Army of tow trucks tackles Houston's cars

Alex Toll is part of an army of more than 1,000 tow truck pilots contracted by Insurance Auto Auctions Inc (IAA), a unit of Carmel, Indiana-based KAR Auction Services Inc. Their job is to extricate vehicles swamped by Hurricane Harvey so insurance companies can begin the claims process.

Along with rival Copart Inc, IAA dominates the US auto-salvage auction market. The company has a dedicated team that handles hurricanes and other large disasters for its insurance customers.

IAA set in motion a massive logistical operation in Houston before Harvey hit last weekend. It is now doing the same for Hurricane Irma, which is bearing down on Puerto Rico and the US Virgin Islands and could hit Florida by this weekend.

Just how many vehicles in South Texas were walloped by Harvey is not yet known. Cox Automotive, owner of the Autotrader online automobile market and Kelley Blue Book car valuation service, has estimated that between 300 000 and 500 000 vehicles were severely damaged or destroyed. That translates to potential losses of between US$2.7 billion to US$4.9 billion.

The prospect that this catastrophe could boost flagging US auto sales sent automakers' shares up last week.

But before most Houston flood survivors can replace their cars, their insurance companies must first process claims. The firms will recoup some of their losses by re-selling flood-damaged vehicles, some for scrap metal and parts, others for transportation.

That salvage effort begins with drivers such as Toll. On Tuesday he was hustling to pick up a car from a subdivision in the Houston suburb of Baytown where all 240 houses were flooded. Along the way he dodged piles of soiled furniture, soggy carpet, old Christmas lights, even a water-logged piano.

“I'm not going to change the world,” said the 43-year-old, whose bushy beard is flecked with gray. “But I can help people get their cars replaced.”



BIGGEST-EVER SALVAGE EFFORT?

Industry executives said Harvey could well end up being the biggest US auto-salvage operation on record after Harvey dumped more than 50 inches of rain on parts of the nation's fourth-largest city.

Flooding during Hurricane Katrina in 2005 damaged about 600 000 vehicles; 250 000 were submerged by Sandy in 2012, according to estimates by Carfax, a service that collects and sells data on the condition of used vehicles.

“There's a lot of unknowns right now,” KAR Chief Executive Officer Jim Hallett said. “We don't know how many vehicles were under water and what the total volumes look like” with Harvey.

Insurance firm GEICO, which works with IAA and is owned by Warren Buffett's Berkshire Hathaway Inc, said it has logged around 30 000 Harvey-related auto claims.

Farmers Insurance, which in not an IAA client, said it had around 9 000 claims so far in the area.

What's clear is that many of those cars could end up back on the road in the U.S and elsewhere, and used-car buyers need to look sharp in the coming months.

Typically, about half of vehicles damaged after a flood are driven again, according to Carfax spokesman Chris Basso. The company estimates there are about 325 000 flood-damaged vehicles currently operating in the United States.

After Hurricane Katrina, thousands of cars submerged for weeks were cleaned up and sold as undamaged used cars, according to a 2009 Justice Department document.

The government received several reports of consumers who perished in crashes after buying flood-damaged vehicles that had their airbags removed. – Nampa/Reuters