Industry Insiders: Government Policies and Automaker Relationships with Michael Wilson (Part 1)

We recently caught up with Michael Wilson, CEO of the Automotive Recyclers Association. Wilson has been in the industry since he started with the ARA in 1997. Considering his extensive experience in the industry and on Capitol Hill, we wanted to sit down with Wilson to learn more about his background, the industry's relationship with automakers--specifically regarding vehicle recalls, and how government policies play a major part in how small auto recycling businesses operate. Part 1 of 2 upcoming posts is below.

Hollander: We wanted to start off by learning a little more about you, your background, what you do, your education, where you’re from, all that fun stuff.

Michael Wilson: Okay, I’m Michael Wilson, the Automotive Recyclers Association CEO. I’ve been with the Association for 14 years. I started off as our lobbyist back in 1997. I did that for six years, then went on to another opportunity, and then the Association executives asked me back in 2007. So, I’ve been heading up the Association ever since. The opportunity to lead the association is something that I enjoy very much. The folks in the industry and the people that have dealt with automotive recyclers and the membership--they’re just the greatest people I’ve ever worked for in my professional life. And to see all these mom and pop businesses that are the backbone of the economy and the challenges and obstacles that they have, trying to help them promote an industry that has both economic and environmental benefits is something that’s a challenge every day you come into work. We have things that are going very well, and we also have some things that we need to try to address to make sure that this is a profitable business moving forward.

Hollander: Absolutely, that’s a great background, thank you. Can you speak a little more to that? Specifically, the challenges and obstacles that these small business owners are facing?

Michael: Yeah, well the Number 1 initiative right now is trying to get access for the recyclers to OEM part numbers and build-sheet information. Because the Number 1 issue they [the small business owners] have right now is actually having the amount of product or vehicles in their inventories, to be able to harvest the parts off to provide those to consumers. And there’s various issues behind that, why it’s so tough to get total-loss vehicles or end-of-life vehicles. But it sort of goes around probably two major things. The strength/weakness of the US dollar— is what it’s been historically. Now the dollar over the last 18 months is getting much stronger, so that’s starting to work its way through the process. But also the price of metal and steel have made a huge impact on the industry. When you look at the dollar when it was very weak, folks coming in could export vehicles overseas very easily because of the value of that dollar. And so we lost a lot of vehicles going out of the United States to other countries, and it made it much more difficult to go to the online auctions or live auctions and bid on those vehicles, especially for late-model vehicles.

Then on the self-service side, with the price of steel, it made it so that almost everybody turned into an automotive recycler. Anybody with a tow truck could go out and pick up those vehicles and bring them in and sell them to a scrap processor. Here you’ve got brick and mortar facilities that are doing everything to comply with state, federal, local ordinances. They don’t have the same—they have many more rules and regulations they have to comply with than someone that just goes out and picks it up with a tow truck, or puts it on a hook and brings it in. So those have been challenges that our folks have faced over the last, probably close to five to ten years. And what we’re looking to do with trying to get access to the OEM part numbers and the build-sheet information, is to be able to look at a vehicle and, instead of harvesting 25 to 35 parts off of those vehicles, to be able to harvest a lot more; and thus if our members can sell more parts off of that end-of-life vehicle--that total-loss vehicle--then they can pay more at the auctions for it, because they’re going to have a bigger return on that vehicle. So hopefully through the economic marketplace, there will be a better point from which they can bid on these vehicles and retain more of the total-loss vehicles in-country, and be more profitable for the professional automotive recycler. But, when you look at the complexity of these vehicles, we’re going to need that one-to-one connection. And so it’s important to have both the part numbers and then also the language that recyclers have spoken for decades, which is the Hollander Interchange numbers. It’s very important that we have both of those working together because one is the one-to-one match, but also knowing that part fits across several makes and models is also important to know for the industry.

Hollander: Absolutely. You mentioned the complexity of those vehicles. Do you feel that the changes in technology in electric and hybrid cars are making it even more difficult?

Michael: That is in addition to it. Again, on the safety side of things, our folks have to be well-trained on how to address those vehicles when they dismantle them, so we’re working on getting additional information from the manufacturers to make sure those things are done properly. Vehicles are pretty much computers on wheels these days. With all the electronic components, we’re going to need professional automotive recyclers to be able to sell those electronic parts. And there are some barriers that make it very difficult for reutilization of those parts, so we’re going to be fighting to make sure that the consumer has a choice so that it’s not just genuine new parts that are available on the marketplace. We play a very huge role in the economic marketplace, because if there is no other alternative to genuine new, then the automakers are able to set the price wherever they want to set that price. By having the recycled product in the marketplace, that provides a counter-weight to make sure that those new parts prices are in balance and have competition in the marketplace.

Hollander: What are those barriers? Can you speak to those a little more?

Michael: Well if you look at it, again you have to reprogram or flash these electronic component parts. Some of them are VIN-specific, so parts are being made only for that one vehicle, and they cannot be reutilized in another vehicle. As we move forward and these vehicles become more like computers, it’s going to be sort of a tug-of-war between the recycling industry and the automakers to find out where all that is going to shake itself out into the marketplace. Again, I think that if we have more communications with automakers and we can find cooperative areas where we can work together, I think this could really move forward in a much more compatible way. Look at the average age of a vehicle: today it is 11.5 years old, that’s much older and longer than 20, 30 years ago. And so I believe that with our communication with the automakers, we can help out because recyclers are not going to sell a new part within the first two or three years of that vehicle, typically because a lot of that stuff is under warranty. So looking from that 4-11 year timeframe, there’s a lot of opportunity when a consumer could use a recycled part to put on their specific make and model. And I think that would help out with the brand loyalty to some of the automakers, because it keeps that consumer in that automaker’s brand, it makes them feel happy to be in that brand, because they’ve got a cost-effective way to repair that vehicle. And then, when they move on and sell that used vehicle, I think they’re more likely to stay in that brand if they’ve had a good experience throughout the life of that vehicle.

Hollander: Of all these challenges, what are the biggest ones that you’re facing daily?

Michael Wilson: Well, I think one of the most important is that OEM part number issue because our industry needs to have access to the inventories they can sell from their facilities; and be able to say “yes” for every phone call that comes in from a consumer or another entity that’s looking for that part. When we look at the OEM part numbers, and the data, and the build sheets and so forth, that’s also very important as we move forward in looking to address the significant recall vehicle issue that’s been on our backs for quite some time. Last year, the number of recalled vehicles in the United States skyrocketed to 64 million. And just within the last few months, the number of vehicles recalled for the Takata Airbags has spiked from 17 million to 34 million. And then when you look all the way back to 2008, I think that figure is about 53 million vehicles recalled for Takata Airbags. It’s important for the professional auto recycling community to be able to identify those vehicles in their inventory and make sure that those parts are not made available for sale. And it’s very important that we work with the manufacturers to get the information into our systems in an integrated way so that there is efficiency in running the VIN check and the parts check on recalls that may happen on a daily basis. I know with General Motors, when they were working on a recall buyback program with the professional automotive recyclers last year through Hollander and RAS (Rebuilders Automotive Supply), they provided both the Hollander Interchange number along with the specific OEM part numbers. But last year, I think there were a little over 800 recalls, so that should be happening at every turn for every recall, the manufacturers and the recycling community come together, identify the Interchange numbers, the OEM part numbers and do it in a way that there’s access to that bulk data so that it can be integrated into the inventory management systems of the industry, to make it as seamless as possible to identify and address the issues.

Hollander: Can you give us a little more insight into your role in recalls?

Michael: The biggest thing is there was sort of a watershed event that happened back in August (2014) with the rollout of SaferCar.gov from NHTSA, which is the National Highway Traffic Safety Administration. For the first time, consumers, recyclers, and other stakeholders could type in the 17-digit VIN and see if there were any open recalls from a specific vehicle. Where before it was generally done as make, model, year. Now, there’s a specific way to be able to track those recalls and see if there’s any open recalls that need to be fixed. Since the recall announcement about a week ago today, NHTSA and automakers haven’t put out a comprehensive list of all the affected vehicles, and that information is not in SaferCar.gov, but we’ve been reaching out looking at the list that becomes publically available and getting those revised lists as far as make, model, and year out to the memberships and to the professional auto recycling community so they understand these are the sort of vehicles in their inventory that we’re looking at. I don’t know exactly if it will today, tomorrow, or the next day but we should have revised counts and models and makes of the vehicles that are affected. So that’s been an important role to make sure that we get that information out and then again, get it in a way that the recyclers can use it in a more efficient way because if they have to check their inventory every single day, especially as your looking going from a per vehicle to all these component parts that have been pulled off the vehicle, it’s important that there’s a systematic way to do that. There’s over 500,000 parts that are being sold daily in the United States that are recycled. And so we’ve got to find an efficient way to do that. That’s not just going to be the recycled part, that’s going to be the aftermarket parts, it’s going to be the new OE replacement parts. There needs to be a tracking of all those parts throughout the lifecycle of the vehicle, because if there becomes a problem, we need to identify if that particular part was replaced at some point. Was it replaced with a part that may be under a future recall? And that can happen, not only on the recycled side of things, but it can happen with and aftermarket, a remanufactured, or a new OE replacement part. So it’s a big challenge. Again it’s one that we can’t bite the entire apple all at once, we’ve got to take little bites at this and move the industries forward and also get stake holders that have not cooperated as efficiently as we could in the past. This gives us the opportunity to take something that is very important asconsumer safety and do a better job of working together to address that major concern.

Hollander: Well it sounds like with the launch of SaferCar.gov, and correct me if I’m wrong here, but there’s been some good progress, maybe a few bites off that apple; is that correct? Have you seen strides in the right direction in this area?

Michael: The SaferCar.gov is a good solution for the individual consumer because, if they only have two or three vehicles in their driveway, or they have their son’s, daughter’s, grandparent’s, whatever, they can go in 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 cars. And 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 stuff. You'd also have to do that on a daily basis, because a recall can happen several times a day. To have that system and do it in a more integrated fashion is definitely doable. And we’re going to need to get the automakers and the other stakeholders working together to get that bulk information, that data to the new car dealers, the independent car dealers, auctions, everybody that has a vested interested in getting access to that in a bulk format so we can integrate it into the system.

But back to your original statement, it is a step forward, a huge step forward, for the individual consumer. Now there needs to be a lot more done for the business community selling the vehicles and parts, so they can efficiently get that information out and you don’t have to have two employees full-time tracking that information. Again in the computerized age, this should be something that is available to stakeholders.

This concludes part 1 of our blog post series with Automotive Recyclers Association CEO, Michael Wilson. To learn more about the ARA, please visit www.a-r-a.org.