Friday, 31 July 2009 08:45

Recyclers Not All Happy About Clunkers Influx

The CARS Act specifies that while many parts of the trade-in vehicle are permitted to be removed and sold, in the end the residual vehicle, including the engine block, must be crushed or shredded. The rules do allow for the drivetrain to be resold as long as the components are sold separately.

Not all auto recyclers are happy about CARS scrappage because engines and drivetrains are a major part of recyclers’ income and those engines are presently being destroyed by the dealers with a corrosive solution of sodium silicate.

The Automotive Recyclers Association says that can damage otherwise sellable parts like pistons and mean smaller profits for scrap yards. It can cost $700 to $1,200 to process a car, including transport and removing toxic items like mercury.

The CARS legislation and rule restrict the sell of the “engine block”, but does allow for the sale of the “drive train” if the drive train, the transmission, drive shaft and rear end are sold separately. NHTSA interprets “engine block” to mean the part of the engine containing the cylinders and typically incorporating cooling jackets and also including the crank, rods, pistons, bearings, cam(s) and cylinder heads. In the case of a rotary engine, the block includes the rotor housing and rotor.

“Why throw away good parts when the supply chain is in jeopardy? It doesn’t make a whole lot of sense,” said Michael Wilson, executive vice president of the Automotive Recyclers Association (ARA). Engines and drivetrains account for 60 percent of recyclers’ revenue from a used vehicle, Wilson said.

Michael Hibbs runs Square Deal Auto Salvage in Tulsa, OK and he thinks it’s a shame that all the Cash for Clunkers cars will be crushed.

“The way the law reads, we have to crush [or shred] them.  So, we’ll bring them in, drain them and get ready to crush them,” said Michael Hibbs with Square Deal Auto Salvage. Hibbs makes a living selling parts that are sometimes hard to find.  He figures crushing 250,000 drivable cars will make good parts even harder to find.

“They’ll still be plenty of cars for inventory, but they’ll be harder to find parts, prices will skyrocket on those,” said Hibbs.

“The dealerships have to go in and destroy, put stuff in the engine, in the transmission, in the rear end to destroy them and make sure they can never be used again,” said Keystone Chevrolet’s Roy Jenkins.

“If this program keeps running, we're not going to have used parts to sell. It's going to hurt us, and it's going to hurt the average everyday person,” says Angela Ingram, of B & A Auto Parts.

Ingram says the consumer will have less used parts available and might be forced to purchase new from a dealership.
“For me to find a replacement used engine, I would probably be looking at $700 to $800. For me to go to the dealership to buy a new one, you're probably looking at $4,000,” says Ingram.

“I haven’t decided that I want the cars,” said George Clark of Western Auto Recycling in Denver, CO. Still, he said, he might make money crushing clunkers if he doesn’t have to buy them from dealers.

Some recyclers say cash for clunkers will hurt lower-income buyers who can’t afford a new car, even with the federal credit. They also claim that destroying vehicles will increase prices for spare parts that lower-income customers depend on to keep their cars running.

“Now you’re removing cars people could afford, and they’re not available anymore,” said Norm Wright, CEO of Stadium Auto and Truck Parts Inc., a Denver recycler. “There will be less cars to pull from, so the price of parts will go up.”

Despite their misgivings, some auto recyclers are urging dealers to send the trade-ins to them instead of to auctioneers who could serve as middlemen for scrap yards. Recyclers and salvage auctions both have to certify they will follow rules for disposing of clunkers.  NHTSA can asses a civil penalty of up to $15,000 for any violation of the CARS act.

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