Getting the World Salvage Market on the Same Page

by Andy Latham

http://www.a-r-a.org/article.asp?paper=102&cat=155&article=752

Technical advances in motor vehicles are making repairs much harder and raising costs. This has the potential to increase instances of fraud and sub-standard repair -- issues that can seriously harm the reputation of the auto recycling industry. How can the global auto recycling industry, whilst keeping costs as low as possible, continue to improve standards, consumer protection, and eradicate fraud?

The recycling of motor vehicles is not new. The environmental benefits of the industry has been recognized over many years and in some countries since the introduction of the horseless carriage in the late 1800s. The vast majority of these recycling businesses have been set up and run to high standards, but as is the case with all business, there are a few individuals who are slightly less than honest in their business dealings. Many countries recognize this and have steps in place to limit the potential for fraudulent activity, but these actions fail to recognize the global nature of motor salvage and the effect of vehicles moving across international borders.

Over the last 10 years the salvage marketplace has changed greatly from being an industry that operated very locally. Motor salvage has now gone global, generating cash in the billions annually. The flow of motor salvage around the world has significantly increased, following the opening up of the European Union, the enactment of the North American Free Trade Agreement, and more importantly, the move into the Internet age.

You can now buy motor salvage 24/7 from online auctions around the world, vehicle parts are available on a mail order basis with 24-hour delivery, and cheap labor and skills are now being utilized from Africa to India to Eastern Europe.

Many of the salvage codes and guidelines written over the past 15 years have focused on the unique circumstances in each individual country. Regrettably most of these codes fail to reflect the global nature of motor salvage, so what could be outlawed in one country is allowed in another, and the motor salvage industry moves motor salvage across borders to the best advantage of their businesses.

As an example, motor vehicle salvage is allowed to travel from Western Europe to former Soviet states like Lithuania, Poland, etc. When these vehicles get there, they can be used to repair other vehicles or could get repaired themselves. The United Kingdom (UK) sourced right-hand-drive (RHD) vehicles are sometimes repaired and brought back to the UK, but many will be repaired, changed to left-hand-drive (LHD), registered locally, and then sold on, for example, to Russia, one of the biggest markets.

The Association of British Insurers Code of Practice for Motor Salvage in the UK requests that the vehicle documentation for some salvage is destroyed. On export the Driver and Vehicle Licensing Agency (DVLA) in Swansea will issue an export document that can be used to register a vehicle in another country.

As re-registration requires original paperwork from the country of origin, these documents are important – or are they? When a vehicle is presented to a registration office in Eastern Europe, do they check with the registration agency in the donor country that the paperwork they have received is genuine? DVLA in Swansea has reported the theft of blank V5 vehicle logbooks over the past few years. Where has this paperwork gone and are these logbooks feeding a black market of repaired vehicles?

Many European countries also fail to control motor salvage vehicle documentation, and in some cases large sums of money are believed to be changing hands for extensively damaged vehicles that come with ownership documents. This only fuels the theft and cloning of same model and specification vehicles.

Insurance engineers completing vehicle damage assessments must apply good engineering practice and safety considerations when deciding whether a vehicle is to be sold for repair, totally destroyed, or broken for parts. All repair assessments should accurately reflect normal methods and costs that would be incurred for policyholder repair with rates reflecting usual market terms.

If insurance engineers make the decision to designate the vehicle as motor salvage, then they need to look carefully at the following statement:

“Could, or should, the vehicle be repaired?”

Perhaps the easiest way to look at this question is to divide “could” and “should.”

“Could” the vehicle be safely and economically repaired in the motor salvage marketplace, using accepted industry standards? Manufacturers’ or the UK Motor Insurance Repair and Research Centre (otherwise known as Thatcham) repair methods must always be used, but independent or second-hand parts and reduced labor rates may be applied.

“Should” the vehicle be repaired? This is a more subjective question and factors that the engineers should include considering:

• The need to remove the vehicle from a possible theft chain, e.g.: a stripped-out vehicle, requiring unobtainable or expensive replacement parts. If such a vehicle is declared repairable, then a similar vehicle may be stolen and broken for parts.
• No vehicle should ever be categorized as repairable on the basis that second-hand shells/frames will be used. In those cases the category should always be spare parts only.
• Vehicles with water damage can present a difficult decision. Engineers first need to determine the type of water present and then categorize accordingly.
• Salt Water damage will generally result in spare parts only categorization due to the corrosive nature of the water. Vehicles flooded to a level high enough to contaminate the airbags should also be considered as spare parts only. Lower level flooded vehicles could be treated as repairable salvage, and these vehicles could be repaired and placed back into use.
• Some vehicles, especially higher value ones, may be considered technically economical to repair, but often they are so severely damaged that they should be categorized as parts only.

What issues are currently faced?

• Guidelines that fail to reflect the global reach of the motor salvage marketplace
• Lack of control over vehicle documentation
• Information not exchanged between countries
• Different standards on recycled parts
• Standards of repair

Vehicle design and the increased use of recyclable materials in production is becoming additionally important and is included in current European Union End-of-Life Vehicle (ELV) legislation.

It is forecast that more vehicles will be produced and sold in the next 20 years than in the entire previous history of the motor industry, ultimately leading to more end-of-life vehicles. The statistics are compelling: 1 billion vehicles scrapped worldwide since 1960; it is predicted that this figure will be almost doubled by 2030 (figures from Drivenet).

It’s not only the bodywork, glass, and trim that needs to be considered. When you add aftermarket sales, over 9 billion batteries will be disposed of between now and 2030 – along with 181 billion litres of oil, 54 billion tires, and 13 billion airbag modules and seat belt pretensioners.

What can the motor salvage industry do?

Option 1: Do nothing, watch the unlicensed and illegal operations take all the vehicles that they can, repair them cheaply and to a poor standard, and not take any responsibility for consumer protection, whilst all the time bringing the salvage industry into disrepute and harming the public perception of this industry.

Option 2: Continue to work to current national standards without reference to other countries or salvage associations. This would have impact locally but vehicles that are subject to cross border trading are left out.

Option 3: Continue to work locally to raise standards as much as possible, but also work globally to get more countries working towards similar standards, the America’s, the European Union, etc.

To accomplish this, the motor salvage industry needs to produce a set of guidelines, or standards, that the global salvage industry can work towards that give consumers the confidence to purchase recycled parts or to drive a vehicle repaired using recycled parts.

The proposed motor salvage code of practice takes some of the best parts of all current standards and codes of practice, refined and updated, to allow for cross-border trading, and designed to be flexible enough to update when new technology or further research and testing show that changes need to be made.

The code sets minimum standards but allows for tougher local standards where applicable. For example, allowing the re-use of non-deployed airbags in the United States under the strict rules and protocols in place would not be allowed in the UK because the Code of Practice specifically excludes this.

The code is designed to support all legitimate motor salvage and auto recycling operations, those that care about their individual business, their staff, their customers, the environment, and the need to have a sustainable business plan. This is a code that needs to be supported by all national and international motor salvage and auto recycling associations.

Inaction could result in legislation similar to legislation in New South Wales, Australia, which prevents all total loss vehicles being re-registered.

An effective code of practice could avoid legislation as governments can see the industry is taking responsibility for their actions, ensuring:

• more quality recycled parts used to repair vehicles
• increased consumer safety
• more repair opportunities
• reduction of repair costs
• reduction in CO2 as a direct result of less new parts being used
• reduction of fraud
• increased numbers of legitimate operators
• increased professionalism and customer perception of the motor salvage industry

At the same time, enhanced enforcement by local environmental agencies is needed to ensure that all licensed operators are working to a consistently high standard. Businesses that fail to achieve these standards should be given the support they require to improve; those that do not have licenses must either receive appropriate licenses or face closure.

Legislators need to be able to close down those operations that are unlicensed, unsafe, and unlawful; and courts must be allowed to set down substantial fines and sentences that send the message loud and clear that unlawful and unethical activity will not be tolerated in this industry.

All national and international motor salvage and auto recycling associations need to use their considerable experience and influence by continuing to set the highest industry standards of vehicle and parts handling, standards that reduce fraud, standards that increase consumer protection, and standards that increase the professionalism and the profits of this industry.

All representatives of the Motor Salvage Industry need to look carefully at their actions and ensure that they are working to the highest professional and ethical standards at all times. This can only add benefit to the industry we love. As consumers see standards being raised, they will become more comfortable purchasing repaired vehicles and recycled parts.

Andy Latham is the Reputation Manager for Bluecycle, one of the UK’s leading online car salvage auction sites and online auction technology specialists. They have been trading for over 10 years and specialize in car salvage, end of fleet, motorcycle, plant, and equipment and commercial salvage, selling hundreds of vehicles each week to customers throughout the UK and Europe.