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Some considerations concerning a calculation model

1 Introduction

A key-issue concerning the interpretation of the Producer Responsibility concerning the “free take-back of ELVs” as specified in the ELV-Directive (2000/53/EC), has been the determination of the value of an ELV.

Almost all producers have done their calculations, primarily lead by PSA, we have done ours and now it also seems as if the shredders have done their calculations. Further: In Sweden the calculations – based on detailed time-studies – were done jointly by the producers and SBR – the National Association of Dismantlers in Sweden.

Over time we have all, virtually spoken, been “throwing figures at each other”, most of the time dominated by “polarized arguments”, like:

Producers claim: ”All used cars and ELVs do contain a positive value”

An argument which are met by those doing the de-pollution work and the dismantling for re-cycling/recovery, as stipulated in the Directive, with words like:

No – this is not true! There are cases when an ELV has a negative value, and where there are net costs as a result of following the rules of the Directive!”

EGARA’s view-point:

It seems now – less than two years before the full producer responsibility comes into force on 01.01.2007, that it – once and forever – would be beneficial to all operators and authorities responsible for national implementation, if we could derive a set of common, European-wide, acknowledged and accepted guidelines for a calculation model, preferable a set of guidelines that are administratively easy to work with – for all stakeholders!

  1. The Legal Basis

In trying to see what the Directive itself says about this, the following paragraphs are important:

(the bolding is done by me)

In Article 5.4:

Member States shall take the necessary measures to ensure that the delivery of the vehicle to an authorised treatment facility in accordance with paragraph 3 occurs without any cost for the last holder and/or owner as a result of the vehicle’s having no or a negative market value.

Member States shall take the necessary measures to ensure that producers meet all, or a significant part of, the costs of the implementation of this measure and/or take back end-of life vehicles under the same conditions as referred to in the first subparagraph.

In Article 5.1:

Member States shall take the necessary measures to ensure that economic operators set up systems for the collection of all end-of life vehicles

And economic operators are defined as: Producers, distributors, collectors, motor vehicle insurance companies, dismantlers, shredders, recoverers, recyclers and other treatment operators of end-of life vehicles, including their components and materials

And all the way through the development of the directive and its transposition into national legislation, it has been made clear that it should be easy for the last owner to dispose his ELV to an Authorised Treatment Facility (ATF).

  1. Spontaneous conclusion

 

With the above stated legal basis, a spontaneous conclusion could easily be:

“Life” and implementation of the directive would have been easy if:

  • There would be a clear definition of when a used car turns in to an ELV
  • Negative value of an ELV had been defined
  • If “all, or a significant part of, the costs of the implementation of this measure and/or take back end-of life vehicles” had been defined.

This is, unfortunately for all “economic operators”, not the case, and the Commissions Guidance Document, published January 2005 do not either make this clear.

However it does, in our opinion, contain important messages concerning Article 5.4, namely:

“It follows from these provisions that delivery to any treatment facility that meets the requirements of this Directive should be free of charge for the last owner/holder of the end-of-life vehicle. Therefore, any additional requirements for application of free take-back, e.g. whether the treatment facility has signed an agreement with a vehicle manufacturer or with an association representing the interests of the vehicle manufactures, would limit the scope of this provision and would thus not be in conformity with the directive.”

And:

“Since the last owner has to cover the cost of transport to the treatment facility, the second indent of Article 5(1) requires Member States to make sure that there are sufficient collection points in their national territory.”

Although the Guidance Document is not legally binding: “It gives the views of the Commission on the basis of which the Commission will start infringement cases against Member States” – as stated by Timo Mäkelä, Director, DG Environment – Sustainable Development and Integration, during IARC 2005, Amsterdam 09.03.2005.

Leaving aside the criteria for the network – which still has to be sorted out on national levels – it leaves us all with the crucial definition to agree upon:

  • What is the market value of an ELV – and how should it be determined?

 

  1. EGARA’s opinion

To us it is clear! All we need to do is to make a model for how to calculate the costs for treating an ELV according to the “rules” of the Directive, or more precisely: Its national implementations.

It is simple! All we have to do is to find out:

  1. Which are the operations necessary in order to “treat” an ELV according to “rules”?
  2. How long time do these operations take to perform? – and then:
  3. What are the labor costs(including overheads for investments) for doing this
  4. What does it cost to get rid of the waste fractions?
  5. Which revenues can be retrieved from some waste fractions?

The equation therefore looks as follows:

Value of an ELV:

   Income from (certain) waste fractions.

÷ Labour costs for de-polluting according to the Directive

÷ Costs for delivering (most) waste fractions to authorised receivers

(The work-sheet defining the 26 operations can be found in Annex 1).

I am fully aware of that this model perhaps not is complete, and especially one could have arguments concerning investments etc. made being “charged” as part of the overhead on labor, but in my opinion standard solutions for this could be defined in order to take away the “uncertainty”.

I am also fully aware of the fact, that with the currently very high prices on scrap, the cost calculation could result in positive values at the bottom line – and what then?

My opinion is clear: For most modern dismantlers the core business is sale of used spare parts!

ELV-treatment is something we are “forced to doing” by law – and on this we should have cost recovery.

A logical conclusion is therefore, that if the bottom line is positive, then we would have to pay back the positive value!

This statement is of course controversial!

  • I am quite sure that some ATFs would not like this!
  • I am also quite sure, that if scrap-prices fall, then the bottom line would be negative, and the same ATFs would love this, as much as they would dislike the above!
  • I am also sure, that if the producers would get a negative bottom line, then they would –as previously – claim, that the dismantlers make a lot of profit on sales of used parts from an ELV.

However: This eventual profit should not be taken into account!

This is basically because:

  • Dismantling for re-use is a quite different process, requiring different skills, tools and working methods and being a lot more time consuming
  • It is up to the individual ATF with the individual ELV to decide which parts should be dismantled for re-use
  • We are forced to do the treatment operations specified in the Directive on all ELVs – whether or not parts can be dismantled for re-use

If we could agree on a model (per country) based on:

  • average ELVs, perhaps in 3-4 different types
  • average treatment times for these, using adequate equipment
  • average labor costs with average overheads
  • average waste fees, with regular updates, e.g. quarterly

It would be fair to all stakeholders, at the same time being simple to work with.

This would also be in line with “market conditions”, since ATFs that have higher costs than the “averages” would be forced to become more effective, whereas those that have “done the extra” would get a “reward”.

EGARA is willing to work on this and looks forward to a constructive collaboration with other “operators”.

Lennart Scharff, M.Sc.

EGARA-secretary

 

ANNEX 1: The EGARA work-operation sheet.

Introduction:

The sheet has basically been done by using the UK DTI booklet:

“Depolluting End-of-Life Vehicles: Guidance for Authorised Treatment Facilities”

which was based on a study carried out during 2002/3 intended to reflect current best practice, to which EGARA has done some minor modifications.

 

Statistical value of the EGARA-survey:

The statistical correctness of the EGARA-survey of 100 dismantlers in 8 countries is doubtful.

The data is based on the ATFs own “perception” of work-times without neither supervision, nor detailed measuring.

Although the average figures for the different “work-steps” presented:

A: Administration:   10 –   25 mins             Average:        18 mins

B: Preparing:            6  –   30 mins Average:        15 mins

C: Depollution etc.   30 – 120 mins Average:        60 mins

D: Other:                     5 –   20 mins Average:        10 mins

Total:             50 –  195 mins Average:        100 mins

Have been done on 80% of the collected data, leaving aside the 10% upper and lower cases, it is evident that the method used, by having data for each operation does not properly take into account that some work-operations are done in parallel, which means that the total time used will be less than the sum of individual operations.

Therefore it is not advisable to make firm conclusions based on these data. However, there is still a major difference to the 23 min.s in total, presented by some producers!

A more “precise” study seems to be necessary!

The work-operations sheet can be found on the following page.

EGARA ELV-VALUE CALCULATION SHEET – MANPOWER
ELV-TREATMENT ACCORDING TO DIRECTIVE 2000/53/EC
     
A: Administrative work  
Item no. Item-description time, min.s
1 Receiving owner and inspecting owner and vehicle documents  
2 Location of VIN-plate, cleaning it and verifying VIN-no.  
3 Entering Vehicle and owner data into computer-system  
4 Issuing Certificate of destruction (COD)  
Total    
     
B: Preparing of elv-treatment according to Directive  
Item no. Item-description time, min.s
5 Locating and evaluating dismantling information (IDIS)  
6 Preparing work-sheet and planning depollution and removing of materials  
7 Moving vehicle to storage area  
8 Moving vehicle from storage to working area  
Total    
     
C: Depollution and removing waste fractions according to Annex 1
Item no. Item-description time, min.s
9 Emptying of fuel-tank and/or LPG-tank incl. removing LPG-tank  
10 Removing main battery and Ni-Cd-batteries  
11 Removing or neutralising pyrotechnical equipment  
12 Draining of engine-oil  
13 Draining of other oils (gear-box, transmission, axles, power-steeing etc.)  
14 Draining of coolant  
15 Draining of brake-fluid  
16 Draining of washing fluid  
17 Emptying A/C-system  
18 Removing all components containing heavy-metals or asbestos  
19 Removing oil- and fuel-filters  
20 Removing catalytic converters  
21 Removing wheels and tyres  
22 Removing large plastic components  
23 Removing glass  
Total    
     
D : Other necessary work-items  
Item no. Item-description time, min.s
24 Removing general waste in vehicle  
25 Transferring treated vehicle to storage area  
26 Preparing for processing of vehicle hulk  
Total