AUGUST 2009

‘Cash for Clunkers’ modifications ease ramifications to auto recyclers

Steady and improving is how John Fischl describes the auto recycling industry. The president of Riteway Auto Parts in Phoenix is seeing an increase in sales and repairs as consumers hold onto their old cars longer in response to the economic downturn.

The improving economic environment for auto recyclers could be in jeopardy, however, because of a $1 billion federal program that is designed to help offset the cost of new car purchases. The program, referred to as “Cash for Clunkers,” and which the National Highway Traffic Safety Administration (NHTSA) calls the Car Allowance Rebate Systems (CARS), would provide a voucher of up to $4,500 to customers who trade in their gas guzzlers for a new car.

Auto recyclers fought hard to change the Consumer Assistance Recycle and Save Act of 2009 bill before it was signed into law by the president in June. One of the original versions of the bill contained clauses that would have removed recycled auto parts and components such as engines and drive train parts from auto recycler’s inventories.

“The automotive recycling industry opposes any Cash for Clunkers legislation that bypasses the recycler and forces vehicles to a shredder or prevents the auto recycler from selling drivetrain components and restricts access to those parts for the American consumer,” said Fisch before a compromise with the industry was hammered out.

“Fewer auto parts available for repairs mean higher prices and fewer options for consumers. The repairer, the recycler and especially the consumer will suffer without the ability to keep that older vehicle running properly if affordable parts are not available.”

The industry’s national association, the United Recyclers Group, based in Centennial, Colorado, helped convince legislators to allow auto recyclers to resell the drivetrain components, except the engine block. Fischl said the program would be better if there were no exclusions for any recycled parts. But because of the compromise, he is now taking a neutral position. “We will have to wait and see what it does,” he said.

The compromise also changed the view of Bill Abold Jr., owner of A&P Auto parts in Cicero, New York. “The issue I had before was that the little guys, who would not be able to afford a new car, would have a limited chance to repair their current car with so much of the products being destroyed,” instead of recycled and resold,” Abold said. “I still feel this bill is only going to help those who can afford new products.”

Abold originally said the legislation is going to hurt low-income consumers. “Those are the guys that drive 10 year old cars that need affordable, recycled parts to keep their cars moving,” he said. “When they pull those cars out of the main stream process, what it is going to do is cause those cheap parts to be expensive parts.”

Any gains made by the auto industry will be at the expense of the auto recycling industry, said Michelle Alexander, executive director of the United Recyclers Group, in a statement before the compromise. “The auto recycling industry will feel the pain most immediately, because our supply of auto parts will decline, and that means prices will climb and the cost of auto repairs nationwide will be driven upwards,” Alexander said.

The NHTSA has 30 days after signing by President Obama to announce the final details of the Car Allowance Rebate System program. According to www.cars.gov, the NHTSA was expected to issue their final rules around July 23.