Environmental Accounting Snapshot CHRYSLER CORPORATION/Mercury Switch Company Profile Location: Auburn Hills, MI Size: 120,000 employees Annual Revenues: $40 Billion Business: Car and Light Truck Manufacturer Industry Sector: Auto manufacture Product/Process Costing Should a mercury switch in an under-hood convenience lighting package for the calendar year 1997 Neon be selected over the other mercury-free alternative? Business Benefits The apparent piece price difference was $0.12 in favor of the mercury switch; however, the relative cost savings when a total life cycle analysis was conducted indicated a $0.12 advantage for the rolling ball switch, the mercury-free alternative. Why Was Project Performed? Chrysler Corporation relies on a large automotive supplier base to manufacture its products. Chrysler evaluates the various components available from different suppliers by performing Life Cycle Management (LCM) studies, which compare components on the basis of not only piece price, but also environmental, health, safety, and recycling considerations in a systematic business decision framework. In addition to assisting with sound business decisions, environmental factors help measure Chrysler's readiness to comply with upcoming regulatory requirements and internal engineering standards. LCM focuses on comparative evaluations of key life cycle segments. Chrysler developed an LCM model for evaluating production components with Franklin Associates, Ltd. In addition to piece price, inputs of the model include: recyclability and disassembly ratings, and recycled content data from Chrysler's Regulated Substance and Recyclability Certification (RSRC) Data Collection and Reporting System; tooling costs; component weight; substances of concern contained in the component; labeling requirements; storage costs; packaging costs; insurance premiums; environmental training; personal protective equipment; record-keeping and reporting; add-on environmental controls; end-of-life disposal and recycling costs; long-term liability; and emissions. The model results in a cost comparison of two or more available alternatives. Project Description Convenience under-hood lighting systems have been available on the Neon for several years. The switches used to turn the under-hood lights on and off have historically contained mercury, a substance gaining more and more attention from environmental regulators. A Life Cycle Management study was conducted by Chrysler to evaluate the hidden costs associated with continued use of the mercury switches compared to other available lighting alternatives, and to determine the least expensive alternative. Analysis Several alternative designs for convenience under-hood lighting systems are available in the automotive manufacturing industry. Options for mercury-free switches include pendulum, rolling ball, transistor, and limit switches. Cost Considerations Mercury vs. Rolling Ball Switch (Mercury-free) Piece Price $ - 0.11 Acquisition Price $ - 0.01 Identification and Tracking $ +0.24 The Total LCM Cost Advantage of the Rolling Ball Switch is: $ + 0.12 per unit The State of Minnesota has a statute in place prohibiting the crushing of a motor vehicle without prior removal of all mercury switches. Wisconsin and Michigan are following Minnesota's lead. Sweden has also banned mercury from motor vehicles sold in that country. To evaluate the cost impact to Chrysler Corporation, an LCM case study evaluated a mercury switch currently in use, and two possible alternatives. Piece prices of the mercury switches are one-third to one-half of the piece prices of mercury-free switches. A cost savings can also be recognized by using similar switches across all Chrysler platforms, and getting volume discounts. No additional tooling costs are required for either type of switch, because both are currently manufactured by Chrysler. Significant identification and tracking requirements are associated with mercury switches, and costs associated with tooling to manufacture labels, label piece price, and labor to install labels are calculated and included in the LCM cost. Product Destination Software will also be required for the mercury switches. This software is required to identify labels which are required or proposed for sales of vehicles in three states. The cost of labeling is related to the variety and difference required by the states. Additional environmental support from Chrysler's corporate staff to address regulatory and reporting issues will be required the first year of regulation. Financial Parameters Not provided. Financial Results The comparison results in a significant cost savings by using the mercury-free rolling ball switch The savings is $0.11 per unit, or about $18,000 per year. The costs were driven to a large degree by labeling costs associated with a variety of requirements stipulated by three states. In addition to this cost savings, using the mercury-free switch supports Chrysler's internal engineering design standards, reduces potential liability, and reduces its regulatory burden. Institutional Change Chrysler has incorporated ECA into the set of decision tools is uses. It also makes extensive use of life cycle management. ECA has changed how Chrysler measures costs, but has not affected cost allocation. Contact Wendy S. White, The Traverse Group, Ann Arbor, MI (313) 747-9301 Dr. Robert J. Kainz, Chrysler Corporation, Auburn Hills, MI (248) 576-5496 Susan G. Yester, Chrysler Corporation, Auburn Hills, MI (248) 576-8038 Source Pollution Prevention and Remediation, Chrysler Corporation, Life Cycle Programs DISCLAIMER: This database presents a number of case studies developed in recent years by a diverse group of organizations. The concepts, terms, and approaches represented throughout the database represent many different philosophies and means of applying environmental accounting principles and don't necessarily reflect the position or views of the US Environmental Protection Agency. Through production of this database, the EPA is presenting many different possible approaches to environmental accounting without intending to endorse any one. http://www.epa.gov/opptintr/acctg/casestudy.htm Revised: 04/09/98