Ford Unveils Plan to Become World’s Biggest Auto Recycler
Ford Motor Co. is going into the business of recycling junked cars and salvaging used parts, hoping to build a global enterprise with annual revenue of $1 billion within five years, the company said Monday.
The move comes as Ford is extending its reach beyond the design, engineering and assembly of automobiles to grab a greater share of auto financing, repair, service and related activities.
The recycling effort also underscores Ford’s effort to improve its “green” image by taking a leadership role in environmental arenas, a major interest of company Chairman William Clay Ford Jr.
“Our vision is to become the world’s largest auto recycler,” Bill Li, the 29-year-old chief operating officer of the unnamed new venture, said at a news conference at Ford’s product development center here.
The auto recycling industry is fragmented, with an estimated 10,000 salvage yards scattered across the country. Most of the operations are small, privately owned businesses with just five to 10 employees each.
Ford quietly entered the business last month with the purchase of Copher Brothers Auto Parts of Tampa, Fla., for an undisclosed amount. It plans other acquisitions nationwide in the coming months and also expects to expand operations to Europe, Asia and Latin America.
“This is an interesting business experiment,” said Maryann Keller, analyst with ING Barings Furman Selz. “If it works, terrific. They will have produced a new profit center. If it doesn’t, it won’t cost them much.”
About 11 million vehicles are scrapped yearly. While many are older vehicles whose useful lives have ended, others are newer models that were involved in accidents and whose parts can be reused.
Ford plans to obtain scrapped vehicles from insurance firms, collision repairers and auctions. It will then strip the autos of usable parts--such as transmissions and doors--and recycle the rest.
The salvaged parts will be sold largely to auto body and other shops that repair vehicles for insurers. Ford says consumers will also be able to purchase used parts, but it expects that to be a small part of the business.
Ford said it will use its manufacturing prowess and newer technologies to bring greater efficiencies to auto recycling.
“We want to take the business to the next level, to make it more efficient,” said Martin Saffer, acting chief executive of the new venture.
Ford also plans to use the Internet to post its used-parts inventory, making it easier for repair shops to locate specific items and thus reduce costs to consumers.
William Steinkuller, executive vice president of the Automotive Recyclers Assn., said his group already operates a parts clearinghouse on the Internet and is planning to add other services to the Web in coming months.
Ford emerged as a potential player in the business about six months ago when it began approaching recyclers about selling out. But the auto maker has declined to meet with the association, unsettling some recyclers.
“Ford has made a ringing endorsement for used parts,” Steinkuller said. “What Ford’s presence will mean long-term remains to be seen. We are anxious, as are many of our members.”
Ford said it hopes to use its research to improve the recycled portion of junked cars to about 90% within a few years. About 75% of a scrapped vehicle is now recycled, with the remainder--largely difficult-to-process plastics or fabrics--shipped to landfills.
Ford and other auto makers are facing regulatory pressure in Europe to recycle 95% of scrapped vehicles by 2005.
Ford’s entry into recycling is the latest in a string of entrepreneurial ventures. The auto maker is forming joint ventures with dealers in some major markets and earlier this month acquired Kwik-Fit, Europe’s largest independent repair chain, for $1.63 billion.
