Clunk Junk

Salvage Firms Are Divided On Whether The Federal Car Initiative Will Provide Their Businesses Anything More Than A Headache

August 06, 2009|By Timothy B. Wheeler | Timothy B. Wheeler,

"Cash-for-clunkers" may be a hit with consumers and a boon to the struggling auto industry, but it's no bonanza for junkyard operators, who say they're being left quite literally with the scraps of the federal economic stimulus program.

While some salvage businesses are eagerly buying traded-in gas-guzzlers from auto dealers for parts and scrap metal, others are steering clear of the government program, with some complaining that it comes with more red tape than it's worth.

"We just ain't getting involved in it," says Roland Reiser, manager of Glory Days Auto Salvage in Hanover. "It's a joke. They're going to ruin the motors before you get the cars."

And Suzanne Olyphant, owner of Doug's Auto Recycling in Middle River, doubts she'll bid for any clunkers. "It's a lot of work to take them in," she said, pointing out the extra paperwork required to document how they're disposed of. And besides, "You can only sell so many things off of them."

Under the federal law authorizing the program, dealers must disable the engines of the traded-in clunkers so they can't be resold and wind up on the highway. The most common method is to drain the engine's oil and pour in sodium silicate, which "seizes up" the pistons.

The federal "cash-for-clunkers" initiative that gives buyers up to $4,500 toward a new fuel-efficient vehicle has proved so popular that it's in danger of running out of money by the end of the week. Congress is weighing whether to pour an additional $2 billion into the effort, on top of the original $1 billion in incentives.

Auto dealers have seen sales jump since the federal Car Allowance Rebate System, better known as cash-for-clunkers, began. But vehicle parts yards are divided over whether it's good for their business.

"It's great for us," says Charmie Polansky, an owner of Paradise Auto Parts in Elkton. She said her business has acquired about 100 "clunkers" from car and truck dealers and is angling for more. "There's tons of parts," she said, and her business is scrambling to satisfy dealers who all want the trade-ins picked up pronto.

Other auto-parts businesses say they'd like some clunkers, too, but have come up empty so far.

"We're hoping," says David Pemberton at Smitty's Auto Parts in Pasadena. And Sam Rozolem, owner of Race Auto Parts Recyclers in Jessup, says he's been negotiating with dealers to get some clunkers.

Auto auction houses also are getting into the act. Manheim's Total Resource Auctions, for instance, is planning a special clunker sale next week at its Elkridge lot just for salvage businesses. Bill Tiedemann, the firm's vice president and general manager, says he already has 1,000 clunkers to move at just two of his 60 auction sites around the country.

But some scrapyard operators say they won't be able to make as much money from clunkers as they could from other wrecks they normally get, mainly because of the ruined motors. Recycled engines are valuable, as are parts from them - worth perhaps 70 percent of all the money that can be earned from salvaging a car or truck.

"The engine is generally a big part of what we try to acquire to resell," explains Joe Duff, owner of Crazy Ray's.

The auctions also bother junkyard operators, who complain that having to bid for dealers' clunkers will only squeeze what they can earn from salvaging parts. The law says dealers must pay customers the estimated salvage value of their trade-ins, and dealers get to keep $50 for processing the car. The typical vehicle is worth only about $200 when recycled for its steel, junkyard operators say. So if a vehicle sells for more than that at auction, who's pocketing the difference, they ask.

"There's a whole lot of confusion out there," says Crazy Ray's Duff.

"It's a free market," responds Rae Tyson, spokesman for the National Highway Traffic Safety Administration, which runs "cash for clunkers." "The dealer in the course of making a sale is negotiating a salvage value of the [customer's old] car. It's up to the dealer to recoup as much of that as possible."

Bill Miller, owner of Redmonds Auto Parts in Pasadena, says he's buying clunkers, though it leaves him with a bad taste.

Besides having to forgo reselling the vehicles or their engines, Miller says he is unable to guarantee to buyers that the automatic transmissions from clunkers work. His people can't start the engines as they normally do to test the transmissions, he says, and the frozen motor even complicates removing the equipment.

Plus, Miller complains, the government's requirement that all "clunkers" be crushed and shredded within six months means he can't keep the hulks around as long as he sometimes does in case someone wants a hard-to-find part.

"Don't take it out on our industry," he says. "We're bottom feeders."

Even so, though the clunkers won't be worth as much to him, he figures he'll still make $200 or $300 per vehicle if his four area salvage yards get the 500 or so trade-ins that he expects to acquire from dealers.

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