Core Charge Programs Ramping Up
It’s been about a decade since Ford Motor Co. launched the industry’s first core charge initiative, the Core Recovery program, but similar efforts are gaining momentum today as more auto manufacturers have implemented them into their parts operations.
Automakers are touting both industry and environmental improvements resulting from core charge programs, but the initiatives have created several operational changes that shops need to adapt to.
Ford’s Core Recovery program, introduced in 2003, requires shops to send damaged OEM parts back to the company in exchange for a new component. Shops pay an additional $75 fee upon initial delivery of the part, which is reimbursed after the damaged component is returned.
Ford expanded the program in 2005 to include aluminum wheels, in 2010 to include bumper fascias, and again in 2011 to include lighting assemblies.
Since then, General Motors (GM) has replicated the effort. GM launched a core charge program in March for bumper fascia and lighting assemblies on model year 2012 and newer vehicles.
Paul Massie, powertrain and collision product marketing manager for Ford, says core charge programs have been developed with two main goals in mind:
Environmental Protection. All damaged parts returned by body shops are melted down and used to remanufacture other plastic products, which prevents parts from entering landfills.
Since 2003, Ford has saved 120 million pounds of plastic from entering America’s landfills, including 62,000 bumpers and 26,000 headlights within the last few years.
Eliminate damaged parts that are refurbished and resold in the aftermarket. Mike Regan, collision parts product manager for GM, says there are too many parts refurbished by the aftermarket that don’t adhere to OEM requirements. Some aftermarket companies have even been caught stealing and refurbishing parts found in shops’ dumpsters. Regan says the core charge program is necessary to help “pull suspect parts out of the industry.”
Gigi Walker, owner of Walker’s Auto Body & Fleet Repair in Concord, Calif., like many other shop operators, says she’s concerned that the programs have created challenges in the following areas:
Administrative tasks. A number of administrative functions are required in Ford’s Core Recovery program:
1. Identify Ford’s core charge parts by looking for a yellow label that states “Core Deposit.”
2. Retain the original box, labels and barcodes, and keep the entire package intact.
3. Remove and copy the yellow “Core Deposit” label and part number from the new component and tape it to the damaged component for return.
4. Call the dealership for pick-up.
5. Store the damaged component in the original box until the dealer picks it up.
Profitability. Shops are not able to recoup their initial $75 deposit if the damaged part is not returned, or if any of the above criteria are not met. But Walker says it’s not always possible for shops to return the damaged part. There are instances when parts are completely ripped off the vehicle and left at the scene of accidents, and other circumstances when the damaged part is non-OEM.
That’s a big problem, Walker says, because a $75 loss on a bumper or lighting component could amount to the entire profit margin. Regular losses on those parts could add up to a significant amount over time, especially for high-volume shops.
Regan says shops should be able to pass on the cost to insurance companies or customers as a line item on estimates.
Cash flow. Even when damaged cores can be returned, it often takes several days to get the money back.
“If you don’t have a parts shipment coming soon, the box just sits until somebody comes to get it,” Walker says, noting the cash flow reduction could hinder shops that are tight financially.
Train Your Staff
Walker says it’s essential to train your entire staff on OEM core charge programs to prevent unnecessary financial losses.
“Shops really have to wrap their heads around this because most facilities have a cleanup person who just smashes boxes down and recycles them,” Walker says. “All these boxes have to stay intact.”
Walker hung GM’s program informational posters throughout the shop to serve as constant reminders and instructions for staff members. She also implemented a standard procedure requiring technicians to store all core charge boxes inside vehicles so they don’t get lost.
“This is definitely requiring more oversight. Your shop will lose out on some amount of profitability if employees don’t buy into the program requirements,” Walker says.