Although the taxpayer funded “cash for clunkers” program has been a huge hit with consumers and new car dealers, auto salvagers and recyclers are less enthusiastic about what they consider a monumental waste.
Under the rules mandated by the Car Allowance Rebate System legislation, auto dealers are required to permanently disable the engines and drivetrains of trade-ins by replacing the engine oil with a solution of sodium silicate that renders them irreparable.
Recycled engines and drivetrains are a huge part of auto recycler’s revenue base from salvaged vehicles and the measure comes on the heels of bankruptcy filings by more than a dozen domestic auto parts suppliers.
Michael Wilson, the executive vice president of the American Recyclers Association is highly critical of the measure. He estimates that as much as 60% of recycler’s business comes from engines and drivetrains and says, “Why throw away good parts when the supply chain is in jeopardy? It doesn’t make a whole lot of sense.”
According to the Automotive Recyclers Association, the mandated method for disabling powertrains and engines is excessive and unnecessary. They claim that the method can severely damage components that could otherwise be salvaged and resold and also means reduced profits for auto salvagers. The organization claims that it can cost between $700 to $1,200 to process a vehicle including transportation costs and those associated with removing toxins like mercury and other carcinogens.
Although the National Highway Traffic Safety Administration has indicated that the sodium silicate used to disable clunkers does not pose an environmental or health hazards, it does require that dealers observe some fairly stringent safety procedures when executing the prescribed engine disabling method. The NHTSA is the federal agency charged with implementing and overseeing the CARS program although the U.S. Treasury Department is the funding agency.
George Clark, who operates Western Auto Recycling in Denver, Colorado is skeptical of the program and says, ”I haven’t decided if I want the cars,” referring to the disabled trade-ins. He indicated that he might be able to show a profit from simply crushing the vehicles provided he doesn’t have to buy the cars from the dealers.
In addition to depleting the already low stock of recycled auto parts, many in the salvage industry and beyond claim that the practice of destroying the trade-ins will create a shortage of affordable used cars and hurt low income individuals and families who cannot afford to buy new cars and trucks.
Norm Wright is the CEO of another Denver auto recycler, Stadium Auto and Truck Parts, Inc., and claims, “Now you’re removing cars people could afford, and they’re not available anymore.” He also warns, “There will be less cars to pull from, so the price of parts will go up.” His company is currently stockpiling parts for a wide array of vehicles that are slated for discontinuation to ensure their availability in coming years.
Despite their concerns over the CARS program, many auto salvagers are encouraging new car dealers to send their disabled trade-ins directly to them instead of involving auctioneers in the process. By dealing directly with new car dealers, auto recyclers can eliminate the middlemen and increase their profits. Both recycler and auctioneers must certify that vehicles they receive through the CARS program are disposed of in accordance with the NHTSA’s rules.