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Tuesday, March 31, 2009

Multi-Industry Committee Formed to Better Market Recycled Parts

Ontario auto recyclers gained momentum for their initiatives with the creation of a multi-industry panel including collision repairers and insurers at the recent Ontario Auto Recyclers Association (OARA) convention in Toronto. The committee was born from a panel discussion on “How to increase the use of recycled parts”, a key event at the two-day conference bringing together more than 150 recyclers and suppliers.

Sam Piercey, co-owner and manager of Budds’ Collision Services in Oakville, struck the motion after members of the three sectors agreed that using recycled parts in the repair process was a means to improving profitability and productivity.

Initial priorities of the ad hoc committee are to work together on collateral marketing material that will make it easier for repairers to “sell” their customers on the value of Green Parts.

“I know the recycling community has put a lot of effort into marketing materials, but we as repairers need to help shape the messaging and marketing collateral to help us convince our customers,” said Sam Piercey.

Keith Hudd of Economical Insurance Group (EIG) said insurers are looking at ways to increase recycled parts usage and indicated EIG has increased the mark-up on recycled parts to 32 per cent and the increased labour by 2.2 hours to encourage the use of recycled parts.

The panel, hosted by Darryl Simmons (publisher of Collision Repair magazine and Canadian Auto Recycler magazine) consisted of key industry leaders: Keith Hudd - Economical Insurance Group, Sam Piercey - Budds’ Collision Services, Tony Canade - Assured Automotive, David Gold - Standard Auto Wreckers, Dom Vetere – Dom’s Auto Parts, Don Fraser – Aadco Auto Parts, Gary McKnight – Co-operators and Dominic Maurini industry consultant.

“There has been a lot of education and a general mind shift in the collision repair industry. The time is right for the entire industry to be held more accountable,” said Tony Canade of Assured Automotive.

Recycled parts are known to have a number of environmental benefits.

“No other product on earth is recycled more than an automobile,” said Steve Fletcher, executive director of OARA. “By increasing the use of Green Parts we will greatly reduce the industry’s environmental impact.”

The 2009 OARA conference was held on March 26-28 in Toronto. The conference was a huge success and it was standing room only for the keynote address by Ron Sturgeon on “The Future of Auto Recycling.” Sturgeon, author of several books including “Salvaging Millions”, discussed the past, present and future of the automotive recycling industry.

“People who pay attention and make required course corrections will do well,” said Sturgeon. “The future of recycling will see pressures on margins, the need for better quality and increased service demands.”

The OARA conference included several other presentations. Cara Sweeny of the Clean Air Foundation presented Canada’s New Vehicle Recycling Program called Retire Your Ride. Michael Hlacar, Director of Ferrous Trading discussed how global demand of raw steel will stay at the current level for some time. Warren Barnard from the Used Car Dealer Association discussed the new MVDA Regulations and the 22 items that need to be disclosed when buying and selling vehicles.

Written by Orest Tcazuk

Monday, March 30, 2009

Another Life for Car Fluff

There are in excess of 600 million cars in the world and the fleet is growing. China is getting its cars, as is India.

The U.S. has the highest number of cars per capita. As of 2005 there were roughly 240 million registered cars in the U.S. With the economic slow down since then the car population probably hasn’t risen much, so let’s call it 250 million today.

The human population of the U.S is now over 300 million, not including illegal immigrants. Considering the 250 million cars per 300 million people we are getting near a car per person and nearing one per licensed driver. There were about 240 million of those in the U.S. as of the end of 2006.

But emissions and demand on oil supplies are not the only problem with the growing car population. A major problem is what to do with cars when they die.

You may not want to hear this, but your beloved car is headed to the junk pile. In fact every car is, with the exception of a few collectible pieces. A car’s best moment is when the ignition key is turned for the first time as it rolls off the assembly line. From there on, it’s downhill, headed to the grave. It’s not a matter of if, it’s a matter of when.

The end of life for cars wouldn’t be so bad if they weren’t so complex. Cars are made of interconnected bits of steel, plastic, copper, aluminum, iron, lead, glass and what have you put together with nuts, bolts, welds, adhesives and then coated in paint to make them look good.

There are complex, well-designed assembly lines to put together cars, but there is nothing sophisticated yet invented to take them apart. While some car parts come off easily – like the wheels – and can be easily recycled – like those snappy aluminum wheels, most parts require considerable difficulty to be removed and recycled.

Even if parts could easily be removed, what then? Can laminated glass with it’s layer of plastic between two sheets of glass be recycled? ( I don’t know.) What about the carpet? The seats? The headliner? The bumpers. The myriad of electronics? The vinyl and foam dashboard? What happens to all this stuff?

Most of this stuff – 25 percent of the weight of a car – is nonmetallic, organic material commonly known as plastics. Automotive recyclers call all the plastic parts “fluff”.

Now, its seems the only way to dispose of cars - fluff and all – is to send them through a similar type of device that’s used grind of tree limbs to make mulch – a shredder for steel. Shredding is done after the big heavy pieces, like the engine and transmission, are removed, by the way.

After grinding, what happens to the automobile shredder residue (ASR)? Off to the landfill or incinerator, I suppose.

However, a joint venture of Chinook Sciences, a manufacturer and operator of advanced gasification technology, and European Metal Recycling (EMR), one of the world’s largest recycling companies and the largest recycler of automobiles in Europe, will be doing something new. The venture, calling itself Innovative Environmental Solutions UK Ltd, plans to use Chinook’s non-incineration advanced gasification technology to process 120,000 metric tons (132,000 tons) of ASR per year into renewable energy.

The process Chinook calls RODECS(R) incorporates pyrolysis, which heats the ASR without burning it. (ASR will burn nicely, given the chance.) The result is a synthesis gas as well as scraps of metal and glass. The metals are undamaged by the pyrolysis temperatures, the synthesis gas is made from the organic (plastic) material. That gas is heated to higher temperatures to clean it up.

The company plans to generate as much as 30 megawatts of renewable electricity from cooked ASR, enough to power 21,000 homes. It will be the first commercial scale enterprise to generate renewable electricity and recycle metal from automobile shredder residue.

Interestingly, while cars make a significant carbon footprint while alive, with this process they’ll have a negative carbon footprint when they are disposed of. The company says the project will reduce greenhouse gases on a net basis by 300,000 metric tons (331,000 tons) per year.

EMR is not stopping there. In another project the company has set up a joint venture with MBA Polymers Inc. (MBA) to process shredder residue that has already been upgraded by EMR at its U.K. operations. MBA has developed processes to recover, separate and purify what it calls high-value plastics from the shredder residue stream. The result is a high quality plastic that can be reused in automotive and other durable goods applications. That operation in Worksop, U.K, should be up and running in early 2010.

by Bruce Mulliken, Green Energy News

Friday, March 06, 2009

Rising number of total losses hurts industry

Many factors put repairers in a total quandary.

During the past 10 years, an overall decline in collision insurance claims and a dramatic increase in the number total loss declarations have had devastating consequences for the collision repair industry.
Between 2000 and 2005, by most estimates the percentage of total loss vehicles doubled, and nearly a fifth (or more, depending on who you ask) of all cars involved in a claim are now declared total losses.

While there appeared to be a decline in totals after 2004, data from Audatex indicates that totals are on the rise again, fueled by the decline in used vehicle prices, increasing raw materials costs, an aging vehicle population and the expense of properly replacing airbags. That trend is expected to continue in 2009.

Consultant Karen Fierst, of KerenOr Consultants, questions whether or not the number of totals ever really stopped climbing, because the data from the information providers “was based only on totals for which estimates were written,” Fierst says.

In fact, the actual number of total losses is probably north of 20 percent if you include obvious totals, where an estimate was never generated.

With repairers fighting to make a profit on fewer and fewer jobs, many are asking if anything can be done to stem the tide of total losses. A few solutions have been floated that could possibly reduce the number of totals, from increased use of aftermarket parts to salvage airbags and new bumper height regulations. Unfortunately, many of the factors that have contributed to the increase — declining actual cash values, and the increasing expense of advanced safety equipment — are beyond the control of repairers and insurers.

Actual cash values
One key factor that has driven up the number of totals is strictly an economic one: the cost of repairs is increasing, while the actual cash value (ACV) of many vehicles on the road is declining. Insurance companies will typically total a car once the cost of repairs reaches or exceeds 70 percent to 90 percent of ACV. Increased salvage vehicle prices also have contributed to the problem, as has the increased age of vehicles on the road.

“A lot of this is really due to the cash value of the vehicles,” says Steve Nantau of Ford, who chairs the Collision Industry Conference’s Vehicle Reparability Committee. “The cash value is dropping and salvage values are increasing, so you are going to see more totals. A lot of salvage vehicles are repairable, but not from an insurance company standpoint.”

Wholesale used vehicle prices improved slightly in January, according to the Manheim used vehicle value index, but the year-over-year decline is still 6.8 percent. A significant decrease in the value of full-size pick-up trucks and SUVs has made it easier to total one of those vehicles for even a minor collision.

These calculations can lead to some confusing and frustrating outcomes for drivers and repair shops. An older vehicle with minor damage might wind up being totaled, while a newer car with extensive damage may not meet the financial threshold for a total. In the current economic climate, drivers who hold on to their older vehicles are faced with the prospect of either buying a new car, or buying their current vehicle back from the insurance company with a salvage title and paying for the repairs.

“It’s traumatic when people come in with total losses,” says Diane Rodenhouse, owner of Rodenhouse Body Shop in Grand Rapids, Mich. “They don’t have the money to get a new car, they can’t get credit, and a lot of times they have less insurance than they thought. I feel sorry for them.”

The cost of safety
Cars are safer and more fuel-efficient now than ever before, but also significantly more expensive to repair. New vehicle designs, airbags, exotic steels and complex technology have made collisions (especially front-end collisions) much more costly.

“Vehicles are increasingly designed to protect the passengers, and to crush,” says Dave Snyder, vice president and general counsel at the American Insurance Association (AIA). “You also have more electronics in the front of the car.”

“That results in higher claims costs and slightly higher insurance premiums,” says Dick Luedke, spokesman for State Farm. “However, you have to weigh that against the benefits of safety. These new technologies are saving lives. We’re interested in doing whatever we can to help promote technology that’s more easily repairable, but not at the expense of making safety technology less effective.”

No one is lobbying for less safe cars, but repairers and insurers alike believe that OEMs could do a better job of making vehicles easier and less expensive to repair by moving expensive computer components away from the front of the car, or limiting the damage to instrument panels and windshields caused by airbags.

“There’s this perception that manufacturers are building vehicles that can’t be repaired,” Ford’s Nantau says. “The amount of damage sustained in a relatively low-speed collision is probably more than what you saw back in 2000, but the fact is that cars are much safer than they were in the past.”

That said, Nantau says that OEMs do have their engineers evaluate vehicle design with an eye toward the total cost of ownership, including the cost of insurance. The design of the new Mustang, for instance, was influenced by a desire to make the car best-in-class on insurance rates.

Others think the OEMs could do more, particularly when it comes to the vehicle’s front end.

Low-speed crashes can result in pricey repairs. In its crash tests of luxury cars, the U.S. Insurance Institute for Highway Safety (IIHS) found that these repair costs could range from $5,000 to nearly $14,000, depending on the model. Non-luxury mid-size cars required repairs that cost between $4,000 and $9,000. According to IIHS, design flaws in newer vehicle bumpers make them less effective than they should be. Many of these bumpers don’t line up vertically, so they don’t engage during a collision, and the bars underneath many bumper covers are not big enough or strong enough to provide adequate protection.

That lack of protection is especially galling to vehicle owners when they find out how much replacement parts cost. The headlamp for a Lexus ES, for instance, costs more than $1,000 to replace.

IIHS has recommended that car manufacturers make their bumpers wider to better protect the vehicle (an idea the AIA supports). If a bumper bar does not extend far enough, the study found, a minor corner impact could cause significant damage to lights and other safety-related components. Bumpers also have to engage properly to minimize damage.

IIHS called for changes to federal rules that govern bumper height, which don’t apply to minivans, pickups or SUVs. The disparity in bumper height among these vehicles further exacerbates the problem of bumper match-ups during collisions.

Honda’s Collision Impact Kit program is another possible solution. The program provides a discount on parts purchased as part of a repair package. The initial offering (for front-end collisions) reduced parts’ costs by nearly one-third.

The airbag problem
Replacing a set of airbags with new OEM modules can cost up to $2,000, and many repairers consider airbag replacement one of the biggest reasons that totals have increased in the past decade.

The salvage industry has suggested using non-deployed airbags from salvaged vehicles as a possible solution. These airbags are considerably cheaper than new modules, and the Automotive Recyclers Association (ARA) has come up with a voluntary certification program (ARAPro) to help ensure their safety.

Repairers, however, remained concerned about safety and liability issues when it comes to salvage airbags. “Every car we work on, we’re held liable for,” says Gary Wano, chairman of the Society of Collision Repair Specialists (SCRS) and owner of G.W. & Son Auto Body Shop in Oklahoma City. “I’m not saying they are not a good way to save money, but until somebody tells me they will take on the liability, I’m not in the market for them.”

Nantau doesn’t think airbags alone are responsible for the increase in totals.

“Use of salvage airbags, in itself, is not going to save a total in most cases,” Nantau says. “When an airbag deploys, there are going to be a lot of other parts affected that need to be replaced — a windshield, instrument panel, sensors, trim pieces or even seats, in some cases. Those other parts, altogether, will exceed the cost of the airbag when you look at the labor to install them.”

There also is an argument that increasing the value of salvage airbags will push salvage values up, and indirectly cause an increase in totals.

Aftermarket parts
Using less expensive aftermarket parts also could help reduce totals, particularly for older vehicles. Many repairers, though, have resisted aftermarket parts because of quality issues with some manufacturers.

The National Association of Insurance Commissioners (NAIC) recently asked the Diamond Standard Brand Alternative Safety Part Division of Reflexxion Automotive and Production Bumper Stamps to re-examine its model laws governing use of aftermarket parts. According to Diamond, just 20 states have regulations that cover equivalency or like-kind quality in aftermarket parts

It’s important to have quality aftermarket parts that can replicate the OEM components, otherwise those parts won’t perform the same way in a collision, leading to even more totals, said Mike O’Neal, Reflexxion’s president,

“If an OEM part is roll formed in one piece, then the aftermarket part has to be made the same way,” O’Neal says. “If you don’t use the proper materials, the part is not going to perform the same way.”

OEMs, led by Ford, are trying to block the importation of some of these parts by claiming patent infringement. In 2006, the International Trade Commission ruled in Ford’s favor, barring the manufacture of aftermarket version of certain parts for the F-150.

“We’d like to work with the repair industry to support the availability of aftermarket parts, which is now under incredible assault from the OEMs,” AIA’s Snyder says. “As repair parts prices go up, that brings on more totals. That should be an area of cooperation in legislative advocacy between our industries.”

The Ford case is being appealed, and last year legislation was introduced in the U.S. House of Representatives that would have exempted component parts from design patent infringement liability. The measure didn’t pass, but it may be reintroduced in the current session.

“Good aftermarket parts have their place in the market,” Rodenhouse says. “I have no problem using aftermarket parts on older vehicles if they’re good parts. You can avoid a total that way.”

If the OEMs are successful in blocking aftermarket parts using international trade laws, then the price for parts could further increase.

“There needs to be reform of the patent legislation,” O’Neal says. “What the OEMs are trying to do is create a monopoly.”

But there is a limit to how much help repairers might get from these parts.

“Anything that is going to drop the dollar figure on the repair is going to give us some assistance,” says Wano. “But I can’t see that there is an opportunity to utilize any more alternative parts than we’re already using. From a repair standpoint, the insurers are pushing hard to use as many aftermarket parts as possible, and we’re still seeing a lot more total losses.”

Repairers also could use more salvage parts, but demand from overseas both for parts and scrap metal has made these components more expensive and scarce. This increased demand for parts has pushed up salvage vehicle prices, which has only helped fuel the increase in total losses.

While the use of aftermarket parts, combined with design changes from the OEMs, could help lower the number of totals, there is no short-term fix to the total loss issue, particularly while the value of older cars continues to decline and repair costs rise.

“People are driving less, and there is more accident avoidance technology in the vehicles,” Fierst says. “So we’re already seeing fewer claims. Then you add on the cost of repairing the accident avoidance equipment, and there’s no question you are pushing the limits of what’s going to be totaled. That combination of a decrease in claims and an increase in totals is going to be a dramatic driver of the shrinkage in the collision repair marketplace.”

Auto Body Repair News March 6, 2009