EmailEmail
PrintPrint
Unusable engines beginning to pile up in junkyards
Red tape, confusion slowing clunker junking
Friday, August 07, 2009

The government's Cash for Clunkers Program might be revving up dealers and car owners, but the program is proving more burdensome than beneficial for some of those on the salvage side of the business.

Though it might seem as though the CARS program -- which requires trade-in vehicles to be crushed or shredded so they can't be resold -- would benefit junkyards, some owners are reporting just the opposite effect.

Many auto recyclers said they haven't yet seen an influx of clunkers because of processing delays, nor are they expecting to turn much profit from the cars they do receive because the engine and drivetrain -- the parts that fetch the most money -- have to be destroyed under federal regulations.

"I see it more as green advantage than a profitable advantage," said Fiona Leshow, owner of West Deer's Blazczak Salvage Inc., which is one of more than 8,000 facilities nationwide certified to dispose of the clunkers.

She's waiting for car dealerships to release the trade-in vehicles to her automobile salvage and wrecking business, but doesn't have high hopes for when that will happen.

"What we're hearing from the dealerships is that the paperwork is such a mess that they cannot release the vehicles yet," she said.

Service manager Jim Boburka at Jim Crivelli Chevrolet in McKees Rocks has experienced that tangle firsthand.

Currently, the dealership has 12 clunkers sitting on its lot and is waiting for delivery of the liquid glass, or sodium silicate solution, that will be used to kill their engines.

Under the National Highway Traffic Safety Administration's regulations, dealers must remove the engine oil from the crankcase and replace it with two quarts of the sodium silicate solution, a compound typically used to seal concrete. It permanently disables the engine within minutes.

"We called our supplier, and we don't know when we're going to get it," Mr. Boburka said. "The intimation was that it's because demand has shot up."

There also are many more deals pending while the dealership waited for Congress to make a decision on the future of the program. So far, 240,000 people nationwide have traded in their clunkers for vouchers of $3,500 or $4,500, using up the program's original allocation of $1 billion.

The U.S. House voted to give an additional $2 billion in funding to the program last week. The Senate approved it last night.

Given the various delays, Ms. Leshow wouldn't be surprised if it takes weeks or months for Blazczak Salvage to begin getting trade-ins.

Her frustration was echoed by Dave Norris, owner of Millerstown Pic-A-Part in Tarentum, which processes and crushes cars.

His junkyard has gotten around 75 clunkers since the program began two weeks ago, but that's not a significant increase for a recycling plant that typically processes 150 to 200 cars per day, he said.

"It seems to be a really cumbersome process for dealers. They have to scan paperwork to get the government's acceptance of their deals," he said. "There's a real bottleneck to the whole program."

In addition to stimulating car sales, one of the goals of the government program is to get gas-guzzling vehicles off the roads in exchange for those that get better mileage.

"A substantial opportunity exists for fraudulent diversion of the trade-in vehicle, largely because its still-functioning engine makes it attractive to return the vehicle to the road rather than relegate it to the scrap yard," said the National Highway Traffic Safety Administration's final rule for the CARS Program.

However, it is those parts that account for 60 percent of recyclers' revenue, according to the Automotive Recyclers Association.

"The most valuable part is the engine," said Mr. Norris, adding that each could fetch between $500 to $1,000. "It takes the real profit out of the picture."

Without the engine, he estimates he will get around $75 for the scrap metal for each car.

Tom Webb, a salesman at Battaglia's Auto Wrecking Inc. on the South Side, had his own share of complaints against the CARS Program.

"I think we should be allowed to keep the cars for least a year," he said, referring to the program's 180-day limit before the cars have to be crushed or shredded.

"We have to make a profit within six months' time. Whether we can get it done in that time allowed is the question."

Once a car gets to the junkyard, the vehicle's hazardous and recyclable fluids are drained. Then, parts are dismantled, cleaned, tested, inventoried and sold before the rest of the car is scrapped -- a process that takes a lot of time and money.

Though Mr. Webb has received only 25 clunkers so far, he said he was already convinced of the wastefulness of the program.

"The engines on a lot of these vehicles I could sell right away," he said. "Actually, the cars themselves are sometimes resellable."

Junkyards don't receive the clunkers for free. They have to buy them from the dealerships, meaning it's a gamble whether they will make or lose money on each clunker.

"Dealers usually want between $200 to $400 for a car," said Ms. Leshow. "I'm not willing to pay them that much, since I'm probably going to make $50 to $100."

Despite the grievances that others in his industry voiced, Nick Curiale, owner of Cascade Auto Wrecking in New Castle, feels he has nothing to complain about.

He said he could probably sell the motors for $200 to $600 if they were in good condition. However, "On most of these cars, the motors weren't that great anyways, so I'm not losing too much."

Cascade has received only about 20 clunkers since the program began -- nothing compared with his yearly total of nearly 600 cars, Mr. Curiale said. Still, he's satisfied with any uptick in business.

"I think everyone involved is benefiting -- the buyers, dealers, manufacturers, junkyards, the environment."


Correction/Clarification: (Published Aug. 8, 2009) The Millerstown Pic-A-Part salvage yard is Fawn Township. An incorrect location was given in a photo caption accompanying this story as originally published Aug. 7, 2009 about the cash for clunkers program.
Liyun Jin can be reached at ljin@post-gazette.com or 412-263-1410.
First published on August 7, 2009 at 12:00 am