Monday, August 10, 2009

Scrap yards get busy crushing clunkers

Auto recyclers hope to make profit; effects on market uncertain
Jim Biggs, yard supervisor at B&F Towing Co. in New Castle, Del., is getting ready to destroy a 1997 green Nissan Pathfinder SUV that looks in pretty good shape except for some wear and tear.

“They’re nicer than what we’re used to crushing,” said Biggs. He climbed into a front-end loader and drove over to the Pathfinder to take it on its final journey to a giant compactor known as a “car crusher.”

The government’s hugely popular “Cash for Clunkers” program is keeping B&F and other scrap yards across the country busy crushing roadworthy vehicles and sending them on for shredding.

Not everybody is happy with the program, which was extended for at least a few weeks when President Obama Friday signed into law a $2 billion extension.

Some auto recyclers are particularly incensed with provisions that limit the ability of the yards to recycle parts from the vehicle.

“There’s a mixed feeling out there among auto recyclers,” said Jennifer Johnson, a spokeswoman for the Automotive Recyclers Association. Under the law, the engine of each "clunker" must be destroyed by a process that involves pouring sodium silicate, known as liquid glass, into it until it ceases to operate.

In addition the drive train cannot be sold without being disassembled. Those two parts typically yield 60 percent of the profit from a recycled vehicle.

Barb Moran, president of Moran Industries, one of the largest automotive aftermarket repair center franchise operations in the country, also said crushing the old vehicles means fewer components that could be used to repair existing cars. “If a customer has a problem, you’re not going to be able to go and find those parts to repair the vehicle,” she said.

But Henry Fenimore, owner of B&F, said he hopes to make at least a small profit from the vehicles he crushes. But he added that he is racing the clock to get the scrap to the salvage yard. “With the market for scrap liable to be flooded with vehicles, the price can come down," he said.

B&F is one of thousands of disposal operations across the country authorized to destroy the gas-guzzlers.

B&F bought the Pathfinder from Union Park Automotive Group in Wilmington, Del., last week and made it a priority to scrap it right away even though he has 180 days to do so under the program. The federal program requires both firms to certify in writing that the SUV was scrapped, leaving an extensive paper trail.

The government wants to ensure that the vehicles and their engines do not end up back on the road after a trade in.

“Once I get possession of them I have to certify that they won’t get back on the highway,” said Fenimore.

That's because one person’s clunker can be another person’s awesome ride; and clearly many of these vehicles are still roadworthy. One of the provisions of the clunker law is that the vehicles have to be driven in to dealerships for consumers to qualify for a government rebate of up to $4,500.

So far, Fenimore has gotten 20 vehicles from dealers around the state to crush as part of the program. He expects 200 more to be heading his way soon.

He typically pays about $200 a vehicle and expects to make a profit from the scrap metal and whatever parts he can sell and recycle. When and how much he’ll make he can’t speculate. “It depends on how fast I can do all this to keep up with the market” for scrap metal prices, he said.

The vehicles that are part of the program are not like others he’s bought before, and he expects slimmer margins.

First off, with cars he hauls from the street, there may be some money in the ashtray, or a wrench or jumper cables in the trunk. By contrast, the vehicles he’s getting through the clunker program are usually cleaned out pretty well by their owners.

Indeed, the only thing left in the Nissan Pathfinder was a pen, half a bottle of washer fluid and a jack kit.

And he can’t resell the most lucrative part of almost every vehicle, the engine.

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