The "Cash for Clunkers" program is infusing the junk industry with close to a billion pounds of extra scrap -- the weight of about 50,000 elephants -- but the mountain of metal heading their way will bring a bounty for some scrap companies and a bad deal for others.
With almost 250,000 jalopies traded in already, the decision this week to pour another $2 billion into the program means that up to 750,000 cars could be destined for scrap dealers and parts recyclers.
As they're exchanged for fuel sippers, the junkers will hit the scrap market over the coming months.
Bob Garino, director of commodities for the Institute of Scrap Recycling Industries, a Washington trade group, estimates that the program will add "several hundred thousand tons of scrap" -- he estimated perhaps 800 million pounds -- to the U.S. scrap supply.
That's the equivalent heft of 50,000 adult male elephants, which can each weigh up to 15,000 pounds, according to the San Diego Zoo.
Getting a piece of such a windfall has some scrap outfits hustling to line up business from the car dealers collecting the clunkers.
"Our traders are aggressively courting the dealerships," said Gamin Zacharias, of OneSteel Recycling in Tampa, Fla.
It's too early to tell how many cars OneSteel might get from the government program, but Zacharias said she's hopeful they will give her company a boost. "We're watching and waiting."
But in a broader sense, Garino said, the effect might not be as much of a boost industry-wide because these car carcasses would have gradually wound up at scrap dealers and recyclers, so the coming parade of clunkers actually amounts to an acceleration of what would have happened anyway.
Garino also noted that the metal represented by the clunkers, while huge, is a small fraction of the annual market for scrap metal -- 140 billion pounds -- in the United States.
Even so, Garino said, "it's a nice addition to supply," though one not expected to "dramatically affect prices."
But, what may be a feast for scrap dealers and recyclers could be famine for auto salvagers, who make their living removing still-usable components from cars at the end of their lives.
A $22 billion per year industry in the United States, salvage companies recover up to 40 parts from each car, said Michael Wilson, executive vice president for the Automotive Recyclers Association, a Manassas, Va. based trade group.
But one of the centerpieces of the Cash for Clunkers program is the rule that each turned-in vehicle must be disabled to keep the beaters off the road for good. To ensure that, federal authorities are requiring car dealers who take the trade ins to pour sodium silicate, or liquid glass, into the clunkers' engines, rendering them lifeless.
Though the clunkers aren't worth anywhere near as much as the cars they're being traded for, many still contain motor parts, which, if harvested, would mean money in the pockets of salvage yards.
So disabling the engines means hurting the bottom line of the salvage trade.
"We're losing 30 to 35 percent of our revenue" by not getting to recover used engines, said Wilson, explaining the importance of used engines to the auto-stripping industry.
At least one salvage company, in South Windsor, Conn., has decided not to participate in the program, Wilson said.
Wilson says he understands why the U.S. Department of Transportation department decided to make auto dealers destroy engines -- to keep the cars from slipping illegally back onto the market -- but he says doing so is a waste of revenue and potential transportation for people strapped for money who badly need a car.
"We just disagree with it," he said, adding that there are 8,400 auto salvage companies in the United States.
"There's a consumer base for these engines," Wilson said. "Low income folks, college students -- people who don't want a car loan."
So why is the Transportation department insisting that auto dealers kill the old cars' engines? "We have anticipated the potential for fraud," said Transportation spokesman Ray Tyson, referring to the possibility that unscrupulous sellers will try to get the junkers back on the road.
The National Highway Traffic Safety Administration -- part of the Transportation department -- is the main agency in charge of making sure the clunkers are scrapped, not shipped overseas or resold. Highway agency officials have consulted with their German counterparts, who once ran a similar program. The Germans reported that many of their clunkers were in fact shipped abroad, Tyson said.
Aside from checking paperwork from auto dealers, recycling and scrap facilities, transportation officials will also conduct spot checks to make sure the companies aren't lying about the final resting place of their clunkers, Tyson said.
Lists of local scrap dealers and car-parts recyclers:
-- Comprehensive national list of scrap dealers allowed to process the Cash for Clunkers is here: http://www.cars.gov/files/ELVS_State/ELVS.pdf
-- Contact information for local car parts recyclers is here: http://www.a-r-a.org/AF_MemberDirectory.asp?version=2
E-mail Isaac Wolf at wolfi(at)shns.com
(Distributed by Scripps Howard News Service, http://www.scrippsnews.com)
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