Long Island Scrap Metal

May 8, 2012

Gershow Says Auto Industry Is Still Struggling

Recent Auto Sales Reports Confirm Company's Own Analysis of Auto Industry Showing Only Marginal Improvements from Depths of Recession


Kevin Gershowitz, President of Gershow Recycling, says the growing age of cars on the road has hurt the scrap metal industry as older vehicles have not found their way to recycling facilities, which need these older automobiles to produce scrap products for manufacture. He also says that the recent report on new car sales in March and April, although an improvement, has shown that the auto industry has only marginally recovered from the recession.

R.L. Polk recently reported that the average age of a car on the road is now at a record-high 11.1 years and light trucks, at 10.8 years, is also at its highest level. The research firm noted the average age of the vehicles on the road has increased since 1995, when the average age was only 8.4 years. With uncertainty about the economy and less-than-stellar job figures, more people have held onto their older vehicles and made necessary repairs as opposed to buying a new car.

When people hold onto their vehicles that are now 10 years or older, we do not see these cars coming to our scrap yards,” Mr. Gershowitz said. "This not only hurts the car manufacturers, but also the scrap metal processors.”

A recent forecast on new car sales in April could mean more bad news for scrap metal recyclers. TrueCar.com forecast vehicle sales for last month to be approximately 1.2 million vehicles, which is 14.8% lower than March’s figure of 1.4 million units. The company, which tracks car sales, prices and trends, is anticipating an annual rate of 14.6 million vehicles for 2012. In order to move new inventory, auto dealerships are offering incentives such as rebates, interest-free financing and no money down to entice potential buyers.

In 2005, there were 16.94 million new vehicles were sold, according to the National Automotive Dealers Association (NADA), but the ensuing years saw a decline in new car purchases. When the "Cash for Clunkers” program went into effect in 2009, NADA reported that 10.4 million vehicles were purchased that year. The following year, auto dealers sold 11.55 million vehicles. Although NADA anticipates 12.73 million vehicles being sold in 2011 and despite TrueCar’s annual forecast for this year, those numbers will not match those from seven years ago.

People are holding onto their vehicles longer and we are seeing that at Gershow,” Mr. Gershowitz said. "Old cars coming in, as compared to some of our other business sectors, are especially slow right now, indicating weakness in the overall economy. When someone takes an older vehicle that is not very fuel-efficient off the road, that car will make its way to a scrap recycling facility that can be made into a newer vehicle or other scrap products. This also helps to preserve the environment by getting rid of these gas-guzzling vehicles that produce greenhouse emissions, and saves our natural resources so manufacturers do not have to mine for ores they need to make their products.”

When the recession hit in 2008, Gershow, like most other businesses, tightened its belt by cutting back on overtime and its Saturday hours. But, in maintaining a long-term, optimistic view of the global economy and making itself well-positioned during such economic circumstances, Gershow did not have one single layoff. The company looked upon the recession as an opportunity to expand in a down market. In the spring of 2010, Gershow opened a facility in Freeport and, in the summer of 2011, opened its eighth location in Valley Stream.

Recognizing it has developed a skilled and extremely dedicated workforce, the Gershowitz family has decided to maintain a long-term, optimistic view of the global economy and has decided to continue to invest in its workforce.

That is the difference between a corporate conglomerate, where employees are just numbers, and a family-owned enterprise, which keeps its employees local, along with its profits and investments,” said Mr. Gershowitz. "This continued investment will put us in a better position competitively when the economy recovers.”

We have been in business for over 45 years, so we have seen the ups and downs of the economy,” Mr. Gershowitz continued. "The economy is very cyclic, especially in the steel recycling business. When people begin to buy new cars, then we, as the scrap yard indicator, will be among the first to see the economy recovering.”