February 23, 2015
The Honorable Richard Blumenthal
United States Senate
724 Hart Senate Office Building
Washington, DC 20510
Dear Senator Blumenthal:
The Automotive Recyclers Association (ARA) represents over 4,500 professional automotive recyclers across the United States and in 14 countries internationally. It is on their behalf that I express serious concern that your recent comments regarding the professional automotive recycling industry during a recent CNN Anderson Cooper 360 broadcast, along with your February 13, 2015 letter to Attorney General Eric Holder regarding automotive insurers, could be taken out of context.The professional automotive recycling industry has long been an advocate for consumer choice, and as such ARA appreciates your extended history of supporting a robust automotive parts supply chain. What is missing in the CNN segment and in your comments is the recognition of the critical economic and environmental role that the recycled, original equipment manufacturer (OEM) parts sold by ARA member facilities play in the market. Their existence in the marketplace provides consumers an important alternative to expensive “new” OEM parts.
•Following are several important facts about recycled OEM parts that you may not be aware of that I hope you will consider in future communications on this issue:
•The reutilization of quality, OEM automotive parts is a $32 billion dollar industry in the United States;
•Each day over 500,000 recycled OEM parts that were designed and built to meet the automakers original requirements for fit, finish, durability and safety are sold directly to consumers as well as to repair shops and automobile dealers who are very well aware that recycled OEM parts are being used in the repair of their vehicle;
• Professional automotive recycling operations have robust product assurance and quality control procedures in place to identify parts that do not meet industry accepted standards. These operational safeguards distinguish ARA members from what the CNN segment and others, including yourself, have referred to as “junkyard” parts;
•Most insurance policies allow for the utilization of recycled parts in vehicle repairs and educated consumers know that recycled OEM parts offer quality, safe parts at a fraction of the cost of new OEM parts;
•Recycled parts play an important economic role in the marketplace. Without their existence, many times there would be no alternative part options to an expensive “new” part available for hard working Americans – leaving them at the mercy of automakers who would be in a monopolistic position in setting the price for that part;
•There are 3.5 million motor vehicles deemed to be a total loss by insurance companies annually. While this figure is enormous, the number would be far greater if vehicle repairs did not utilize recycled OEM automotive parts;
•After five years of ownership, a motor vehicle will have decreased in value by an estimated 63 percent. Based on the cost of replacement parts and a motor vehicle’s depreciation in the marketplace, a 7 year old motor vehicle that is involved in an accident will be declared a total loss 75 percent of the time; and,
•With the current length of motor vehicle loans as long as 60 or 72 months, there are many cases where a consumer may owe more than what they will get from an insurance company if their vehicle is declared a total loss. Utilizing recycled OEM parts in automotive repairs can save consumers’ vehicles from being declared a total loss, thus helping extend the lives of many vehicles that would be prematurely taken off the road and keeping consumers from being upside down on their motor vehicle loans.
Regrettably, a number of collision repair entities are trying to forward the false premise that the products professional automotive recycling facilities sell are “nothing more than junk yard parts”. That is simply untrue. Parts sold by professional automotive recycling facilities are recycled, genuine, original OEM parts that meet OEM requirements. They are OEM parts, designed by the OEM, and built to meet the OEM requirements for fit, finish, durability, reliability and safety. These parts are a valued commodity and are in significant demand, but there utilization could even be greater The most recent statistics reported in the Mitchell International’s Industry Trends Report indicates that recycled OEM parts accounted for only 13.21 percent of the average dollars used per appraisal by Mitchell-equipped estimators.
In addition to industry recognition of the definition and value of OEM recycled parts, state court actions also have ruled on this issue. Recently, the West Virginia Supreme Court of Appeals affirmed the use of salvage/recycled OEM crash parts in vehicle repairs, found that recycled parts are diametrically different from aftermarket parts and applauded automotive insurers for using measures to reduce premium costs for their customers.
It is critical for our nation’s policymakers to help consumers understand the different options in the automotive parts supply chain and the various market motivations that exist. Armed with this knowledge, CNN viewers and others can be better informed and will understand that some body shops also engage in the practice of “steering” consumers to utilize only brand new OEM parts instead of using more economical quality, recycled OEM parts – parts that are just as proper or even more appropriate for a particular repair.
ARA is proud to promote the significant environmental benefits realized through the reutilization of quality OEM parts. In your role as a leader in Congress, it would be very appropriate for you to help educate consumers that automobiles are among the most recycled commodities in today’s marketplace and that the reutilization of quality OEM parts provide significant savings of natural resources. In addition, you could help make consumers aware that in the parts recovery process, professional automotive recyclers annually collect and reuse or recycle millions of gallons of motor vehicle fuel, motor oil, engine coolant, and window washer fluid.
Given the complexity of the issues involved in your concerns with the automotive insurance marketplace, we look forward to your leadership to ensure that quality OEM recycled parts that are important in the marketplace are not mischaracterized in a way that diminishes their utilization in the professional repair process.
Michael E. Wilson,