WSJ: USA ReManufacturers Cry for Free Trade

original Wall St. Journal article, with pictures

retroworks file photo CRT tube polishing

From Trash Heap to Store Shelf

Refurbished-Goods Industry Seeks U.S. Support for Freer Global Trade, More R and D

• By JAMES R. HAGERTY And PAUL GLADER

Ray Mills unpacks and processes vacuums at Cleveland's Vacuum Systems International, which remanufactures commercial-grade vacuum cleaners. Executives from some of the largest U.S. manufacturers are gathering in Washington Monday and Tuesday to seek more government support for their efforts to refurbish and sell used products ranging from cell phones to railroad locomotives to medical scanners.

Remanufacturers—including Caterpillar Inc., General Electric Co., General Motors Co., Eastman Kodak Co. and Xerox Corp.—would like the government to push harder for free global trade in reconditioned products and to help fund research into better methods of remanufacturing, which involves restoring used products to like-new condition for resale.



Auto parts have been rebuilt for decades, along with various kinds of machinery parts and motors. But remanufacturing now extends to a wide array of items, including computers and home appliances.
An estimated $100 billion of remanufactured goods are sold each year in the U.S. and more than 500,000 people are employed in the industry, according to Nabil Nasr, who heads the Center for Remanufacturing at the Rochester Institute of Technology, Rochester, N.Y., which is hosting the meeting of more than 20 companies along with the Council on Competitiveness, a Washington, D.C., nonprofit group that aims to make U.S. businesses more competitive.


A key issue for remanufacturers is they haven't convinced everyone that their products are as reliable as new ones. Many countries, including China, Japan and Brazil, have banned or restricted imports of used medical equipment. Even when imports are allowed, government-controlled hospitals sometimes are barred from buying them, with officials citing fears that foreign companies are sending outdated or substandard products.

The Industry of the Used

The thousands of large and small firms involved in remanufacturing tout it as a highly profitable business that affords customers lower costs—sometimes as little has half the price of a new product—and also helps the environment by reducing waste and energy use. Remanufacturers say any expansion of their activities will create jobs—a priority in Washington.

Manufacturers often see better profit margins on remanufactured products than on new ones, said Trent Simpson, a product manager at Caterpillar, the construction- and mining-equipment giant, which remanufactures engines and parts for a variety of machines.


"Customers, business and the environment all win," Mr. Simpson said.


Officials from the Department of Commerce and the Office of the U.S. Trade Representative are also due to attend the meeting, which comes as the Obama administration seeks improved its relations with the business community.


Remanufacturing also faces challenges on pricing. Imports of low-priced new auto parts from Asia, for example, can sometimes still undercut parts remanufactured in the U.S., and many products may never be good candidates for remanufacturing. Some, like toasters or hair dryers, are already so cheap it would be hard to justify the expense of fixing and putting them back on the market. Rapid changes in fashion and technology also frustrate some efforts to revive old products.


Working in remanufacturing's favor, however, is the rising cost of copper, steel and other commodities, making it economical to invest in processes that extend the life of these materials. Meanwhile, environmental legislation is forcing companies to seek production methods that use less energy and leave less waste. Many U.S. states have passed or are considering legislation requiring manufacturers of electronic equipment to take used goods back for recycling or other kinds or reuse. Those laws facilitate remanufacturing because they create more reliable ways of gathering used products, which otherwise might be dispersed in landfills.

Vacuum Systems International Inc., or VSI, based near Cleveland, remanufactures commercial-grade vacuum cleaners used to clean retail stores across the U.S. Diana Richards, VSI's chief executive, says she is expanding the business in Europe. ReCellular Inc. of Dexter, Mich., remanufactured or recycled parts from about five million cell phones last year, up 25% from 2009, says Steve Manning, the company's CEO.

One reason for such growth is that companies and consumers are searching for cheaper goods as the sluggish economy squeezes budgets. Health-care companies "are under a lot of economic pressure these days," said Dave Elario, who heads a General Electric unit that remanufactures medical equipment. As hospitals seek lower-cost gear, GE's sales of refurbished imaging and ultrasound machines last year totaled about 1,500 units, up more than 10% from a year earlier, he said.


Elisabeth Staudinger, CEO of refurbished systems at Siemens Healthcare, a unit of Germany's Siemens AG, said 20% to 25% of medical scanners sold by the original manufacturers in the U.S. are remanufactured.
Remanufacturing could help companies meet any future limits on their emissions of so-called greenhouse gases. Rolf Steinhilper, who heads a remanufacturing institute at Bayreuth University in Germany, estimated that remanufacturing a car starter produces about 53% less carbon dioxide emissions than making a new one.


Write to James R. Hagerty at bob.hagerty@wsj.com and Paul Glader at paul.glader@wsj.com