Read Driven By Design’s Caryn Smith Feature Article in AutoInc. Magazine
Hitting the Reset Button
Driven by trends in technology and repair techniques, parts recyclers are calling for a new focus on industry forces working together.
January 25, 2018
By Caryn Smith
EDITOR’S NOTE: The views expressed in this story are those of the author and the ARA, but not necessarily those of the ASA.
Whether you’re a new technician entering the automotive world, or you know someone who is – perhaps you’ve just hired one or two – it’s critical to understand one thing: Your education is never finished!
“The best professional automotive recyclers demonstrate essentially the same characteristics as those in automotive repair shops. They subscribe to best practices, including the Gold Seal and Certified Automotive Recycler certifications of the Automotive Recyclers Association (ARA), and work to position themselves in the marketplace as providers of excellent experiences for their customers. They’re also trying to stay ahead of rapid changes in vehicles rolling off the assembly lines.
Some examples of those changes include advanced virtual computers; high-strength steel and plastics; high-tech software that can track the habits of car owners; 24/7 wireless connectivity that’s subordinate to high-profit business models (think Tesla and Google); and OEMs exerting control over the recyclers’ creations.
Bottom lines and business models are changing. Regulations, legislation and the courts are impeding. Yet despite all the changes, professional automotive recyclers continue to seek creative ways to serve customers and maintain market share.
What follows are some of the issues that the industry is working to master. Some of the issues will be years in the making; others are knocking on your door now.
The Parts-Data Issue
Not so much a trend as a critical need, recyclers continue to struggle for access to parts numbers entitled to them by law. “Two years ago, President Obama signed the Fixing America’s Surface Transportation (FAST) Act into law,” notes ARA regional director Scott Robertson, president of Robertson’s Auto Salvage of Wareham, Mass. “It requires OEMs to provide data to recyclers to identify recalled parts. We still don’t have the data. In the future, the OEMs could control all aspects of the vehicles they manufacture. Therefore, they could control how they are repaired and disposed of at end-of-life.”
Viewing this as an antitrust issue, and one that’s not in the best interests of the consumer, ARA is investing time and resources on Capitol Hill in the belief that more partnering is required. Should these efforts be successful, they would benefit all repair, insurance and auto recycling industry partners.
“Until the data is released,” adds Mike Kunkel, of Profit Team Consulting, “the auto recycler must continue to stay efficient to remain profitable.”
The High-Value Parts Issue
Smartphones keep consumers connected, and they want that same level of connectivity in their cars, too. Automakers are responding to these desires at light speed. And as the National Highway Traffic Safety Administration’s (NHTSA) Crash Avoidance and Electronic Controls Research Program contributes to the public’s acceptance of advanced crash-avoidance systems, automakers are digitizing their vehicles at a rapid pace to meet the demand, which means that the number of salvageable auto parts is multiplying – as is the value of those parts.
For example, just one electronic sensor on a new Volvo costs $1,200. Automotive recyclers will seize the opportunity to salvage these high-dollar electronics, which will likely replace current cash-cow parts.
Imagine dismantling and recycling all of those systems? Yet for the progressive and adaptable recycler, the potential for profit will be astounding. And although vehicle safety technology mandates might increase, with the intended result being fewer accidents, auto salvage recyclers must rise to the challenges of increasing the number of parts of higher value that they have in stock.
“Electric and hybrid vehicles will soon dominate the market,” says Norman Wright, president, Stadium Auto Parts in Denver, Colo., a Gold Seal facility that celebrates its 73rd year in business in 2018. “As such, auto recyclers must train their techs to handle dismantling a high volume of these technology-driven vehicles.”
Tanvir Arfi, managing director at Solera Holdings, affirmed that point in a 2016 Automotive Recycling magazine article. “Electronic parts will not be crushed like metal and put into landfills,” he wrote. “The marketplace will expect these parts to be responsibly handled. The automotive recycling industry already carries the green flag of reusability with regard to the carbon footprint. We need to celebrate this green potential.”
The Tech-Tsunami Issue
With technology increasing, consumers are the only factor slowing the pace of technological development enough so that the recycling and repair industries will have time to adapt. A 2016 ReportLinker.com survey reported that a majority of consumers – 63 percent – said they wouldn’t feel safe in a fully automated vehicle, with 36 percent of them citing road safety and 10 percent naming vehicle safety as the reasons.
So although auto recyclers have some time before they need to place “geek wanted” ads, they will need to seek a more technologically skilled workforce in the near future, according to Virginia Whelan, executive director of the ARA’s Education Foundation and ARAUniversity.org, the industry’s online training platform.
“The automotive technology tsunami is a huge disruptive shift that is reshaping automotive recycling workforce training,” she says. “Connected cars, guided by computer and sensor systems, have ushered in an era of ‘everything is programmable’ – an era of thinking about the car in computational, programmable and designable terms when repairing.
“New technologies and system platforms are driving an unprecedented reorganization of how automotive recyclers train for recycling and reuse. Diagnostic scan tools are entering the auto recycling industry for part removal, damage analysis and reprograming for reuse. It is important to note that many vehicle makers require calibration and initialization of advanced safety systems and driver-assist systems following parts replacement. And auto recyclers are training with scan tools to maintain and grow the reuse of these parts.”
Despite fewer accidents, new profit could be found in those recyclable and reprogrammable, high-valued electronics that would be too costly to replace with new components. A new skilled workforce will be needed to remove, reprogram, test and certify parts, just in time for more computer-savvy generations who enter the workforce looking for meaningful employment.
The Internal-Processes Issue
“Trends in the repair industry are impacting the automotive recyclers by pushing them to revisit all aspects of their processes to increase and deliver quality recycled parts for reuse,” Whelan says.
With vehicle connectivity in place, there could be diagnostic opportunities for insurance, repair and recycled auto parts providers to know exactly which parts are needed before a vehicle comes to a shop for the actual repair. Getting parts before the car arrives could decrease cycle time, but auto recyclers continue to look for better transportation, inventory management and internal processes to speed delivery of parts to their repair partners.
“Electronic procurement of quality recycled auto parts will dominate service to the marketplace,” says Wright. “As the repair industry continues to consolidate and have much more influence on which parts are being used in the repair process, so is the automotive recycling industry. It will shift the demographic as large, well-financed, automated and efficient operations, or trading groups, service the marketplace. Relationships and processes developed with selected repairers and insurers may save some direct procurement opportunities for recycled auto parts.”
The Global-Consolidation Issue
All that leads to the fact that even more consolidation will likely take place in the foreseeable future. According to Wright, “Fewer professional automotive recycling facilities will stay in business because of shrinking margins and availability of salvage, a real global issue. More and more recyclers will either sell to consolidators or combine forces in co-op trade groups to maintain sufficient inventory to compete and provide the service and availability customers demand.”
Furthermore, Wright points out that, with autonomous cars, the number of new cars sold in metropolitan areas will likely shrink due to ride- and car-sharing operations, which will result in fewer cars on the road.
“Ultimately, we need to show what is available in our trading network and how all parties can best present that data,” Kunkle agrees. “The larger the inventory an auto recycler has will help sell parts, but only when the data is executed properly.”
Yet places where end-of-life vehicles can be dismantled must be found. For this critical function, the ARA is working to avoid solutions being dictated at federal or state levels of government. No matter how consolidated the industry becomes or how much change takes place, the ARA believes these factors shouldn’t be allowed to hinder those facilities dedicated to selling quality recycled parts.
And because those issues are of global concern, the ARA has added new international chapters in revitalized countries that are looking for expertise as they grapple to care for end-of-life vehicles.
Jan-Feb 2018 AutoInc. Magazine
The Shared-Interests Issue
As the ARA deals with all of that change, it continues to believe that the stage is set for increased collaboration across industry lines to secure the marketplace for shared interests. “A partnership between the repair and automotive recycling industry, along with the insurance industry, is imperative for each one to thrive in the future and provide safe repairs to the consumer at affordable costs,” says Robertson.
According to ARA CEO Michael E. Wilson, the organization is calling on all stakeholders involved in the auto repair marketplace to recognize the value, safety and other benefits that each repair part option – recycled, new, aftermarket or remanufactured – can provide the consumer.
“ARA’s underlying desire is for more professional auto repair representatives to fix repairable vehicles owned by consumers within the insurance pipeline structure,” Wilson says. “Repair procedures that advance only the highest-priced parts option ensure more vehicles owned by consumers ultimately will be declared total losses by insurance companies. In this situation, all stakeholders lose. Consumers will lose their vehicles; insurers will book increased claims costs; and repairers will see a reduction in the volume of repairable vehicles in their professional repair facilities.”
However, current trends will ultimately provide new opportunities for the industry to pursue support for the technology-driven automobile repair process of the future.
Caryn Smith is the editor of Automotive Recycling magazine and covering the industry to over 20 years.
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