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The Key to Automotive Recycling’s Circular Economy

Automotive Manufacturers must embrace Parts Reuse as a means to close the loop in basic and effective economic models.

The evolution of the circular economy, which dates back to the 1970s, is now a driving force for one of the fastest growing global economic trends. Automotive Recycling will examine the basic tenant of a circular economy framework, which is to recover all products, components and materials at their highest utility and value. This philosophy rejects the old linear model of “take, make, waste” and instead, favors quality products and materials that can be reutilized rather than simply disposed of in a landfill.

In the automotive industry, there is potential for significant new revenue streams if original equipment manufacturers (OEMs) truly embrace circular economy concepts. The Automotive Recyclers Association (ARA) has argued this point to the OEMs themselves, along with federal regulators, Members of Congress, and other industry stakeholders for quite some time. Regrettably, almost every automotive manufacturer has chosen to put blinders on and disregard the purest form of circular economy philosophy by rejecting the reuse of the quality OEM parts that they, themselves, have produced.

In recent years, auto manufacturers have chosen to release or revise position statements on recycled and salvage OEM parts. These statements are attacks on recycled parts and significantly backtrack on the manufacturers’ economic stewardship commitments to conserve resources and protect the global environment, contradicting many of their publicly-stated environmental principles. It is ARA’s position that automotive manufacturers need to abandon their anti-circular economy positions on the utilization of recycled OEM parts. It is unacceptable for these manufacturers to claim a leadership role in the circular economy movement while having corporate positions that do not support the reuse of OEM parts in motor vehicle service and repair.

Fearful that the presence of recycled parts in the replacement parts market will lead to lower corporate profits, automotive manufacturers have responded with unfounded attacks and misleading information about the use of recycled OEM parts to drive consumers away. Unfortunately, this “trashing” of used parts is not a new phenomenon within the automotive sector.

Automakers’ Long History Opposing Reuse

Since the early decades of the automotive industry in the United States, manufacturers have battled against the very cars and parts they produced. As the automotive industry grew in the 1900s to the 1920s, more enhanced vehicles entered the marketplace in greater numbers with each passing year. Many owners sought to sell their current cars to fund the purchase of a newer vehicle. The growing number of secondhand automobiles became a used-car and used-parts “problem” for manufacturers and dealers by the mid-1920s as the market became much more saturated. Auto manufacturers, desperate to prevent past sales from cannibalizing their current markets, began developing programs to dispose of used cars and their parts.

The U.S. Federal Trade Commission’s (FTC) “Report on Motor Vehicle Industry” in 1939 detailed these so-called junking programs, four of which actually operated: the Chevrolet plan, the Ford plan, the highway-safety plan and the highway-safety plan extended. The Chevrolet plan adopted by General Motors in 1925 along with the National Automobile Chamber of Commerce (NACC) highway-safety plan, adopted in 1929, provided for the complete demolition of so-called junk cars which allowed no parts be resold as usable parts.

While the NACC did issue a bulletin that referenced a highway-safety plan extended in 1932 that allowed the salvage of usable parts from demolished cars, the program didn’t last long as the NACC abandoned the campaign near the end of 1933. It was only under the Ford plan that every usable part was harvested off the car and the remainder was reduced to scrap metal. Remarkably, Ford had an actual salvage department at the company’s River Rouge plant in Detroit.

With such a rich history spearheaded by the iconic Henry Ford, one would think that Ford Motor Company would be leading the circular economy movement within the industry today. However, this does not seem to be the case. Instead, it appears Ford Motor Company and its Executive Chairman William Clay Ford, Jr. (Henry Ford’s great grandson) are engaged in a campaign aimed at disparaging the professional automotive recycling industry. ARA is dismayed that Mr. Ford, a sitting member of the company’s Sustainability Committee with a long history of supporting environmental causes, would support misleading information regarding basic reuse principles which offer undisputed environmental advantages.

In fact in 2015, the Ford Motor Company launched a public awareness campaign allegedly to help consumers understand why using original equipment manufacturer parts matters. This campaign seems to be a rather transparent attempt to malign recycled Ford replacement parts from professional automotive recycling facilities in order to boost sales of expensive “new” parts from Ford. Are they so arrogant that the company is unwilling to recognize the indisputable fact that every Ford vehicle driving on our highways and roads today, once that vehicle leaves the dealership, is made up of 100 percent used parts?

The utilization of recycled OEM automotive parts has been widely accepted for decades and has a very long track record of successful and safe use in vehicle repairs. In fact, it was not that long ago in 1999 that Ford actually made over a $1 billion investment in the development of an automotive recycling division, GreenLeaf Acquisitions LLC, that at its peak included over 30 facilities which sold recycled parts to repair shops.

The Circular Economy as a Competitive Advantage

Despite touting commitments to the basic tenants of a circular economy – recovering all products, components and materials at their highest utility and value – Ford and others now oppose the fundamental reutilization of their company’s very own parts once they have left a dealership. ARA believes that automakers should stand by the durability and quality of the parts they produce.

There are vast opportunities to embrace parts reuse and circular economy principles.

In a 2016 document, “Automotive’s latest model: Redefining competitiveness through the circular economy,” the global professional services company Accenture indicated that “potential revenue of selected circular economy business models for automotive companies could more than double by 2030, growing by $400-600 billion. In a disruptive scenario, circular models would outpace revenue growth generated through new passenger car sales. And profitability could be more than three times higher than traditional new vehicle sales – making circular economy business models a major profit pool in the auto industry.”

In that same publication, Accenture referenced that companies could complement their circular capabilities by working with third-parties, such as Renault is doing in France. In that instance, Renault has developed a network capable of supporting closed-loop recycling. The network includes three complementary companies working to help Renault embrace new circular principles – Renault; INDRA, a pioneer in automotive recycling; and Suez Environment/SITA, a specialist in global waste management and recycling.

As a pioneer in the circular economy, Renault shows how a dramatically different approach to vehicle-making is good for the planet and good for business. Instead of planning for disposal at the end of their product’s life, Renault strategizes to reuse, repair or re-manufacture. The last generation and next generation of vehicle become part of the same circular production process.

In a circular economy framework, Renault thinks of waste products as a resource. End-of-life vehicles are dismantled to transform parts and materials so they can be used again (and again) to make new products. In this space, Renault is investing in automotive recycling with its subsidiary INDRA, using them as a resource for spare parts, and further recycling of components and materials.

Renault’s philosophy, “Nothing goes to waste in a natural cycle. Everything is reused, composted or digested. Likewise, a manufactured product like a car can be made at a minimum cost in energy terms by integrating the car itself into the ongoing production process. Instead of planning for disposal at the end of the product’s life, we plan to reuse, repair or re-manufacture. The last generation and next generation of car become part of the same circular production process.” With this perspective, Renault is turning its circular economy approach into a competitive advantage.

Governmental Action to Encourage Automotive Parts Reuse

Legislators and regulators around the world should take a serious look into the actions of auto manufacturers to encourage circular economy principles. For instance in France, former Prime Minister Manuel Valls and his Environmental Minister Ségolène Royal, passed a law in 2016 mandating that automotive workshops offer customers the choice between spare parts from the circular economy (CE) and newly produced parts. The law states that CE parts are “used parts” or “parts that have been re-manufactured.” The only accepted reasons for workshops not to offer a CE product is lack of availability of CE parts, severe safety concerns, if there is a warranty issue with the part itself, or there are service contracts with special conditions.

The new legislation ensures that circular economy parts are a clear option for the vehicle owner. This, in combination with attractive pricing, means consumers can now use their buying power to direct the market toward recycled parts. The new legislation will become active in early 2017.

ARA Activities to Advance Circular Economy Reuse of Automotive Parts

In March 2016, ARA participated in the G7 Alliance on Resource Efficiency’s workshop, entitled “U.S. Workshop on the Use of Life Cycle Concepts in Supply Chain Management to Achieve Resource Efficiency,” that was focused on the automotive sector. The workshop was orchestrated by the U.S. Environmental Protection Agency (EPA) and participants included representatives from U.S. and foreign governments, scholars from academia, automakers and other domestic and international auto industry stakeholders as well as experts in life cycle and sustainability from other manufacturing industries. The focus centered on dialogue between the public and private sectors, discussions of life cycle and supply chain analysis and end-of-life challenges.

In an EPA report summarizing the discussions of the workshop, published in September 2016, ARA contributions to the dialogue were recorded that highlight the need for automakers to design with the “next life” of materials in mind – end of use is not the end of life. It was noted that communication across the supply chain seldom focuses on “next life” of products, which can limit options for recycling, re-purposing, re-manufacturing and reuse. One “Best Practice” that was identified in the report was to “create formal business relations between manufacturers and recyclers/refurbishers to eliminate barriers to communication, provide new insights on resource efficiency opportunities, and promote new business opportunities.” The report also noted a potential action of convening a meeting between the ARA and OEMs to increase coordination on parts numbers and other issues to facilitate recycling, reuse, and re-manufacturing of auto parts.

ARA followed up on its workshop participation with a meeting with EPA representatives in December 2016 to discuss the problematic position statements by automakers against the reutilization of automotive parts.

The Association has also continued to work with the office of Rep. Adam Kinzinger (R-Illinois) to push for recyclers’ access to OEM part numbers and build sheet data to help address safety issues surrounding recalls and also to breakdown barriers to the reuse of automotive parts. Most recently ARA leadership and staff met with Federal Trade Commission (FTC) representatives to discuss the anti-competitive and possible monopolistic nature of certain actions by automotive manufacturers. This meeting is a continuation of a meeting held last summer with the FTC to explore disparaging marketing practices of the automotive manufacturers towards recycled parts.

A Continued Commitment
ARA is committed to promoting effective competition in the markets for replacement parts and equipment to ensure efficient repair and maintenance of motor vehicles around the globe. A true commitment to, investment in, and adherence to circular economy concepts will not only benefit our industry, but open doors to new revenue streams for other sectors of the motor vehicle service and repair marketplace.

ARA will continue to call on all stakeholders to recognize the genuine value, safety and benefits that each repair part option (recycled, new, aftermarket, re-manufactured) may provide and to address unfair market disincentives for the sale of some types of parts versus others.

Michael E. Wilson is the CEO of the Automotive Recyclers Association, representing an industry dedicated to the efficient removal and reuse of automotive parts, and the safe disposal of inoperable motor vehicles. ARA’s mission is to advance the automotive recycling industry and promote its beneficial effects on society and to increase public awareness of the industry’s role in conserving the future through automotive recycling. ARA builds awareness of the industry’s value as a high quality, low cost alternative in collision and car repair for the automotive consumer. Learn more about ARA at www.a-r-a.org