Born Again

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Back in 1981, Chevrolet was making good things happen; Chrysler was holding the line on prices; and Ford had a better idea. But perhaps the best idea of all belonged to Peter Fuller and David Leggett, who -- that same year -- got into the business of remanufacturing automobiles.

Remanufacturing involves taking a used item and rebuilding it from the ground up. Fuller and Leggett's Automotive Import Recycling Inc. (AIR) of Belvidere, N.J., is currently the only U.S. company doing this to cars. Over the past few years, the market for such vehicles has begun to ripen. With the average price of all new cars up 53.2% since 1978, consumers have been combing used-car lots in search of bargains. AIR offers what may be the best bargain around: used cars that run as well as new cars, but retail for just about half the price.

With a typical used car, notes Fuller, "You don't know what you're getting. The warranty is usually 30 days or 30 feet." AIR, on the other hand, provides a 12-month, 12,000 warranty on its remanufactured Volvos and BMWs, comparable to warranties available on brand new models.

The secret lies in the remanufacturing process itself. "We have strict criteria for deciding whether or not to replace old parts with new, or for reusing used parts," says Fuller. Mechanics at AIR evaluate, recondition, and rebuild everything from steering wheels and exteriors to brakes and transmissions. The decision to replace or reuse old parts is based on the condition of each casting and its expected life span. According to Fuller, 150,000 miles is added to a car's life by the time AIR's 25 mechanics are through.

To be sure, remanufacturing is not exactly a new idea. Remanufactured products have been used in the industrial sector for 40 years, according to Robert Lund, research professor at the Center for Technology and Policy at Boston Univerty. In the automotive industry, it has long been common practice to repair vehicles with rebuilt parts, and -- in recent years -- various companies have begun remanufacturing entire trucks and buses for commercial use.

But Fuller and Leggett are among the first to enter the consumer market witn remade goods, says Lund, who has just completed a five-year study of remanufacturing as an alternative for developing nations for the U.S. Department of Energy and the World Bank. "There is a consumer bias in this country against used merchandise. The feeling is that new is good, and not new is not good."

This, he contends, is a fallacy. "Many of the original bugs are worked out during the remanufacturing process. Castings that have lived through a certain period have proven that they won't break down, and weak castings that have proven to be unreliable are replaced."

In addition, remanufacturing uses only 20% to 25% of the energy required to manufacture the same products from scratch, and it conserves labor, capital, and raw material as well. "For every one pound of new material put into a remade product, you can save seven to eight pounds of the old," says Lund. "This captures a substantial amount of the labor and capital that went into making the product in the first place." These savings translate into lower prices. According to Lund, remanufactured goods generally cost 20% to 60% less than new products.

The problem is getting people to buy them. "You need a knowledgeable buyer for a remanufactured [product]," explains Lund. "In industry, someone buying a remanufactured lathe knows how to check it out for a performance requirements. But the average consumer relies on the reputation of a manufacturer, or a warranty, or simply the fact that something is new. It takes an educated consumer to recognize the value of remanufactured goods. When people see a car as a practical vehicle for transportation rather than a flashy accessory, they will consider remanufactured automobiles."

Fuller and Leggett have already found one such group of educated consumers among the present and former owners of Volvos and BMWs. Indeed, almost twothirds of their customers are satisfied owners who bring their cars in for renewal. The rest are value-conscious consumers who would prefer to spend $8,000 to $9,000 on an AIR-rebuilt 1976 Volvo than $16,000 on a new 1983model.

AIR, for its part, has no trouble finding cars to rebuild. Most are the popular model BMWs and Volvos from the mid1970s, for which the company usually pays from $1,000 to $2,000. In addition, "some people bring in Volvos from the early '70s and either give them to us for free, or for as little as $150," says Fuller explaining that the seller usually has a sentimental attachment to the car, and would rather see it recycled than junked.

Fuller and Leggett are steering clear of American cars, however, at least for the moment. "Maybe some of the later models, beginning with the 1980s, [will be] worth doing," says Fuller, "but the earlier ones don't hold their value. They depreciate quickly."

On the other hand, the partners plan to add fleet vans and taxis to their repertoire once the company settles into its new, 40,000-square-foot production facility this December. In its present facility, AIR is having trouble keeping up with demand, which has boosted revenues from $200,000 in the first 12-months of operation to $600,000 in fiscal 1982. Fuller says the new plant will enable the company to increase production from 20 cars per month to more than 40.

In the meantime, they seem to have found supporters in the headquarters of the original manufacturers. Thomas O. McGurn, spokesman for BMW of North America in Montvale, N.J., says AlR's operation is "terrific for the automobile. BMWs are an enthusiast's car. Certainly people who can afford a new car will buy one, but the heritage of the old cars is important. [AIR] is keeping that alive."