Padnos

Confusion for clunkers: Scrap dealers end up with cars junked under federal program

GRAND RAPIDS -- Gas-guzzling rust buckets are nothing new for West Michigan's scrap-yard industry, but in just a week, the ``cash-for-clunkers'' program drove the junk-car specialists into situations never before imagined.

``I never saw anything like this,'' said Mike Ostrander, an account executive with Louis Padnos Iron & Metal Co., Kent County's biggest metal recycler.

``There are a lot of good, working trucks coming in. Even an older Mercedes,'' Ostrander said.

But they all have one thing in common: They're gas guzzlers, gulping a gallon of petrol in less than 18 miles.

Padnos metal shredders already chewed up more than 100 cash-for-clunkers vehicles in the first week of the program.

President Barack Obama on Friday approved another $2 billion to supplement the popular $1 billion rebate program, formally known as the Car Allowance Rebate System, or CARS. That could extend clunker sales until the end of this month, analysts said.

``People are picturing rust buckets,'' when they think of clunkers, Ostrander said. ``But there are some pretty nice cars.''

So far, those vehicles hit the shredder mostly intact. Their engines are seized with a liquid glass infusion at the dealership; other potentially useful parts stay put.

``We're getting the value of the scrap,'' Ostrander said. ``We get the battery, fluids, and mercury out, then it goes right to the shredder.'

But he said, ``We're not parts-ing out anything.''

Scrap steel is bringing about $125 per ton these days. Padnos sorts the steel from the car's copper, aluminum, and rubber, and ships it out via rail or truck to foundries and steel mills in the Midwest.

``It's remade back into a car,'' Ostrander said.

Padnos is the biggest, but clearly not the only, area scrap merchant on the cash-for-clunkers list. More than a dozen other local companies are on the scrap dealers' list at cars.gov.

Confusion reigns

Across the board, the dealers of used parts and scrap metal agree on one attribute of the unique program -- confusion.

``In the beginning, they said, `Yeah, we could get some pickings off of them, but not the drive train,''' said Doug Sherd, 57, manager at Grand Rapids Auto Parts. ``That thing (the rules of the program) changes on a daily basis. There's so much confusion.''

Some scrap dealers say they can't tap the used car parts before the vehicle hits the shredder. Others say just about anything but the engine can be reclaimed and sold.

The Web site cars.gov said it's OK to cull parts from clunkers, except the engine and drive train.

In Jenison, Grand Valley Auto Parts also is on the approved scrap dealer list but hasn't been tapped. That may be OK, said office manager Jennifer McDonald, 31. ``The motors are the No. 1 sellers for us, so I don't know if we're as interested in them (with seized engines),'' McDonald said.

`Just crushing them'

In Sparta, Connie's Auto Parts Recyclers owner Gary Potter said he's worried about a shrinking used-car market, a potential side-effect of the Cash-for-Clunkers program.

``It's taking cars (valued at, say, $3,000) off the market that a lot of people need,'' said Potter, 60. ``There are a lot more of them than (those who) need a 2009 model. You strip the poor people of anything to drive. You're just crushing them.''

Sherd said he has another worry -- the people who are stretching to buy a new car in this economy.

``I'm afraid these people will jump on this bandwagon for that $4,500, and next year, they lose their job,'' Sherd said. ``Then, there goes the car.''

Few scrap dealers besides Padnos have actually processed a cash-for-clunkers trade-in, but they see the carcasses lining up at area auto dealers.

With all the uncertainty of funding, and the snarl of traffic to register purchases online, dealers have been reluctant to finalize cash-for-clunkers sales.

Dealers bear the brunt of risk in the program -- they must store the gas-guzzlers traded in, extend the rebate to the buyer for the new car, and after they get the federal reimbursement, disable the trade-in's engine and send the old car to the shredder within seven days.

Until July 31, a week after the program launched, dealers were ordered to destroy the old cars' engines before they could get their money back. An amendment changed that choreography at about the same time the program appeared to be going broke. 

No wonder, then, that dealers are being cautious.

``I haven't gotten a call,'' Potter said, despite the growing stockpile of beaters at Sparta-area dealerships.

``It's kind of strange. I know the back lots are full of them -- they've got X's on the windows,'' he said.

``I think the politicians had no clue on what they wrote up, and what they passed,'' Potter said. ``They came up with a law and money, but what do we do now?''

At Padnos, Ostrander said he also has seen dealers balk at seizing the engine of a drivable gas-guzzler before they get reimbursed for it.

Every clunker's motor must be drained of oil, filled with sodium silicate, and run until the fluid turns to glass and literally kills the engine.

``Some dealers are very, very hesitant to put that solution in there, until it's firmed up,'' he said.

The latest twist should give dealers some breathing room, but they still have to store the clunkers and get rid of them quickly, once they get paid.

Source: mLive.com

Share this on