The Automotive Service Association (ASA) Salvage Subcommittee was formed to work closely with other organizations, such as the Automotive Recyclers Association (ARA) and the United Recyclers Group (URG), to strengthen the lines of communication and improve the process of using recycled parts. With that in mind efforts are being made to fine tune a grading system for recycled components.The ARA started its Parts Grading Guide so that all individuals involved in the repair process would have a consistent and uniformed guide for grading recycled parts. With different Internet search sites becoming popular and so many of those sites using different grading systems, ASA felt it was in the collision industry's best interest to be a part of the Guide and endorse one easy-to-use, uniform standard.
"The ARA Parts Guide is a tremendous tool for the estimator, the insurer, the counterman at the yard and the parts manager in the shop to be on the same page for describing recycled parts," says ASA Crash Parts Subcommittee Chairman Ron Nagy.
Recently, the ASA Salvage Subcommittee decided to broaden its scope and is now called the ASA Crash Parts Subcommittee, which is composed of ASA collision members interested in crash parts issues, be they recycled, aftermarket or OEM surplus.
In the past, the Crash Parts Subcommittee worked behind the scenes to improve the industry. For example, under committee Chair Harry Moppert, they were able to work with CCC to add the drop-down menus for LKQ parts.
"Through the use of the Guide, the collision repair industry has the ability to uniformly know the condition of the part being priced and know upfront of any damage or cleanup time needed," says Nagy, of Nagy's Collision Center, Doylestown, Ohio.
The ARA Parts Grading and Description Guidelines are intended to improve communication between automotive recyclers and their collision repairer, mechanical repairer and insurer customers. Many customers cannot decipher the codes used to describe the conditions and options of a recycled part. As a result, the part sale goes to another vendor or the recycled part is returned because it did not meet the customer's expectations.
This document brings standardized part descriptions and terminology to the parts inventory process. It identifies common parts and terms used to describe part conditions and part options. By standardizing part descriptions, the recycling industry can more easily set customers expectations and increase sales of recycled parts to companies in the repair process.
According to ARA Electronics Committee and E-Commerce Committee Chair David Gold, who's also the owner of Standard Auto Wreckers in Scarborough, Ontario, Canada, the Electronics Committee is responsible for establishing the ARA Parts Grading System and Damage Codes, and the E-Commerce Committee is consistently analyzing additional ways of standardizing the parts grading process.
Gold says recycled OEM parts currently occupy 10 percent of the marketplace. The issue of clarity when it comes to the exact condition of the part, while important for a customer coming into a facility to pick up a part, is absolutely crucial for someone buying a part online to know exactly what they are putting their money down on.
"Because we are dealing with a used product, we do need to be very diligent in how we grade our parts, because they aren't going to be perfect. But if we describe them effectively that's pretty much all we can ask for." says Gold. "Kind of like the eBay philosophy, you've got to highlight all the negatives so that there are no surprises on delivery and that's kind of our whole mantra with parts grading."
The ARA has developed its own language, which is accessible to everyone, including insurers, collision repairers, auto mechanics and the general public. For example, an "A" grade body part has one credit card sized unit of damage or less, a "B" grade part has two units of damage or less, while a "C" grade part has more than two units of damage and an "X" grade part does not contain enough data for the information provider to grade the part.The ARA parts grading system is not limited to body parts either: an "A" grade mechanical part has 60,000 total miles on it, or if over 60,000 miles it can not exceed 15,000 miles per model year of age. A "B" grade mechanical part has between 60,000-200,000 total miles on it and has exceeded 15,000 miles per model year of age, while a "C" grade mechanical part is any part that has more than 200,001 total miles on it, no matter the age.
"The industry is trying to put some teeth behind it to really ensure auto recyclers use it," says Gold. "There are insurance companies out there who will not want to see recycled parts if they are not graded."
Complete details on the parts grading system can be found at the ARA Web site, www.a-r-a.org/.
The main thing the ASA subcommittee is after is a uniform grading system, so that no matter where you called and no matter who does the calling (repairer, insurer, counterman or parts manager), the grading system is the same. In a business where time is limited and clear communication among the various parties is essential, having one parts grading guide is key to success, according to Nagy.
The subcommittee approved the ARA system just before the end of 2006, and will be endorsing it through different means over the next few months.
"As the ARA Parts Grading Guide is adopted by recyclers, repairers and insurers, it will give everyone a common language for describing recycled parts and lessen the current chaos involved with describing the condition of recycled parts," says Nagy.
By: Troy Sympson, Automotive Body Repair News
Thursday, March 01, 2007
Sunday, January 14, 2007
Auto wreckers become recyclers
KW Record - Jan 10, 2007
Opinion & Editorial
To some people, auto-salvage companies are operators of unsightly junk yards, but they should more appropriately be regarded as pioneers of the recycling movement.
An auto-salvage company, at its best, is an environmentally friendly business that is performing a vital service. There simply isn't space in dumps -- now known as landfill sites -- to take old cars. And, even if there were room, cars are filled with too many pollutants to allow them to leach into the ground.
The importance of the salvage industry was noted late last year when Rona Ambrose appeared at Logel's Auto Parts in Kitchener to announce a federal initiative to ensure that toxic mercury switches are removed from cars before they are recycled. Ambrose was the environment minister when she announced the program. The switches activate convenience lights in hoods and trunks. Logel's has been removing them since it learned of the concern, about six years ago.
As a story in The Record on Monday pointed out, the auto-salvaging business is not well regulated. Neither Ottawa, Queen's Park nor local governments have clear rules governing the industry. None of these governments have given even licensed salvage companies standards on how auto parts and fluids should be recycled.
There are also some regional bylaws, but the recycling of automobiles is clearly more complex than a region can properly regulate, despite the goodwill of individual inspectors.
Steve Fletcher, executive director of the Ontario Automotive Recyclers Association, said the federal initiative on mercury switches represents a good start, but he added that other environmental hazards associated with recycling cars require attention. "There are just as many problems with the whole vehicle as there are with that tiny mercury switch," he said.
How refreshing to have an industry prepared to accept government assistance in setting standards in a field that is clearly in the public interest.
John Logel Sr., owner of Logel's, has pointed out that there are 25 licensed salvage yards in Waterloo Region, but others operate without a licence. The unlicensed ones are interested in salvaging metals, but they don't necessarily have the experience or inclination to recycle parts safely.
This is a field in which the federal and provincial governments should work together along with reputable organizations, such as the Ontario Automotive Recyclers Association, to set standards for the entire industry. With environmental concerns becoming of greater public interest as each month goes by, there is no reason to delay.
Opinion & Editorial
To some people, auto-salvage companies are operators of unsightly junk yards, but they should more appropriately be regarded as pioneers of the recycling movement.
An auto-salvage company, at its best, is an environmentally friendly business that is performing a vital service. There simply isn't space in dumps -- now known as landfill sites -- to take old cars. And, even if there were room, cars are filled with too many pollutants to allow them to leach into the ground.
The importance of the salvage industry was noted late last year when Rona Ambrose appeared at Logel's Auto Parts in Kitchener to announce a federal initiative to ensure that toxic mercury switches are removed from cars before they are recycled. Ambrose was the environment minister when she announced the program. The switches activate convenience lights in hoods and trunks. Logel's has been removing them since it learned of the concern, about six years ago.
As a story in The Record on Monday pointed out, the auto-salvaging business is not well regulated. Neither Ottawa, Queen's Park nor local governments have clear rules governing the industry. None of these governments have given even licensed salvage companies standards on how auto parts and fluids should be recycled.
There are also some regional bylaws, but the recycling of automobiles is clearly more complex than a region can properly regulate, despite the goodwill of individual inspectors.
Steve Fletcher, executive director of the Ontario Automotive Recyclers Association, said the federal initiative on mercury switches represents a good start, but he added that other environmental hazards associated with recycling cars require attention. "There are just as many problems with the whole vehicle as there are with that tiny mercury switch," he said.
How refreshing to have an industry prepared to accept government assistance in setting standards in a field that is clearly in the public interest.
John Logel Sr., owner of Logel's, has pointed out that there are 25 licensed salvage yards in Waterloo Region, but others operate without a licence. The unlicensed ones are interested in salvaging metals, but they don't necessarily have the experience or inclination to recycle parts safely.
This is a field in which the federal and provincial governments should work together along with reputable organizations, such as the Ontario Automotive Recyclers Association, to set standards for the entire industry. With environmental concerns becoming of greater public interest as each month goes by, there is no reason to delay.
Salvage yards in chaos - Canada lacks the strict standards of other nations for auto recyclers
KW Record - 1/8/07
Tasmin McMahon
Canada is lagging behind the rest of the world when it comes to regulating salvage yards, the head of the Ontario Automotive Recyclers Association says.
"We've been trying to get them to (regulate)," Steve Fletcher said. "Let's get into the modern age and understand that cars can be good and cars can be bad if they're not handled properly."
In Ontario, there is no provincial auto recycling licence, mainly because rules governing different aspects of auto recycling are spread out among 13 government ministries, Fletcher said.
Nationally, Canada lags behind Europe and Japan, which have well-developed standards for how to recycle and dispose of car parts and fluid, kind of like blue boxes for auto recyclers.
Fletcher's association has an inspection program for new members. But it represents only 150 of as many as 1,000 companies in Ontario that have identified auto recycling as part of their business.
Some municipalities, like the Region of Waterloo, have progressive licensing systems to keep track of auto recyclers, but most don't, he said.
"You end up with a pretty huge disparity in how cars are treated."
The province needs to adopt a common set of standards to create a level playing field across Ontario, Fletcher said.
Most salvage yards do their best to operate safely, but more regulation is needed for unscrupulous businesses, said Gord Miller, Ontario's environmental commissioner.
"It's the kind of system where the industry might be wise to come up with some kind of self-regulation if they want to reassure the governments that they're doing everything right before there's a push from the province to do more," he said.
Such a system is expected to come into force in British Columbia early next year. The legislation requires salvage yards to be certified before they can apply for a business licence. The program was developed by the auto recyclers arm of the Automotive Retailers Association. It was adopted six years ago by the City of Abbotsford before the provincial government signed on this year.
The association hired environmental consultants to develop an environmental checklist for salvage yards, and businesses pay $500 a year to be inspected. Those who run a clean business, get fewer inspections and pay less the next year.
About half the association's 99 auto recycling members have voluntarily signed on to the program.
"We wanted to create our own regulations, our own code of practice before the government made us do it," said David Scarrotts, head of the association's auto recyclers arm.
Ontario's auto-recyclers association is hoping the success of the B.C. regulation will spur the Ontario government to adopt similar regulations.
Politicians are racing to label themselves as green as the environment becomes higher priority for voters, and this bodes well for those wanting greater regulation, Fletcher said. But he doesn't think the province will go as far as creating a provincial licence for auto recyclers.
"I would be shocked if the provincial government would put a licence in place, as much as I know it's the best way to go, and what we've been fighting for," he said. "But the political reality of what's on their agenda is that we're just not that high up."
Tasmin McMahon
Canada is lagging behind the rest of the world when it comes to regulating salvage yards, the head of the Ontario Automotive Recyclers Association says.
"We've been trying to get them to (regulate)," Steve Fletcher said. "Let's get into the modern age and understand that cars can be good and cars can be bad if they're not handled properly."
In Ontario, there is no provincial auto recycling licence, mainly because rules governing different aspects of auto recycling are spread out among 13 government ministries, Fletcher said.
Nationally, Canada lags behind Europe and Japan, which have well-developed standards for how to recycle and dispose of car parts and fluid, kind of like blue boxes for auto recyclers.
Fletcher's association has an inspection program for new members. But it represents only 150 of as many as 1,000 companies in Ontario that have identified auto recycling as part of their business.
Some municipalities, like the Region of Waterloo, have progressive licensing systems to keep track of auto recyclers, but most don't, he said.
"You end up with a pretty huge disparity in how cars are treated."
The province needs to adopt a common set of standards to create a level playing field across Ontario, Fletcher said.
Most salvage yards do their best to operate safely, but more regulation is needed for unscrupulous businesses, said Gord Miller, Ontario's environmental commissioner.
"It's the kind of system where the industry might be wise to come up with some kind of self-regulation if they want to reassure the governments that they're doing everything right before there's a push from the province to do more," he said.
Such a system is expected to come into force in British Columbia early next year. The legislation requires salvage yards to be certified before they can apply for a business licence. The program was developed by the auto recyclers arm of the Automotive Retailers Association. It was adopted six years ago by the City of Abbotsford before the provincial government signed on this year.
The association hired environmental consultants to develop an environmental checklist for salvage yards, and businesses pay $500 a year to be inspected. Those who run a clean business, get fewer inspections and pay less the next year.
About half the association's 99 auto recycling members have voluntarily signed on to the program.
"We wanted to create our own regulations, our own code of practice before the government made us do it," said David Scarrotts, head of the association's auto recyclers arm.
Ontario's auto-recyclers association is hoping the success of the B.C. regulation will spur the Ontario government to adopt similar regulations.
Politicians are racing to label themselves as green as the environment becomes higher priority for voters, and this bodes well for those wanting greater regulation, Fletcher said. But he doesn't think the province will go as far as creating a provincial licence for auto recyclers.
"I would be shocked if the provincial government would put a licence in place, as much as I know it's the best way to go, and what we've been fighting for," he said. "But the political reality of what's on their agenda is that we're just not that high up."
Auto-parts recyclers push for regulation
KW Record - 1/8/07
Tasmin McMahon
Johnny Logel bristles when people call his family business a junkyard. Logel is set to take over an auto salvage yard on Bridge Street East in Kitchener next year, the third generation of his family to run Logel's Auto Parts.
The business dismantles and recycles about 1,000 old and wrecked vehicles a year, draining as much as 8,000 litres of potentially toxic fluids such as gasoline, motor oil, antifreeze and mercury.
Cars are dismantled in an enclosed workshop. Reusable parts are sorted, inventoried and stored in a warehouse and resold. The company pays licensed haulers to get rid of antifreeze, tires and batteries, which are often recycled. Oil and transmission fluid is filtered into a clean-burning furnace and used to heat the warehouse and shop. Gasoline is suctioned out of cars and used to fuel delivery vehicles, and Logel's sells freon to repair shops to be reused in car air conditioners
The days when rusting hulks sat in yards leaking fuel into the ground are gone, Logel said.
"The word junkyard is like a swear word around here."
Logel's and other legitimate scrapyards have been trying to clean up the image of their industry and are pushing the provincial government to crack down on environmentally unscrupulous auto wreckers.
Recently, Logel's yard was used as a benchmark for a new federal program to cut down on hazards from recycling cars. The program requires wreckers to remove mercury switches before vehicles are crushed. A gram of mercury is enough to pollute a 20-acre lake.
But as the high price of scrap metal entices more businesses into scrapping used cars, Ontario auto recyclers are complaining their industry is poorly regulated.
Lax and inconsistent licensing policies across the province leave it up to companies like the Logel's to voluntarily ensure their businesses don't pollute the environment.
Regulating mercury switches is a good start, said Steve Fletcher, executive director of the Ontario Automotive Recyclers Association, but governments need to take a broader look at the environmental hazards of recycling cars.
"They are officially putting a lot of time and effort into something that's as big as the tip of your baby finger," he said of a mercury switch. "There are just as many problems with the whole vehicle as there are with that tiny mercury switch."
There are 25 licensed salvage yards in the region, but there are others who operate without a licence, dabbling in the industry mainly to salvage metals with little regard for how to safely recycle parts, said Logel's owner John Logel Sr.
One of the problems is that there are no requirements for who can buy scrapped cars, known as end-of-life vehicles, Logel Sr. said.
Even for those that are licensed, there are no set standards for how parts and fluids should be recycled, and inspectors have little power to actively enforce existing rules.
The Ministry of the Environment has issued five orders against salvage yards in the region since 2002 for a range of violations.
The violations range from not properly storing potentially hazardous vehicle fluids, to burning waste, contaminating soil and releasing chemicals into the air.
The ministry issued two cleanup orders against to J.M.W. Automotive on Margaret Avenue in Kitchener after a neighbour complained in 2002 that the business had contaminated her yard with oil. In 2004, a wall at the wrecking yard collapsed metres from where children play.
Across the province, the environmental commissioner's office has received three requests for investigations into salvage yards, including complaints that cars are crushed before fluids are drained, and that scrapyards are over-filling municipal landfills with "auto fluff," the foam taken from seats and dashboards that are ground up to salvage the metal.
The Region of Waterloo requires scrapyards to get an environmental assessment before applying for a new licence. But there is no such requirements for existing yards.
Regional bylaw officers inspect licensed salvage yards at least twice a year, mainly to enforce a bylaw requirement, said Marty Sawdon, administrator of Licensing and Regulatory Services.
Bylaw officers have some power to enforce environmental issues contained in the bylaw, such as ensuring car batteries are stored off the ground and facing upward. If inspectors suspect there are environmental problems, they can report them to the Ministry of the Environment.
They also investigate complaints, but Sawdon said most public complaints relate to noise violations and scrap metal that is piled too high.
The region tried to deal with environmental concerns when it rewrote its salvage yard bylaw last year. A November 2005, regional report identified the environmental dangers of salvage yards as a "major concern" in the wake of several blazes at scrapyards, including a $400,000 fire at Logel's in 1997 that was started by blow torch.
As part of the new bylaw, the region tried asking scrapyards to produce a letter of clearance from the Ministry of the Environment or undergo an environmental assessment every five years.
But the ministry doesn't regularly inspect salvage yards and so won't issue clearance letters. The region later realized environmental assessments are so expensive they would have put some salvage yards out of business, Sawdon said.
Ultimately, the region decided to leave environmental enforcement up to the province but would suspend, revoke or refuse to issue salvage licences to yards with serious documented problems.
No scrapyards have lost their licence since the new bylaw came into force, Sawdon said
"It comes back down to the question of jurisdiction and who is responsible for this type of thing and it's our viewpoint that it resides with the ministry," said regional clerk Kris Fletcher.
The Environment Ministry inspects scrapyards if it gets a complaint and also incorporates auto wreckers into its regional inspection plan, said Dolly Goyette, the district officer for the ministry's Guelph office. She couldn't say how often salvage yards were inspected under the district plan.
The region conducts detailed tests on its water supply and hasn't found automotive chemicals in municipal wells, said manager of water resources Eric Hodgins. Metals tend to stick to the soil, rather than filter into groundwater. Petroleum-based products, like gasoline and oils, usually stay shallow, while drinking water wells are deep. "It's very unlikely we would see direct impacts," Hodgins said. "That being said, we don't have a lot of specific information on a lot of individual sites."
The province's Clean Water Act, passed in October, is expected to give municipalities greater powers to inspect businesses like salvage yards for environmental problems and take steps to protect the water supply. The legislation is in place, but the region is still waiting on four sets of regulations, expected over the next two years, that will spell out details of exactly what information the municipalities can collect.
In the meantime, the region has put salvage yards on a list of businesses with the highest risk of contaminating the environment as part of its wellhead protection planning.
It also created zoning restrictions the don't allow scrapyards to set up shop in the areas around wells, although 10 of the 25 existing scrapyards are within wellhead protection areas.
The region did run a program that gave businesses such as scrapyards up to $20,000 to invest in technologies that would prevent spills but cancelled it last year after getting an underwhelming response.
Depending on the powers in the Clean Water Act, the region may restart the program or try something new, Hodgins said.
That's disappointing news for organizations such as Clean Air Foundation, whose Car Heaven program promotes salvage yards that recycle cars in environmentally sound ways.
Cars are one of the most recyclable products in the world, said executive director Ersilia Serafini, but there is no regulatory body ensuring that recycling is done properly.
"Really no one is looking at them," she said. "They got their certificate of approval from the ministry and they can do pretty much whatever the hell they want."
Tasmin McMahon
Johnny Logel bristles when people call his family business a junkyard. Logel is set to take over an auto salvage yard on Bridge Street East in Kitchener next year, the third generation of his family to run Logel's Auto Parts.
The business dismantles and recycles about 1,000 old and wrecked vehicles a year, draining as much as 8,000 litres of potentially toxic fluids such as gasoline, motor oil, antifreeze and mercury.
Cars are dismantled in an enclosed workshop. Reusable parts are sorted, inventoried and stored in a warehouse and resold. The company pays licensed haulers to get rid of antifreeze, tires and batteries, which are often recycled. Oil and transmission fluid is filtered into a clean-burning furnace and used to heat the warehouse and shop. Gasoline is suctioned out of cars and used to fuel delivery vehicles, and Logel's sells freon to repair shops to be reused in car air conditioners
The days when rusting hulks sat in yards leaking fuel into the ground are gone, Logel said.
"The word junkyard is like a swear word around here."
Logel's and other legitimate scrapyards have been trying to clean up the image of their industry and are pushing the provincial government to crack down on environmentally unscrupulous auto wreckers.
Recently, Logel's yard was used as a benchmark for a new federal program to cut down on hazards from recycling cars. The program requires wreckers to remove mercury switches before vehicles are crushed. A gram of mercury is enough to pollute a 20-acre lake.
But as the high price of scrap metal entices more businesses into scrapping used cars, Ontario auto recyclers are complaining their industry is poorly regulated.
Lax and inconsistent licensing policies across the province leave it up to companies like the Logel's to voluntarily ensure their businesses don't pollute the environment.
Regulating mercury switches is a good start, said Steve Fletcher, executive director of the Ontario Automotive Recyclers Association, but governments need to take a broader look at the environmental hazards of recycling cars.
"They are officially putting a lot of time and effort into something that's as big as the tip of your baby finger," he said of a mercury switch. "There are just as many problems with the whole vehicle as there are with that tiny mercury switch."
There are 25 licensed salvage yards in the region, but there are others who operate without a licence, dabbling in the industry mainly to salvage metals with little regard for how to safely recycle parts, said Logel's owner John Logel Sr.
One of the problems is that there are no requirements for who can buy scrapped cars, known as end-of-life vehicles, Logel Sr. said.
Even for those that are licensed, there are no set standards for how parts and fluids should be recycled, and inspectors have little power to actively enforce existing rules.
The Ministry of the Environment has issued five orders against salvage yards in the region since 2002 for a range of violations.
The violations range from not properly storing potentially hazardous vehicle fluids, to burning waste, contaminating soil and releasing chemicals into the air.
The ministry issued two cleanup orders against to J.M.W. Automotive on Margaret Avenue in Kitchener after a neighbour complained in 2002 that the business had contaminated her yard with oil. In 2004, a wall at the wrecking yard collapsed metres from where children play.
Across the province, the environmental commissioner's office has received three requests for investigations into salvage yards, including complaints that cars are crushed before fluids are drained, and that scrapyards are over-filling municipal landfills with "auto fluff," the foam taken from seats and dashboards that are ground up to salvage the metal.
The Region of Waterloo requires scrapyards to get an environmental assessment before applying for a new licence. But there is no such requirements for existing yards.
Regional bylaw officers inspect licensed salvage yards at least twice a year, mainly to enforce a bylaw requirement, said Marty Sawdon, administrator of Licensing and Regulatory Services.
Bylaw officers have some power to enforce environmental issues contained in the bylaw, such as ensuring car batteries are stored off the ground and facing upward. If inspectors suspect there are environmental problems, they can report them to the Ministry of the Environment.
They also investigate complaints, but Sawdon said most public complaints relate to noise violations and scrap metal that is piled too high.
The region tried to deal with environmental concerns when it rewrote its salvage yard bylaw last year. A November 2005, regional report identified the environmental dangers of salvage yards as a "major concern" in the wake of several blazes at scrapyards, including a $400,000 fire at Logel's in 1997 that was started by blow torch.
As part of the new bylaw, the region tried asking scrapyards to produce a letter of clearance from the Ministry of the Environment or undergo an environmental assessment every five years.
But the ministry doesn't regularly inspect salvage yards and so won't issue clearance letters. The region later realized environmental assessments are so expensive they would have put some salvage yards out of business, Sawdon said.
Ultimately, the region decided to leave environmental enforcement up to the province but would suspend, revoke or refuse to issue salvage licences to yards with serious documented problems.
No scrapyards have lost their licence since the new bylaw came into force, Sawdon said
"It comes back down to the question of jurisdiction and who is responsible for this type of thing and it's our viewpoint that it resides with the ministry," said regional clerk Kris Fletcher.
The Environment Ministry inspects scrapyards if it gets a complaint and also incorporates auto wreckers into its regional inspection plan, said Dolly Goyette, the district officer for the ministry's Guelph office. She couldn't say how often salvage yards were inspected under the district plan.
The region conducts detailed tests on its water supply and hasn't found automotive chemicals in municipal wells, said manager of water resources Eric Hodgins. Metals tend to stick to the soil, rather than filter into groundwater. Petroleum-based products, like gasoline and oils, usually stay shallow, while drinking water wells are deep. "It's very unlikely we would see direct impacts," Hodgins said. "That being said, we don't have a lot of specific information on a lot of individual sites."
The province's Clean Water Act, passed in October, is expected to give municipalities greater powers to inspect businesses like salvage yards for environmental problems and take steps to protect the water supply. The legislation is in place, but the region is still waiting on four sets of regulations, expected over the next two years, that will spell out details of exactly what information the municipalities can collect.
In the meantime, the region has put salvage yards on a list of businesses with the highest risk of contaminating the environment as part of its wellhead protection planning.
It also created zoning restrictions the don't allow scrapyards to set up shop in the areas around wells, although 10 of the 25 existing scrapyards are within wellhead protection areas.
The region did run a program that gave businesses such as scrapyards up to $20,000 to invest in technologies that would prevent spills but cancelled it last year after getting an underwhelming response.
Depending on the powers in the Clean Water Act, the region may restart the program or try something new, Hodgins said.
That's disappointing news for organizations such as Clean Air Foundation, whose Car Heaven program promotes salvage yards that recycle cars in environmentally sound ways.
Cars are one of the most recyclable products in the world, said executive director Ersilia Serafini, but there is no regulatory body ensuring that recycling is done properly.
"Really no one is looking at them," she said. "They got their certificate of approval from the ministry and they can do pretty much whatever the hell they want."
Monday, November 06, 2006
Salvage Returns vs. Parts Availability
For years, the interdependency between total loss frequency, salvage recovery rates, and the use of recycled parts has been a subject of interest to the collision repair industry, with different constituents having different perspective on the above-mentioned relationship. Insurers, collision repairers, salvors, and dismantlers each assert that the others’ business practices negatively affect their customers and profits, with the end victims apparently being vehicle owners, who ultimately pay the price in higher insurance premiums.
Mitchell International conducted a series of interviews with various industry participants to compile a list of the ten, most commonly held beliefs/assumptions in this area. The next step was to verify or challenge these assumptions by researching the facts of the matters using a mix of sources such salvage pools, collision repair shops, insurance carriers, and independent adjusters. We expect our findings, which appear below, to be of interest to many:
Assumption: The average repairable estimate total is increasing significantly.
Status: FALSE
Average repairable estimate totals have changed very little between 2004 and 2006, and have actually decreased 4% ($92) since 2003, though increasing slightly the past three years.
Assumption: Most collisions are front impacts and are often declared total losses
Status: TRUE
We analyzed several thousand repairable and non-repairable vehicles looking for a correlation between the point–of–impact and the total loss rate. Our analysis revealed vehicle impacts are distributed as follows, and more-or-less as expected:
Front 45%
Rear 29%
Left 13%
Right 12%
Unknown 1%
Point-of-impact had a significant effect on the likelihood that a vehicle would be totaled. The data showed that fifty percent (50%) of front-end collisions get totaled, twice the rate at which rear-end collisions result in totaling, and nearly four times the rate for side-impacts. Our appraisal analysis and industry surveys confirmed that air bag deployment, power train damage, and extensive (and expensive) front-mounted electronic components can quickly total out a vehicle in a front-end collision.
Assumption: Total losses ratios are increasing every year
Status: TRUE
We looked at total loss rates for several carriers across the US from 2003 through 2005 and found that—in 2003—the state total loss rate varied from 10% to over 26%, with the majority of states (31) falling in the 16–20% range, and only one reporting total losses at 26% or higher. By 2005, twelve states were reporting total loss rates of 26% or more, with only five states continuing to report “low” total loss rates. Our research confirms that most carriers have experienced a steady increase in total loss rates of 1% (or 5% marginal growth) each year over the past several years. Some carriers
have attempted to mitigate, or even reverse this trend by searching for economically viable ways to repair more vehicles.
Assumption: More salvage is going overseas, impacting domestic parts availability and pricing.
Status: TRUE
It is widely accepted amongst salvage pools that more cars than ever are going overseas. Some border/coastal pools claim that 40% of their “rebuildable” salvage goes to international buyers. Dismantlers are being outbid by these buyers and believe that this will cause a recycled parts shortage, driving the total loss rates even higher. But why is this happening? One reason is web bidding. Before Internet bidding was available, an international buyer would have to fly or drive to the US to participate in an auction, requiring considerable time and expense on the part of international buyers in order to participate in bidding. The combination of local and Internet bidders helps drive record salvage recovery rates. Another reason for the increase in salvage recovery rates is favorable exchange rates. The US dollar has softened considerably since 2003 compared to other currencies. In fact, international buyers have seen a 32-44% increase in their buying power since 2003. For European buyers, salvage valued at $10,000 USD cost 9,708 Euros in 2003, but dropped to only 7,917 EUR Euros by October 2006. This overseas buyer has become so common that shippers provide reduced container pricing for a “four pack” of vehicles to a European base port, often as low as $925 per vehicle. In combination, ready access to domestic auction markets, increased purchasing power due to favorable exchange rates, and reduced shipping costs (also impacted by exchange rates) make the US an attractive market from which to acquire salvage.
Assumption: Shortages of available recycled parts are driving parts prices higher, further increasing total losses.
Status: CON TESTED
We analyzed thousands of estimates from 2003 through mid-2006 looking for a trend in pricing, recycled parts usage, or percentage of the estimate dollar. The average part price has actually decreased from a high of $132 in 2003 to $122 in 2006. As a percentage of estimate dollars, recycled parts have held flat at just over 11% during the same time period. Regardless of the measure utilized, the use and price of recycled parts has been flat for the past four years.
Assumption: The increasing number of total losses is driving lower salvage return rates.
Status: FALSE
Finally, we looked at how total loss rates would affect salvage returns. Some states with high total loss rates had high returns and others had the opposite. We couldn’t find any direct correlation, and neither could other industry experts with whom we consulted. While most would expect that a high number of total losses would drive down returns (too much supply) quite the opposite was often true. Vehicles that were arguably totaled out too early can become valuable as salvage, fetching top dollar when sold at auction.
So, what’s the bottom line on Salvage Returns vs. Parts Availability?
• For most carriers, the relatively flat “repairable” estimate has been at the cost of increasing total losses. As fewer and fewer “hard-hits” are repaired (and instead totaled) the overall repairable estimate figure can appear artificially low.
• When more vehicles get totaled due to front-end collisions, salvage pools end up with the task of remarketing a disproportionate number of front-end damaged salvage vehicles to buyers seeking undamaged front-end components.
• When an insurer works hard to lower their total loss rate by repairing more cars, they will inadvertently lower their salvage returns by turning only heavily damaged vehicles—which contain fewer salvageable components—over to the pools.
For the foreseeable future, we can expect that the number of total losses will continue to increase, due to the inclusion of additional (expensive) safety devices and electronics, and the reluctance of vehicle owners to accept the repair of a heavily damaged vehicle. US salvage buyers will have to compete with international buyers at least as long as the exchange rate stays in their favor. The usage and price of recycled parts will remain relatively flat until insurance companies perceive the benefit of recycled parts vs. other repair options.
By Keith McCrone, Senior Director, Product Management, Mitchell International from the Mitchell Industry Trends Report
Mitchell International conducted a series of interviews with various industry participants to compile a list of the ten, most commonly held beliefs/assumptions in this area. The next step was to verify or challenge these assumptions by researching the facts of the matters using a mix of sources such salvage pools, collision repair shops, insurance carriers, and independent adjusters. We expect our findings, which appear below, to be of interest to many:
Assumption: The average repairable estimate total is increasing significantly.
Status: FALSE
Average repairable estimate totals have changed very little between 2004 and 2006, and have actually decreased 4% ($92) since 2003, though increasing slightly the past three years.
Assumption: Most collisions are front impacts and are often declared total losses
Status: TRUE
We analyzed several thousand repairable and non-repairable vehicles looking for a correlation between the point–of–impact and the total loss rate. Our analysis revealed vehicle impacts are distributed as follows, and more-or-less as expected:
Front 45%
Rear 29%
Left 13%
Right 12%
Unknown 1%
Point-of-impact had a significant effect on the likelihood that a vehicle would be totaled. The data showed that fifty percent (50%) of front-end collisions get totaled, twice the rate at which rear-end collisions result in totaling, and nearly four times the rate for side-impacts. Our appraisal analysis and industry surveys confirmed that air bag deployment, power train damage, and extensive (and expensive) front-mounted electronic components can quickly total out a vehicle in a front-end collision.
Assumption: Total losses ratios are increasing every year
Status: TRUE
We looked at total loss rates for several carriers across the US from 2003 through 2005 and found that—in 2003—the state total loss rate varied from 10% to over 26%, with the majority of states (31) falling in the 16–20% range, and only one reporting total losses at 26% or higher. By 2005, twelve states were reporting total loss rates of 26% or more, with only five states continuing to report “low” total loss rates. Our research confirms that most carriers have experienced a steady increase in total loss rates of 1% (or 5% marginal growth) each year over the past several years. Some carriers
have attempted to mitigate, or even reverse this trend by searching for economically viable ways to repair more vehicles.
Assumption: More salvage is going overseas, impacting domestic parts availability and pricing.
Status: TRUE
It is widely accepted amongst salvage pools that more cars than ever are going overseas. Some border/coastal pools claim that 40% of their “rebuildable” salvage goes to international buyers. Dismantlers are being outbid by these buyers and believe that this will cause a recycled parts shortage, driving the total loss rates even higher. But why is this happening? One reason is web bidding. Before Internet bidding was available, an international buyer would have to fly or drive to the US to participate in an auction, requiring considerable time and expense on the part of international buyers in order to participate in bidding. The combination of local and Internet bidders helps drive record salvage recovery rates. Another reason for the increase in salvage recovery rates is favorable exchange rates. The US dollar has softened considerably since 2003 compared to other currencies. In fact, international buyers have seen a 32-44% increase in their buying power since 2003. For European buyers, salvage valued at $10,000 USD cost 9,708 Euros in 2003, but dropped to only 7,917 EUR Euros by October 2006. This overseas buyer has become so common that shippers provide reduced container pricing for a “four pack” of vehicles to a European base port, often as low as $925 per vehicle. In combination, ready access to domestic auction markets, increased purchasing power due to favorable exchange rates, and reduced shipping costs (also impacted by exchange rates) make the US an attractive market from which to acquire salvage.
Assumption: Shortages of available recycled parts are driving parts prices higher, further increasing total losses.
Status: CON TESTED
We analyzed thousands of estimates from 2003 through mid-2006 looking for a trend in pricing, recycled parts usage, or percentage of the estimate dollar. The average part price has actually decreased from a high of $132 in 2003 to $122 in 2006. As a percentage of estimate dollars, recycled parts have held flat at just over 11% during the same time period. Regardless of the measure utilized, the use and price of recycled parts has been flat for the past four years.
Assumption: The increasing number of total losses is driving lower salvage return rates.
Status: FALSE
Finally, we looked at how total loss rates would affect salvage returns. Some states with high total loss rates had high returns and others had the opposite. We couldn’t find any direct correlation, and neither could other industry experts with whom we consulted. While most would expect that a high number of total losses would drive down returns (too much supply) quite the opposite was often true. Vehicles that were arguably totaled out too early can become valuable as salvage, fetching top dollar when sold at auction.
So, what’s the bottom line on Salvage Returns vs. Parts Availability?
• For most carriers, the relatively flat “repairable” estimate has been at the cost of increasing total losses. As fewer and fewer “hard-hits” are repaired (and instead totaled) the overall repairable estimate figure can appear artificially low.
• When more vehicles get totaled due to front-end collisions, salvage pools end up with the task of remarketing a disproportionate number of front-end damaged salvage vehicles to buyers seeking undamaged front-end components.
• When an insurer works hard to lower their total loss rate by repairing more cars, they will inadvertently lower their salvage returns by turning only heavily damaged vehicles—which contain fewer salvageable components—over to the pools.
For the foreseeable future, we can expect that the number of total losses will continue to increase, due to the inclusion of additional (expensive) safety devices and electronics, and the reluctance of vehicle owners to accept the repair of a heavily damaged vehicle. US salvage buyers will have to compete with international buyers at least as long as the exchange rate stays in their favor. The usage and price of recycled parts will remain relatively flat until insurance companies perceive the benefit of recycled parts vs. other repair options.
By Keith McCrone, Senior Director, Product Management, Mitchell International from the Mitchell Industry Trends Report
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