The clean air program that has outlawed thousands of old, short-haul trucks at the San Pedro port complex has been rife with controversy – but it’s also turning out to be an unexpected source of profit for some businesses.
At Dick’s Auto Wrecking, a sprawling salvage yard in the gritty city of Fontana, scores of banged-up big rigs are neatly lined up awaiting their fate at the hands of skilled dismantlers.
As of last week, about 60 cabs were parked on a small patch of the dirt yard, while more are rolling in daily as thousands of old trucks are prohibited from servicing local ports and rail yards due to the new clean air rules that went into effect this month.
That’s good news for Dick’s and other scrap yards in Los Angeles, which have been suffering from a slowdown due to the recession.
“We’ve done some scrapping in the past for environmental programs totaling a few hundred (trucks) over the years, but we’re hearing that this time there will thousands of old trucks coming in this year,” said Marcia Murray, program administrator at Dick’s responsible for managing the incoming trucks.
Indeed, some 10,000 trucks are now banned from serving the huge L.A. and Long Beach port complex, and many of them will be scrapped here or sold to other countries.
Those kinds of numbers also mean a windfall for new truck dealers, with at least $108 million in state subsidies to encourage truck owners to buy new clean trucks and scrap their old ones.
“The timing is good as we are seeing most sales from drivers working the ports at a time when business overall remains down,” said Brad Fauvre, president of Whittier-based Velocity Vehicle Group, which owns 12 truck dealerships and sends its used trucks to Dick’s salvage yard.
Revving up regulation
As part of their Clean Trucks Program, the ports of Los Angeles and Long Beach as of Jan. 1 banned all trucks manufactured before 1994 and required those older than the 2004 model year to have engines retrofitted to reduce diesel soot. The January ban is estimated to have applied to 8,000 trucks alone, on top of 2,000 pre-1989 trucks banned in 2008.
In addition, the same day the ports’ ban took effect, the California Air Resources Board implemented a statewide ban with identical restrictions on trucks at all ports and rail yards statewide. It’s unclear how many additional trucks that ban will hit in the L.A. area.
The restrictions require truck owners to make one of two choices.
If owners received a subsidy through the state’s air board, they will get about half the cost covered for a new truck, which costs about $100,000 for a clean diesel truck or about $160,000 for an alternative fuel version. They must scrap their old rigs.
(Similar to the Cash for Clunkers car program of the summer, each truck’s engine must be destroyed by the scrap yard to prevent the rig from finding its way on the road again as the goal of the regulation is to eliminate emissions from older trucks.)
But if truckers received private financing or got subsidies not from the state but from the local ports, they are free to sell, scrap or continue using the rig outside of ports and rail yards.
Scrap yards particularly like the air board program because truck owners receiving subsidies are not allowed to receive payment for scrapping their rigs – saving the yards the roughly $500-$1,500 usually paid for an old diesel rig.
That means with an average big-rig truck cab weighing about 10 tons, a yard can make $100 to $200 per ton, or about $1,000 to $2,000 per truck cab, with only the costs of dismantling and incidentals to eat into profits.
“Whatever the current scrap value, we should make a profit on these trucks,” said Murray of Dick’s, which is expected to receive an additional 200 to 300 used trucks from Whittier’s Velocity Vehicle alone.
There are only four salvagers in the L.A. area approved by the air board where drivers receiving subsidies can scrap their old ones. Aside from Dick’s Auto Wrecking, they are Pick Your Part, Ecology Auto Parts and U Pick U Save, all of which have yards in Los Angeles.
Jun Mendez, manager of environmental and special projects at Pick Your Part, which has yards in Wilmington and Sun Valley, said he had yet to receive many trucks and wasn’t sure of the effect the program would have on his bottom line.
“We know more trucks will start showing up but aren’t sure how lucrative the bans will be for us,” said Mendez.
Trucking treasure
Scrap yards aren’t the only businesses making money on the old trucks. If sold on the used-truck market, older trucks can fetch between $1,000 and $8,000. They are highly sought by foreign markets, which like the quality of the U.S. manufactured trucks, dealers said.
Diesel Truck Export in Fontana, for example, buys old trucks and exports them to foreign companies. Co-owner Bob Kimball said the company shipped more than 1,000 trucks overseas last year. Most came from the port drivers, boosting sales to $27 million in 2009, up 50 percent from the prior year.
“There’s a lot of demand for U.S. trucks in Asia and Latin America,” Kimball said. “Many countries won’t let the real old ones in because they have emissions laws, too, but they do want their engines for other equipment such as water pumps that use the same components. These trucks aren’t total trash.”
Still, some truckers are holding off on ridding themselves of the rigs, as the bureaucratic process in getting the air board subsidies has caused delays. (Recognizing the slowdown, the air board is allowing truck owners waiting for state subsidies to run older rigs until April 30.)
Take the case of Golden State Express, a Rancho Dominguez trucking firm. The company qualified for $1 million in subsidies for 10 liquefied natural gas trucks but is still awaiting delivery.
Golden State President Fred Johring said he expects to get all his new trucks by the end of February. But in the meantime, he’s holding off on scrapping the older ones, even though he hasn’t needed to use them since port traffic is down.
It’s a similar and costly problem for Atlas Marine, a small trucking firm in Long Beach irked by the delay in getting the state subsidies for three new trucks.
Atlas has to pay a total of almost $5,000 in registration renewal and highway vehicle use fees to keep the three trucks legally able to operate, but their only trip may be to the scrap yard in the next few weeks.
“We’re not even driving the trucks as there’s no business for them. So it’s kind of a waste to pay their tags when they just sit there,” said Barry Walsh, Atlas’ vice president of operations. “But we are getting $50,000 for each of the new trucks so it’s ultimately worth the tradeoff, I guess.”
