Journal of Cleaner Production 15 (2007) 1147e1157 www.elsevier.

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A critical assessment of motives for product recovery: the case of engine remanufacturing
Margarete A. Seitz*
Im Leisental 14, 79427 Eschbach, Germany Accepted 28 May 2006 Available online 20 September 2006

Abstract Over the past decade, there has been an increasing interest in product take-back, product recovery and the (re-)distribution of these products. The automotive sector, in particular, has a strong history of product recovery operations, such as remanufacturing. Alongside this development, an academic interest in the management of re-use, recycling or remanufacturing has evolved and developed into the eld of closed-loop supply chain management. Closed-loop supply chain management, however, is only characterised by a short research history, the earliest contributions can be found on reverse logistics and were published in the early 1990s. Due to the novelty of the eld there are still a large number of unsolved research problems. One of these is the question for the rationale behind product recovery operations. This research is based on in-depth case studies within the remanufacturing facilities of a major European Vehicle Manufacturer. The article examines whether the classic motives for product recovery are applicable to automotive remanufacturing. It concludes with a summary of the contributions this research makes to theory, to industry and to future research in the eld. 2006 Elsevier Ltd. All rights reserved.
Keywords: Remanufacturing; Closed-loop supply chain management; Protability; Environmental legislation; Ethical and moral responsibility; Original Equipment Manufacturer (OEM); Case study

1. Introduction Over the past decade, the increasing interest in product return, recovery and the distribution of recovered products has led to a number of contributions in the areas of reverse logistics, product recovery and closed-loop supply chain management. The earliest contributions can be found on reverse logistics, such as Stock [1] and Pohlen and Farris [2]. More recent publications include Mukhopadhyay and Setoputro [3]. While these works have focused specically on reverse logistics, which is dened as the physical movement of goods in reverse to the conventional forward distribution, the eld of reverse logistics has developed into the investigation of the whole supply chain for

* Tel.: 49 711 50505 865; fax: 49 711 50505 333. E-mail address: seitzma@cardiff.ac.uk. 0959-6526/$ - see front matter 2006 Elsevier Ltd. All rights reserved. doi:10.1016/j.jclepro.2006.05.029

recovered goods; the closed-loop supply chain (e.g. Seitz and Peattie [4]). This article focuses on the motives for product recovery in the automotive industry. There are various product recovery operations in the automotive sector, including recycling, repair, reconditioning and remanufacturing. This article only investigates remanufacturing, which is dened as the transformation of an end-of-life product into a product with an as good as new condition. Remanufacturing as a product recovery operation is extensive and includes product disassembly, cleaning and identication of parts, parts recovery and product re-assembly. Material recycling only occurs when parts and components cannot be reworked. The automotive sector is one of the rst industries to practice remanufacturing, however, the historic rationale behind remanufacturing is manifold and does not originate from one particular source. Compared to the manufacturing and distribution of new vehicles, automotive remanufacturing has

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remained largely invisible [5]. Only recently is remanufacturing gaining scientic signicance in a variety of industry sectors, such as photocopier [6], cellular telephone [7] or single-use camera remanufacturing [8]. Three main players can be identied in the automotive remanufacturing market. Firstly, there are the original producers of the product, the so-called Original Equipment Manufacturer (OEM), who undertakes remanufacturing operations. The OEM can be either a vehicle manufacturer (VM) or a supplier of the original equipment. Most commonly, the OEM collects the used products and distributes the remanufactured products through the own logistics channels. Secondly, there are independent remanufacturers who are not related to the car or the original equipment in any way, but remanufacture parts produced by the OEM. Independent remanufacturers tend to be small and work in a competitive environment. There is also a wide range of quality levels among independents. Thirdly, there are subcontracted remanufacturers who perform services for the OEM. The aim of this paper is to identify whether the reasons the literature traditionally discusses as motivations for product recovery apply to automotive engine remanufacturing undertaken by OEMs. These motives include ethical and moral responsibility and environmental legislation as well as the direct economic motive (protability of the remanufacturing operation). This research makes several distinct contributions. Firstly, it examines whether this classic rationale is applicable to the automotive sector. Secondly, it develops a new rationale by identifying new, additional motives for automotive remanufacturing. Thirdly, it outlines the impact these ndings have on theory and theory-building. Finally, the article summarises implications for industry and concludes with recommendations for future research. This research does not only aim to feed back to the remanufacturing sector, but may provide new insights for the automotive sector and other industries in which closed-loop supply chains play a role. In addition, the understanding of the rationale behind remanufacturing, such as the identication of the motives behind product recovery operations, may assist policy makers in inuencing the automotive remanufacturing sector or steering it towards sustainable behaviour. 2. Methodology This paper is based on a three-year research project on automotive remanufacturing. The research has taken a case-study approach with more than one hundred and thirty interviews conducted across ve case companies (locations):  Case Company 1: A German based engine remanufacturing plant, owned by a Vehicle Manufacturer (VM).  Case Company 2: The VMs Global Warehouse.  Case Company 3: The VMs Headquarters.  Case Company 4: A UK-based subcontracted engine remanufacturer (providing services to a second VM).  Case Company 5: A German based independent remanufacturer.

Interviews were semi-structured, structured and ranged (in duration) from twenty minutes to several hours. Interviewees came from all functional levels, including executives (centre manager; head of department), middle management (planners; administrators) and workers (assembly-line staff; warehouse operators). Interview data was supplemented with (process) observation, business process mapping and secondary data gathering. The insights presented here derive from detailed case study research focusing on the engine remanufacturing operation of a major vehicle manufacturer. Three levels of the case studys supply chain were investigated, the remanufacturing plant, the main distribution centre and the companys headquarters (administrative centre). Within the remanufacturing plant, the research focused on the analysis of operational processes, while research at the headquarters and the logistics centre considered the whole supply chain for recovered engines. 3. Motives for product recovery and remanufacturing e literature review The necessity to identify the motives for remanufacturing began to unfold when, during the rst eld visit (Case Company 1) at the remanufacturing plant, protability was questioned as one of the main motives for the OEM remanufacturer. As a result, further motives for remanufacturing were called into question. 3.1. Moral and ethical responsibility Within the literature on closed-loop supply chain management and the environmental social sciences, moral and ethical responsibility has often been identied as a motivator for product take-back and recovery. Industrial ecology theory, for example, assumes that humanity seeks to maintain (deliberately and rationally) a desirable carrying capacity [9]. The concept of corporate social responsibility adds that a company is (morally or ethically) responsible for the impacts of its actions (e.g. Refs. [10,11]). Also, contributors from the elds of closed-loop supply chain management and reverse logistics have outlined the role of corporate citizenship as motive for product take-back (e.g. Ref. [12]). Contributors have listed green consumerism, the green marketplace and competition as the main reasons for being socially responsible (e.g. Refs. [13,14]). Literature on reverse logistics and product recovery has also noted the commitment to environmental issues and ethics, as well as producer responsibility as reasons for undertaking reverse logistics and product recovery (e.g. Refs. [15e20]). These assumptions have been tested within this research in order to discover whether they are valid for the automotive engine remanufacturing undertaken by the OEM. 3.2. Environmental legislation There has been extensive discussion throughout the literature with regard to end-of-life take-back strategies (e.g. Ref. [21]),

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compliances with governmental regulations (e.g. Ref. [22]), preempting legislation (e.g. Ref. [23]) or transforming regulative pressures into a competitive advantage (e.g. Refs. [24,25]). However, this research investigated a potential relationship between environmental regulations and product recovery operations, which many contributors have assumed as a given fact (e.g. Refs. [26e30]). The article examines whether the case companies have established and maintained their remanufacturing activities because of environmental product take-back and recovery legislation (such as the European End-of-Life Vehicle Directive, for example; see Ref. [31] for further information). 3.3. Protability Protability of reverse logistics, product recovery and other so-called green activities, has been questioned from various research perspectives (e.g. Ref. [32]). Some academics (e.g. Refs. [33e35]) assume that closed-loop supply chains including product recovery create economic and environmental benets (e.g. Ref. [36]) e a win-win scenario in the business jargon. Within this group of researchers, some, even consider the question of protability as obvious, yet the only obvious thing about the protability of reverse logistics is the need for more research [37]. This is exactly what this article presents. It evaluates whether a direct economic motive (i.e. protability or remanufacturing) is the reason for Original Equipment Manufacturers (OEMs) to undertake remanufacturing of automotive parts and components. 4. Motives for OEM automotive remanufacturing e case study results In this section, the reasons for remanufacturing which have been taken from academic literature are examined for their applicability to the automotive remanufacturing sector. The product group under investigation (passenger car engines) was selected due to the fact that it was among the rst automotive products to be remanufactured. This research has found that the rst rationale for engine remanufacturing within Case Company 1 was very likely the high rate of engine breakdowns among previous engine generations. Consequently the Vehicle Manufacturer needed to provide replacements. Remanufacturing was therefore initially dened as an operation that provided replacements in a short period of time, and at a reasonable price. However, as technology has improved, it is assumed that the original reason for engine remanufacturing has become less signicant and other reasons for OEM engine remanufacturing have emerged. 4.1. Ethical and moral responsibility Carroll [38] has presented the pillars of corporate social responsibility (CSR), or, the range of business responsibilities. These include economic responsibility (be protable) as basis of the four additional responsibilities, the legal, ethical and

philanthropic responsibility. This section aims to outline what has been described as ethical responsibility by Carroll. In other words, it examines to what extent standards, norms and expectations, which are seen as fair or just by stakeholders (e.g. consumers, employees or shareholders) have inuenced the establishment of OEM automotive remanufacturing operations. Holliday, C.O. et al. [39] argue that corporate social responsibility results in three key benets; improved brand value and reputation, improvements in human capital, and revenue generation. This section, however, does not examine the key benets or results of CSR, but questions ethical responsibility as a motive for automotive companies to undertake remanufacturing. Interviewees were asked via open, non-directive questions about their companies motivations for engine remanufacturing. None of the interviewees mentioned ethics, green consumerism, the green marketplace, pressure from society, or environmental responsibility as motives for OEM remanufacturing. It was therefore assumed that motives which were not mentioned by interviewees could not be considered as very signicant and real-world motivators for OEM remanufacturing. However, there were further reasons why ethical and moral responsibility was not perceived as motives for engine remanufacturing. Essentially, the green or ethical consumer group could not be identied: Our main customer target group for remanufactured engines [passenger cars and light commercial vehicles] comprises taxi and shipping companies as well as eet owners. The police are a good case in point, too. These customers have one thing in common: they wear out engines quickly.1 In addition, interviewees conrmed they do not perceive any pressure from society with regard to environmental responsibility that would drive or support OEM remanufacturing. In fact, several respondents claimed that generally little is known about remanufactured products among the broad mass of common car users. The Manager for Cleaning and Identication at the remanufacturing plant of Case Company 1 explains: The important thing is to point out the advantages of remanufactured products to the customers. Hardly any normal customer knows about remanufactured engines. But the truth is that subsidiaries rather sell a new car than a remanufactured engine.2 Another interviewee conrms: An environmental responsibility or an environmental rationale has zero inuence on our remanufacturing efforts. OEM remanufacturing is also not undertaken because of

Quoted from the interview with the Manager for the Core Warehousing and Dismantling Process at Case Company 1, June 2002, translated from German. 2 Quoted from the interview with the Manager for the Cleaning and Identication Process at Case Company 1, June 2002, translated from German.

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the ELV Directive. As I have mentioned before, the most important drivers are spare parts supply and warranty.3 There have been further reasons why ethical or moral responsibility could not be conrmed a sole motive for OEM automotive remanufacturing. The automotive industry has always focused on the making and distribution of new products. This is also true for the aftermarket, where new products are distributed for the purpose of replacement. As a result, the whole industry is structured to suit the needs of new parts production and distribution. The return and recovery of used products was not anticipated to be a part of this structure. Remanufacturing may be seen as less glamorous than the distribution of new cars and may even result in negative brand image. Chris Hancock, the editor and publisher of several industry journals has even observed a contra-remanufacturing attitude from VMs towards the independent sector: The attitude to remanufacturing has never been positive [.]. The VMs and to a degree the OEMs prefer to produce non-remanufacturable products. The only problem is as technology advances with the original product so it does in the aftermarket.4 Ferrer and Guide [40] conrm that a pure ethical reason can never be the main motive for remanufacturing. They furthermore argue that companies need to focus on investing in their core-activities, rather than offering eco friendly products as part of ethical responsibility. Ferrer and Guide therefore claim that the decision-making process with regard to an engagement in recovery activities should be based on a thorough costs and benets analysis. Concluding, ethical or moral responsibility could not be conrmed as a motive for automotive remanufacturing with regard to the specic case companies and the specic product group that was investigated. However, it is likely that the relevance of an ethical or moral motivation for remanufacturing may differ within other industries or may be valid for other products within the automotive sector. In addition, as one interviewee has outlined, ethical or moral responsibility may not have been of signicance at the time of the research, but may increase in importance in future, given continuous environmental degradation, for example. 4.2. Product take-back and recovery legislation The second motive for product take-back and recovery that was taken from the literature and investigated with regard to its applicability to the automotive sector was product takeback and recovery legislation. The End-of-Life Vehicle
Quoted from the interview with the Product Manager for Service and Parts (Car Life Cycle Management) at Case Company 2, September 2002, translated from German. 4 Quoted from personal communication (letter) with Chris Hancock, the editor and publisher of practitioner and industry journals such as Engine Repair and Remanufacture and Vehicle Electrics and Electronics: Diagnostics and Emissions, Rye, UK, January 2004.
3

Directive (ELV Directive) was chosen as an example to examine the motive of environmental legislation as a driver for remanufacturing. The ELV Directive requires that car producers are responsible for the costs of recycling of vehicles put on the market after 1 July 2002. From 1 January 2007 they will be liable for recycling all vehicles, without consideration of a vehicles age. The ELV Directive sets successive recycling requirements. By 1 January, 2006, all ELVs must have 85% of their materials re-used and recovered and by 1 January, 2015, these percentage targets will increase to 95% and 85%, respectively. However, the ELV Directive not only aims to improve the recovery of end-of-life vehicles, but also seeks to implement strategies which prevent the generation of waste by making producers responsible for the costs of the implementation [41]. With regard to the implementation of environmental policies, the power of legislation has already been conrmed by Murphy and Poist [42]. While it is a different discussion to what extent remanufacturing contributes to environmental preservation, the role of product take-back legislation has been identied as a major reason for product recovery operations and remanufacturing by main contributors in the eld (e.g. Ref. [43]). In the course of the research several aspects were discovered which indicated that legislation has never been a reason for OEMs to undertake their activities. In the US and Europe there were a variety of historical developments that seem to have nurtured the growth of a remanufacturing sector: these include material scarcity during the Depression and the Second World War and demands from the racing industry. As a result the remanufacturing sector developed long before environmental degradation was perceived as a worldwide issue. In Europe, where remanufacturing activities seemed to have emerged slightly later than in the US, the rst independent engine remanufacturing company was established at least 60 years before the rst European automotive product takeback and recovery regulation. One interviewee conrms: Engine remanufacturing has been operating since before the Second World War and has been way ahead of its time in recycling. Just leaving the fast moving automotive industry and engines used in other applications such as marine, industry, agriculture, commercial vehicles, classic cars, etc. are kept going through remanufacturing almost indenitely.5 In addition the ELV Directive fails to cover two factors that are relevant to this research. On the one hand the Directive refers to the car as a whole; hence an environmental contribution which is made by the recovery of certain components during a cars life cycle is neither covered by the Directive nor credited to the original producer or remanufacturer in any way. An enquiry with the European Commission did not
5 Quoted from personal communication (letter) with Chris Hancock, the editor and publisher of practitioner and industry journals such as Engine Repair and Remanufacture and Vehicle Electrics and Electronics: Diagnostics and Emissions, Rye, UK, January 2004.

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conrm that remanufacturing during a cars life cycle is credited to any industry player. In fact, the ELV Directive only refers to whole vehicles which have become waste. In addition, the original manufacturer is not credited for the environmental contribution made by remanufacturing activities: I am not aware that vehicle manufacturers can score [with regard to environmental take-back legislation]. Particularly, since cores [used parts] do not necessarily return to the vehicle manufacturer and the remanufactured parts are not imperatively distributed by the original manufacturer. [.] for the rest, the remanufacturing of valuable used parts is not a result of environmental considerations, but takes place because there is a protable market.6 It may therefore be assumed that there is no direct link between the original manufacturers obligations to take back the products for product recovery and the environmental contribution made by the remanufacturing sector. Neither does there seem to be an environmental balance sheet in which the environmental (and therefore legal) contribution of automotive remanufacturing is recorded and accredited. The argument of legislation being a reason for remanufacturing is again weakened by the fact that in the course of this research further signicant and predominant reasons for vehicle manufacturers to undertake engine remanufacturing were discovered, such as the securing of spare parts over the whole car life cycle, as well as market share and brand protection. Interviewees perceived these motives as the most dominant for engine remanufacturing. Concluding, product take-back and recovery legislation, such as the ELV Directive, could not be conrmed as a reason for OEM automotive remanufacturing, for the specic case companies and the product group under investigation (engines). However, it could be a motive for remanufacturing within other industry sectors or for other product groups. Future research also needs to further investigate this nding for the independent automotive remanufacturing sector.

engines models. Further critical aspects that inuence protability of remanufacturing are discussed within this section. Due to a take-back network structure that stretches across several supply chain echelons (retailer, cleaning/sorting service provider, remanufacturing plant and distributor) and the time delays in the return process, the OEM takes a higher nancial risk within core acquisition than a smaller independent player. This is also due to the fact that larger (OEM) engine remanufacturers tend not to assess the quality of the returned product instantly, particularly if the product exchange is conducted at the retail level when only a supercial assessment is undertaken. One interviewee conrms the difculty of core assessment within OEM engine remanufacturing: The quality of returned cores is logically subject to strong variations, ranging from practically unusable to nearly undamaged. Since a complex quality assessment would be too costly with regard to the vast amount of cores and may also not demonstrate the necessary accuracy, a at valuation is permitted and has been arranged with nancial auditors but is also allowed by law.7 Competition for cores further impacts on protability of OEM remanufacturing. As this research has found, there is erce competition for used engines, and one can assume this competition leads to an increase of core prices. Several interviewees have stated that OEM remanufacturers aim at cleaning the market so that independents do not have access to cores. The author therefore assumes that OEM remanufacturers are, compared to independent remanufacturers, less protable with regard to core acquisition, due to the fact that one of their main motives is the exclusion of independents from access to cores. This also implies that OEMs need to pay higher prices for cores than other players in the market and that they will buy back any core. These factors have an impact on the profitability of OEM remanufacturing operations. Overall, there seemed to be a difference between interviewees stemming from the independent sector or with strong links to the independent side of the sector and interviewees taking and OEM perspective. The general consensus was the fact that remanufacturing operations performed by independents were more likely to be protable and/or driven by the motive of protability than operations undertaken by the Original Equipment Manufacturers. With regard to OEM remanufacturing, interviewees have stated: We hardly make any prot with remanufactured engines. But why are we so interested in remanufacturing then? Well, the reason is that we want to be quick. In some cases a remanufactured engine is the only possibility to provide a replacement in a short timeframe.8

4.3. The direct economic motive (protability of remanufacturing) Research on closed-loop supply chains within operations management research has tended to assume that the protability of product recovery has been sufciently explored. In fact, this is not the case, as Guide et al. [44] conrm. Within remanufacturing there are several specic aspects to consider. On the one hand, cores (the used product) may indeed be less expensive than a new part. On the other hand, their acquisition incorporates high uncertainties, such as competition for cores, high scrap rates or unavailability of older
6 Quoted from personal communication (E-Mail) with Thomas Kobudzinski from Department for Public Relations at the Gesamtverband Autoteile-Handel e.V. (German representation of interests e independent parts distributors) in Ratingen, Germany, October 2003, translated from German.

7 Quoted from personal communication (E-Mail) with the Manager for Marketing and Sales at Case Company 3, October 2003, translated from German. 8 Quoted from the interview with the Manager for Customer Process Management at Case Company 2, September 2002, translated from German.

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When we rstly introduce a remanufactured product to the market, the overall contribution to xed costs instantly plummets. This is due to the fact that remanufactured parts have signicantly lower prot margins than new products. With regard to current sales gures, the exchange business cannot be perceived as protable. Remanufacturing denitely is a long-term strategy.9 Overall, none of the interviewees in the case company could report or provide the author with a sound protability analysis for car engine remanufacturing. However, interviewees referred to further predominating reasons for engine remanufacturing. With regard to OEM engine remanufacturing, the author assumes that a corporation, which is entirely unaware of a particular operations protability, must have further, predominating motives to undertake the activity. In addition, a corporation that is driven by protability would also seek to overcome the main obstacles inherent in the remanufacturing process and consider all relevant aspects in order to measure and increase its protability. With regard to the case companies, this includes the identication of all cost factors (including costs for reverse logistics) and the increase in efciency of the remanufacturing process, as well as core acquisition. This observation indicates that the direct economic motive (protability of remanufacturing) must be seen as a minor role for the establishment and undertaking of remanufacturing within the companies that were investigated. For any Vehicle Manufacturer, remanufacturing is not generally a core activity. We can, therefore, conclude that protability of this operation was not one of the companies driving forces. Instead, interviewees explained that engine remanufacturing was perceived as a necessity in order to exclude competition and to provide the supply of replacements. More critically, the remanufacturing sector is a sector that offers alternatives to new replacements. OEMs are more interested in the distribution of new goods, but feel the pressure to be active in a sector that seeks to replace their premium replacement goods with cheaper alternatives. At present, engine re-manufacturing is not a growth industry as the standard of engines today is far superior to those some thirty years ago. The growth in general automotive remanufacturing is mainly due to the high cost of OE parts. This has led people to look at other options. Second hand parts were always the second option, but were fraught with problems. People found that they wanted a better quality, but not at OE prices. It is my view that re-manufacturing was basically born from this concept. Engines have always been rebuilt, but never brakes, turbochargers etc., and this is where the main development of the industry has been.10

This section has discussed the direct economic motive as a reason for automotive remanufacturing. Several ndings were made: Firstly, a distinction needs to be made between the independent remanufacturing sector and the motivations for OEM remanufacturers. It is very likely that independent remanufacturing is protable; therefore the direct economic motive plays a major role. However, this research has focused on Original Equipment Manufacturers who undertake remanufacturing. With regard to the main case company that was investigated, there was a lack of knowledge whether this specic operation was protable or not. Analysing the protability of remanufacturing not only seemed challenging given the vast amount of aspects to consider, but also not practiced on a regular basis. Therefore, we could assume that companies that are not aware of the economics of a specic operation cannot be driven by a direct economic motive. Secondly, a variety of factors have been discovered in the course of interviews that have an inuence on the protability of OEM automotive remanufacturing, such as the strong competition for cores, expensive new parts added to the process and high labour costs. Thirdly, a variety of new, predominating reasons for the rationale behind remanufacturing were expressed by interviewees. The following section will elaborate on these in detail. 5. Reasons for remanufacturing e new research ndings and discussion The rst part of this article investigated three motives for product take-back and recovery and for remanufacturing in particular. These motives included ethical and moral responsibility, environmental legislation as well as the direct economic motive. These three reasons had been taken from the literature and examined with regard to their applicability to the OEM automotive remanufacturing sector. This section, however, discusses newly identied motives that were perceived as predominating over all other motives by interviewees and that were discovered and discussed within interviews. 5.1. Aftermarket reasons: securing spare parts supply and warranty One of the main motives for OEM engine remanufacturing that was discovered within this research was the securing of spare parts supply. A main obstacle in providing spare parts after the phase-out of a car models serial production is the increasing dependency on suppliers. In many cases, tools and machinery are broken down when the equipment for the new car model takes up its place on the production oors. For spare parts, this usually means sharp price increases. However, remanufacturing reduces the dependency on suppliers after the termination of production in terms of prices and parts availability. One interviewee conrms: Cores are so important and valuable for us because they are not mass-produced any longer. They are also cheaper than parts that are specically manufactured by the supplier

Quoted from the interview with the Product Manager for Remanufactured Parts at Case Company 3, February 2003, translated from German. 10 Quoted from personal communication with Brian Ludford, the General Secretary of the UK Division of the Federation for Engine Re-Manufacturers (FIRM), Plymouth, June 2004.

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[often in small volumes]. Cores are therefore the only source of parts for which there is no serial production any longer.11 The secure supply of spare parts is particularly important for the automotive sector, in which many vehicle manufacturers guarantee to cover for a period of 10 years or more. In some cases, remanufacturing is the vehicle manufacturers only option to provide spare parts.12 Interviewees conrmed that remanufacturing is a signicant source of replacement engines. This aspect is particularly relevant in the classic car sector. The installation of remanufactured parts in cars may therefore be seen as the extension of the cars product life cycle. This product life cycle extension, however, is not based on environmental motives, but rather a result of the car owners interest to extend the vehicles life: With remanufactured products we complement our aftermarket programme of repair (dealers and subsidiaries) as well as used parts (used parts centre). We want to offer the customer a choice.13 A second important aspect of spare parts management is the allocation of under-warranty engines. The average warranty for new cars is three years or 60,000 miles [45]. In fact, a car owner, on average, only receives a brand-new engine if product failure occurs within the rst 10,000 to 15,000 km. For every under-warranty case above this mileage, the car owner receives a remanufactured engine. Today, engine remanufacturing is a vibrant and growing industry. As powertrain warranties continue to increase, most automakers want to nd suppliers to carry them through the warranty period. People are keeping their cars longer, and replacing their engine is a cost effective alternative to replacing the vehicle [46]. By cultivating a reliable pool of warranty replacements, the vehicle manufacturer decreases its warranty costs by providing the customer with a recovered product instead of a brand-new engine: There are four main reasons why we provide remanufactured products. Number one: because the market wants it. Number two: high number of warranty cases. Number three: it is part of product phase-out management. Number four: cores have to be taken back because we dont want competitors to get hold of them.14 Important is the overall view and the consideration of all engines, as discussed in the interview: warranty e which

we pay anyway e and the ability to supply across the whole car life cycle.15 Moreover, remanufacturing is likewise a measure to balance aftermarket engine demand and the demand for new engines in the vehicle assembly process. Since the manufacturing output of new engines is related to the vehicle assembly operation, the withdrawal of new engines from the serial production would lead to an engine shortage in the vehicle assembly process. Hence remanufactured engines may full the demand for engine replacements. 5.2. Market share and brand protection Lund [47] has conrmed that remanufacturing may be a defensive action by OEMs to discourage competitors from the remanufacturing of OEM products. The research has shown that there are two dimensions of a defensive action undertaken by OEMs. The reasons brand protection and market share protection have been identied as outcomes by this research and may be considered as novel ndings. Previous research has not elaborated on these specic motives for remanufacturing, but rather briey noted the existence of market protection as a driving-force for remanufacturing (e.g. Ref. [48]). Within the case company, aftermarket share and brand protection have been identied as decisive reasons for the establishment of a remanufacturing cycle. This may be due to the fact that in the automotive sector, brand management and awareness have always been key components to success (e.g. Ref. [49]). With regard to brand awareness and protection, this research discovered that the VM did not want other remanufacturers to play around with its engines. In fact, there was fear that customers may not distinguish between the brand name on the engine and the potential low-quality recovery undertaken by independents. In order to protect the companys luxury brand, the OEM sought to ensure that remanufacturing only took place at the vehicle manufacturers remanufacturing plant. This gave the company control over the quality of remanufactured products and sought to ensure that the product performance met the customers expectations. The second dimension, market share protection, relates to the discussion of aftermarket strategies. This research shows there is also strong competition between Original Equipment Manufacturers undertaking remanufacturing activities and independent remanufacturers. In the United States, the majority of remanufacturing rms are independent. This is a reason why previous, mainly American contributions have not particularly emphasised the issue of market protection by the OEMs. This research suggests that in Europe OEM remanufacturing plays a more dominant role than in the US (see also Lewis [50]) and it may be assumed that
Quoted from personal communication (E-Mail) with the Product Manager Service and Parts (Car Life Cycle Management) at Case Company 3, October 2004, translated from German.
15

11 Quoted from the interview with the Manager for Customer Process Management at Case Company 2, September 2002, translated from German. 12 These cases include the bankruptcy of a supplier or supply of a product with a very long life cycle, for example. 13 Quoted from the interview with Manager Technical Support for Chassis at Case Company 2, September 2003, translated from German. 14 Quoted from the interview with the Product Manager Remanufactured Parts at Case Company 3, February 2003, translated from German.

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automotive OEM remanufacturing (vehicle manufacturers and rst tier suppliers) plays a more dominant role than in the United States. According to interviewees, the VM (Case Companies 1, 2 and 3) did initially not perceive competition from the independent sector as an issue, but began to notice that a signicant amount of aftermarket sales were taken up by independent remanufacturers, rather than by the sale of their OE replacements. The key to achieving both objectives (brand and market share protection) seems to be the core collection, or, as it has often been termed in interviews, the cleaning of the market. Hauser and Lund [51] have described cores as [.] the lifeblood of the remanufacturing cycle (p. 1), which remanufacturers see as a critical factor with regard to growth. This research has conrmed the reason cleaning of the market from both sides. On the one hand, the vehicle manufacturer has outlined the importance of a thorough core collection: Ofcially a remanufactured engine can only be bought if a core is returned. But if a customer offers us just the core without buying a remanufactured product, we tend to buy it anyway, because otherwise, the core would be food for our competitors. With regard to commercial vehicle engines, at one point, we even bought back used engines from scrap yards to avoid that competitors would get hold of them.16

the process of having their cars professionally checked promotes a feeling of security in consumers. Consequently, the case company provided a more extensive product range, including remanufactured products. For the VM the take-back and remanufacturing of used engines had further advantages. On the one hand the VM took care of the used product; hence retailers saved waste disposal and scrapping costs. This is benecial in cases where engines were seriously damaged and could not be remanufactured. On the other hand, retailers may bet from good quality spare parts at reduced prices. From an end-user perspective the company provided a just in case stock of remanufactured spare and replacement parts for its main target groups, including eet managers and mailing companies. The availability of exchange products, just in case the customer may require a remanufactured engine, may inuence the buying decision. 6. Summary and contributions This article has reviewed the driving forces and motivations behind product take-back and recovery in general and automotive remanufacturing more specically. In the rst part of the article three specic motives for product take-back and recovery were taken from the literature and tested within an automotive remanufacturing environment. These driving forces included ethical and moral responsibility, product take-back and recovery legislation, as well as the direct economic motive (protability of remanufacturing). Through an in-depth case study approach, their applicability to automotive remanufacturing was examined. Concerning OEM remanufacturing and passenger car engines, the research has demonstrated that their involvement in inducing automotive remanufacturing is low. The research did not conrm that any of these three reasons induces or supports the engine remanufacturing activities of the case companies. However, ethical and moral responsibility, environmental legislation and the direct economic motive may be reasons for remanufacturing in other industry sectors, for different product groups or cases. The second part of this article presented the (new) motives that were discovered within this research and that have been identied as driving forces for automotive engine remanufacturing undertaken by the OEM. It was found that for the Vehicle Manufacturer, the remanufactured engines provided a valuable source of spare parts and under-warranty engines. In addition, market share and brand protection as well as customer orientation were seen as more dominant reasons for the undertaking of the recovery operation than the motivations discussed in the literature. Table 1 summarises the key ndings from this research and the main aspects that have been discussed within this article. 6.1. Contribution to theory Generally, a theory provides explanations for certain characteristics or observed phenomena (e.g. Refs. [54e56]).

5.3. Customer orientation This section illustrates aspects, which have been summarised as broader market appeal by Lund. Lund does not further illustrate this point; however, it may be assumed that the broader market appeal for customers includes the vehicle manufacturers ability to provide spare parts for a reasonable period, at a reasonable price and within a reasonable time. One interviewee conrms: One of the reasons why we remanufacture passenger car engines and engines for small commercial vehicles is the fact that we want to offer the customer the option to purchase remanufactured engines. It all boils down to customer orientation and customer satisfaction.17 Nagler [52] claims that the production of parts, which can be remanufactured economically, is one way to promote serviceability. Kiff and Chieux [53, p. 23] explain that customers appreciate an extensive service and repair network just in case. The same may be true for an extended aftermarket product range. .for consumers, the ideal is to have no servicing or repair at all, but they do expect and require the availability of a service and repair network just in case. In addition to this,
Quoted from the interview with the Manager for Customer Process Management at Case Company 3, September 2002, translated from German. 17 Quoted from the interview with the Manager for Customer Process Management at Case Company 3, September 2002, translated from German.
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Theories that are relevant within the scope of this article are systems thinking, industrial ecology, and the concepts of corporate social responsibility as well as sustainability. This section outlines the implications that the ndings of this research have on those theories and concepts. Firstly, corporate social responsibility suggests that one potential reason for a companys involvement in corporate greening (e.g. product recovery) is moral or ethical responsibility. The presentation of research results within this article has demonstrated that moral and ethical responsibility had a low degree of inuence on inducing OEM engines or electronic devices remanufacturing. Secondly, industrial ecology assumes that there is a willingness of the actors to be ecological [57] and that they strive to maintain a desirable carrying capacity [58]. Hence industrial ecology assumes that underlying environmental motives play a role in corporate decision-making. However, contributors in the area of industrial ecology are aware of the legal constraints and boundaries in which they are operating. This research demonstrates that environmental legislation (e.g. the ELV Directive) also has to be considered as a motive with a low degree of inuence to induce OEM remanufacturing. As a result, assumptions made within the main debates of the environmental

social sciences could not provide a sufcient explanation for the rationale behind automotive remanufacturing. For contributors in the areas of corporate social responsibility and industrial ecology, this conclusion may provide an impulse or closer examination of assumptions taken within the elds and their application. For researchers within product recovery management, the ndings provide new insights, which might be considered within future research projects. 6.2. Implications for management and policy This research demonstrates a completely new set of motivations that are relevant within OEM engine remanufacturing. The implications of these ndings mainly affect industry in the form of product recovery management and policy making. On the one hand, remanufacturing incorporates many uncertainties [59]. This article has discussed the issue of protability within the take-back process of used engines in detail. However, this research identies the long-term supply as an essential motive for OEM remanufacturing. For industry this implies a rethinking with regard to product design. Remanufacturability or general recoverability needs to be considered within any product design in order to facilitate the

Table 1 Motives for OEM engine remanufacturing Reasons for automotive remanufacturing Motives identied in the literature Ethical/moral responsibility Degree of inuence to induce OEM engine remanufacturing Low Findings

 No emphasis on promoting the eco-friendliness of remanufactured products  The green consumer group or green marketplace could not be identied  Anti-remanufacturing attitude of VMs discovered  History of engine remanufacturing is based on other reasons  ELV Directive does not account for remanufacturing  The research has discovered further, predominant reasons  High uncertainty in core acquisition: scrap rates  Strategy cleaning market from cores increases core prices (competition for cores)  Necessity to incorporate expensive new parts  High labour costs  Decreasing dependency on suppliers with regard to prices and spare parts availability  Remanufacturing is, in some cases, the only source of spare parts  Remanufacturing of phase-out engines is technically and economically more viable than a reproduction  Balancing engine aftermarket demand through remanufacturing  Important source of under-warranty engines  Controlling quality of remanufactured engines  Building quality image for own products by promoting employee skills and sophisticated equipment  Thorough core collection as universal key to excluding independents  Availability of extensive, reasonably priced aftermarket range, just in case  Vehicle manufacturer takes care of used units  Stock replenishment time reduction

Legislation

Low

Direct protability/prot maximisation

Low

New observations

Secure spare parts supply

High

Warranty Market share and brand protection

High High

Customer orientation

High

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recovery processes, which might take place decades later. Measures could be a reduction of product variants or the use of specic products in a variety of cars (product platforms). To date, product designers tend to ignore such issues. However, given an increasing importance of remanufacturing in future, the long-term supply of spare parts could be facilitated by these measures. On the other hand, several interviewees within this research claimed the automotive industry needs to move away from a throwaway society in which new products and parts are permanently pushed into the market, whereby vehicle manufacturers prefer to sell a new car rather than a remanufactured engine. For policy makers, this indicates that measures of product life cycle extension, such as remanufacturing or reuse need to be supported. Vehicle manufacturers need to be accredited for recovery activities during a cars life cycle. In addition, customers who are often unaware of the advantages of remanufactured products should be reassured with information on the quality and benets of remanufactured goods. Overall, in order to become more sustainable the automotive industry needs to move away from the focus of making and distributing new products, and the principles of closed-loop supply chain management should be implemented. Concluding, the knowledge of the true rationale behind remanufacturing provides policy makers with starting points on how to support and advance sustainability in the automotive sector.

Acknowledgements The author would like to thank the ESRC Centre for Business Relationships, Accountability, Sustainability and Society (BRASS), for the support that made this article possible. Special thanks also goes to Simon Richardson for proof-reading the manuscript.

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6.3. Implications for future research It seems as if previous researchers have often based their research on the classic assumptions (motives) taken from the literature. Consequently, their research outcomes have been linked to these assumptions. Examples are optimisation models for disassembly, core acquisition and scheduling (e.g. Refs. [60,61]). However, if contributors had known that for some industry players, such as the OEM, motivations for remanufacturing differed, they would have developed different models, and hence current research would have provided different research outcomes. As an example, had previous contributors known that OEM remanufacturers may not consider optimising their core disassembly or core acquisition processes due to the fact that their rationale was not entirely based on the direct economic motive, they would have also known that the overall role of remanufacturing within these corporations is rather negligible. Hence, overall optimisation may not have been their main objective, but they would have requested the design of a exible production system that is able to handle the uncertainties within remanufacturing. Potential research outcomes could have been the design and testing of lean remanufacturing principles, or the remanufacture-to-order approach within OEM remanufacturing. As a result of this work, future researchers within the eld may base their assumptions on the new ndings and therefore provide more applicable and real-world solutions.

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