Examination of Witnesses (Questions 80
TUESDAY 23 OCTOBER 2001
80. You have noted that the DVLA needs to introduce
a better system for de-registration, and I think we would all
agree with that. How do you see the Certificates of Destruction
(Mr Macgowan) The Certificate of Destruction is absolutely
crucial to the whole process. Again, this is absolutely in Paul's
area and, if you do not mind, I will ask him to specifically answer
(Mr Everitt) Clearly aside from the abandoned vehicle
problem, which we think needs best addressing by DVLA and actually
tightening up the registration and de-registration process, the
Certificate of Destruction is important to sign off the responsibility
of the final owner and also to track the vehicle through the treatment
chain so we can know at the end of the day how many vehicles have
been treated, how much has been recycled, how much has been recovered,
etc., etc. We believe that there should be a two stage Certificate
of Destruction. One, when the final owner hands over the vehicle
to a treatment facility to signify, if you like, that the owner
has acted responsibly. Second, when the vehicle is actually destroyed.
We were somewhat amused and somewhat alarmed to find in the consultation
document it talks about whether or not we think vehicles should
come back on the road after a Certificate of Destruction has been
issued. There does seem little point in issuing a Certificate
of Destruction if those vehicles can come back on the road. We
absolutely need a foolproof system to ensure that once a vehicle
is handed in there is clear proof that that vehicle has actually
been put beyond use and, therefore, that is a two stage process.
(Mr Macgowan) Although we are appearing before you
in an automotive context, and rightly so, I think that Option
4 has the great benefit of being an option that would apply to
other sectors as well. We do think there are people who are talented
at dealing with the destruction of product and, therefore, Option
4 gives us this opportunity, hence the Certificate of Destruction.
Although we are talking to you today in an automotive context,
we actually believe that this type of approach will end up being
appropriate for other sectors when eventually they too find that
they are in line for their particular ELV legislation which undoubtedly
will come and come across many other sectors.
81. At what point would the last owner of the
vehicle get the Certificate of Destruction? Would they get it
from the dismantler or when it is finally shredded?
(Mr Everitt) Under our option they would have to get
it from DVLA. Basically they would get a receipt from the authorised
treatment facility and once the paperwork had gone through the
shredder would sign off the documents to DVLA and the DVLA would
issue the Certificate of Destruction.
(Mr Macgowan) That was why I thought there was some
confusion earlier on about when does a vehicle become an ELV.
It is terribly, terribly clear when a vehicle becomes an ELV.
It becomes an ELV at the point that depollution starts. It is
when that first thing occurs, that is when a vehicle becomes an
ELV, no doubt about that.
82. The DVLA is currently doing a trial of electronic
systems and I do not know what you think about that but it certainly
sounds a better option than paper at the moment, does it not?
(Mr Macgowan) The DVLA, as you know only too well,
is involved in a number of electronic transmissions. For instance,
75 per cent of all cars when they are newly registered, it is
an electronic process now. They are geared up to look at that
kind of process and the pilot programme looks to be very good.
It is absolutely crucial that de-registration works and is seen
to be effective. Under our Option 4, the combination of an effective
de-registration process, coupled with our ability to come to the
party from 2002 in terms of underwriting costs, will result in
the abandoned vehicle problem, which is a social problem that
we all struggle with, being reduced, we believe.
Linda Perham: I welcome that.
83. I was very interested to hear what you said
about the idea of a two stage Destruction Certificate and I was
going to raise two points, one of which you have addressed which
was the abandoned vehicles. Can you give an outline of why you
think it would help on that? The other is the potential perhaps
for cut and shut vehicles, dealing with that as a problem. Have
you looked at the possibility of a two stage Certificate having
a positive impact on preventing that?
(Mr Franklin) I will take your second point first,
the business of cut and shut vehicles. The Vehicle Crime Act is
also very much dependent on the Certificate of Destruction and
it is very clear that they do not want vehicles to come back on
the road once a Certificate of Destruction has been issued. A
lot of the vehicles that you see as abandoned are also untaxed,
unregistered, probably uninsured, and there are over one million
of them. There are very compelling reasons, other than just the
ELV Directive, for these vehicles to get themselves into the system
and be recognised: congestion charging in London, speed cameras,
etc., all sorts of associations with crime that could be linked
to these vehicles. The CoD is vital and a better de-registration
and registration system.
(Mr Macgowan) As regards why we think that Option
4 will address a matter which is not actually part of the ELV
DirectivePeople often say to me "is this Directive
all about dealing with abandoned vehicles?" It comes into
it but, as you know, it is all about reducing waste going to landfill
sites primarily. Funnily enough, I was coming into the office
this morning and I passed on the Seven Sisters Road a vehicle
that has been sitting on the Seven Sisters Road pavement certainly
for the best part of a week as far as I am aware. It is actually
a fairly modern vehicle and, although I am not a complete expert
in end of life vehicle values, I would say it has a value. At
the present moment there are all kinds of problems in dealing
with that vehicle: the local authority is overstretched, etc.
Our option offers the possibility of market forces coming into
play and an enterprising dismantler driving past that same vehicle
would see that and say "there is an opportunity for me there,
I could arrange to get that vehicle gathered up. I will contact
the police, I will contact the local authority, there is a value
in that vehicle" and if he or she is enterprising, which
they will be because of competitive forces, there will be an incentive
to do something about it from the industry end. Frankly, we believe
that is the greatest single merit in our option, that market forces
will be encouraged in that area. We cannot guarantee that it will
sweep away what is a ghastly social problem. As my colleague says,
on so many of these vehicles the owner has no intention of insuring
it, doing anything with it at all. I do not think any of us have
a magic wand to wave on that but we do think that our option will
reduce abandoned vehicle problems.
84. I can see the attraction of Option 4 but
I can also see the particular attractions to yourselves. In one
sense your proposal lists a range of responsibilities for dismantlers,
shredders and so on, but could you clarify for us in a bit more
detail what the responsibility of manufacturers would be under
(Mr Macgowan) I think that the responsibility of manufacturers
has been in place for a long, long time. I mentioned that Steve
is with our Vehicle Recycling Unit at the SMMT. This is an area
that we have been working on for donkey's years, as have manufacturers.
We believe that we are meeting our responsibilities already by
basically designing vehicles that are fit for reverse manufacturing.
We believe that we are in the process already. We think that this
legislation, when we absolutely have to and want toa very
important point I would arguemeet our obligations are there
for all to see, there is no wriggling on this issue at all. The
point is that there is in place a mechanism for dealing with old
vehicles and we would just like to see that sector, ie dismantlers
and shredders, really being looked at in just the same way as
we look at component manufacturers who supply things to us, dealers
who do a fabulous sales job for us. We would like to see those
companies being as subjected to market forces as, for instance,
component manufacturers are, as opposed to being mothballed in
some legislative cocoon where there is no incentive on them to
do anything at all other than sit there and mop up these cars.
(Mr Franklin) Just to add some of the other things
the motor industry is doing, although I think Chris has ably described
most of them. We are actively engaged in the design for recycling.
That also includes as part of the Directive to eliminate heavy
metals, which we have got to do by 2003. That is an enormous cost
and task because we have to do it to current vehicles, not just
new vehicles coming on stream. Anything that is currently produced
and sold from 2003 onwards will have to meet these very vigorous
requirements and, frankly, we are unsure no matter how much money
we spend that we are going to completely meet them, but that is
our obligation to try. We are already marking component parts
so they are easily identifiable and making things more easily
detachable when it comes to the dismantling stage. As of 2005
it is a requirement in the Directive once again that we will have
to type approve a vehicle to say that it is 95 per cent recyclable.
There is a massive amount of work that is happening in the technology
centres of the industry. There are still things we can do in the
collection network, going back to the other end. We would probably
have a responsibility to make people aware of where they can take
their vehicles, maybe there will be a hotline that people can
phone and we could help and assist in the publication of that.
85. How, under your Option 4, do the dismantlers
and shredders get paid properly and efficiently, speedily?
(Mr Macgowan) In terms of if there was a deficit after
a period of time?
(Mr Everitt) At the moment we are looking at a situation
where we are looking for a flexible system so that manufacturers
will look to take up the responsibilities implied by their brands
in a variety of different ways. It may be that certain manufacturers,
certain brands, will want to step in and say "Okay, we are
going to set up our own collection network because our particular
vehicles have some special value". Others will just look
to step in and say "Fair enough, we will hand over the money".
At this moment we are not looking to be too prescriptive at this
particular stage. Clearly at the moment we are in the relatively
early stages of discussions with the dismantlers and the shredders
as to how we can best make this work.
87. Arguably your proposal really passes the
burden of responsibilityI have not even said it yet. Is
that a guilty conscience?
(Mr Macgowan) Not at all.
88. I can see the economic logic of Option 4,
I am not asking being dogmatically hostile but you are passing
a substantial part of the responsibility, notwithstanding what
you said about your obligations, from big business to what are
essentially small businesses. I asked the question how do they
get paid when they need to get paid quickly and you said "we
will need to be flexible about it".
(Mr Macgowan) With respect, we would not come before
this Committee unless we had a fair, high level of accuracy in
what we have said. We have got an independent consultancy who
have done a study which indicates that even with the increased
costs of having to depollute these vehicles shredders are making,
and will make, a return. All we are saying is why should this
industry of ours be saddled in this one area with a position that
ignores market forces? We work in an industry, as our Chairman
is prone to remind us on a very regular basis, where market forces
must be at work and they must be at work in this area as well
and we should not be denied that opportunity.
(Mr Everitt) I do not think there is any suggestion
that there would be any reason why we would not want to ensure
that works speedily. Essentially we were in a position where we
were looking at the three options put forward by Government and
found them not totally satisfactory and have acted reasonably
speedily in drawing together an alternative that does meet most
of the requirements certainly the manufacturers have put down
and we believe will meet the requirements of dismantlers and shredders
(Mr Macgowan) In just the same way that there has
been a huge amount of information around on what the cost of this
is all going to be we have obviously, as you would expect, been
involved in a huge amount of work on typical costs. We have seen
extraordinary figures like £300, £400 and our research
indicates that the typical cost is £45.
Mr Berry: I note your comment on market forces.
Sir Robert Smith
89. You talked about reverse engineering earlier,
trying to build in recyclability. We heard in earlier evidence
about how quite a valuable car involved in quite a major accident,
both airbags go off, is an economic write-off. Is there any work
that is being done in the industry to try to reduce that step
function that a minor accident becomes a major economic write-off?
(Mr Franklin) It is a problem with modern day cars
that things like an airbag could render it a write-off. The form
that the insurance industry uses takes 60 per cent of the pre-accident
value of the vehicle and if repair costs come to more than that
then it is a write-off. Clearly this is where those types of vehicles
move down a few echelons and, rather than being repaired in authorised
dealers, start being repaired in some other area. The question
as to whether automotive companies can do something about it,
I think somebody suggested that we have cheaper airbags. As an
airbag deploys it causes damage to the trim around it which means
you may end up replacing more than just the airbag. This is a
feature of one of the conflicting obligations that the motor industry
has to design recyclability, meet safety requirements and all
the other obligations it has upon it. Obviously these things are
constantly looked at.
90. So it can move down market and come back
(Mr Everitt) Yes.
91. You have given an option where maybe this
question from your point of view does not make sense because you
see it as a no cost option, but if there are costs to be met for
processing ELVs, how do you see they could be allocated between
the manufacturers and others? Ford have come up with the idea
that 50 per cent should be picked up by them. Does your Association
have a view as a whole?
(Mr Macgowan) Clearly Option 4 illustrates that when
there is a cost, if there is a cost, at the end of the whole shredding
process the industry will pick that up. As regards individual
companies, yes, I am sure they do have their own variations on
a theme. I seem to have mentioned a specialist company once or
twice, I will not do it again, but companies like that do not
believe they have to worry about a cost at all. Option 4 has total
manufacturer support, including the financing of it.
92. With Option 4 you are talking to Government
sources about that, are you optimistic that will be accepted as
a compromise at this stage?
(Mr Macgowan) I think that in the meetings we have
with the DTI and others they are very sensitive to the fact that
they have no desire to implement this Directive in what is usually
referred to as a gold-plated manner. I am optimistic that they
will see merit in this option. In fairness to the DTI, their consultation
paper came out relatively recently and, therefore, they will have
only very relatively recently seen Option 4 in all its glory.
We have got to give them time. It has the overwhelming benefit
of doing two things. It has industry support, manufacturer support,
and we believe deals with the position from 2002. That was our
biggest worry, and is still our biggest worry, that the UK Government
will in some way introduce this legislation in an aggressive way
and a far more aggressive way than the way that, for instance,
France and Germany appear to be thinking of now. I think we are
optimistic that Option 4 will be given a very, very good hearing.
It also has the merit of being the only sensible option on the
table as far as the DTI is concerned right now.
93. It has been suggested that the costs of
the ELVs could be built into the initial purchase price. What
would you say to that?
(Mr Macgowan) I do not think that is feasible. The
Directive makes it quite clear that manufacturers must bear a
significant part of all the costs of providing cost free take-back.
Those Member States that have implemented schemes like an increased
tax disc, that really flies in the face of the thrust of the Directive
where the responsibility rests with the manufacturer. We understand
that it does and we are not in any way trying to avoid that. Will
manufacturers increase the cost of product to the consumer as
a result? That is an accusation that is frequently made "Oh,
it will just be passed on to the consumer", but the reality
is that very rarely happens and, indeed, the prices across the
whole of Europe, not just the UK, are under extreme pressure.
What we try to do is actually make the people who provide a service
to us more and more efficient so that costs go down and we can
then become more efficient so that costs go down. I do not think
that the idea of "Oh, well, we will just pass the cost on
to the consumer" is viable. Firstly, it would be inappropriate
under the spirit of the Directive and, secondly, it is just not
realistic, you cannot just do that. There was a time perhaps 20
years ago when you could do it but not now, the cost pressures
are downwards. That is why we want to see the shredders and the
dismantlers subjected to that kind of market force which the rest
of us are subjected to.
94. Presumably also manufacturing sub-contractors
would be expected to take up some of the cost? Have there been
discussions going on on that basis?
(Mr Macgowan) Yes. For instance, if you were to go
today to any of the major component manufacturers you would find
that they are already hugely involved and engaged in re-manufacturing.
There are tonnes of components coming back which then get re-manufactured
to as new condition and are subsequently used. That is where the
investment has been. They are all involved and they too would
like to see a competitive recycling industry so that they can
keep their costs under control.
95. So is it basically the manufacturers' view
that as between the manufacturers and the sub-contractors, in
other words everyone except the customer, everyone will take a
bit of the pain? Is that what you are getting at?
(Mr Macgowan) Yes, I think that is the reality. You
know the wording in the Directive and we have to sign up to that.
We want to.
96. Specifically on that point. Of course part
of the cost will be passed on to the consumer, as your head of
economics will advise you, it depends on market conditions. It
is only in extreme circumstances that no costs will be passed
on, which we will not go into in our conversation. Let us be clear
about this. It is very kind of you to say that all of the costs
will fall on the producer but in reality, unless the market is
extremely poor and unless demand is incredibly price sensitive,
part of that cost will be passed on to the consumer, that is how
free markets work.
(Mr Macgowan) I was trying to draw the distinction
between the question I was asked as to whether or not a cost would
be passed on to the consumer in the way, for instance, that is
done in Denmark where they elected to increase the cost of the
annual fee for putting a car on the road, the insurance cost,
and that became a pot where a clear definable cost has been added
to an insurance policy to cover this. I do not believe that is
what will happen. I have no doubt you are right that some element
of cost does stray through in the final analysis but not as a
97. You accept, therefore, looking at who hands
over the cash is no measure of who actually picks up the cost
burden, that is all I am saying. That is the case, is it not?
(Mr Macgowan) No, I do not believe that is the case.
Mr Berry: Have a chat with Mr Everitt, I am
sure you will find that it is.
Sir Robert Smith
98. Can I come back to my question and clarify
that when you are speaking for the whole industry of manufacturers
you are talking about manufacturers picking up the whole cost?
(Mr Macgowan) We are talking about sharing the cost.
(Mr Macgowan) As we say in Option 4.