THE AUTO RECYCLING AND SCRAP
PROCESSING INDUSTRIES ARE
TWO SIDES OF THE SAME
RECYCLING COIN, WITH MANY
SHARED INTERESTS AND
CHALLENGES. THE AUTOMOTIVE
RECYCLERS ASSOCIATION’S
GEORGE ELIADES IS A GREAT
ADVOCATE OF BRINGING THE TWO
INDUSTRIES EVEN CLOSER.
BY KENT KISER
W
hat do scrap processors really
know about the U.S. automotive recycling industry? Sure,
they know that auto recyclers sell used
car parts. They also know that auto
recyclers are important generators of
all types of scrap—from car hulks to
catalytic converters to lead-acid batteries. That’s probably about it.
There’s so much more to the industry, though. It’s a $25 billion-a-year
business—the 16th largest in the
United States—with 46,000 employees
and a $973 million payroll. In short,
auto recycling is a significant, wellestablished industry that’s been
around since just after the first car
rolled off the assembly line—and it
has been an essential supplier of scrap
to processing yards for just as long.
Though the auto recycling and scrap
processing businesses are undeniably
different, they face many of the same
SEPTEMBER/OCTOBER 2006 _ Scrap _ 49
“I THINK THE COOPERATION BETWEEN AUTO RECYCLERS AND SCRAP PROCESSORS IS MUCH, MUCH BETTER
BECAUSE SOME OF THE PREVIOUS SUSPICIONS AND MISUNDERSTANDINGS HAVE BEEN CLEARED UP.”
challenges. For instance, auto recyclers
and scrap processors can both find it difficult to secure insurance, hire and train
qualified employees, maintain compliance with environmental regulations,
and meet customers’ quality expectations. Both also face stiff competition for
raw material and challenges regarding
mercury switches in retired vehicles.
You could say the two industries are siblings in the larger recycling family.
George Eliades knows this, which
explains why one of his goals as executive vice president of the Automotive
Recyclers Association is to forge
stronger bonds between the two industries and their trade organizations.
“We have a great relationship with
ISRI right now,” he says. “And I think
the cooperation between auto recyclers
and scrap processors is much, much
better because some of the previous
suspicions and misunderstandings
have been cleared up. We need to
cooperate and improve communication so we can help our respective
industries as much as possible.”
Eliades knows a lot about helping
industries. That has been his focus
throughout his decades-long career as
a certified association executive. In
2003, after years of leading other associations and serving as an association
consultant, Eliades accepted the top
post at ARA. He assumed the reins
during the recession that was battering
the auto recycling and scrap processing industries at that time.
“When I came in, ARA was in the
red,” he says. “My goal has been to
stabilize the organization and clearly
define its focus so we can improve our
services to members and help them
increase their profitability.”
ARA has made much progress in
the past three years, Eliades says, noting that the association is again in the
black and is rolling out several new,
innovative programs. “I think our
members are pleased with the way
things are going right now and the
direction we’re taking,” he says.
Currently, ARA has about 1,000
50 _ Scrap _ SEPTEMBER/OCTOBER 2006
member companies, Eliades notes.
From the association’s headquarters in
Fairfax, Va., he oversees a full-time
staff of five and another six part-time
employees who are spread out in various states, including Virginia, Texas,
Florida, and Massachusetts. The association plans to increase its staff soon
to keep up with the industry’s growing
needs, he says.
Eliades is understandably bullish
on the future of ARA and the industry
it represents, seeing great potential for
both. In July, he took a break from his
busy schedule to discuss the industry’s
current state, its future prospects, and
how ARA is helping its members succeed in the 21st century.
What are the biggest issues facing auto
recyclers?
The five biggest challenges are salvage,
insurance, education and training, air
bags, and mercury switches.
Finding reasonably priced salvaged
vehicles is a huge problem for this
industry. So many old cars are being
exported, and many of them are being
purchased by unscrupulous buyers
who will pay almost anything to
acquire them. For instance, some people will buy salvaged cars just to get
the vehicle identification number,
which they put on a stolen vehicle to
get a clean title. Also, a lot of vehicles
exported from the United States wind
up in the hands of criminals. To combat this illegal behavior, ARA is working closely with the North American
Export Committee, a group of law
enforcement officials in Canada, the
U.S., and Mexico.
Insurance is also a big issue for auto
recyclers. More than a year ago, the
largest provider of workers’ comp coverage for our industry stepped back.
The company elevated its minimum
annual premium, thus eliminating a
lot of renewals. So there’s a big need
to secure workers’ comp insurance.
Toward that end, we’ve been exploring
the idea of forming a captive insurance
company that would offer competitive
workers’ comp insurance to qualified
auto recyclers.
Education and training is another
large problem. The reality is it’s hard
to find good, skilled labor. We’re trying
to offer training that will improve the
skills of our members’ employees and,
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“I BELIEVE THE [MERCURY SWITCH] MEMORANDUM OF UNDERSTANDING IS A GOOD, WORKABLE SOLUTION.
WE DIDN’T GET EVERYTHING WE WANTED—NOBODY DID—BUT SOMETHING IS BETTER THAN NOTHING.”
in the process, improve the efficiency
of each company.
Other challenges include enabling
automotive recyclers to be able to sell
nondeployed [original equipment
manufacturer] air bags and removing
mercury switches. ARA just
announced its new Air Bag Protocol,
which we believe will enable the reuse
of perfectly recyclable nondeployed
OEM air bags.
There’s a lot of pressure to get mercury out of the environment. Like
ISRI, ARA is a signatory to the U.S.
EPA’s new Memorandum of Understanding, which establishes a voluntary, nationwide mercury switch
removal program. This program, I
believe, will encourage many others to
capture mercury switches to help save
and protect our nation’s land and
water resources.
Are you happy with the resolution of
the mercury switch issue?
I believe the Memorandum of Understanding is a good, workable solution.
We didn’t get everything we wanted—
nobody did—but something is better
than nothing. We’re not unhappy, but
we could have been made happier.
For us, one big issue was that auto
recyclers should receive a fair rate to
remove mercury switches. If you take
your car to a dealership and ask for a
switch to be removed, you’ll be surprised how much it costs. Yet we’re
expected to remove them for under $1
per switch in the MOU. It takes us as
much time as it takes the dealer, plus
you have to know where to find the
switch in the first place, which isn’t
always easy. There’s considerable
preparation and labor involved in
removing switches.
Another critical issue for us was
that automakers would hold auto recyclers harmless for the collection and
disposition of the mercury switches.
The liability issue is something everybody wishes to avoid. The good news
is that the automakers have agreed,
in effect, to indemnify automotive
52 _ Scrap _ SEPTEMBER/OCTOBER 2006
recyclers who participate in the program from the point of recovery to
delivery.
So overall, we want to solve this
problem, we’re committed to doing it,
and our members are collecting
switches—whether they’re getting paid
a fair rate for the work or not.
What trends are shaping the auto
recycling industry now?
Have automakers made any changes
that have improved automotive
recycling?
There’s more consolidation in the
business. Auto dismantlers are buying
each other, plus companies outside the
industry are stepping into the business. For instance, you’ve got scrap
corporations like Schnitzer Steel
Industries integrating backward into
auto dismantling.
There’s also definitely a move
toward the self-service, you-pull-it
auto dismantling yards, in which customers are allowed to enter the yard
and pull the parts they want. Labor
costs, the tight labor market, and the
potential for greater profits are driving
a lot of companies to do that or consider doing it.
On the horizon, our industry is
wondering about the impact of hybrid
vehicles [on vehicle recyclability].
Other trends include ongoing design
changes that auto manufacturers are
making to their new vehicles. One
example is boron steel, which is much
stronger and much lighter than regular
steel. Carmakers are using other new
materials to build lighter, safer cars
and achieve higher fuel efficiency. All
of these material changes affect the
auto dismantling industry.
Though our communication with
automakers has improved on this
issue, there are additional design
changes we’d like to see. For example,
it would be helpful to have petcocks
under the radiator, the engine, and the
fuel tank so we could drain 100 percent of the fluids. We’d like a way to
blow out the brake system. We’d like
to know where various components—
like boron steel and mercury
switches—are located in vehicles.
Also, put all the gas tanks on the same
side of the car. That would make it
easier for recyclers during processing.
We understand, of course, that
automakers have to make tough decisions. Take gas tanks as an example.
Should they use metal or plastic?
Metal is easier to recycle, but if they
need to make the car lighter, they may
opt for plastic. They have to consider
many factors, including material cost,
environmental impact, and government requirements. This is not as simple as many people think. But we’re
making progress, thanks in part to the
work of groups like the Vehicle
Recycling Partnership, whose members include ARA and ISRI.
www.scrap.org
Does the auto recycling industry, like
the scrap industry, struggle with
safety issues?
Actually, we’ve been very fortunate in
that regard, though there are still
safety hazards in our business. Fire is
always a possibility where torches are
involved. Some recyclers inventory a
lot of scrap tires, which can be a fire
hazard as well as a breeding ground
for mosquitoes and rats.
Dismantlers also need to be wellinformed and careful about processing
hybrids. In those cars, you have to
know not to touch anything that’s
orange because those parts are
extremely hot. Plus, hybrids have a
240-volt battery, as opposed to a 12volt battery in a traditional vehicle. A
12-volt battery can give you a shock,
but a 240-volt unit can kill you. So
employees need to understand how to
process hybrids properly and safely.
Overall, though, our industry is in
good shape on the safety side.
What are the biggest regulatory or
legislative challenges ahead for auto
recyclers?
Scrap tires, stormwater, and fluid
recovery are all important issues. Our
goal is to get 100 percent of the fluids
out of retired vehicles because fluids
can lead to stormwater problems,
hazardous-material issues, and more.
That’s why we’re pushing for design
changes in new vehicles. That’s also
why we’re proposing a study on fluid
recovery—to get closer to that 100percent recovery goal.
What are ARA’s greatest challenges as
an association?
For one, we want to increase the number of ARA member companies because
that will give us more clout and enable
us to benefit the industry more.
We also need to generate more nondues revenue so we can keep our
membership dues at a reasonable level
while still funding new activities that
the industry really needs. To achieve
that, we need to increase the number
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of members and
develop other sources
of revenue.
Another problem for
us—like all associations—is getting more
volunteer participation
in committees and
leadership roles. A lot
of our members simply
don’t have the time.
They operate small
businesses, so devoting
a lot of time to the
trade association is quite a commitment.
For our industry to truly survive,
our strength and power must come
from numbers and unity. If you look at
the big industries, they all support
their trade associations avidly because
they work. The associations help make
the road wider. They help the whole
industry, not individual companies.
Trade associations are very valuable.
Those that have the funding and the
staff to aggressively address the issues
are the most successful.
I’d especially like to generate more
interest in ARA among small businesses. Big businesses tend to understand the benefits of an association. If
smaller businesses would make that
leap and support their industry association, like ARA, they’d not only
strengthen their association but also
help themselves in the process. I’d like
them to realize that not being an ARA
member is a handicap to their business. I haven’t found the magic answer
to that challenge yet, but I’m sure
working on it.
Tell me about ARA’s Certified
Automotive Recycler program.
The CAR program and its related Gold
Seal distinction are quality endorsements for our industry, sort of like the
Mr. Goodwrench label for auto repair
shops. CAR firms exhibit consistently
high quality in operating their businesses, meeting environmental requirements, and providing customer service.
The CAR program focuses on the environmental and business elements,
while the Gold Seal program deals
with customer service. Currently, about
25 percent of our members—just over
250 companies—participate in the CAR
program, and about 50 percent of those
firms are Gold Seal operators.
We recently unveiled a new version
of the CAR program. One change is
that members no longer have to go
through ARA to find an environmental
professional to do the audits required
under the program. Instead, members
can hire their own auditor who may be
local, less expensive, or more convenient. We’re trying to make the program
easier for members and save them
money at the same time.
What ARA programs are you
particularly proud of?
We’ve got several programs that are
outstanding. Certainly the CAR and
Gold Seal programs are two of them.
We’ve developed a new protocol for
nondeployed OEM air bags that’s going
to be a wonderful program because it
will help our members sell recyclable
OEM air bags.
We also have a program with
Location Management Services that’s
enabling some of our members to
receive tax rebates or credits if they
operate in certain commercial zones.
One member received a rebate of more
than $100,000, which was like winning the lottery because he had no
idea his company was eligible.
SEPTEMBER/OCTOBER 2006 _ Scrap _ 53
“ANOTHER PROBLEM FOR US—LIKE ALL ASSOCIATIONS—IS GETTING MORE VOLUNTEER PARTICIPATION IN
COMMITTEES AND LEADERSHIP ROLES. A LOT OF OUR MEMBERS SIMPLY DON'T HAVE THE TIME.”
We’re encouraging our members to
grade their parts and use ARA’s damage codes because the only way insurers see their parts is in a written
description. In this vein, we’re working to get repair shops and recyclers
on the same page and speaking the
same language regarding damage codes
to prevent miscommunications and
misunderstanding.
The problem is that estimates are
generally written based on repair time.
We believe the variables [in estimates]
can be limited if damage is defined by
unit amounts, with a unit representing
the damage that can be covered by a
credit card-sized object. The repair
shops and recyclers can both relate to
this. Obviously, one inch of damage at
the door handle area is going to be
more serious than a one-inch hole in
the door panel itself, but we believe
parts grading and use of the ARA damage codes will put everyone on the
same page and increase the acceptance
and use of quality OEM used parts.
I’m proud of our annual convention,
too, because it gives members a chance
to network, exchange information, and
learn from each other. Our magazine is
the best it has ever been—we’ve got it
up to 60 pages and people are giving us
a lot of positive feedback on it. Our
education and training programs have
been outstanding in recent years, and
our Education Foundation just
launched a new training and certification program in March. Our Scholarship Foundation is awarding 40 college
scholarships to deserving young candidates this year. Also, as I mentioned,
we’re trying to put together a captive
insurance company, and we’re working
to get legislation passed that will enable
members to buy more salvage.
So we’re proud of a lot of things
were doing. This is an exciting time to
be involved with ARA. I think we’ve
got a bright future. We just need to
improve industry awareness and
understanding of what we’re doing and
that activities like these just don’t happen without trade associations.
54 _ Scrap _ SEPTEMBER/OCTOBER 2006
You mentioned a new air
bag protocol. What is
that?
It’s a training program in
which members would
have an employee
become certified to
remove nondeployed air
bags. Essentially we’re
training recycling technicians to properly remove
and process the air bag
and to be able to recycle
it with ARA validation
that the air bag was not
tampered with in any way. Until now,
insurance companies have shied away
from installing nondeployed air bags
from salvage vehicles because they
don’t want the liability to shift from
the automakers to themselves. If we
can make sure the line of liability
stays with the automakers, then insurance companies will start using these
nondeployed OEM air bags. This will
save them money and result in fewer
total-loss declarations on cars. Plus,
more insureds will be able to keep
their vehicles.
How do you think the public views the
car recycling industry these days?
I think we’re in transition. Until
recently, people viewed us as junkyards. While there are still junkyards
in the U.S., most car recyclers are not.
ARA members operate the ultimate
recycling facilities. Most of them are
clean as a whistle. They have
stormwater permits. They are compliant with the law. These guys are white
hats. We’re trying to get more of the
industry at the same level as the ARA
membership.
I think that reuse is the pinnacle
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“UNTIL RECENTLY, PEOPLE VIEWED US AS JUNKYARDS. WHILE THERE ARE STILL JUNKYARDS IN THE U.S.,
MOST CAR RECYCLERS ARE NOT. ARA MEMBERS OPERATE THE ULTIMATE RECYCLING FACILITIES.”
of recycling, and that is what our
members are all about. They sell
quality OEM used parts. In doing so,
they preserve raw materials, save
energy and landfill space, and enable
consumers to save money by buying
quality OEM-specification used parts.
Our challenge is to increase awareness of the auto recycling industry
and get the public to view the industry in positive terms and consider
quality recyclable used parts as a
viable, trustworthy alternative. Most
ARA members are like Sears or
Nordstrom in that, if a used part
doesn’t work, they’ll take it back and
replace it.
How would you describe the relationship between scrap processors and
auto recyclers as well as their
respective associations?
We have a great relationship with
ISRI now. We’re closer now than at any
time in the past. And I think the cooperation between auto recyclers and
scrap processors is much, much better.
Some of the old suspicions, some of
the misunderstandings have been
resolved. We need to cooperate. We
need to work together to improve cooperation and communication so we can
help your members and my members.
Earlier this year, ARA met with auto
recycling associations from around the
world. Can you discuss that event and
the idea behind it?
More than 31 countries were represented at that event, which was a big
success. The important accomplishment is that we’re improving communication and cooperation in areas of common interest. All of the countries
involved are facing the same issues that
we’re facing. We learn by networking
with them and finding out how they’re
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addressing the problems.
We plan to continue these meetings,
with the next one being held in Tokyo
in April 2007. We’ll get to visit some
Japanese auto recycling facilities and
see some of the innovative changes
they’re making.
What’s the idea behind ARA’s slogan,
“When You’re Thinking About Used
Parts, Think Green Parts”?
The green reference is all tied in with
recycling. Reuse, recycling, protecting
the environment is what we’re really
all about. We want to encourage the
public to help the environment by
using more quality OEM used parts.
We want people to view reuse as the
ultimate form of recycling.
This applies to auto dealerships as
well. Did you know that 48 percent of
the profit at a car dealership comes
from its service center? I tell [dealerships] that if they want to hold on to
more business in the future, they
should consider offering customers not
only brand new OEM replacement
parts but also quality OEM used parts.
After all, if customers don’t want to
pay for a new OEM part, they’ll go
somewhere else. The dealership will
lose that business. If the dealer offers
quality OEM used parts as an alternative, they’ll keep the business.
I think most customers—especially
those with older cars—would welcome
the opportunity to have an alternative.
And auto recyclers would welcome
the market opportunity. After all, U.S.
auto recyclers currently have about a
12 percent to 14 percent share of the
overall parts market, so the potential
for growth is obviously huge. S
Kent Kiser is publisher and editor-in-chief
of Scrap.
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