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The Honolulu Advertiser
Posted on: Tuesday, August 25, 2009

Isle dealers delay scrapping clunkers


By Will Hoover
Advertiser Staff Writer

Hawaii news photo - The Honolulu Advertiser

A clunker destined for the scrap pile is lifted off a flatbed at Schnitzer Steel Hawaii's recycling yard. Auto dealers in Hawai'i are holding on to their clunkers, worried about whether they'll be reimbursed by the government.

ADVERTISER LIBRARY PHOTO | August 2009

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Now that the Cash for Clunkers program is over, Hawai'i auto dealers face the additional burden of getting more than 1,100 clunkers off their lots and processed through a little-known industry called the ELVS — the End of Life Vehicle Solution.

Until then, the clunkers sit on dealers' lots, taking up space designed for new car inventory.

Chad Ajimine, with Auto Recycling Corporation on O'ahu, said his firm had not received a single clunker, even though it's listed as one of 17 ELVS facilities in the state.

"They have us on the list, but I haven't got any yet," said Ajimine. "They called me up, but nobody called me to bring a car here."

Otherwise, he said his company is equipped to remove all the vehicle's fluids and mercury switches as required, and then turn it over to one of the two companies on O'ahu that can either shred, or crush and bale the vehicle.

Those two operations are Island Recycling Inc., which crushes and bales the vehicles, and Schnitzer Steel Hawaii, which shreds the vehicles. Both companies pay a fee for the dismantled cars, SUVs and light trucks and subsequently earn a modest profit by selling the baled or shredded metal for scrap.

Because of space limitations, Ajimine said his outfit could only take vehicles with parts that can be sold. "We don't take just any kind of car, because we don't have the space," he said.

Karen Shinmoto, business and compliance manager at Island Recycling, said her company is also waiting to get its first junked car. She said Island Recyclers could possibly take as many as 50 clunkers a day.

So far, though, it hasn't seen the first one.

"We have not gotten any clunkers," said Shinmoto, who said her company charges dealers $100 to pick up and dismantle a vehicle. "The dealers aren't being paid yet."

According to Dave Rolf, executive director of the Hawaii Automobile Dealers Association, the trouble has been that dealers are required to disable a clunker's engine by running a solution through the engine before they turn the car over to the ELVS facility. Once disabled, the car has no more value as a vehicle.

That leaves dealers anxious about dismantling a clunker they've essentially paid $3,500 to $4,500 for before they're sure they'll be reimbursed the federal government.

"Tony Group had 170 Cash for Clunkers deals written, and they've received payment for what you could count on one hand," said Rolf. "And you'd have to store the vehicle before you could dismantle and then release it."

Rolf stressed that the program was slated to end once the federal government had exhausted its Cash for Clunkers money. But he said the government couldn't give dealers any idea of when that might happen.

Dealers didn't want to get caught holding the bag after the cash ran out. That's why some O'ahu dealers began winding down their Cash for Clunker deals as early as last Thursday.

"It was a huge amount of risk for the dealers," said Rolf. "There was just an awful lot of trust with the federal government that the money would come through, and that it had a good eye on where the exhaustion point would be for the $3 billion."

Tony Group's collection of clunkers represents a well over half-million-dollar investment. It, like other dealers, has found itself caught between the joy of a wildly popular program and one that's left some dealers feeling too financially vulnerable.

Rolf, for one, is loathe to say anything negative about a program that has been a godsend for an industry hit hard by the economy.

"I've been happily into this because of what it's done for the industry, the economy, the community, and for all these happy consumers," he said.