Following the clunkers
Pickups, SUVs and passenger cars that have been orphaned under the federal government’s cash for clunkers program have started to trickle in to St. Louis-area auto salvage yards.
And operators are preparing for a bigger wave of castoffs.
"We are actually getting an influx of cars," said Joe Heiman, president of Al’s Foreign Auto Salvage and Sales in Pagedale,
While the cash for clunkers program will send thousands of used cars to salvage and recycling operators, visions of huge profits for such companies are being kept in check.
Some vehicles will yield usable parts, but others will fetch only what someone will pay for scrap metal.
For salvage companies, clunkers have limited value compared to vehicles from other sources. The engines in clunkers must be disabled almost immediately — a process that involves replacing the engine oil with a sodium silicate solution and running the engine until it seizes.
The car itself must be crushed within six months, then shredded.
Those vehicles going directly to scrap generate little cash, however, likely $100 to $125 per unit, Heiman said.
Steel mills are paying about $245 to $250 a ton for recycled car metals, said Bruce Savage, vice president of communications for the Institute of Scrap Recycling Industries. Last summer, the metals were going for about $550 a ton.
"The question is: Is there domestic demand for these materials?" Savage said.
Under cash for clunkers, tens of thousands of American motorists have traded in their cars for vehicles promising better gas mileage. Qualifying car owners can receive a credit worth up to $4,500 toward the purchase or lease of a new car.
The program proved so popular that Congress stepped in to authorize another $2 billion after the original $1 billion fund began to run dry two weeks ago. By Thursday morning, dealers had submitted 338,659 transactions with a combined value of $1.4 billion, according to the National Highway Traffic Safety Administration.
There is currently a backlog of vehicles that dealers are holding on to until they are sure they are getting paid for them, said Jan Daniels, contract vehicle purchasing manager for Pick-N-Pull Auto Dismantlers, which is based in Rancho Cordova, Calif payday loan lenders., and has a facility in St. Louis.
"The mass volume of the cars coming to our facilities hasn’t happened yet, but we are anticipating that the numbers should pick up," said Michael Wilson, executive vice president of the Automotive Recyclers Association.
Under the program rules, dealers have to turn the cars over to a salvage yard or to a scrap processor. Vehicles can be sent to salvage pool auctions, but ultimately must end up with a recycler.
"These are all cash for clunkers here," Heiman said recently, as he approached a batch of cars on his 4 1/2-acre lot. "We’re scrapping them as fast as we can, pulling the converter, the gas tanks (and draining) the transmission fluid."
Al’s has received about 35 clunkers from local auto dealers with an additional 70 to 80 promised. Heiman said the clunker program helped him branch into the sale of domestic car parts. Without clunkers, he would have had to pay more for the domestic vehicles he is now getting from dealers.
Salvage operators say they have been struck by the quality of some so-called clunkers.
Under the federal program, the cars must get less than 18 miles per gallon combined city and highway, must be drivable and must have been owned and insured by the same person for the previous year.
"We somewhat expected more beat-up vehicles. Rusty vehicles. Older vehicles. The term ‘clunker’ brings an image to mind," said Brad Schwartz, president of Liberty Auto Parts & Salvage in St. Louis whose clunker inventory included a Pontiac Trans Am with a T-top and even a 1990s Jaguar.
"Clunker is the wrong word to use to describe a number of these vehicles."