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Auto recycling business becomes high-tech

By Charlene Arsenault CORRESPONDENT

WORCESTER — Shiny, pre-owned, "like new" cars, trucks and SUVs fill the parking spaces in the lot that semicircles the entrance of Linder's Inc. Granite Street. Linder's has long been at the forefront of refurbishing cars, and still sells late-model vehicles.

But the 30-plus acres beyond the building are sardine-packed with dented, totaled and retired cars. There are crushing machines, stripping and cleaning bays, and warehouses shelved with catalogued parts on the property, too. A good portion of Linder's revenue comes from its ability to find the gems, in the form of "in demand" car parts, from these piles of metal.

And more and more, finding buyers for the car parts they strip out is about navigating an unseen world of online auto auctions where cars and their parts are sold to the highest bidders. And those buyers could be as close as the mechanic down the street, or as far away as the Middle East, Africa and South America.

"Pay no attention to the man behind the curtain," joked Chris DiMarzio, facility manager at Linder's, who has been in the auto salvaging industry "all his life," and with Linder's for the past 16 years.

Auto recycling has long conjured up images of the old junkyard — rows of rusty, dusty and dented vehicles sandwiched against one another, awaiting the crusher. But there is money to be made in those cars, piece by piece.

"It's like the garbage industry — no one wants to talk about it," said John Cahill, who is co-owner of Brown's Auto Salvage, which has four facilities, one in Winchendon. "But we're just a recycler who makes it easy for customers to do business. We're taking the junk out of the junkyard."

The industry of recycling cars and car parts has changed dramatically over the past decade, because of a delicate mix of technological advancements, environmental reforms, the economy and the advent of an international, online bazaar of used car parts.

The mom-and-pop junkyards have either been replaced by, or evolved into, an intricate, educated and finely tuned recycling and auto salvaging business that buys and sells to customers around the world.

"We're an auto salvage recycling facility," said Mr. DiMarzio. "People think of auto salvage as this huge scrapyard, but a huge component of our business model is acquiring the salvaged cars and then harvesting good, quality, used parts from the vehicle that we can resell to body shops, garages and the weekend fixer-upper guy. The act of what we're doing is retail, but in a greater sense, it's recycling."

With a division devoted to salvaging cars, dismantling them and selling the parts, Linder's also has at least four employees who spend their days logged onto terminals, connected to a network of auction sites. They research prices, part values, supply and demand, and bid on thousands of cars daily in online, live auctions, primarily from across the Eastern Seaboard.

Both Mr. Cahill and Mr. DiMarzio oversee an operation that starts with bidding on cars, pulling them into the shop, stripping them, cataloguing them and posting the inventory online.

Once the car is acquired, the fluids are drained and it's logged in and given a stock number. It heads to the "drop area," where inventory personnel document all of the saleable parts with a unique part number.

Everything from the transmission and engine to the bumpers and doors can and will get yanked, cut or melted from the car before it's crushed into a square of "precious metal" that is sent to a re-smelting plant. Smaller parts, such as fan belts or even windshields, aren't worth salvaging. They head with the remains of the body into the crusher.

Buyers from anywhere can log on to auction sites virtually any time — and they do.

Mr. DiMarzio said Linder's generally bids in three auctions per day, and wins between 5 and 10 percent of the cars it bids on. These buyers are privy to auctions not always open to the general public.

Several factors have been driving up the value of used car parts: Fewer cars are being produced, people are keeping their cars longer, motorists are having fewer accidents and better-built cars are better able to withstand the damage; and with the creation of an international marketplace to buy and sell used cars and car parts, there are more buyers. Salvage yards such as Linder's have had to become increasingly vigilant and intelligent in navigating the system. And you have to know what parts are most desirable.

Mr. DiMarzio, for instance, looked up on his computer last week the database history of three domestic engines from three cars manufactured in 1998.

The 2.24 liter engine for a '98 Toyota Camry is very popular — there were 99 "lookups" that day for the part from buyers locally, nationally, worldwide. All the '98 Camry engines that have come through Linder's have sold right away. Linder's sells the engine for $1,200. New, it would cost $3,500.

There is much less demand for the engine in a '98 Chevy Lumina, while demand for a '98 Ford Escort's engine is pretty much nonexistent.

Sometimes, the car is worth more in parts than it is whole.

Take the 2012 Ford Fusion that Mr. Cahill just purchased in an online auction. The front doors alone are worth $650 apiece. But its engine? $500. A 2004 Fusion engine, however, can garner about $1,200. And the doors? "Next to nothing."

"It's very vehicle-specific," said Mr. Cahill at Brown's Auto Salvage, "but if you look at percentages, engines and transmissions are usually worth the most, followed by front doors and rear doors. Sometimes the engine can have a low value, but the car has high-value body parts."

Buyers such as the ones at Linder's and Brown's watch these trends like brokers watch the stock market.

"We have other reporting and also do a drill down, and it'll tell us our highest- performing cars — what we paid for it and what we anticipated we were going to get in revenues off it," said Mr. DiMarzio.

While that niche market of salvaging and recycling car parts can still turn a profit, the market has expanded so dramatically on a global scale that has squeezed out some of the little guys. As the employees sit in the offices at Linder's or Brown's and bid in auctions on cars around the world, so do people in South America, Africa and the Middle East, in particular.

"When the totaled car gets brought to an auction, it's now Internet-based, and people from all over the world are bidding," said Mr. DiMarzio, who said a bid on an auction can get up to $7,000 for a car of value. "It's especially huge for export." Employees may bid on hundreds of cars a day, but win only five or ten.

"There are fewer totaled cars than years before, and they exasperate the problem of more buyers in the world in the buying pool," said Mr. DiMarzio. "That's fewer cars for us to purchase for the recyclers in our area. That's driving up the cost. We find ourselves having to pay more and more. A huge percentage — 40 to 50 percent — of the business is going overseas."

Mr. Cahill said that the hunger for certain cars — such as the Toyota Corolla — has grown in other countries because there is a much lower tariff on used vehicles. By contrast, new vehicles have an exceptionally high tariff.

"People are bidding everywhere in the world," said Mr. DiMarzio, "but there are markets that we don't have to compete with too much, like England. They love our big cars over in Saudi Arabia. They love Caprices or full-sized GMs and the Fords. They have always loved them. In South America and Africa, they tend to love Toyotas, Nissans and Hondas."

A 40-foot export container filled with used parts sits in the yard at Linder's, ready for shipment to Africa. Last month, a similar container headed to Israel. But while salvage yards do ship worldwide, Mr. DiMarzio explains that the largest percentage — about 75 percent — of exported parts are still sold to regional autobody shops, mechanics and individuals.

"Most of our parts are sold domestically," agreed Mr. Cahill. "Some do go to places like Costa Rica and Honduras, but it's very specific makes and models."

All this online trading has not done away with junked cars, however. There is still a market for do-it-yourselfers who want to navigate the rows of junked cars looking for just that one part.

Armed with his own socket wrench, the do-it-yourself mechanic will fork over a $2 entrance fee to explore the yard across the street at Sam's Pull-A-Part, where older model cars (2004 and older) sit for dismantling.

The average door for a car at Linder's runs in the range of $150 to $200. At the Pull-A-Part, it's around $35.

"It's a huge savings for someone who's looking to do the work," he said. "But we don't deliver those parts or take phone calls."

What auto salvage shops like Linder's and Brown's did, about 10 years ago, was recognize that the marketplace of selling used cars and car parts online was the future of the business.

There are a lot of salvage yards in Massachusetts and surrounding states, but only a small percentage — probably less than 10 percent — that are on the cutting edge of technology," said Mr. DiMarzio. "We have leveraged technology and have been very aggressive with technology to guide us forward."

Some "good friends" in the auto salvage industry have closed their doors under the weight of the changing market, or sold out to conglomerates, he said. The industry, while contracting, leaves the surviving auto recyclers who stay on top of the trends in a "good spot."

"You had to double down," said Mr. DiMarzio. "You had to invest in technology and spend more for the cars, so you had to get creative in production and marketing to decrease your costs and make up those margins. We made that capital investment. There were a lot of guys who thought it was a fad, and they didn't double down."