Saturday, July 12, 2008

More on what happens to stolen car parts

One of the things that hasn't made sense to me as I've pondered the fate of stolen car parts is that I can't understand how it can be profitable enough to warrant the risk. Sure, the parts themselves start out as free (ignoring costs associated with getting caught), but it seems to me like it would be impossible for stolen parts to be cheaper than, say, real Honda parts at the dealership because the trade in stolen parts would lack the efficiencies of scale and specialization, the benefits of sophisticated inventory management, and the discounts on shipping that Honda has.

My independent garage says they can get axles for my car in an hour. Someone somewhere would have to be sitting on (and paying for land and a building to store) a massive variety of car parts, so that they've got axles for my make/model/year car on hand. And their inventory would have to be large enough that my garage get my parts so reliably that they can quote me a low price for the repair. It just seems like there can't be that many cars stolen to support that kind of inventory. And it also seems like there aren't that many of these independent garages to make it worthwhile to maintain that kind of inventory.

I see that State Farm sheds some light on this, describing that garden-variety stolen-car-part fencing is a highly organized enterprise, with a national distribution network:
This illustrates the fact that most cars today are stolen by people who are in the theft game for money. Because the parts of a car are worth more collectively than an intact car, many stolen cars are delivered to chop shops. These shops specialize in stripping cars, disposing of identifiable parts and selling others through a national network. Chop shops can meet the demand for parts more quickly and, typically, more cheaply than legitimate parts dealers.

Here's a bit more information about how a distribution network for body parts worked in Philly until it was busted:
The participants maintained close contact through a network of speaker phones called an "Elite Line." The systems can connect more than 100 offices at once with the push of a button. Orders were placed on the system, often in a verbal "code," McGinnis said.

Such networks have been used by the auto-repair industry for decades, Ozga said. He had three networks feeding into his office with a combined 260 members. Many dealt in illegal parts, but many others didn't, he said.

According to Ozga, those shops wishing to stay "legitimate" knew what was going on with illegal parts. They could hear it on the speakers. But they wouldn't deal with those engaged in the illegal trade.

According to McGinnis, the participants in the illegal organization benefited from high profit margins on the stolen goods. A thief might get $300 from a chop shop for a stolen car. The shop would package the entire body of the car and sell it to the salvage yard for $1,500, then get hundreds more from another customer for the engine and transmission.

The salvage yard could sell the front end of the car to the body shop for $1,500, leaving the rear end, side panels, doors and other parts for profit.

The division of labor isn't always as such, however. Often, the salvage yards run their own chop shops, or the chop shops deal directly with the body shops, according to Ozga, who admits buying and selling the stolen parts but denies running his own chop shop.

Although described by authorities as an organization, the stolen-parts business differs from other crime syndicates. There is no true hierarchy and no "muscle" involved.

"We're talking about organized crime without the violence," said Assistant U.S. Attorney Robert Reed, the lead prosecutor in the chop-shop investigation. "These were businesses. There were workers. They were paid wages. There were shifts and (production) expectations. There were Christmas bonuses.

"It was a corrupt shadow economy."

The Boston Globe reports that some stolen cars end up in Iraq and are used for car bombs.
Toole said American-made vehicles are particularly attractive to terrorists in places such as Iraq. Forensics specialists there have identified some bomb-rigged cars as vehicles that were swiped off American streets and sold overseas by criminal gangs and organized crime syndicates.

Terrorists desire a "vehicle like a Suburban because it can hold a lot but it also blends in," said Toole, who is leading the FBI's efforts to complete the database.

That particular Chevrolet SUV model is popular, he said, because "it looks like an American security vehicle" in Iraq and "they can get closer to their target than if it was a beat-up old Toyota."

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