Ford buys LV auto wrecking yard as part of its recycling initiative

Phil Levine

Monday, March 13, 2000 | 11:13 a.m.

Ford Motor Co. hopes acquisitions such as its purchase of Las Vegas-based King Auto Parts will add a green hue to its corporate image.

Terms of last week's King Auto purchase were not disclosed. As a result of the transaction, Las Vegas joins a growing list of cities comprising Ford's nationwide Greenleaf Acquisitions project.

Under the Greenleaf initiative, the world's second-largest automaker purchases auto wrecking firms in select markets nationwide. Ford hopes the project will increase its supply of used parts while improving its environmental image through recycling.

Jim Calhoun, principal owner of King Auto, said selling his company triggered "strong, mixed emotions."

"I'm very happy for the hard-working 29 employees we have here, as Ford is keeping them all on and this is a great opportunity," he said. "But for me, it's almost like giving up a child.

"Still, it would be real difficult to survive if Ford had looked at buying another parts company."

Located at 4950 Copper Sage St., King Auto was founded in 1990 by George Brookman. Calhoun, along with five principal investors, took over the firm in 1993 when Brookman retired.

"By running such a clean, efficient company, George really laid the foundation for our success," he said.

Brookman says Calhoun improved the operation.

"When I was running this place, we did about $500,000 per year," he said. "After Jim took it over, he was grossing around $4 million a year. They did a hell of a job making this company successful."

Calhoun said King Auto focuses only on parts from recent or higher-end model cars, and has carved itself a niche in the auto wrecking industry.

He and his partners also grew the company from its original five acre spread to more than 20 acres.

"There are other auto wreckers in town, but none who really compete with us in this market," Calhoun said.

To some observers, the melding of Henry Ford and Fred Sanford may seem an odd union.

But Ford officials say its Greenleaf subsidiary enhances the company's image as an environmentally-friendly business.

"There are really two driving factors behind this project," said Greenleaf Chief Executive Officer David Montgomery. "Ford wanted to add more choices (for used parts), but we are also looking at the environmental benefits of this.

"The Greenleaf project also means we can reduce the amount of scrap (metal) going into landfills."

Montgomery said acquisitions such as the one in Las Vegas mean steel from Ford-owned junkyards may now find its way back to the manufacturing factory.

"It's a way for us to close the loop, recycling the steel back from the yard to the factory," he said.

The company hopes to own at least one successful auto wrecking company in each of the 50 largest metropolitan markets nationwide.

The Greeleaf project emphasizes continuity, and that's why Ford asked King Auto General Manager Keith Russell to continue on as manager.

"It's going to be pretty much business as usual, although we'll have the resources of Ford to help grow the company," said Russell.

Recognizing the importance of industry knowledge and local connections, Ford's Greenleaf policy nationwide is to maintain local management whenever possible.

"We know it's important to know the local community and understand the local market," said Montgomery. "That's why we try to keep the existing management team in place at each (wrecking) company."

Ford's foray into the junkyard business isn't restricted to the United States.

In December, Ford's Canadian division purchased Hamilton, Ont.-based Plazek Auto Recyclers Ltd.; more Canadian purchases may be pending.

Ford revealed its decision to enter the junkyard business last April. It first entered the world of recycling a month later with its purchase of Copher Brothers, a Tampa, Fla.-based wrecking company.

Since then, Ford has added more than 20 auto wrecking companies to its growing stable of junkyards across the country.

Still, that's a mere fraction of the more than 5,500 independent junkyards nationwide.

Despite its low-key image, the recycling business continues to grow exponentially.

A 1997 survey by the Automotive Recyclers Association estimated the U.S. parts recycling business generates more than $7 billion per year in revenue.

That figure is expected to continue to grow rapidly over the next several years.

Montgomery says Ford is convinced acquisitions such as King Auto will allow the company to seize a significant share of the used parts market.

Auto industry watchers agree, but say Ford's move into the used parts business is driven by both legislative and image-related concerns.

"There's no doubt they're doing this to improve their environmental image," said Ted Finch, industry analyst with Boston-based Loomis, Sayles & Co. "But they are also trying to stay ahead of proposed (recycling) legislation that may be coming down the pike."

He cited existing European legislation requiring automakers to reuse parts as a potential template for future recycling laws in the United States.

Despite the lucrative nature of the recycling business, Finch cautioned Ford must also be cognizant of potential pitfalls.

"(Greenleaf) runs counter to the strategic push by the big three (automakers) to reduce the capital intensity of their business," he said.

"However, there's obviously some strategic thinking behind this move, and I wouldn't be surprised if G.M. and Daimler-Chrysler are looking at this (business) as well."

Although he has signed a non-compete clause with Ford, Calhoun is leasing back five of King Auto's 20 acres as he prepares to enter the world of e-commerce.

"We're starting up an Internet business that will sell parts for collectable and classic cars," he said. "We're finalizing the website now."

The new company name reflects Calhoun's straightforward business approach.

"We're calling the company PARTS," he said.