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Search Salvage Yards for Auto Parts

Recall Tsunami

With recall announcements on the rise, ARA is proactively working to help the industry get the information it needs.
By Caryn Smith

Recall announcements are rising dramatically and causing expensive and labor-intensive issues for automotive recyclers. ARA is working with legislators, government regulators, and industry groups to gain access to important parts data that will increase the ability of the automotive recycling industry to respond to automotive recalls.

Recall announcements are rising dramatically and causing expensive and labor-intensive issues for automotive recyclers. ARA is working with legislators, government regulators, and industry groups to gain access to important parts data that will increase the ability of the automotive recycling industry to respond to automotive recalls.

Despite the ongoing dangers posed by defective and nonconforming parts, automotive vehicle recalls have gone from a rare and shocking occurrence – something that deeply hurts an auto manufacturers’ image – to a nearly commonplace event where consumers have such low expectations for transparency that manufacturers are seemingly unaffected by their own lack of regard for the public.

Through the years, automotive recalls have increased at an alarming rate from affecting 6 million vehicles in the 1990s to highs of approximately 64 million vehicles in 2014 and 51 million in 2015.

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These recent figures are partially caused by the historically unprecedented scope of the current Takata airbag recall, but the trend highlights many issues that recalled parts cause in the professional automotive recycler’s daily workflow.

The primary issue for automotive recyclers in the face of recalls is that the millions of automotive parts in recyclers’ inventories that are currently subject to safety recalls can’t be sold and become effectively worthless. As vehicles with bad parts populate automotive recycling facilities, trying to abide by regulations prohibiting the sale of recalled parts may result in staggering administrative expenses and efforts for most recyclers.

The numbers are staggering – over 100 million motor vehicles have been  recalled since the beginning of 2014. In attempting to abide by existing regulations which prohibit the sale of recalled parts, automotive recyclers have run into resistance from automotive manufacturers, who refuse to release the original equipment manufacturer (OEM) parts numbers for almost all of their recalled parts – where numbers are released, they are often distributed in paper or electronic formats that cannot be integrated into recyclers’ existing inventory systems. While the National Highway Traffic Safety Administration (NHTSA)’s website (www.safercar.gov) lists recalled vehicles, abiding by existing regulations requires manually typing in the vehicle identification number (VIN) of every automobile in a recyclers’ inventory on a regular basis to check for recalls – a daunting and unworkable solution to a serious problem.

As an example of the scope of the existing problem with recalled parts, it was widely reported on March 7, 2016 that the massive Takata airbag recall by Toyota Motor Corp. recalled 400,124 vehicles since 2013. Furthermore, an estimated 29 million Takata airbag inflators have been recalled in the United States in more than 19 million vehicles.

Nearly 34m recalled

 

Defining the Problem
In one of many recent discussions on recalled parts by industry professionals, an auto recycler in the Midwest recently stated his frustration with the current recall system. “We don’t want to sell faulty parts. It’s no good for anyone. Safety-related recalls are a huge concern. It took 2-3 people, 30-40 hours a week in the beginning to get to the point that, with all that investment, we can now begin to manage the process of pulling recalled parts from our inventory. If it was every Honda, it would be easier to process, but we have to check all vehicle makes and models affected. So we decided as a company to check every vehicle that comes through our facility for recalled parts.”

The process for this Midwest auto recycler looks like this: At the time of check-in of a purchased vehicle, his company runs the VIN using the manufacturers’ website for recalls. “We have found this has the freshest information, better and is easier to use than www.safercar.gov.” It takes about two minutes to process the information with wireless laptops at the vehicle check-in point. If a vehicle is found to have a recalled airbag, it is removed from the vehicle and set aside for a later time when it can be determined how the manufacturer has decided to remedy those parts. Those recalled parts are attached to an unprocessed invoice to allow them to be counted in the inventory for tracking, but not available for sale.

“The hardest part is automotive recyclers all work off Hollander interchange numbers and not all [parts of a given Hollander number] are recalled. Therefore each VIN must be individually checked.” Recalls are performed based on a part’s OEM part number, which is often unavailable to recyclers.”

This process really becomes cumbersome and difficult when a recall is announced after the motor vehicle has been checked-in and processed. “In our full-service facility, we now check the VIN at point of sale, when we are doing the quality control inspection, and that seems to be working. But it is more challenging in the self-service facility. There, if we checked the vehicle in October, put it out in the yard in November, and in December there is a recall and we check the vehicle and the part is gone, it’s a dilemma. But once made aware of the recalls, with checks and balances we have in place, we should not find any recalled parts for sale in inventory.”

Unsellable recalled airbags in recycler inventories are numbering in the hundreds at this one particular facility of the Midwest recycler interviewed, and are increasing daily. Without being reimbursed for recalled parts, recyclers must unfairly bear the burden of the manufacturer’s defective parts. Such burdens reduce the ability of automotive recyclers to supply the public with affordable, eco-friendly parts solutions.

Poisoned Parts
One complaint from auto recyclers is the slowness with which recalls are announced. Takata knew about the defect in their airbags when NHTSA conducted a recall query into the problem between November 2009 and May 2010, and may have known as early as 2001. Yet the company was not forthcoming with its knowledge of the defect until 2014, which endangered the public and grossly increased the number of new vehicles outfitted with the defective parts.

“Part recall issues are extremely important to the auto recycling industry,” says Jeff Schroder, Founding CEO at Car-Part.com. “Many end-of-life vehicles (ELVs) pass through recycling facilities before being scrapped, and recyclers may have information regarding the status of recalled parts (particularly when they are separated from a vehicle prior to the vehicle being scrapped).” It is important that information that the auto recycling industry has be included in the parts recall remedy process used by NHTSA and the OEMs for several reasons:

“We cannot allow the recycled parts market to be poisoned because a small percentage of such parts are defective and subject to a parts recall. Some OEMs are already saying that consumers should not buy recycled parts at all because you don’t know whether such parts are subject to a parts recall,” says Schroder. Such recommendations seem disingenuous in light of resistance from many OEMs to give recyclers access to vital parts numbers that could remedy this problem.

“Because of the potential dangers to the public relating to recalled parts, NHTSA has announced a goal of 100 percent recall completion rate. NHTSA and the OEMs cannot achieve this goal without accounting for recalled parts that may have been used in the repair of other vehicles or that may be in recycler inventories,” Schroder stated.

ARA CEO Michael Wilson believes that the OEMs will continue to use this lack of transparency with regard to OEM part numbers to make recycled auto parts appear less attractive. He notes that the very companies keeping their information private tend to overemphasize the risks their own defective parts pose.

Automakers have continued to propose that, instead of releasing parts numbers, recycled vehicle parts should not be sold. For example, in an August 2010 Chrysler position statement which discussed the use of recycled parts, the company stated, “Chrysler LLC does not support the use or re-use of any structural components. … While some salvage parts may ‘appear’ equivalent, there can be dramatic differences in the design and functional characteristics which cannot be determined by visual inspection. … Salvage components may have been affected by crash impact loads, incorrect, improper or inadequate disassembly and removal procedures.”

“This is just one example of how automakers want to destroy the integrity of recycled auto parts,” says Wilson. “The automotive manufacturers are launching media campaigns calling into question the quality of their very own parts, in order to monopolize the replacement parts market by advocating only new replacement parts.”

The Current Solution Tool is Not Business Friendly
While NHTSA’s www.safercar.gov is a necessary first step, many auto recyclers are frustrated with its functionality. “This website is not real quick and is designed for single VIN lookups. They make sure you are not a robot on every single VIN, and this slows you down,” said the Midwest auto recycler. “Bulk VIN uploads would help quite a bit with a data return of what VIN has a recall on it. For us, going to 12 manufacturer websites is quicker than www.safercar.gov.”

“The www.safercar.gov is a good solution for the individual consumer,” says Wilson, “because, if they only have two or three vehicles in their driveway, they can go there and type in those 17-digit VINs and get the information pretty quickly. Where it falls short is in the business community where you have tens, hundreds, maybe even thousands of motor vehicles. To type in a 17-digit VIN is a challenge without messing up one of the digits and having to go back and retype all that information.”

“Our you-pull-it has 75 to 100 customers come through on the weekdays, 200 on the weekends. Imagine the scale of this with yards that have 1,000 people coming through their door, with that many more vehicles in their inventory. It is a massive undertaking,” says the Midwest auto recycler.

“Facing this tsunami of recalls could be the biggest issue to ever face the professional automotive recycling industry. This is one industry challenge where we can’t afford to fail,” says Wilson. “We’ve got to take every opportunity to find a solution and secure the industry’s future by getting all stakeholders to live up to their corporate responsibilities.”

It’s a Numbers Game

It is no secret that auto manufacturers have placed major restrictions on the dissemination of OEM part numbers and build sheet data so that it cannot be integrated into professional automotive recyclers’ inventory management systems. Without this important parts data, recyclers are not able to seamlessly integrate their OEM parts inventory into estimating and collision repair platforms. Delays in updating parts inventories often means that consumers have fewer choices when making important decisions about the repair of their vehicles.

ARA’s position is that the industry must be provided with safety information that can be automatically synchronized with recycled parts inventory so that important recall and service bulletin information is seamlessly integrated into the inventory management systems utilized by the automotive recycling industry.

“Part recalls are the responsibility of the OEMs,” says Schroder. “NHTSA is the governmental agency that oversees the recall process to ensure that the steps taken by the OEMs are adequate. However, the current recall processes used by OEMs and NHTSA are focused almost exclusively on VINs (rather than parts) and leaves many gaps. Although part recalls are an OEM responsibility, we believe that the OEMs and NHTSA are incapable of achieving the stated goal of 100 percent recall completion rates without assistance from the auto recycling industry.”

“While the auto recycling industry may be uniquely positioned to assist OEMs and NHTSA in improving recall completion rates,” continues Schroder, “we do not have key vehicle and part information which would allow us to efficiently identify recalled parts in the vehicles which come through our facilities. Car-Part.com believes that the OEMs must provide the auto recycling industry with VIN and part numbering information regarding recalled parts (and the vehicles they come from), so that defective parts can be efficiently and effectively removed from our inventories and marketplaces. We also believe that NHTSA should assist the auto recycling community to obtain such information from the OEMs.”

“For the sale of green recycled auto parts and with the technology of the vehicle rapidly changing from model to model, the build sheet data needs to be in the consumer’s hands and in our yard management systems,” says Mike Swift, ARA President. “There are too many choices on parts and their safe use. We need more complete information.”

“The recall data and the build sheet data have never been more important than today,” says Swift. “The door has been cracked open – we need to figure out now how to kick it open. This is the time that we need all professional auto recyclers to speak up to their legislative representatives about the importance of receiving parts data on all vehicles electronically.”

“If NHTSA wants 100 percent remedy rate on recalled parts,” says Swift, “then they need auto recyclers to have the right information at their disposal, today.”

The Big Switch

On February 6, 2014, General Motors (GM) recalled about 800,000 of its smaller-model cars due to faulty ignition switches, which could shut off the engine during driving and thereby prevent the airbags from inflating. The company continued to recall cars over the following months, resulting in nearly 30 million cars recalled worldwide and paid compensation for 124 deaths caused by the defect. The fault had been known to GM for at least a decade prior to the recall being declared.

The significance of OEM part numbers is demonstrated by this ongoing GM ignition switch recall investigation and the subsequent revelation that GM engineered a new ignition switch nearly a decade ago, however the redesigned part was not given a new part number – an act contrary to standard operating procedures.

“I know with General Motors,” says Wilson, “when they were working on a recall buyback program with the professional automotive recyclers last year through Hollander and Rebuilders Automotive Supply (RAS), they provided both the Hollander Interchange number along with the specific OEM part numbers. That should be happening at every turn for every recall — the manufacturers and the recycling community need to come together, identify the interchange numbers, the OEM part numbers, and do it in a way so there is access to that bulk data and it can be integrated into the inventory management systems. It needs to be as seamless as possible to identify and address the issues.”

“ARA is on the right path,” says the Midwest auto recycler. “If we can get vehicle VIN and parts numbers, from the build sheet data, we could create better reports and work through this more efficiently.”

“RAS has been working with multiple OEMs since mid-2014 as well as hundreds of salvage yards to identify safety recalled products, such as ignition switches and airbags,” says Marcy King, RAS’s Director, Online Buying Division. “RAS has played a key role by working with salvage yards, helping them identify recalled parts by VIN or year/make/model, and providing instructions on how to handle and ship hazmat material to remove these dangerous parts [from] public circulation …. We will continue to assist the salvage industry until such time when recyclers will be made aware of recalls prior to purchase into the salvage network.

“RAS has procured tens of thousands of ignition switches and airbags,” says King. “We are very proud of our role as a corporate citizen in removing these very dangerous parts out of the salvage network which ultimately results in saving lives.”

Legal Dilemma
NHTSA wants to know what recyclers are doing about recalls, but even recyclers trying their best to comply with existing regulations receive conflicting or difficult-to-utilize information from both NHTSA and the manufacturers responsible for the recalls.

“The information changes constantly, and is hard to comply with,” says ARA’s Wilson. “For instance, in 2015 there were 900 recalled car part campaigns affecting 51 million vehicles. In 2014 there were 13 million vehicles affected. Furthermore, there were 33 million vehicles cited as affected by Takata air bag recalls, but then it was downgraded to 19 million.”

Under the Transportation Recall Enhancement, Accountability and Documentation (TREAD) Act of 2000, which was passed following the discovery of defects in Firestone tires equipped on Ford Explorers in May of that year, “At the time the Act was passed the number of recall parts was small and mostly directed to tires,” says another auto recycler located in the Northwest. “Since then, we all have witnessed the explosion of recalls, especially in the last several years with ignition switches and now airbags.”

“Checking vehicles is cumbersome and time consuming. A recycler isn’t being provided information in a useful way. Parts can potentially be recalled 24-36 months after a car is bought, dismantled, and inventoried,” says Wilson. “Both full-service and self-service facilities have unique challenges to addressing the recall issue within their business models.”

“All professional auto recyclers want to protect their customers from using any parts that may be defective or have been recalled by the manufacturer for any reason,” echos the Northwest recycler. “The information must be readily available to us in an electronic format that can be accessed and incorporated into their management systems.”

“Auto recyclers bear the burden of time and lost revenue, throughout the process to search, discover and remove from inventory recalled parts. Manufacturers have not been held accountable for their lack of outreach to the professional automotive recycling industry,” says Wilson.

Furthermore, Wilson notes, “If a manufacturer sold a vehicle with a defective/recalled part, they are required and responsible by law, extending back 15 years, to make it right with the motor vehicle owner by 1) repairing the part 2) replacing the part, or 3) reimbursing the car owner for the part. Those requirements for remedy are available to automotive recyclers as well, and as the lawful owners of those vehicles, recyclers should be eligible for reimbursement of labor charges and time spent removing and inventorying the automakers defective recalled parts.”

“A best case scenario for auto recyclers could be that the recycler pulls the part out of sellable inventory and gets reimbursed for the automakers defective part. Inventory management systems can create reports that allow for a reimbursement from the manufacturer,” Wilson suggests. But reimbursement for the part itself, even when it happens, does not cover the recycler’s lost revenues.

“Reimbursement must be inclusive. Getting reimbursement on a part is great, but what about the pieces that go with it?” Many parts are far less marketable without their complementary parts, and dismantling certain assemblies to access a recalled part can be time consuming. “This is why ARA has spent time on this issue,” Wilson says, “it just continues and the problem gets more complex with time.”

Small Steps in the Right Direction
The leadership, staff and volunteers of the ARA have been working non-stop on improving the recall experience for automotive recyclers and the public.

“The ARA Governmental Affairs Committee (GAC) continues to work with ARA staff to ensure that our industry is at the table to be part of the solution to the automotive recalled parts issue,” says Norman Wright, ARA GAC chairman, Past-President, and owner of Stadium Auto Parts.

“The Committee has members from both the full-service and self-service sectors, so interests of both sectors are addressed. We continue to alert our members through various ARA publications and emails about what is transpiring and what ARA is doing to protect both our members and the entire industry. In addition, ARA members have hosted invaluable facility tours, including one for the lead Congressman on our issue, Representative Adam Kinzinger (R-IL).”

“ARA members need to continue to read all ARA publications and emails to make sure they are aware of the impact of automotive safety recalls on their business throughout this process. Any member who has questions or concerns should know that the ARA’s Governmental Affairs staff and committee members are available to answer their concerns. We encourage all to connect with the process to support the efforts. ARA is there to help our members be aware of the laws and regulations that our industry faces,” Wright says. (See box on ARA’s effort to secure part numbers.)

Taking the Fight to the Hill

ARA received a significant legislative win with support from key government officials following a requirement for OEMs to disclose part numbers for recalled parts. The progress is remarkable, though much remains to be done.

To review, during ARA’s Hill Day 2015, ARA presented Congressman Adam Kinzinger (R-IL) with the Association’s Congressional Champion Award for his role in posing targeted questions to the automakers about access to parts data for professional automotive recyclers in a December 2014 congressional hearing focused on recalls. These questions and the automakers’ responses are part of the official hearing record of proceedings. The underwhelming responses from manufacturers and automakers continues to be slow, but with the aid of well-informed congressional support, is moving in a promising direction.

In a June 2015 U.S. House Congressional hearing on the Takata airbag recall, Kinzinger once again stepped up to the plate and asked the two automaker associations how the automakers plan on sharing parts data with professional automotive recyclers. During the June 2 hearing, the Congressman asked the following questions of the Alliance of Automobile Manufacturers and the Association of Global Automakers, which represent most of the worldwide automakers. After a statement of support rising from NHTSA and DOT, he asked:

“My question is this: If you know the answer, when and how do your members plan on making this information available to recyclers? And are you aware of any discussions in the industry to help share this information to improve safety? Can your organizations facilitate this and make something like this happen?”

Regrettably, the Associations’ Presidents/CEOs who testified failed to answer, and requested additional time to respond to the questions. The Congressman requested they respond back directly to his office as well as for the record. The manufacturers sent a joint letter to the Congressman five weeks later, on July 9. While the last line of the letter stated that “…[we] would be happy to work with you and the automotive recycling community to explore ways to facilitate the removal of defective parts taken from recalled vehicles from the stream of commerce,” the rest of the letter discussed a solution as being the government’s VIN lookup database, www.safercar.gov. The letter stated that, “The majority of vehicle parts do not contain specific parts numbers stamped on them and may not have other specific identifying information,” a fact that ARA argues underscores the need for the automakers to provide the parts data to auto recyclers.

The letter also “oppose[s] the use of salvaged airbags and airbag components as replacement parts.” Part of the manufacturers’ argument supporting this position comes from their belief that “the salvaged airbag or component may not be appropriate for the particular vehicle – for example the coupe and sedan versions of a certain model may appear the same, but have differences in the design of similar components.” Again, if recyclers have only Hollander interchange numbers for parts, which may not distinguish between certain model designs as clearly as is needed, manufacturers should support the sharing of OEM part numbers and build sheet information with professional automotive recyclers to promote customer safety.

In addition to seeking legislative assistance, ARA has been lobbying at industry events as well. In April 2015, ARA actively participated in “Retooling Recalls,” a NHTSA one-day workshop of leading transportation officials, automotive industry representatives, safety advocates, and researchers to brainstorm on how to achieve a recall completion rate of 100 percent.

Throughout the event, in both the general and small group breakout sessions, ARA staff made the compelling argument to the over 100 stakeholders present that only with bulk access to recall data along with OEM parts numbers and build sheet data would NHTSA be able to reach its stated 100 percent recall remedy rate goal and fulfill its statutory obligations to ensure the safety of the nation’s drivers. As a result of this participation, the final reports of the breakout sessions – as stated clearly in the closing general session comments and recording posted on NHTSA’s website (www.nhtsa.gov) – all include a variation of the recommendation “to provide access to bulk recall data along with OEM parts numbers and build sheets.”

In May 2015, U.S. Department of Transportation (DOT) Secretary Anthony Foxx recommended that automakers provide OEM part data to recyclers. Rep. Sam Graves (R-MO), Chairman of the Transportation and Infrastructure Committee’s Highway Subcommittee, following a February hearing, posed this question to Secretary Foxx:

“In your testimony before the Committee, on the importance of reauthorizing the Nation’s surface transportation programs, you stated that the GROW AMERICA Act must be passed in order to provide U.S. DOT with the authority to either stop automotive manufacturers from selling vehicles that have been recalled or require that such vehicles be repaired prior to sale. Every day 500,000 original equipment manufactured (OEM) parts are sold and reutilized to repair vehicles in the United States after being harvested from total loss or end-of-life vehicles. The capability to track OEM automotive parts throughout their life-cycle is essential in identifying and remedying faulty automotive parts that are at the root of the historic number of motor vehicle recalls and to protecting the safety of the traveling public. Do you also support requiring the automotive manufacturers to provide essential parts numbers to professional automotive recyclers in order to ensure the proper identification and tracking of automotive parts throughout their life-cycle?”

In response, Secretary Foxx recently supplied the following statement for the record:

“I support requiring automotive manufacturers to provide parts numbers related to recalls to professional automotive recyclers to ensure the proper identification of such parts. Vehicle safety recalls often involve replacing defective parts, and defective parts that are reused as replacement parts on other vehicles could present a safety hazard. The automotive manufacturers should provide this information in an efficient and easy-to-use format directly to recyclers and others who need the information. This approach would not require the government to be the go-between or require the creation and expense of a new government program to collect and distribute the information.”

Wilson notes, “This is one of those huge challenges – I mention to folks that it’s sort of like climbing Mount Everest. We’ve been able to get to base camp, and now with the Secretary’s announcement, we’re starting to make our way up that climb. But it’s a huge event and obstacle out there that we will continue to strive to go up that mountain.”

Making Change and Continued Pursuit

“The new FAST ACT provides that the auto manufacturers must make available the part numbers and component descriptions for all recall parts,” says the Northwest auto recycler. “On the full-service side, with this information our inventory management systems can incorporate it into our database so that when a part is searched it would be easily identified that it was subject to a recall and we can then properly handle the transaction.”

“Likewise, the self-serve recycler can incorporate this information into their management systems to identify by either vehicle type or VIN number what parts on the vehicle are subject to recall and can then properly process it in their operations. The most important key is having the information available and then put into a useable format that can be easily incorporated into our management systems.”
As this edition goes to print, NHTSA has not announced exactly how the Agency plans to implement the FAST ACT and the new requirement for automakers. ARA continues to dialogue with NHTSA on a regular basis to ensure that after such a hard fought legislative victory, the industry cooperates with and effectively implements the requirement.

“The battle is not over,” concludes Wilson. “ARA needs the participation of members, industry partners, and other stakeholders to continue our pursuit of access for more comprehensive OEM parts identification information.”

“We will be back up on the Hill this April for our Annual Hill Day,” says Swift. “ARA members will be talking with legislators, continuing to explain why access to all OEM parts data is so critical. More is sure to come on this issue in the months ahead and I urge all auto recyclers to get involved.”

Caryn Smith is the Editor of Automotive Recycling magazine.