By Marty Hollingshead
Back in January of 2017, I wrote an article about the Five-Year Plan, and what the future holds for auto recyclers. So, now four years later, I just want to recap the problems facing us and what changes we have seen. We will start off by looking at problems that were facing us and how things are now.
1. Information Denial by the OEMs: This was clearly the biggest threat before us then, and it still is now. It seems that there is more and more resistance to us getting information and part numbers from the OEMs, as well as all of the new “Position Statements” that have been initiated by the OEMs in opposition of using anything other than new OEM parts for repair on a vehicle.
What will happen to interchange if we do not have access to OEM part numbers? This will make it difficult for us to operate our businesses. It will be difficult to apply and use analytics, also for making informed decisions on purchasing, pricing, and inventory management, as well difficult for our customers’ and the insurance companies’ ability to look up and source our parts.
2. Autonomous (Driverless) Vehicles and the Evolution of Collision Avoidance Systems and Advances in Technology: As these vehicles become safer, there will be less accidents, which equals less vehicles in need of repair, less total losses, and more importantly, less opportunities for the automotive recycler to sell and acquire product. With the coming of electric vehicles, this will eliminate for the auto recycler our number one and number two part types in terms of revenue, which are engines and transmissions. There will be high value in electronic components on these vehicles, such as collision avoidance components, cameras, modules, etc., but most of these components will be VIN specific. This means they will only function in the vehicle from which they came, and in most cases, the OEMs will be the only ones that will have the ability to reprogram or reflash these components.
I do not believe that we will have a market to the end user, mechanical or collision repair shop, because they will not have access to the same technology. Our market for these parts will probably be a third party, like what we have now with the key fobs. What is certain at this point in time is that in the future, we will have less part types to sell, but this will also be reflected in what we pay for our salvage vehicles. Obviously, as part type demand and anticipated revenue goes down, so will salvage prices.
3. Ever-Widening Gap: Big Guys Versus the Independents: As this gap widens, it will be increasingly difficult for the smaller independents to compete against the big guys. The question that the auctions and the insurance companies should be asking themselves is, “if the independent or the smaller recyclers are gone, won’t this have a negative effect for the salvage returns for the insurance companies, as well as the auctions?” The byproduct will be that they will both realize lower returns and less revenue from less competition.
4. Environmental Compliance: Will this industry be subject to increased scrutiny by the EPA on the federal, state, and local levels? The answer is, yes, and we are seeing it now with stormwater testing and also politically – how this industry can possibly be viewed as a threat to the environment.
5. Increasing Insurance Costs: We are seeing this now. I am hearing from other recyclers about the difficulty and the high cost of getting renewals on their policy.
6. Fallout from Public Negative Perceptions. How will the negative perceptions of our industry affect us in the future? Will it make us unwelcome in our own communities? The answer to this is that we have to eliminate the stigma of the junkyard image, which is how we are perceived by others. Being certified, ethical, clean, and business savvy can certainly help change this, but we also have to be proactive to promote these aspects about our business to change our industry image.
Challenges are Opportunities if We All Get Involved
So, as we can see, things will not get better for our industry until we take control of our future. To do this, we all need to get involved. We need strong direction and leadership from ARA, as well as our state and local associations. ARA has taken the lead and they are our voice on a national level to address and find solutions to many of these issues. Our state and local associations are also working hard to address our best interests and concerns. ARA – through training, education, mentoring and certification – provides ALL auto recyclers with the tools and resources they need to be better and more successful operators.
Remember this, we all have a responsibility to our businesses, our employees, and our community to work hard, support, and have a voice on all of these issues.
As ARA President Scott Robertson says, “We are the most misunderstood industry in the world.” And, he is so right. As an industry, we have a great story to tell. We need to let others know what we are and what we really do.
With challenges also come opportunities. Whenever I am asked, “Why should I support or belong to ARA?” My answer is, to have a voice and participate in addressing all the challenges facing our industry and work together to find solutions. We need to look at the big picture here. We can no longer sit on the sidelines and wait for things to happen. We need to take control of our destiny before someone else does. We all need to participate. We can no longer afford not to.
Support your Associations! Participate, be involved! Your business’s future and very survival is at stake.
During our first mentoring session, I was handed this note from Lawrie Beacham:
“Every person owes time and money to the industry in which they are engaged. No one has a moral right to withhold his support from an organization that is striving to improve conditions within his sphere.” I have this saying on a plaque in my office, and I look at it every day.
Martin “Marty” Hollingshead is President of Northlake Auto Recyclers, Hammond, IN, and is the First Vice President of the Automotive Recyclers Association.