Taking it to the hill: the Automotive Recyclers Association is lobbying on three legislative issues that potentially could harm professional auto recyclers. (Automotive Recycling Update).

Approximately 86 percent of the automotive recycling facilities in the U.S. are small businesses with 10 or fewer employees, according to the Automotive Recyclers Association (ARA), the international trade association representing recyclers of automotive parts.

These small businesses are particularly vulnerable to legislative changes mandating expensive and extensive changes to their daily operations, as many within the industry typically have pre-tax operating margins of less than 2 percent and annual revenues of $100,000 to $249,000, according to a study published by the San Francisco-based organization Sustainable Conservation.

To mobilize its membership, the Fairfax, Va.-based ARA sponsors Hill Days each spring, inviting members from around the U.S. to meet with their legislators. Bill Steinkuller, ARA executive vice president, says legislators generally provide an understanding and receptive audience. However, challenges exist.

"It is a definite educational experience, both for our members as well as for the members of Congress and their staffs," Steinkuller says. "Unlike a lot of industries, we have to explain what the automotive recycler really does and what the automotive recycling industry's many contributions to the environment and to the economy really are."

Steinkuller says the association has focused its lobbying on three primary issues: vehicle scrapping programs, the Motor Vehicle Owners' Right to Repair Act and mercury legislation. Additionally, ARA is lobbying for model vehicle identification number (VIN) condemnation legislation.

These issues represent a threat to the auto recycler's bottom line, either by limiting access to vehicles and marketing opportunities or by establishing costly and seemingly impractical tracking methods that create additional administrative responsibilities.

THE VEHICLE SCRAPPING ISSUE

The Energy Policy Act of 2002 included vehicle scrappage legislation advocating the scrapping of older vehicles in an attempt to reduce tailpipe emissions and increase fleet fuel economy.

"Under these programs, motor vehicle owners are offered financial incentives to scrap their vehicles and replace them with newer ones," according to ARA literature. "In most cases, the performance of the vehicles targeted for scrappage could be more cost effectively improved through proper maintenance and repair."

Steinkuller says, "The ARA opposes vehicle scrappage programs that basically paint a bull's eye on small businesses in our industry by eliminating some of the very vehicles, parts and marketing opportunities that some in this industry really need to survive." He adds, "Since recycled parts used in the repair and upkeep of older vehicles are a significant source of commerce for some of our professional auto recycling members, the motorvehicle scrappage program poses an economic threat to the industry."

The legislation also included language stating that a state office will determine the appropriate payment to the recycler of the scrapped vehicle, a troublesomely vague notion for ARA.

THE RIGHT TO REPAIR ACT

While ARA is not lobbying against this legislation per se, its language is at issue.

The bill is intended to protect consumers' rights to diagnose, service and repair their late-model vehicles by being able to choose independent shops rather than dealerships. While the bill mentions the consumers' right to access original equipment manufacturer (OEM) parts as well as aftermarket parts, ARA would like the language amended to include recycled OEM parts.

According to ARA, the use of new parts in the repair of vehicles results in higher repair costs, which leads to the repair of fewer vehicles, the "totaling" of more vehicles by the insurance industry and ultimately to higher premiums for auto insurance.

MODEL MERCURY SWITCH LEGISlaTION

Removing mercury switches from in-use and end-of-life vehicles in order to preserve the recycling infrastructure and the purity of steel supplied to electric arc furnace mini-mills is a priority for various trade associations, environmental groups and industries. However, the financing of such a program is at issue.

"Obviously, ARA's concern is that small businesses are not saddled with the incredible cost, liability and toxicity of mercury," Steinkuller says. "Auto manufacturers made a conscious decision when they engineered their products to contain mercury. And while auto recyclers may be willing to assist with the problem, auto recyclers didn't create it, and they are not in a position to accept the responsibility and the liability for such a toxic substance," he adds.

ARA would like to see automakers take responsibility for their design choices by taking financial and organizational responsibility for the collection and recovery of mercury and similar toxic substances from vehicles.

Draft legislation supported by the Partnership for Mercury-Free Vehicles, which includes the ARA, the Institute for Scrap Recycling Industries Inc. (ISRI) and several other organizations, seeks a 90 percent recovery rate and urges automakers to take financial and organizational responsibility for collection efforts, including the collection, transportation and recycling or disposal of mercury-containing devices. (See "The Mercury Program," Recycling Today, March 2002.)

"There has been some legislation in various states proposed and some progress made," Steinkuller says. "But it's disappointing to see that the manufacturers are not as anxious to talk with us directly about a role that we might play in the mercury issue, rather than fighting state by state to see if they can get small `mom and pop' businesses to take care of what, in essence, is a problem they created."

VIN CONDEMNATION LEGISLATION

Another ARA effort concerns severely damaged vehicles that could potentially make it back onto the road. According to the ARA, a national solution is needed to address the twin problems that often arise when non-repairable vehicles (those damaged far beyond safe repair) are sold at auto auctions to unscrupulous re-builders or thieves, who bid high for wrecks and then profit from them by committing serious, even deadly, wrongs against consumers. Currently, ARA has model VIN condemnation legislation for which it is seeking bipartisan support.

Steinkuller says the proposed legislation "bypasses the title branding debates that have been going on for a number of years and really attempts to address two key areas through federal vehicle identification number condemnation."

The legislation would condemn severely damaged vehicle s and establish a national registry of total loss vehicles.

"It provides a level playing field for ARA members," Steinkuller says. "But it is not simply a piece of legislation to help ARA members, it's common sense legislation that will keep vehicles which have already been determined to be beyond economic repair off the highways and out of the hands of unscrupulous re-builders."

MAINTAINING MARKET SHARE

Steinkuller says that while automakers themselves haven't necessarily lobbied for specific legislation harmful to ARA members, some do make statements in their literature that "casts doubt and disparages the recycled automotive part." He adds that this is ironic, given the fact that the vast majority of the parts sold by ARA members are OEM parts from the same manufacturers.

"In a real world marketplace, you do have obviously competing interests which would benefit potentially from not using a quality recycled product," Steinkuller says. "It's clear that if you can sell your new part to the exclusion of your previously manufactured part, then that is to your economic advantage."

Despite the disparaging remarks and threatening legislation, recycled parts have enjoyed a strong market. "Some individuals always have a heightened sense of the value of recycled parts during an economic downturn," Steinkuller says. "The recycled parts market is steady," though Steinkuller adds that some ARA members are having a difficult time as a result of the economic downturn and their increasing environmental burdens.

"But the parts themselves are at least as valuable if not more so than they would be in more prosperous times," he says. "In times like these, sometimes people re-discover the recycled part, both on the retail and wholesale level, and that's to everyone's advantage."

MORE ON REGULATIONS

Read about ARA's concerns about parts checking regulations as well as its testing of recycled airbags. An update on state legislative acts concerning mercury can also be found at RecyclingToday.com.

RELATED ARTICLE: Scrapping it?

Auto recyclers continue to focus on their primary business, the recovery and resale of auto pads. However, some are increasingly interested in further dismantling vehicles to maximize their profits.

"Obviously, the easiest and most profitable part of the business are those auto parts that you can get out quickly and easily and sell fairly quickly and easily," Gordon Hawke of AADCO Automotive Inc., Brampton, Ontario, Canada, says. "Traditionally, that is what the industry is focused on."

Bob Hoffman of QRP, Schofield, Wis., says that while auto recyclers may be interested in the scrap value of the cars they are processing, the labor costs associated with removing such components often outweigh the scrap value.

Contrary views can be found, however. "We're much more cognizant of the scrap value," Gary T. Wiesner of PRO Auto Recyclers, Williamstown, N.J., says. "At one time, it was more or less a by-product of everything we handled. Now, it has become an intricate part of our business."

Hawke says, "I think traditional companies in the industry are moving towards dismantling more of the vehicles rather than just crushing them as they used to."

Aluminum components, such as wheels and broken transmission housings, provide an easily accessible form of scrap for many auto recyclers, Hoffman says.

Bill Steinkuller, executive vice president of the Automotive Recyclers Association, Fairfax, Va., agrees that many auto dismantlers have been removing the aluminum components from vehicles. "For those companies that perhaps are more into the scrap end of the equation, they will have aluminum [furnaces] and will have made a business decision that this was a good activity to pursue in-house, rather than selling in bulk the vehicle with its aluminum components," he says.

AADCO completely dismantles its vehicles to retrieve high-value auto parts in the quality and quantity that the company wants. "That's what drives us to the 100 percent environmental solution," Hawke says.

"The trick is finding the best markets and eliminating the various middle men along the way," Hawke says.

While plastics currently give AADCO problems, Hawke says the company's most profitable material is steel, which it sells directly to a steel company.

Wiesner says, "Aside from selling the resalable parts and reusable pads, we have to be aware of all of our sister industries, especially the scrap industry."

The author is assistant editor of Recycling Today and can be contacted via e-mail at [e-mail].