Unfulfilled Potential

While the benefits of using recycled auto parts are obvious in terms of the environmental and economic components, there are advantages that are not as easily visible. Inconsistencies remain, however, that prevent recycled parts from achieving increased market penetration.

Despite these inconsistencies, acceptance of recycled auto parts by consumers, insurers and auto body shops continues to grow incrementally. But, as Maurice Leiser of Cleveland’s Ridge Roads Auto Parts says, “There is room for improvement.”

DEGREE OF ACCEPTANCE

“The insurance industry loves recycled parts because they are able to save money,” Leiser says. “That’s what it’s all about.”

Dave Hurst, public relations liaison for State Farm Insurance, says that insurers readily accept the use of recycled parts, provided that the recycler has a proven record of delivering quality parts within the quoted time frame.

Avi Pelc, director of product management for ADP Hollander, Plymouth, Minn., says, “Much of the use of recycled parts in the repair of body damage over the last 24 months has been encouraged by insurance companies. Part of it is driven by what happened with aftermarket parts.” Pelc is referring to lawsuits in several states that led some insurers to temporarily suspend the use of aftermarket crash parts, or parts manufactured by companies that have not been approved as suppliers by auto manufacturers.

Bill Steinkuller, executive vice president of the Automotive Recyclers Association (ARA), says body shops “under-utilize” recycled parts. “I think there is a general lack of understanding and appreciation of the quality of the recycled OEM [original equipment manufacturer] component.”

Steinkuller says this response indicates a lack of understanding about what professional auto recyclers do and the quality of parts and components they can supply. Some body shops tend to use traditional supply sources, he says, without stopping to consider that an alternative may exist.

Pelc says many insurance companies hope to strengthen their long-term relationships with the auto recycling industry and receive more original quotes that use recycled parts, because they are substantially less expensive.

Not only are recycled auto parts less expensive than OEM parts, they can some-times reduce the time needed to repair the vehicle. The ecological benefits are also a major consideration. “Logically speaking,” Leiser says, “I think it’s in everybody’s best interest to use recycled parts.”

The Automotive Service Association (ASA) of Bedford, Texas, encourages the use of recycled parts when feasible, Ken Roberts, vice president of com-munications says. However, he finds instances where recycled parts are inaccurately identified and repair time is under-estimated continually problematic.

Pelc credits the growing acceptance of recycled auto parts to their OEM quality—“they just happen to be experienced,” he quips.

Pelc says three reasons are key to the acceptance of recycled parts: the ecological importance of reuse and recycling; the consolidation occurring in the auto recycling industry, like Ford Motor Co.’s foray into auto recycling; and the comparatively high cost of OEM parts.

“When the general public sees large corporations such as Ford getting into it, it adds a lot of credence to it,” Pelc says.

Ford’s entrance into the field of auto recycling should also increase acceptance of used parts within dealerships, which have been reluctant to use recycled parts because the dealerships want to strengthen the link with the manufacturer they represent by ordering OEM parts, Pelc says. “Up until now, Ford dealers had no encouragement from the corporation itself to buy recycled parts.”

Steinkuller says, “Consumers need better education to overcome some traditional stereotypes about auto recyclers.” The auto insurance and repair industries will have to work with the recyclers to educate consumers, he says.

POTENTIAL FOR PROBLEMS

Detracting from the credibility of recycled parts, on the other hand, are the times when late delivery or poor part quality disappoints the body shops.

Laurie Garcia, director of marketing for LKQ, Corp., Chicago, says the barriers hindering auto parts recyclers are “created by a smaller population of unprofessional recyclers who have not met a certain standard of quality.”

Leiser says, “If the vendor is professional in his business practices, then there shouldn’t be a problem.” Scruples aside, Leiser finds most errors are not a result of imperfect or inefficient technology, but of human error, such as failing to notice and therefore report the extent of the recycled part’s damage.

The problems sometimes seen by State Farm, Hurst says, are that recyclers quote prices for parts that are not actually available; ordered parts are not delivered in time; and part quality falls short of the original description.

“Today’s collision repairs are emphasizing ‘cycle time,’ as are the customers and insurers,” Hurst says. “The items I listed have the potential for delaying repairs. This is not acceptable.”

Roberts says instances where the incorrect part is shipped happen too often. For example, manufacturer changes might occur within a model year but are not accounted for. “Better identification procedures are needed to identify these types of situations, to ensure the order is correctly placed by the repairer and correctly filled by the recycler,” he says.

“A large-scale commitment to the cataloging of parts across various suppliers needs to be undertaken. Currently, without such cataloging, time is often wasted when ordering parts from recyclers. This is often true when trying to identify pieces that should accompany a specific part once that part has been ordered by a repairer,” Roberts says. “If used parts were accurately identified and proper repair procedures were estimated through the use of automated databases, than those parts represent a viable repair alternative.”

RANGE OF BENEFITS

Garcia says one of the top reasons recycled parts are an attractive option in repairs is that they are of OEM quality. “The manufacturers’ OE specifications are in those parts, and for us, the advantage is being able to market that. The part we’re putting back on your car is just like the one that came off it,” she says.

The industry also touts the importance of recycling on an environmental level, Pelc says. “It is the environmentally sound choice; it’s the right thing to do,” he says. The specific environmental reasons Pelc offers are the energy savings from the manufacturing standpoint and the ability to return cars to the road that may otherwise have become scrap.

“It makes no sense to disregard perfectly reliable reusable components,” Steinkuller says, referring to the environmental factor.

When a vehicle is considered for repair, the total cost of the repair is compared to the actual value of the vehicle before the accident. When the cost of the repair approaches a percentage of the actual vehicle value, it is declared a total loss, Pelc says. “When you consider the fact that repair costs are greatly driven by the cost of the new parts,” Pelc says, “by putting used parts on a car, you lower the cost of the repairs and, therefore, allow the vehicle to be put back on the road.”

Steinkuller says such savings often exceed 50% of the new part’s cost.

Roberts also points out a recycled part may be available sooner from a local recycler than the factory or distribution center can ship a new OEM or aftermarket part.

When assemblies, such as doors, are concerned, Garcia says the use of recycled parts can decrease the cycle time, allowing the vehicle to be repaired more quickly. “You also get factory assembly—a door that has been put together and welded robotically. There are some efficiencies there, I’m sure,” Garcia says.

Pelc says ADP Hollander is working closely with insurers, the ASA and other body shop associations to increase the use of recycled parts. ADP Hollander also has two Web sites, valuparts.com and mypartshop.com, that are geared toward the general consumer market and car enthusiasts, respectively. According to ADP Hollander, the sites receive a combined total of 1,200 users per day. Pelc says both sites allow the user to determine, based on a search by year, model and part, which recyclers in their ZIP code area are likely to have the part they are searching for.

AIDED BY TECHNOLOGY

Web sites such as those offered by ADP Hollander have helped to increase the use of recycled parts, as have the networks connecting various shops throughout the U.S. and Canada.

“The technology has been outstanding in this business,” Leiser says. He uses his Pinnacle software to make tactical business decisions based on a complete analysis of the data recorded by the system.

The computer systems available give recyclers the ability to analyze the parts in demand and to purchase and warehouse parts based on that information.

“Technology has been everything to us,” Leiser says. “People who haven’t kept up with technology haven’t been able to grow their businesses, meet customer need or outfit their inventory.”

Pelc says, “This industry has seen a revolutionary change, a total cultural change, in the way it does business. I can think of auto recyclers no more than 10 years ago totally refusing to talk to one another or to sell parts to one another. Now, you’ve got most of them computerized—at least all of the leading ones are computerized.”

EDEN, a parts locating network owned by ADP Hollander, unites the inventory of recyclers from throughout the U.S. and Canada.

“That means that a recycler who receives an inquiry from a body shop in Minnesota looking for a front end for a late model Mercedes may find it in Seattle and have no qualms about buying it from them, having it shipped to Minnesota and reselling it to the body shop,” Pelc says.

The ARA has developed a for-profit subsidiary, the ARA Services Corp., to provide products and services that enable better communication among recyclers, which is intended to increase the sale of recycled parts, Steinkuller says. The software, PARTSonline (www.arapol.com), is available to ARA members and non-members on a subscription basis.

PARTSonline allows auto recyclers to search for parts across the three primary inventory management systems, ADP Hollander, URG’s Pinnacle and CCI Triad’s Checkmate, according to a press release, and provides access to a database of more than 40 million parts from more than 1,000 recyclers.

LOOKING TO THE FUTURE

Leiser estimates recycled parts currently make up 12% to 15% of the market. But he thinks much greater market penetration is attainable, with the exception of current model vehicles. “The greater percentage of the repair industry can be filled by the recycling industry, without a doubt,” he says.

Pelc surveyed 30 body shops recently regarding their use of recycled parts. “I was astounded to find out that the actual percentage of recycled parts that they buy represents anywhere from 20% to 33% of the total parts they buy,” he said.

Pelc and Garcia see salvage availability as a potential hindrance to market penetration. “We are already seeing the price of vehicles at auction sites increasing. There is increasing competition for those vehicles,” Pelc says. “Also, as more cars become repaired, fewer become total losses. So, if I see a risk, I think the only one I see at this point that could limit or curtail the growth of auto recycling would be the availability of [salvaged] vehicles.”

The author is a staff member of Recycling Today and can be contacted via e-mail at dtoto@recyclingtoday.com.