For immediate release –November 2008
Written and published by Mike Gibson and Ron Sturgeon, autosalvageconsultant.com, email to mikeg@autosalvageconsultant.com. To register for future free issues, visit http://www.autosalvageconsultant.com. Don’t forget to watch for our management articles monthly in Recyclers Power Source Magazine, or posted at our web site.
This Month’s News
Up To Speed, Court mandates salvaged car database, Los Angeles Times, Ken Bensinger – Sixteen years ago, Congress passed a law requiring the creation of a national database of vehicle title information that would allow consumers to determine whether a vehicle had been in a serious accident. It seemed like a great idea, but it was never implemented. Thanks to a federal court ruling today, however, that should soon be changing. A U.S. District Court judge for the Northern District of California handed down a decision that requires the federal government to create a database of stolen cars and state, insurance and junkyard title information. Government-supplied data are to be made public by the end of January, with private industry data coming out by the end of March. The ruling comes after years of pressure from consumer groups, which pointed out that without access to such information, motorists cannot really know whether a vehicle has been severely damaged or “totaled.” That’s a serious safety risk, because badly wrecked cars can be unsafe to drive even if they’re repaired. The case, against the U.S. attorney general, was brought by Public Citizen, Consumer Action and Consumers for Auto Reliability and Safety. It was filed in February and called on the Justice Department to enforce the statute. “It’s pretty much a slam-dunk ruling,” said Deepak Gupta, an attorney for Public Citizen who litigated the case. “Now, with just a VIN number, people will have access to critical data on their cars.” The Justice Department did not return calls for comment. The ruling by Judge Marilyn Patel is important because title rules vary by state and because there is no consistent nationwide reporting system. Without broad availability of data, untold numbers of cars and trucks that have been seriously damaged in floods and accidents can be given clean titles by state agencies. It’s a system that’s ripe for unscrupulous dealings: A 2001 study by the Justice Department estimated that a database would reduce fraud losses by as much as $11.3 billion a year and that about 1.5 million totaled vehicles were put back on the road every year. In a typical case, a vehicle that has been badly damaged in a wreck is sold by the insurer, with a clean title, to a buyer who makes mainly cosmetic repairs and then sells it as an undamaged used vehicle. Depending on state rules, this practice can be legal as long as the cost of repair does not surpass a predetermined percentage of the car’s book value. According to experts, that percentage can be as high as 100%. Although final rules have not been written, it’s likely that the database would be accessible via the Internet, according to Gupta and others familiar with the matter. That would allow consumers to use a car’s unique vehicle identification number — the aforementioned VIN — to discover whether it had even been in a serious wreck, because the search would turn up police data, as well as state department of motor vehicles, insurance and junkyard information. Insurers have claimed to be essentially agnostic on the matter of a database they would be obligated to report to, but the industry has had problems with passing bad titles in the past. In 2005, for example, State Farm agreed to pay $40 million in a case brought by state authorities over 30,000 vehicle titles that were not marked as salvage. Other businesses potentially affected by the ruling are fee-based background-check services such as Carfax and AutoCheck. Providers of such data claim to be comprehensive, but in February of last year, Carfax settled a class-action suit alleging that the company misled customers in indicating its background searches were complete. State attorneys general who brought the case alleged that Carfax didn’t get data from 20 states, nor did it get information from most insurers. Carfax charges $24.99 for one report and $34.99 for unlimited reports. A federal database would probably be free or very low cost, Gupta said. A spokesman for Carfax could not be reached for comment. On Friday, the Justice Department released a set of proposed rules on establishing the database. That proposal was published in the Federal Register today. The law, the National Motor Vehicle Title Information System, mandated that state motor vehicle administrators, as well as insurers and junkyards, report title information to a central database as well as insurers and junkyards. Although some states have been reporting that information for years, others have not, among them California and New York. Instead, those states sell their information to private data services, according to Rosemary Shahan, head of Consumers for Auto Reliability and Safety. “California and New York get revenue from selling that data,” she said. “They don’t want to just hand it over for free. ”
Schnitzer Steel Hawaii halts buying scrap metal, Star Bulletin by Allison Schaefers – Hawaii’s steel industry is bending under the strain of a collapsed U.S. financial market and lingering credit crunch, according to the state’s largest scrap metal recycling company. As of today, Schnitzer Steel Hawaii has temporarily suspended buying scrap autos and light iron, said General Manager Jim Banigan. The announcement, which comes as the company is in the throes of a lawsuit filed by competitor Paragon Metals Inc., is not related to the pending litigation, Banigan said. “The scrap markets are collapsing,” he said. “The financial crisis is hitting our industry. A lot of the credit markets have dried up and there are basically a lot of steel mills sitting around with a backlog of scrap.” However, Paragon Attorney Ted Pettit said that Hawaii’s other steel companies are continuing to operate despite the slumping economy. Schnitzer’s issues are due more likely to their struggles with toxic waste, Pettit said. In June, Paragon filed a lawsuit accusing Schnitzer of dumping mercury into Oahu’s overflowing Waimanalo Gulch Landfill and misleading the City of Honolulu into paying an annual subsidy estimated at nearly $2 million for discounts on fees to dump auto residue at the landfill, he said. Paragon is also seeking an injunction against Schnitzer to halt the dumping of automobile residue into the landfill and has asked the court to stop subsidy payments to the company, Pettit said. Banigan deferred comment on the lawsuit to Schnitzer Attorney Gary Grimmer. The company’s answer to the complaint is due on Friday, Grimmer said. If the financial market improves, Banigan said Schnitzer will resume purchasing autos and light iron. In the interim, the company will continue buying heavy melting steel, he said. While Banigan said there are other Hawaii companies that are still purchasing scrap auto and light iron, some Hawaii small businesses are assured of feeling the trickle-down effect. “I’m not in the scrap business as of today,” said Shane Celetano, owner of Freebie Towing. “It’s going to substantially impact our business and the hundreds of other companies that bring metal to this place.” The slowdown at Schnitzer is going to severely impact Celetano’s business, he said. “I’ve got four kids and another on the way and I don’t know how I’m going to be able to pay for my shop or cover my business credit cards or loans,” he said. “This is a life-changing decision for me and thousands of other people who make their living dealing in scrap metal.” While the financial crisis is impacting businesses everywhere, other Hawaii scrap-metal dealers, including Paragon, possibly could pick up where Schnitzer left off, Pettit said. “I’m certain there are other metal scrap dealers in the state, like Paragon, that can start crushing and sending the entire cars out of state,” he said. Paragon does not conduct a shredding operation here, Pettit said. It ships all metal scrap to the mainland for processing and does not dump any waste into landfills in Hawaii, he said. “They do buy and sell scrap on Oahu, but their efforts are mostly concentrated on the neighbor islands because Schnitzer has had an unfair advantage on Oahu,” he said.
How’s Business?
“Success – To laugh often and much; to win the respect of intelligent people and the affection of children; to earn the appreciation of honest critics and endure the betrayal of false friends; to appreciate beauty; to find the best in others; to leave the world a bit better, whether by a healthy child, a garden patch or a redeemed social condition; to know even one life has breathed easier because you have lived; this is to have succeeded.”
Bessie A. Stanley
AutoSalvageconsultant.com was formed in 2001 to help recyclers improve their businesses. With over 50 years of experience in 3 staff members, the group is THE definitive source for recyclers’ management and training needs. Mike Gibson and Tammy Sturgeon joined the team in 2003, and bring a wealth of experience to the team, plus more resources, as there have been more requests for help than Ron could meet. The founder, Ron Sturgeon is past owner of AAA Small Car World. In 1999, he sold his six Texas locations, with 140 employees, to Greenleaf. In 2001, he founded North Texas Insurance Auction, which he sold to Copart in 2002. In 2002, his book “Salvaging Millions” was published to help small business owners achieve significant success, and was recently reprinted and published in Chinese. In June 2003, he joined the new ownership and management team of GreenLeaf. He also manages his real estate holdings and investments. You can learn more about how to help your business at www.autosalvageconsultant.com. Mike can be reached at 628 SW Rand Drive, Burleson, TX 76028, (preferably) mikeg@autosalvageconsultant.com, or 817-925-8430.
