"Random Thoughts"

by Mike Kunkel

The month of February eases upon and we are settled into the New Year. My beloved Steelers will have won the Super Bowl by the time you read this and all seems right with the world.

I have been reading a number of articles concerning the disposition of the flood cars from Hurricane Katrina. Some of the auction facilities are complaining about losing the opportunity to sell those vehicles because of a new state law requiring them to be destroyed or sold for parts only. The auction makes a compelling case about how they are protecting the consumers from the people who are rebuilding vehicles. However, it occurs to me that the auction is probably more concerned with the loss of the $300 - $600 sale fees. If you multiply that by the number of units that were damaged as part of the storm, it is a sizable piece of sale fees. People talk about protecting the consumer but sometimes it appears that is only important when the bottom line can profit.

Another thing I continue to hear about is why it is bad to move the flood damaged cars out of the area to be sold. The complaint centers on the buyer not knowing that the vehicle is a flood car. The first problem I have with this is that I have never seen an insurance company take the time and effort to clean up a vehicle before selling it. For various reasons, they are better suited to sell the vehicle as it sits than risk the law suit about not properly portraying the vehicle. The cases that the buyer must be vary of is someone purchasing a Katrina vehicle and steam cleaning and deodorizing then running through a sale in a different area. The second issue is that simple economics will tell you that the costs of moving vehicles from one area to another is going to reduce the net return on the vehicle. The only two scenarios that I see this happening in are when you have market proliferation, where the supply is so high that it becomes a buyers market. The other case would be if the vehicle was not severely damaged and has a better chance of recouping the loss in another area.

While some people find fault with this, it is not fair to the people that are paying for these losses to not be able to recover as much of their loss as possible. I have read some of the stances from the Automotive Dealership Associations. Naturally, they are adamantly opposed to any vehicles, regardless of damage, being repaired. I wonder if selling new / used vehicle sales to replace the lost vehicle has any impact on their views.



 

Cont......

There are many salvage facilities that sell vehicles that can be rebuilt. Salvage yards also purchase flood and fire vehicles to sell for parts. One of my delivery trucks is a rebuilt burn unit. In many states, the titles are branded as salvage or flood vehicles. In some states the title laws are still lax, but there are not many states left that you can wash a title in. I do not think that any of the states surrounding Louisiana can be used to wash a title. In the case of my rebuilt delivery truck, it went through State and Department of Public Safety inspections. The vehicle still has a rebuilt title on it but it is safe and has well over 100000 miles on it since being repaired. According to the car dealers and the run and driving sales this should not have occurred.

While not every vehicle that could be rebuilt should be rebuilt, it does seem better to allow free market forces to dictate instead of self serving interests directing public policy. American Auto Salvage does not rebuild vehicles; we also cannot predict who will properly fix a vehicle. When blanket statements start to influence the insurance company’s right to recoup monies lost by them and private individuals or companies are told they are not trustworthy enough to rebuild a vehicle, we seem to be creating more problems than they are hoping to solve.

It is an interesting debate that has been on going and will continue to be a fight. The public spotlight will start to die down soon and will stay that way until another disaster strikes and the watchdogs see another opportunity to gain publicity. They will say that people guilty of trying to take advantage of the public. I say that one man’s junk is another man’s treasure and the marketplace will always allow the cream to rise to the top.