car dealers, this should not have occurred.

While not every vehicle that can be rebuilt should be rebuilt, it does seem better to allow free market forces to dictate rather than self-serving interests directing public policy. American Auto Salvage does not rebuild vehicles; we also cannot predict who will properly fix a vehicle.

When blanket statements start to influence the insurance company's right to recoup losses, and private individuals or companies are told they are not trustworthy enough to rebuild a vehicle, we seem to be creating more problems than solving.

It is an interesting debate that has been on going and will continue to be a fight. The public spotlight will dim soon at least until another disaster strikes and the watchdogs see another opportunity to gain publicity by implying that people are guilty of trying to take advantage of the public. In my opinion, one man's junk is another man's treasure and the marketplace will always allow the cream to rise to the top.

Mike Kunkel is the general manager for American Auto Salvage in Fort Worth, Texas, and also a member of the national steering committee for the PRP program.