Car Manufacturers Seek Monopoly on Repair Parts

According to an international trade watchdog, The Automotive Recyclers Association (ARA), auto makers Honda and Hyundai have recently given their dealer repair shops guidance to tell customers not to use recycled auto parts. According to the ARA, these auto makers are claiming recycled or used components will void vehicle warranties.

Recycled auto parts have been in wide use for decades without any challenge to the quality or reliability of these parts that should affect warranty work. An irony of this recent policy shift is that recycled Honda or Hyundai parts were manufactured by Honda or Hyundai in their own factories.

Parts manufactured by the same company that produced the original vehicle are referred to as Original Equipment Manufacturers (OEM) repair parts in the automotive business. Salvage industry recyclers collect OEM parts off salvaged vehicles and offer them for sale to parts to repair shops and consumers at an average 60% savings over new OEM parts and an average 30% saving over other newly manufactured aftermarket parts. Further, those recycled parts are not of the aftermarket variety; they’re simply OEM parts that are re-used after the donor vehicle goes out of service.

So if recycled parts originate from the OEM, reduce landfill volume by reusing automotive components destined for the garbage heap, and are cheaper for the customer then why are Honda and Hyundai warning against their use?

The most likely reason is of course that automotive sales are down with the continued sluggish economy. Auto makers are looking to grow their OEM repair parts business with a strong arm move against their customers. This leaves many consumers without a choice to use recycled parts if they are facing a voided warranty.

For it’s part, the ARA filed an official letter of complaint with the Federal Trade Commission saying that the actions of the auto makers fly in the face of the Magnuson-Moss Act of 1975, which was enacted to make warranties more straightforward.

Most consumers are not driving vehicles still under factory warranty and will not be affected by this move.

Still, it presents an interesting data point that large and profitable auto makers are putting financial pressure on their customers at a time when many consumers are wary of big business in the wake of 2008 and 2009’s bail outs.

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