In the Game Of Cores – there is always a winner and a loser.
GAME OF CORES
As a processor and toll-refiner, we are asked what the difference is between selling per-unit as opposed to assay. The answer is quite simple; when you are paid on assay, you are receiving the true value of your converters with no guess work. Getting paid on assay means getting paid based on the Platinum, Palladium, and Rhodium contained in your converters. When auto recyclers are looking to make the switch to toll refining, they sometimes mistakenly base their converter selling decisions on unreliable information provided by one or multiple core buyers, who undoubtedly have the most to lose from the potential switch. This often results in the ultimate “Game of Cores.”
Frequently, we speak to automotive recyclers, who are experts in their field, but just don’t have the same expertise when it comes to converters. Unfortunately, both core buyers and internal automotive recycling staff sometimes use this as an opportunity, to trick recyclers out of their true converter returns. In the past, cats were considered the ‘cherry on top’; however, in today’s market they can represent more dollar value than the rest of the car combined. Evidently, there is just too much value in cats to be taken for granted. We are here to help our industry partners, by sharing our collective experience, and by exposing the games played — in order to keep you up to speed.
Plot 1: Wish Upon a Star
Often times, core buyers will visit a yard with a “star” price list including some of the highest value’s recyclers have seen for specific converter serial numbers. These buyers promise to purchase all of your converters by code, but when all is said and done, only a small percentage end up being paid by number. The rest are paid on the core buyer’s personal grading scheme/system – which more often than not, ends up being a lot lower than what your material is truly worth. Most core buyers have an “all-star” list, with codes they know recyclers are familiar with; they use this to get their foot in your door.
So, although they may overpay on a few “star” units, the $50-80 profit they are making on the majority of the rest of your material (that is not identifiable by code), more than compensates. In reality, those units that fall outside of your knowledge, actually end up providing your core buyer with a “star” profit right under your nose!
As a recycler, it’s important to start asking yourself: am I constantly wishing on a star, or am I shooting for the stars?
Plot 2: Who’s Counting?
Another game core buyers play is the counting game. Basically, an “across-the-board” price is offered – but, when you get into the nitty gritty, many recyclers will often make the mistake of getting excited with a high dollar figure per unit and not investigate further to take into account all of the aftermarkets, DPF or foil units being counted as a single piece. For example, a lot of 150 mixed pieces including 30 aftermarkets, becomes 120 units with 1 aftermarket. The core buyer will pay an across-the-board price for 121 units, instead of revealing the true count. The discrepancy in numbers not only affects your bottom line and your pocket, but it also inflates the perceived price versus true real value.
Additionally, core buyers utilising “across-the-board pricing”, will tend to allow only a maximum percentage of Aftermarkets and Foil Units in any given purchased load — as it is impossible to turn a $30 converter into a $300 converter.
Plot 3: Hand in the Cookie Jar
Using a consultative approach with our suppliers, we typically start by asking for more details around converter management and selling methods; shockingly, our detail oriented inquires have actually helped our suppliers uncover internal staff (responsible for converters), with their hand in the cookie jar.
Essentially, what happens, is the internal manager gets a cut per converter in return for selling to that specific buyer. Typically, this is why the employees that have a hand in the jar don’t respond well to our questions and discourage change. Nevertheless, when the right questions are asked, the truth always comes out.
Even if big averages are reported by some managers, there can still be a lot left on the table. When it comes to these valuable cores, we cannot stress the importance of putting someone in charge that is trustworthy, principled and can be held accountable — as their actions will determine whether converters generate the proper revenue stream for your business.
Plot 4: Needle in a Haystack
This plot relates to larger businesses with multiple locations. It is still common for a multi-location recycler to consolidate their material, to meet most toll-refining’s minimum lot requirements. While this is the best method for return, combining converters can hide internal issues. A great example of this is a supplier of ours who switched to multi-facility results; by using our small lot-assay technology and proper material separation reporting, he was able to uncover a facility manager switching out 70% of the location’s mixed converter load with aftermarkets. The owner, our supplier, was able to clearly identify and spot the discrepancy compared to his other location’s results.
When converters are consolidated without proper internal controls, averages will hide this type of theft. When one facility is switching out material the business as a whole suffers but it is next to impossible to detect. Once the business was able to maintain inventory control, material separation and assay by location, the owner had a clear overview of his converter yield and can spot irregularities much faster. Do you have a needle in your haystack, or is your business all bundled up securely?
To summarize, in the words of George R.R. Martin “when you play the game of thrones, you win, or you die. There is no middle ground.” I would argue, the same rings true when you decide to play the “Game of Cores.” When you decide to play the game, there is always a winner and a loser. Make sure you are on the winning team by working with a partner that can help you accurately inventory your units, provide payment based on true value, and monitor the consistency of your results.
For more evaluation and processing knowledge, visit PMR’s Resource Center.
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