May 21, 2012, was a highly unusual day in Detroit. For more than a century, this city’s long history as the world’s center of the automotive industry has been one of intense competition among its major auto manufacturers. Representatives of the Big Three—Chrysler, General Motors, and Ford—have rarely been on the same stage together. But on this day—perhaps in an auto industry first—the Investment Recovery Association brought all three giant manufacturing companies together onto the same podium…sharing details of their own unique processes!
The occasion was the association’s IR Lunch & Learn©, hosted by Chrysler’s Asset Recovery group in the stunning Walter P. Chrysler Museum on the company’s Auburn Hills headquarters campus. More than 100 Investment Recovery Association members, associates and prospective members were in attendance for this informative and engaging event.
Following introductory remarks and a brief presentation by association president, Michael Rhodes, CMIR Fellow, the agenda included an overview of how all three industry giants organize and handle their investment recovery functions; a presentation on sustainability by Greg Rose, Chrysler’s sustainability guru; and a discussion of metals markets and scrap pricing by Mike Hermann from OmniSource.
Even though the goal of maximizing the investment recovered from surplus and idle assets is the same for each of the auto manufacturers, each company organizes its efforts in its own unique way. The differences and similarities were evident as each organization reviewed its processes.
Chrysler Asset Recover
Debora Hester, PE, Asset Recovery Manager
The Chrysler Asset Recovery (AR) group is embedded within the Manufacturing Engineering organization. The AR group interfaces with all corporate locations to manage surplus capital equipment. The two full-time Asset Recovery employees also have technical experts located within each functional area (Body, General Assembly, Paint, IT, etc.) to control the disposition of all surplus equipment. Surplus asset sales and scrap are managed within Purchasing.
The AR group’s primary focus is manufacturing plant equipment; however, it does manage surplus equipment for product engineering, labs, warehouses, MOPAR parts distribution centers (PDCs), training centers, etc.
The AR group manages the process of managing surplus equipment in addition to the actual equipment itself. Additionally, they write the corporate policies and procedures relating to surplus equipment inventory.
Asset Recovery Process: Chrysler’s Asset Recovery group focuses on reusing surplus equipment where at all possible, and all capital equipment is managed the same way. Each asset is individually reviewed by the appropriate technical expert onsite, after which the disposition method is determined.
Redeployment: Chrysler has had exceptional results redeploying even entire facilities for reuse in other locations. A body and paint shop in a South St. Louis facility was able to be 85% reused, and a North St. Louis body shop was able to be 98% reused! The cost avoidance thus created totaled more than $54 million.
Manufacturing locations manage their surplus equipment availability by posting each asset number to an internal list, which broadcasts availability to all corporate locations. This system was developed internally and interfaces with SAP.
Warehouses manage their inventory individually, most frequently with Excel spreadsheets, but at the discretion of the warehouse manager.
Bar Code/Tagging Practices: Every capital asset is issued a bar code containing the asset number. The asset number is recorded in the SAP accounting system. RFID (Radio Frequency Identifier) is under investigation for certain locations that have Internet “fence to fence” capability.
If Unable to Redeploy: For older technology, Chrysler would likely part-out the asset in order to keep strategic spare parts. If an asset is complete and in working condition, it will be considered for sale; otherwise the asset is scrapped.
Sales Process: Once the technical expert has determined an asset cannot be reused, it is offered for sale through the Asset Sales Provider if the asset is complete, in running order and has been written off the books. Purchasing manages the Asset Sales Provider contract. Various methods used to sell equipment include auctions, directed sales and sealed bids.
Scrap Process: The amount of scrap generated by Chrysler U.S. is mammoth: 50,000 tons per month from three onsite processing centers. Scrap sales are managed by Raw Materials, Purchasing, with 90% of the scrap processed by one scrap metal company.
General Motors Asset Recovery
Tammie Lowe Eggleston, Buyer, Scrap Sales and Asset Recovery
General Motors Asset Recovery (AR) was created and managed under the GM Purchasing organization in 1997. Originally the AR process was global, but due to the varying differences in business regulations, GM transitioned to regional authority in 2010. At that time, the Asset Recovery and Scrap teams were charged with the responsibility to strategically dispose of all surplus materials, equipment and commodities.
Asset Recovery for GM North America currently employs eight Asset Recovery and Scrap Sales agents. The staff is located in the Powertrain World Headquarters Building in Pontiac, Michigan, just minutes from the Chrysler Asset Recovery offices.
Surplus Inventory Tracking: GM developed its own unique asset tracking system to internally manage and track asset dispositions. The system assigns a unique tracking number for each surplus asset, whether it’s expensed, capital, tooling, IT assets, etc. GM Finance interfaces with the asset tracking system to remove assets from the GM books as asset disposals are completed. GM Asset Recovery must comply with all export control laws and conduct the export screenings as needed.
Overview of Asset Recovery Process: GM assets are reviewed weekly during Asset Recovery Governance Board (ARGB) meetings with divisional representatives, agents and Finance. The primary focus is on internal reuse. GM Asset Recovery can also disposition an asset and sell (either through an inside or outside sales agent), donate, trade/barter or scrap.
GM has an agreement with Maynards Industries, which acts as an outside sales agent. Maynards conducts online sales, liquidations and live auctions on behalf of GM. In 2011, Maynards Industries was awarded the GM Supplier of the Year honor.
Asset recovery and scrap for each GM location (i.e., Powertrain, Stamping Plants, Assembly Plants, etc.) is handled by a single agent. That agent handles both the asset disposals and scrap sales. Before and during the ARGB meetings, reuse opportunities are formulated and discussed among the plants, representatives and agents.
Bar Code/Tagging Practice: GM uses a brass tag or bar code to identify assets. The tags are created within GM Finance and sent directly to the plant to be applied. The tags are used for inventory and financial accounting purposes. The assigned tags may vary in type depending on the asset (Brass tags, paper tags, bar codes, etc.)
Scrap Process: Much like the Asset Recovery process, the GM scrap process is managed via agent and plant. The agent handles spot sales and annual contracts as well as any special disposal projects at all manufacturing and non-manufacturing locations. All scrap is competitively quoted, and each scrap customer must adhere to GM’s strict environmental regulations as well as comply with all internal GM Security requirements.
Reuse is King! The first-and-foremost effort is to redeploy an asset within GM. But if an asset cannot be reused or is not needed internally, the GM Asset Recovery agent has the authority to sell on behalf of GM. All sales are competitively quoted but can also be assigned to the outside sales agent, who conducts sales via Webbased auctions. In both cases, all export rules and compliance screening is conducted prior to the completion of the sale. And as in any good Asset Recovery program, payment is required prior to the release of any asset sold.
Ford Global Asset Management
Tim Foster, Manager, Globa Asset Management Ford Global Asset Management
(GAM) was organized under Ford Land by the Global Controllers Office in 2008. GAM has sole global authority to manage assets under Ford Finance and Operating Manuals. It has 35 full-time employees and 14 purchased service employees responsible for asset and tooling management. GAM’s central office is in Detroit, Michigan, with regional offices in Germany, Brazil, Mexico and Australia. India and China are planned for 2013, at which point GAM plans to have 61 Asset Recovery staff.
Overview of Asset Recovery Process: GAM is responsible for global reuse and sale of assets, purchasing of “used” assets and global control of tooling at 6,422 suppliers. In addition, GAM provides support for all Ford plants, plus scrap management for all decommissioned plants, tooling and assets.
GAM has developed in-house expertise, processes and a global contacts list to sell its own assets. It is responsible for developing the business case studies necessary to assess maximum value opportunities, which include Fair Market Value (FMV) tracking vs. Net Book Value (NBV) and Scrap Value. All appraisals are conducted internally. (The selling plant generally wants NBV.) GAM’s primary focus is plant equipment; however, it is also called upon to dispose or approve of all asset disposals. Equipment and machinery are not removed from the plant until sales are paid for and finalized.
Surplus Asset Inventory: Ford GAM has developed its own internal SharePoint system to manage global reuse and used asset purchasing assets. It also developed its own Global Tooling Management system that cross matches part numbers to tooling in a many-to-many relationship across all regions. Ford purchases more than $1 billion (with a B!) in new tooling each year, and due to the intellectual property contained, ‘old’ tooling is never sold.
Bar Code/Tagging Practices: Fixed assets are brass tagged, while smaller assets contain bar codes. Aluminum plates, with a unique numbering identifier, are affixed to tooling. There is an annual, arbitrary, audit process in place for existing tooling to be physically verified and matched to part numbers. Ford does not use RFIDs.
Scrap Process: GAM is responsible for all plant demo scrap in addition to asset and tooling scrap. All scrap is bid out to at least three Ford-authorized scrap companies. Scrap is weighed at closest scale if not at the plant itself. Ford pre-estimates scrap weight, and if the supplier does not produce a weight ticket within 24 hours that disputes Ford’s estimate, then Ford’s weight estimate is used for billing. All scrap is subject to independent audit, including security details following to verify assets are scrapped—especially tooling scrap.
GAM North America is responsible for oversight of all regions to ensure regions are maximizing value. As you might imagine, there are vast differences between regions, which is likely to continue as it enter India and China. GAM is responsible for all billing.
Assets are first assessed for reuse globally, if assets cannot be reused, they are sold or scrapped. Ford’s global regions are notified of available assets. Regions have developed their own lists of potential buyers, after reuse has been eliminated as an option. Assets are first assessed to determine minimum bids based on scrap value. GAM sends out a minimum of three RFQs. Normally, the high bidder is selected based on financial and operational capability.