DENVER (AP) - Not all auto recyclers are relishing the government's new cashfor clunkers program, which requires car dealers to destroy thegas-guzzlers they get as trade-ins from new car buyers.
Used engines and drive trains are a big part of recyclers'income from each scrapped car, and under the federal program thoseengines must be destroyed. The idea is to promote fuel efficiencyand help automakers, but it comes at a time when more than a dozenU.S. auto parts suppliers have filed for bankruptcy this year.
"Why throw away good parts when the supply chain is in jeopardy?It doesn't make a whole lot of sense," said Michael Wilson,executive vice president of the Automotive Recyclers Associationbased in Manassas, Va.
Engines and drive trains account for 60 percent of recyclers'revenue from a used vehicle, Wilson said.
Under cash for clunkers, the government is advising car dealersto replace a trade-in's engine oil with a sodium silicate solutionand run the engine to ruin it before giving or selling the car to ascrap dealer.
The Automotive Recyclers Association says that can damageotherwise sellable parts like pistons — and mean smallerprofits for scrap yards, considering it can cost $700 to $1,200 toprocess a car, including transport and removing toxic items likemercury, Wilson said. Recyclers' profits vary but can reach severalhundred dollars for a 6-year-old car.
"I haven't decided that I want the cars," said George Clark ofWestern Auto Recycling in Denver. Still, he said, he might makemoney crushing clunkers if he doesn't have to buy them fromdealers.
The cash for clunkers program took effect July 1, and rules werepublished Friday. It offers drivers who trade in qualifyingvehicles up to a $4,500 credit toward a new, more fuel-efficientcar from participating dealers. The government reimbursesdealers.
The Colorado Automobile Dealers Association estimates the $1billion program could boost sales 10 percent or so for its roughly260 dealers before it ends Nov. 1 — earlier if the federalmoney runs out. In April, the market research firm Auto OutlookInc. estimated Colorado would have 108,510 new retail light-vehicleregistrations in 2009.
Nationwide, an estimated 250,000 people could get credits,helping to spur sales at a time when industry sales are down 35percent.
Some recyclers say cash for clunkers will hurt lower-incomebuyers who can't afford a new car, even with the federal credit.They also claim that destroying vehicles will increase prices forspare parts that lower-income customers depend on to keep theircars running.
"Now you're removing cars people could afford, and they're notavailable anymore," said Norm Wright, CEO of Stadium Auto and TruckParts Inc., a Denver recycler. "There will be less cars to pullfrom, so the price of parts will go up."
At his warehouse next to Interstate 25, used transmissions fillshelves stacked almost as high as the 24-foot ceiling. Outside,rows of salvaged car doors hang from racks. Chrysler PT Cruisers,soon to be discontinued, are being stockpiled so parts areavailable for years to come.
Despite their misgivings, some auto recyclers are urging dealersto send the trade-ins to them instead of to auctioneers who couldserve as middlemen for scrap yards. Recyclers and salvage auctionsboth have to certify they will follow rules for disposing ofclunkers.
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