Salvage Industry Reforms Enacted

Significant reforms of California’s loosely regulated salvage automobile industry, which was scored in a series of state investigations and Senate hearings in recent years, were enacted last week in Sacramento.

The reforms, touted by consumer advocates as trend-setting advances in auto safety, are contained in two bills passed by the Legislature and signed by Gov. Gray Davis. The bills (SB 1331 and SB 2076) establish safety rules for the estimated 145,000 wrecked vehicles that are recycled back onto state highways each year and place new regulations on the salvage automobile business.

The laws “will save lives and protect unsuspecting consumers from buying cars built with stolen parts,” said Sen. Jackie Speier (D-Hillsborough), sponsor of one of the measures.

In a Senate Insurance Committee hearing in January, state regulators cited mounting evidence that consumers are buying repaired vehicles, previously declared total losses by insurers, that do not carry required titles branding them as salvage.

The Department of Motor Vehicles estimates that 2.4 million salvage vehicles--about 8% of all registered vehicles in the state--are being operated in California. Investigations have shown a pattern of these vehicles being improperly repaired, sometimes with stolen parts, and recycled from salvage auction pools to used-car lots.

Testimony by the California Highway Patrol at the January hearing also shed light on the problem of missing air bags in salvage vehicles, which are as likely to be late-model luxury cars as old junkers. The CHP had found air bags missing from salvage vehicles involved in major injury accidents.

Consumer advocates hoped the Legislature would clamp tough new restrictions on the salvage industry, including safety inspections of major vehicle systems, and require licensing of salvage repair facilities, auction lots and other links in the industry’s chain. The measures stop short of fulfilling all those expectations.

“It doesn’t solve the problem,” said Rosemary Shahan, president of Consumers for Auto Reliability and Safety. “But it is a good step.”

Senate Bill 1331, introduced by Speier, requires that salvage vehicles be inspected by the CHP to ensure that they are equipped with proper air bags and that their vehicle identification numbers are valid.

“Air bags are the most important part of the bill,” said Richard Steffen, staff director of the Senate Insurance Committee. “It requires the salvage rebuilder to get an inspection.”

Air bags are among the most expensive equipment to replace on a damaged vehicle. Because they typically deploy in major collisions, most salvage vehicles require air-bag replacements, which cost an average of $1,800 each.

The new vehicle identification number inspections also will make it more difficult for rebuilders to weld together sections of a legitimate salvage vehicle and a stolen vehicle, using the legitimate vehicle’s VIN to make the resulting car or truck marketable.

The bill recognizes the existence of salvage rebuilders, but leaves the industry largely unregulated. Because salvage rebuilders do not repair vehicles directly for consumers, they have been exempt from licensing rules of the Bureau of Automotive Repair.

SB 2076, by Sen. Debra Bowen (D-Marina del Rey), closes existing salvage title loopholes that exempt leasing companies, self-insurers and financial institutions, among others, from some of the disclosure requirements for salvage vehicles.

State investigations have found cases in which leasing and rental companies have recycled their wrecks into the salvage system without salvage titles or making other disclosures to the end buyers.

It would eliminate those exceptions, helping to avoid the finger pointing that often occurs when disputes arise over disclosure lapses, Shahan said.

Steffen said he believes that the new requirements are “consistent with what the governor wants.”

A third consumer measure, SB 1743, also by Speier, was vetoed by Davis. It would have required the DMV to set up a publicly available database of all salvage vehicles to let consumers check whether cars they are considering buying have ever been totaled.

The bill also would have required salvage auction companies to obtain a state license, a first step in regulating the system that takes wrecked vehicles from insurers and recycles them onto the highways.

In vetoing the measure, Davis said the state could not afford the database or the proposed licensing system, which would cost an estimated $450,000.

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Ralph Vartabedian cannot answer mail personally but responds in this column to automotive questions of general interest. Please do not telephone. Write to Your Wheels, Business Section, Los Angeles Times, 202 W. 1st St., Los Angeles, CA 90012. E-mail: [email protected].