We spoke to Chad Counselman, President of the Automotive Recyclers Association (ARA), to find out his background in vehicle recycling; their business model, what issues are faced in the US and what the ARA’s plans are for the year ahead.
Where did it all begin?
Chad told us that his business is third generation. It started with his grandfather’s ‘backyard bodyshop’ in the 1950s. His father then joined and saw a market for selling scrap cars, of which there was an abundance, after being used for parts for vehicle repairs in the bodyshop. His father had the idea to rent a piece of land nearby to store these vehicles and sell parts from them. In 1966, the pair opened up another salvage yard nearby. His father ran this while his grandfather continued to run the bodyshop but they soon realised the salvage yard was more lucrative so the bodyshop was sold.
They worked as partners until 1985, at which time Chad’s father bought out his grandfather’s share of the business. In 1993, Chad came on board, splitting his time at the yard and with education at high school then college.
In 1996, Chad ran the operation full-time. He bought out a competitor in the area which took their operation up to three. His younger brother came on board to run the new site and his sister provided accounting services at the original site. Then in 2008, Chad and his brother bought their father’s share of the business and formed the company ‘Counselman Automotive Recycling LLC’ as it is known today. In the same year, they closed the original site but still had a staff of 30 and were handling 20 cars a week with the two remaining sites.
At present, they have 73 employees and their operation handles 75 cars a week.
It’s all about distribution and working cooperatively
Chad told us more about their set up. As well as the dismantling site, they have four distribution centres in Tallahassee, Florida; Montgomery, Alabama; Birmingham, Alabama and Chattanooga, Tennessee.
The distribution part of the business began only 4 years ago and this was how they grew their business. Chad pointed out that this is something which does not take place in a lot of countries around the world to the level it needs to, including the UK and Australia. But this system seems to work well in the US. They work with other salvage yards to cooperate specifically to trade parts during the night.
In the beginning, Chad told us they used a 26ft long truck carrying vehicle parts which started from their site in Mobile, at the close of business for a 4-5 hour drive to a distribution centre to arrive around 11 pm to meet with 10 other facilities to trade parts in an empty warehouse. Pallets of vehicle parts were moved around from truck to truck and this process took approximately one hour. The truck then returned to their site and arrived back at around 4 am. The truck was unloaded onto smaller trucks to make deliveries for that day. This process allowed them to expand into markets 4 hours away.
The process is still the same but now trucks are sent out every night to two distribution centres (one north, one east), each 4 hours away, to meet between 6 and 12 distributors which allow for parts to be delivered even further away.
There are 39 salvage yards participating in this cooperative group to trade parts and because of this cooperation, parts can be sent to their destination up to 8 hours away at a minimal cost of $12 per part. He said this has changed their marketing – their customer base. Parts are delivered by their own trucks to 1150 different body shops /repair centres since the cooperative distribution came into effect. He said: “1150 unique customers in a 30 day period is amazing!”
How was the distribution cooperation formed?
Chad said he started by setting up a distribution centre in Birmingham, Alabama four years ago but he couldn’t get enough parts from other dismantlers – it seemed there wasn’t enough trust between them. Then an owner of several auction companies, who sold vehicles to a number of dismantlers and whom they all knew well came up with the idea to set up the group where they all trade parts together – a solution which occurred after he was forced to close his own auction companies due to competition from larger auction companies. Dismantlers trusted him and were willing to pay a yearly subscription fee to become a member. It wasn’t seen as giving money to a competitor but to someone who is slightly disconnected with the day to day operation of dismantling.
Distribution successes and failures
Chad said that the tipping point was being able to make a next day delivery, whether it was in stock or a brokered part. He said that their company can guarantee next day delivery 90% of the time and he has total confidence that their logistics is dependable with a 99% effective rate of parts arriving and with their 300-500 parts a day being delivered, this is an amazing percentage.
He told us that his company differentiates from competitors due to their distribution – in the last 3 years multiple competitors have closed down. And the reason being was their unwillingness to adapt and join the group that was offered to them. “They had the same opportunity as I had to join the group, to trade parts and pay the $1200 a month to be a member of the group but if you’re not doing everything you can to fill more requests then you’re ultimately going to end up going out of business.”
What of unlicensed operators in the US?
In the US, the estimate is 50% of facilities out there are unlicensed/illegal operators. There are 10,000 salvage/parts providers in the US but the licences don’t come close to this figure. This is a problem, the world over.
Chad gave an example of the number of unlicensed operations discovered over a three year period by a taskforce in Southern California: The taskforce was asked to find 15 unlicensed operations but they found 750. Now this taskforce has a three-year extension to investigate further unlicensed operations. But the laws in California are not strong enough to put them out of business; they can arrest them and take them to court but will receive a minimal conviction and get back to dismantling illegally again.
The ARA was asked to help them pass the legislation to make their law stronger by putting them out of business. But it seems this is still a difficult process as law enforcement in the California area cannot be enforced if gates to a site are closed. The gate must be open to gain entry to enforce the law.
He said that there is a constant struggle in the US with unlicensed operators and the rest of the world. He gave an example of how unlicensed operators are trying to be eliminated in Brazil – “they apply a QR code to every single part”, and like this, parts and traceability are being looked into in the US, something which may be forced upon them due to the number of unlicensed operators.
How is the rise of EVs affecting the dismantling industry?
The average age of a vehicle in the US is 12.1 years when it enters the yard and EVs have not been around that long. Maybe in another 5 years, more will be seen entering their yards. The main focus for end-of-life EVs is battery recycling and the ARA recently attended a conference in Chicago at Argonne Laboratories to discuss the disposal of lithium-ion batteries.
There is a solution being developed to export end of life hybrid and electric vehicle batteries to Umicore headquarters in Belgium by the end of 2020 as they have developed a process which costs less to recycle and reclaim rare elements.
Umicore, a global materials technology and recycling group has been working with some parts consolidators in the US – Phoenix auto cores and United Catalyst Corporation and they will become consolidators for hybrid and electric vehicle batteries in the US. So it looks like exportation to Belgium is likely.
When it comes to the circular economy, where does the dismantler fit in?
Chad was pleased to announce the ARA’s invite to manufacturers meeting at a Honda plant (at the end of January) to be a part of their strategic partnerships. Here they will be discussing the full circular economy when it comes to recycling batteries. They will also be discussing how the dismantling industry can assist the manufacturing industry in reclaiming and recycling these batteries – “a first step in the right direction.”
A second meeting will take place on the 21st-22nd April at a GM plant in Detroit where the ARA will also be attending.
News from the ARA
At the time of our discussion (end of December), Chad told us that in 2020 manufacturers are planning to launch legislation in 20 states to make it law that any repairer repairing a vehicle that is 5 years old or younger must repair the vehicle using the manufacturer’s procedures. The legislation has been launched in 5 states already.
Chad told us though they agree that vehicles must be repaired correctly, historically the repair procedures have very crafty language to make it questionable to use a used part or an aftermarket part in the repair process.
A lot of the repairers trying to abide by the procedures stopped using used or aftermarket parts completely. So if this is passed by law, they fear that manufacturers will tweak their repair procedures so that used or aftermarket parts cannot be used. The ARA is looking at adding language in the bills – to abide by the procedures but that the procedures cannot dictate part choice.
This is the big bill they are worried about right now. They want to be sure to protect the use of recycled and reused parts. Manufacturers are trying to force the repairer to buy new parts. They are trying to argue that this is a safety issue, but their (ARA) dispute of this is if it is a safety element then why is it only for vehicles up to 5 years old? There are no procedures for older cars. It seems that money is the motivation here.
What next?
Chad told us that he sold his half of the family business to his brother, effective as of 31st December 2019. He will still stay on as an employee and be involved in ideas and strategies whilst at the same time he will begin to help other recyclers improve efficiencies and profits by ramping up consulting work as his ARA Presidency concludes towards the end of 2020. For his new venture, he said he is willing to travel outside of the US and so far he has already made contacts in the UK and Australia.
We wish Chad every success in his new consultancy role and look forward to receiving further updates from the ARA as they arise.
Update: Since writing the above, Chad Counselman has now stepped down as President of the ARA, effective as of 10th February 2020.
He will remain on the Board of Directors and current First Vice President, Scott Robertson, will step in to serve the remainder of Mr Counselman’s term. Robertson will begin his own Presidential term as scheduled in November 2020 during the 77th Annual ARA Convention & Exposition.
Chad has accepted a business opportunity in Australia working with All Auto Recalls and alongside Chris Daglis, founder and Managing Director of All Auto Recalls and Chris Daglis PARTnered Solutions.
