SEPTEMBER 2010
                                        

Pulled parts thrive in thrifty times

While many aspects of automotive businesses have stagnated since the economic crisis of late 2008, the good old fashioned practice of going to the junkyard and picking up a used part at a bargain price has not only remained steady, but has grown significantly.

Several reasons for this seem obvious. People have been hesitant to buy new vehicles, and many are doing repairs themselves or opting for their shops to install used parts to save money on both mechanical and body work. In most cases, this saves a lot of money, considering the rising prices of OEM and aftermarket parts. Additionally, there are often difficulties in obtaining parts as vehicles age.

“I’ve been in this business a long time. Self-service auto recycling is not completely recession proof, but our industry really does fairly well during difficult economic times because it creates a situation where people are willing, or have to consider the most economical way of repairing their cars,” said Dudley Smith, a central United States district manager for the LKQ self service division.

LKQ entered the u-pull-it business in 2004. Since then it has rapidly expanded to 34 locations in 14 states and 1 in Quebec. Smith explained how LKQ’s self service business has fared since the 2008 economic crisis, “Our stores are doing well. We have had growth since expanding our footprint nationwide but also within the facilities we already had. More parts are going out the door. The number of new customers buying parts has increased significantly. Our store managers tell us about customers who are brand new and walk in not knowing how the system works and want to know what they have to do.”  


Jeff Robbins, manager of Horseheads Pick-a-Part in Elmira, New York told us about his 1,700 vehicle operation. “Actually, business is pretty good. With the recession people are keeping their cars longer. I’ve seen an increase in new customers and from farther away, driving as much as two and a half hours to get here. In addition to the used parts, we are selling new parts like gas tanks, radiators, headlights and tail lights. If they can’t find it in the yard we offer them new parts. That’s about five percent of our business.”

While people seek out economical parts to keep their cars in good repair, it also means that there are fewer cars available to part out.

Horseheads estimates that approximately 30 percent of its business comes from in-house dismantling for customers. “I haven’t seen an increase in dismantling since the recession. It’s remained steady,” Robbins noted. “People are just trying to save money by pulling the parts themselves.”

Since the recession, Robbins estimated that he has seen a 10 percent overall increase in business. “Our business is doing better than many.”

Many independent self service operations like Horseheads run environmental and safety compliant operations, but there are all too many yards that ignore regulations, are downright unsafe, and give the industry a bad name. A long-time industry expert estimated that today in the United States there are anywhere from 5,000 to 7,000 junk yards of various types. Fortunately, there are fewer bad operations every year, as many are forced out of communities through zoning or fail to comply with state and federal regulations.

What used to be called junkyards have mostly evolved into modern auto recycling facilities. Over the past few decades, however, there has emerged a new breed of corporate, multi-location self-service lots that are revolutionizing the used parts business. Every day they attract new customers to clean, safe, well organized, mega-sized yards that emphasize customer service.

“There’s been a renaissance within a sector of the automotive recycling community. The numbers have grown in leaps and bounds over the last five to six years,” said Michael Wilson, CEO of the Automotive Recyclers Association (ARA).

“Business is good!” said Steve Levetan, senior vice president of Pull-A-Part. “I explain to people it’s a double-edged sword. On the one hand people are keeping cars longer so they need the parts we are able to provide and we are able to provide them very inexpensively because of the do-it-yourself nature of our business. On the other hand people are keeping their cars longer so there are fewer cars in the marketplace for us to buy from which they can pull parts.”

Organization of yards and keeping an accurate inventory of the makes and models on-site have been key as new self-service parts dealers seek to increase customer service and the ease of use of their systems.

LKQ and Pull-A-Part are good examples of the remarkable growth of large, modern self service operations.

Pull-A-Part grew out of a Georgia scrap metal business that dates back to 1915. It branched out to establish Pull-A-Part as a separate, privately-held company in 1997 with one location in the Atlanta area. In 1999, it opened a second location in Georgia and in 2002 began a rapid national expansion. Today, the company has 23 locations spread over 10 Southeast and Midwest states.

Levetan explained the Pull-A-Part growth strategy. “We acquired some businesses, bought land for others and did several Brownfield redevelopments. Site selection was a matter of location. We are typically looking for large sites close to major urban centers. Our emphasis has been in the eastern part of the country, but we have solid plans for continued expansion.”

A typical Pull-A-Part location contains over 2,000 vehicles, all 10 years or older end-of-lifers. We asked Levetan how his business model contrasted with an old time junkyard. “Well, the same way that night contrasts with day. We are literally the exact opposite of what most people have of the image when they think about our industry, as are many others in today’s modern auto recycling industry. We really feel we take it to a new level. Our locations are clean, neat and organized. You see cars all up on stands in perfectly neat rows, organized by manufacturer. It’s easy for our customers to come in, remove the parts they need and save a huge amount of money in the process.”

Pull-A-Part attributes much of its success to an outstanding environmental and safety record. The company website lists scores of environmental, civic and industry awards.

“We see environmental issues as something that really helps us stand out in the industry,” said Levetan. Pull-A-Part was, for instance, the only auto recycler in the country that was a member of the United States Environmental Protection Agency’s Performance Track Program which required a rigorous process of standards and inspections to be accepted into the program.

“All of our sites are compliant for storm water and spill prevention under the Clean Water Act and the National Pollutant Discharge Elimination System. We have rigorous self-inspection programs, both environmentally and for safety throughout our various management levels and we also utilize third-party inspectors from consulting firms. All of those compliance problems that others struggle with are routine for us,” said Levetan.

Pull-A-Part does not dismantle parts for customers. It is strictly a do-it-yourself, self-service business. “Everything we do is aimed at improving the customer experience,” said Levetan. We noticed this approach of simplifying shopping at the company website. A search feature allows a user to locate a vehicle by location, make, model or manufacturer. The website is updated every night.

At Pull-A-Part, part pricing is on a fixed base price regardless of make, model or year. The price for a six-cylinder engine, for example, is the same no matter what kind of car it comes out of. This pricing by category goes down to the smallest parts like a windshield wiper arm. If a part is not on one of the cars in the store, the customer can request to be notified when that car arrives at the store.

For a small add-on fee to the base price, the customer can buy a 30-day replacement warrantee. If a part does not work, the customer can either get another part or receive a store credit. There may be a core-charge on some parts that is refunded when the customer returns the old part and there is a small regulatory-environmental fee charged with each transaction.

Customers visiting a Pull-A-Part location find touch-screen computers to help find what car they want and exactly where it is located in the yard. “We also have a customer service desk at each location to help find parts and cross-check parts from different models that are compatible,” said Levetan.

Torches and jacks are not allowed in the yards and customers must bring their own tools. The company provides wheelbarrows to move parts. Engine hoists are provided as well forklifts to move heavy parts out of the yard. Levetan estimated the average vehicle stays on the lot for 60 to 90 days and claimed that fresh inventory is delivered daily. After parts are cannibalized, hulks are crushed on-site and sold as scrap.

Of course, the main attraction to self-service is bargain prices. “We sell parts for a fraction of the cost of a new part, plus on older vehicles many times the part is not available or limited, you have to wait a while to get it. A tail light assembly for an older Honda may cost well over $100 dollars and we are $10 to $15 dollars. We sell an entire door for what you would have to pay for a new door handle,” Levetan concluded.

Most self-service yards do not sell OEM, aftermarket or reconditioned parts. But that is changing as larger multi-location operations and independent auto recycling yards are looking for ways to increase revenue. When a customer can’t find the used part at a picking yard, smart auto recyclers see a sales opportunity to satisfy a customer need. It may take the form of stocking commonly used tools, parts or accessories, or forging partnerships with other used and new part suppliers. It may require more time, or software upgrades to locate parts and have them delivered. The name of the game is customer service and convenience to help ensure repeat business.

As we continue to grow as a nation of do-it-your-selfers and habitual bargain hunters, the word-of-mouth about the great values found at a customer focused self-service used parts yard has spread wider during this recession and is likely to sustain into better times. Reusing parts is a good deal for the customer, the automotive recycling industry and the environment.