Examination of Witnesses (Questions 60
TUESDAY 23 OCTOBER 2001
60. I would like to ask about option four that
you have put forward. It draws quite a distinction between the
responsibilities of dismantlers compared to shredders. Could you
explain your view on the grounds on which an authorised dismantler
could reject an ELV?
(Mr Macgowan) In just the same way as is currently
the case. We are dealing with approximately 1.8 million vehicles
a year. At the moment, a dismantler is in a position to either
say, "Yes, I will deal with this vehicle" or not. We
believe that is a market force at work. Our view is that in establishing
what the value of the vehicle is it is far better to leave it
to the market place to decide, rather than to have some independent
body trying to decide whether a vehicle on somebody's lawn, as
you said earlier, is or is not worth something. Leave it to market
forces. A dismantler sees two opportunities in the value of a
vehicle when it appears to be coming to the end of its life either
in the sale of parts from it or in the sale of base metals from
it. Those are two things that are very clear. Therefore, a dismantler
has that option to decide whether he or she wishes to accept that
vehicle. After all, that is what is happening at the present moment.
The vast majority of people in this country are highly responsible
in dealing with a vehicle when it comes to the end of its useful
life. They look through the Yellow Pages or at their local paper
and phone up and establish where they can dispose of this vehicle.
A dismantler will be able to say, "Yes, I will offer you
£50 or £100 or whatever." That is a market force
at work. He has the option to either say, "No, I do not want
it" or, "I do want it." That is the thrust of our
option four. The market decides what is the value of this vehicle.
61. The dismantler makes a commercial judgment
about that. That does not mean that the end of life vehicle or
the vehicle that may be an end of life vehicle ceases to exist.
It is still there in the possession of the end user. What is the
responsibility of the end user? Presumably, if a particular old
car, 20 or 30 years old, fails its MOT, the owner has taken it
along and been told, "Look, guv, we cannot do anything with
this. You will have to get rid of it", and it is really not
working, what does the end user do with it? Does the end user
have to stand the cost of hawking round dismantler after dismantler
to be told, "It is not in our interest"? Who stands
the cost of that?
(Mr Macgowan) There is no hawking of anything round
anybody. The situation we have today is regularised. After all,
today a few phone calls are made to establish where I can place
my end of life vehicle. As our colleagues from the Retail Motor
Industry Federation said just now, I might be a dealer and I might
take it in myself. Alternatively, I might be a shredder and deal
with it in that way or I might be a dismantler. The great thing
about our option four is that it does offer a market value to
take over and a free take-back facility from 2002 which none of
the other options does.
62. Could I ask you the same questions I asked
the Retail Motor Industry Federation? At what point does free
take-back start? Does it start at the point when the vehicle is
delivered to someone who takes it, the dismantler or the shredder,
or does it start at the point of recovery from the end user?
(Mr Macgowan) The ELV directive states that delivery
must be at no cost to the last owner. All of the other Member
States interpret that to mean that the last owner is responsible
to deliver the vehicle to the place where it is going to go but
then there is no cost. I hope that answers your question.
63. If dismantlers reject ELVs, with what they
consider to be negative values for them, why under your scheme
are shredders obliged to take those vehicles?
(Mr Everitt) The whole aim is that there should be
somewhere where the owner can take their vehicle back free. Therefore,
there has to be one player out there who has that obligation.
The central theme of this approach is that the vehicle is going
to the people with the best ability to extract value. Analysis
that we have done shows a complete vehicle delivered directly
to a shredder has more value than a hulk that has already been
dismantled going to a shredder. The shredder is in the best possible
position to extract the maximum value from that vehicle so it
seems to us most appropriate that it is the least cost method
of taking back vehicles at the end of their lives. By providing
the obligation on a shredder, we supply him with a high quality
flow of complete vehicles from which he can extract value and
the motor manufacturer from 2007 is there to underwrite any deficit
should that be the case.
64. Perhaps we can move to underwriting. We
have established that differentiating between vehicles having
positive and negative values is not an exact science. They have
a positive value to one operator and a negative value to someone
else. You have drawn out the distinction between what may be in
the commercial interests of a dismantler compared to the interests
of a shredder. Could you explain the mechanism that you would
see for being the final arbiter of that? The dismantler has made
a commercial decision so he or she does not need an arbiter. When
it comes to the shredder, who decides whether, to the shredder,
that has a positive value or a negative value?
(Mr Everitt) As we have set out in our proposals,
there should be some independent assessment through government,
not to determine whether a vehicle does or does not have a value,
but to determine whether or not the shredding industry is or is
not in deficit as a consequence of taking the obligation. It is
not a judgment based on each and every vehicle that they process;
it is a judgment on whether, after a period of time, from 2002
to 2007, that industry is able to profitably handle those vehicle.
If they are, there is not a liability that manufacturers have
to pick up. If there is a liability, we recognise that responsibility
and will step in to ensure that free take-back is taken forward.
65. Would that assessment be an assessment of
the industry or a company by company assessment within the industry?
(Mr Everitt) We would assume it would be on the basis
of the industry. The whole thrust of option four is a free market
approach, as far as it can be within this kind of regulated environment.
The dismantlers are free to take or not take. If they take, that
is no longer anyone's responsibility because that is a positive
value vehicle. If there is a deficit before we come in, there
is to be a level of competition between the shredders and the
dismantlers so they improve and become more efficient. If we set
up a situationwhich is the fearthat essentially
we just pay a subsidy to ensure this work carries on, that is
not going to improve the industry and it is not going to make
it more efficient.
66. In option four you mention that the shredders
have an obligation. As soon as an obligation comes in, the market
that your option four is based on is immediately non-existent.
It is an obligation; therefore, the market element has gone. You
mentioned that the industry would underwrite any deficit but clearly
there is not going to be a great clamour, one would not have thought,
of individuals to set up as shredders when the potential to make
a living has to rely on a deficit being met. How can you be sure,
for example, that there is going to be capacity in shredding to
deal with the large volume of vehicles that are not coping elsewhere
in the system?
(Mr Macgowan) The point that we are trying to underline
is that there is not a large number of shredding companies in
the United Kingdom so it is not a proliferation of companies and
it is a competitive market. In the same way as the motor industry
deals with other organisations up and down the supply chain to
encourage them to be competitive, we think the same rules should
apply to those shredding companies, so market conditions prevail,
but we have a responsibility, should there be a deficit, to step
in. Put another way, we do not think it would be at all acceptable
for the United Kingdom to interpret the legislation by just saying
to manufacturers, "You must pay a shredder £X for every
vehicle." What possible incentive is there for the shredding
industry to become more competitive under those circumstances?
They can just sit back and take the money. It is just the way
in which you look at it. We want to encourage a competitive, efficient
67. You do not think there will be an impact
(Mr Macgowan) No.
(Mr Franklin) Shredders take pretty much all of the
vehicles that reach the end of their lives today.
68. Under this option, if I have a wreck of
a car outside and I want to get rid of it and I am phoning dismantlers
and they all come on and say, "I am sorry, we cannot take
this", would there not be a growing culture of people thinking
they cannot be bothered with this? Once it became known that shredders
under your option had to take vehicles, would people contact shredders
direct and say, "I am not going to bother with a dismantler"?
Would it lose the dismantler and the whole industry business if
people thought they could dispose of something to whom they knew
had to take it?
(Mr Macgowan) We do not think that will happen because
that is not what happens at the present moment. People are interested
in any value for their old wreck and they would like to get that
value. That value is most likely to come to them from a dismantler.
The overwhelming desire would be to pick up the phone to a couple
of dismantlers and get a price for your vehicle. That would be
the natural thing to do.
(Mr Everitt) The dismantler would be encouraged to
seek your business. If the consumer has an easy route, maybe they
will take it and that would be great for the shredding people
because they will get a volume of vehicles, but if the dismantler
wants to be in the market then they have to be more proactive
in ensuring that those people who have those vehicles know that
there is someone available to them who may well pay them. It is
an incentive for them to take a more proactive role in the market
69. Can I ask a question around the concept
of the complete vehicle because, as I understand it, you say that
shredders would have an obligation to take back the vehicle providing
it was complete. I understand that you do not want someone else
in the chain to rip off the valuable bits and present the shredder
with something that has little or no value to them. What is the
definition of complete? Is there not a potential loophole there?
We are dealing presumably with very old vehicles which have all
sorts of things missing from them probably just in the course
of wear and tear and so on. The shredder says, "It is not
worth my while doing this one" and will cherry pick by saying
to the end user, "This is not complete. It is your problem."
What would be the safeguards on that?
(Mr Macgowan) With our option four, we have come from
the point that the central thrust of this directive, as you know,
is to reduce the amount of waste product that goes to landfill
sites. Therefore, the object of the exercise is to make certain
we do that. Clearly, the completeness of a vehicle is crucial.
It is obviously very, very important. It is an area that my colleague
has been addressing.
(Mr Everitt) It is a valid point because under the
Directive we have tried to encompass what it requires and the
Directive equates to largely complete. The only way the manufacturer
has to pick up responsibility is if the vehicle is largely complete.
That has been passed on in the terminology for the shredding.
At the moment, we are still in discussion and have been in discussion
for some time with government to discover what some of these phrases
will mean. Clearly from that point of view "largely complete"
means maintaining and still having the large components that have
value: the engine, the catalytic converter, the gearbox.
(Mr Franklin) Just to reinforce that, what we have
said is that it must have all its major body component parts and
it must be in a rollable condition, you must be able to push it
along if it will not start.
70. It has got to have wheels on?
(Mr Franklin) Yes, it has got to have wheels on.
Sir Robert Smith
71. In your submission you say that there are
37 shredding sites in the UK. What would be the cost on the final
owner of getting them to one of these sites, an average cost?
(Mr Macgowan) The Directive, of course, is centred
around the fact that consumers must have an option. They must
find it reasonably convenient to, first of all, go to a dismantler
and, if need be, to go to a shredder. Obviously it depends on
the geography. The thrust of the legislation is that the end user
will deliver to the point at which the vehicle is dismantled or
(Mr Franklin) Shredders are very hungry machines and
they have feeder yards around the country to allow the depollution
to take place. The most likely scenario is that will take place
at feeder yards. These are distributed all around the country
and have arrangements with other yards. The exercises that we
have done show something like 250 yards cover 95 per cent of the
(Mr Macgowan) It has got to be convenient for the
consumer to find a home.
72. You are a bit unlucky if you are in the
five per cent.
(Mr Franklin) You would have to double the amount
of yards to cover another five per cent and it is one of those
diminishing returns, unfortunately.
73. It sounds like the sort of excuses cellphones
give. I wonder what contacts and what relationships manufacturers
have built up historically with different sections of the vehicle
disposal industry, such as through CARE and ACORD?
(Mr Macgowan) My colleague here actually runs the
ACORD Initiative and would therefore be best able to tell you
precisely what that relationship is made up of and the SMMT is
responsible for it.
(Mr Franklin) Over many years CARE and ACORD have
had a very good relationship with all the other associations.
CARE has done a lot of work in doing trials on dismantling and
doing studies to see at what level of dismantling a vehicle extra
material is gained from it and whether, in fact, it is better
to go into the shredder room and make post shredder recovery.
There is an enormous amount of work that has gone on. We have
done trials that show the more you strip a vehicle you may only
gain two per cent rather than going the route which is direct
to the shredder.
(Mr Macgowan) I think the technology is fairly well
advanced and understood as to what is the most efficient way.
Against that background it is the case that we have a responsibility
to year on year produce vehicles that are more and more recyclable
and I think the evidence is clear that we are doing that.
74. What discussions have you had with other
economic operators about how the Directive should be implemented?
(Mr Macgowan) We have spoken to all of the parties
(Mr Macgowan) Yes. Our discussions in some cases are
at a very advanced level, others more recent. We are in touch
with all of the economic operators.
76. Have there been any conclusions out of that?
(Mr Macgowan) No, I do not think so. Fundamentally
we were somewhat disappointed with the consultation paper that
the DTI put out because whilst the three options they put forward
all have merit, and we are not in any way criticising any one
of those options in particular, we just felt that there were some
more imaginative solutions available, which is how, after many,
months of consultation, we came to evolve Option 4.
77. Can I just take you back to something you
said earlier. You mentioned the worries about Rover, and I agree
with you, but surely there ought to be some responsibility on
BMW, they ought not to quite get away so easily?
(Mr Macgowan) When I talk about the worries of Rover
it has to be in the context of the fact that MG Rover Group is,
as we all know, on an absolute successful path.
(Mr Macgowan) And I would hate you to get the impression
that I was singling them out as being vulnerable because that
is not what I am saying. I am saying that there are companies
like MG Rover that do have quite a large number of models in the
vehicle parc for which they do have a responsibility, or would
do under the terms of this legislation. I am saying that those
companies that have a big percentage of vehicles in the parc,
of which MG Rover is just but one, are obviously likely to be
gravely affected. I do not think I am in any way in a position
to comment on what happens to companies that have sold other companies.
With due respect, I think you could get yourself into a terrible
muddle trying to backtrack as to who owned whom over the years
at what particular time. I suspect that this piece of environmental
legislation has to rest with the current operators.
79. I totally agree with that. The only thing
I would say is that this sale did not take place too long ago
when everybody knew that this was going to happen so hopefully
BMW's responsibilities will be there.
(Mr Macgowan) Yes.