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AAEQ has branched out from its engine core and auto salvage business to enter the scrap recycling sector.

Brian Taylor May 28, 2010

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The Stolberg family has been purchasing, refurbishing and reselling engine cores and other select automotive components since 1949, when brothers Aaron and Alex Stolberg founded the company now known as AAEQ.

The Stolbergs started their business in Chicago, where AAEQ still operates two locations—one on the city’s south side and the other in Blue Island, Ill.

AAEQ’s foray into scrap metal has taken place in the western United States, however, where Aaron’s son Scott

AAEQ Manufacturers and Recyclers at a Glance
Principals and Key Managers: Scott Stolberg, president and CEO (pictured at right); William (Billy) Stolberg, president and chief operating officer; co-founder Aaron Stolberg also remains involved with the company
 
Location: Corporate headquarters, engine core and components operation and scrap recycling operation in Las Vegas; engine core, components operations and export division in Chicago and in Blue Island, Ill.
 
No. of Employees: 105
 
Equipment: Harris HRB series baler; Caterpillar skid steers and telehandler; Genesis mobile shear; alligator shear; vertical balers; forklift trucks
 
Services Provided: AAEQ Scrap Metal purchases, collects and processes ferrous and nonferrous scrap; AA Midwest purchases, refurbishes and sells used engine and transmission cores and engages in other automotive salvage activities for the domestic and export market; EngineQuest (EQ) makes and sells hard-to-find new, remanufactured and reclaimed engine parts to engine builders, machine shops and race teams and stocks cylinder head replacements for performance engines.
 

moved in the 1980s to manage the company’s growing volume of business in that part of the country.

WESTERN JOURNEY

The Chicago-based company started by Aaron and Alex (and called AA Midwest to reflect their ownership) initially sold engine cores to the local and regional market, but it wasn’t long before its products were being shipped nationally—and especially to Southern California, where cars and trucks more typically go through engine rebuilds since their vehicle bodies are not exposed to ice and road salt.

The volume of cores and other engine parts heading to places like California and Arizona caused AA Midwest (which changed its name to AAEQ in 2006) to start a trucking division. The company typically shipped parts west and then arranged backhauls of agricultural produce or other loads for the return trip to Chicago.

In the mid-1980s, the Stolbergs decided to change the way they were doing things by exiting the trucking business and asking Scott to move to California so he could manage a new company location there.

Scott lived and conducted business in Southern California for several years before opting to move his family and the company’s western U.S. facility to Las Vegas. He says the regulatory climate in California partially prompted the move, and the deal was clinched by the welcoming attitude of the Nevada Development Authority.

“When I met with them and told them I only had 16 people, their reply was, ‘That’s 16 more new jobs than we had when the morning started.’ I really liked that attitude,” recalls Scott.

By 1993, Scott was overseeing a 53,000-square-foot warehouse that refurbished, stocked and shipped out engine cores and other engine parts.

In Chicago and Las Vegas, the company specializes in cores and engines for the types of vehicles (including pickup trucks, SUVs and taxi and police fleet vehicles such as Ford Crown Victorias) that can log well beyond 100,000 miles and whose owners will rebuild an engine rather than scrap the vehicle.

Part of its business remains domestic, but the company also ships cores and engine parts to the owners of such vehicles in Central and South America and other export destinations.

AAEQ has held on to its volume of business even though this market has been a diminishing one in the past 10 years. (Scott notes that the cost and difficulty of repairing newer fuel injection engines is part of the problem.) “For engine rebuilds, the total volume has probably shrunk by one-third in the past 10 years,” he comments. “But there will always be a market for performance engine rebuilds. Companies like ours who have survived the shake-out of the past 10 years can still operate profitably.”

What’s in a Name?

The company now called AAEQ has its roots in Chicago, where it began as AA Midwest, with one letter “A” standing for Aaron and the other for Alex, the two Stolberg brothers who founded the engine core and engine parts refurbishing company in 1949.

AA Midwest grew throughout the second half of the 20th century, developing new services and subsidiaries, including EngineQuest (EQ), a subsidiary that specializes in manufacturing discontinued, hard-to-find engine parts or custom components that can help engine cores fit into new applications.

In 2006, the AAEQ acronym was introduced as the company’s corporate name, consolidating the AA Midwest brand with the EQ brand that had also grown in importance.
 

The search for profitability also has played a role in AAEQ’s entry into Southern Nevada’s scrap metal market.

FROM GENERATOR TO BUYER

Its role in the engine repair and salvage business has meant AAEQ has always generated a certain amount of scrap metal. The generation of that material allowed the Stolbergs to become familiar with the scrap business from the customer perspective.

In managing the Las Vegas location, Scott also managed the sale of the company’s scrap. He first cultivated the notion that the company could take steps to upgrade its own scrap and yield more revenue from it. “We steadily got better at grading and marketing our scrap,” he comments, “and we increasingly bypassed our scrap dealer to sell directly through a trusted broker.”

In 2004, the company made the leap into becoming a retail scrap location, installing a scale and investing in equipment and people to start the AAEQ Scrap Metal division. “I went to an ISRI (Institute of Scrap Recycling Industries Inc.) Convention that was here in Las Vegas and began shopping for the equipment that would get us up and running,” says Scott.

That step was one of just many in what AAEQ refers to as its “five-year master plan” to become a full-service scrap recycler. Enacting that plan, according to Scott, has entailed making $5 million worth of investments into processing equipment, thick concrete paving with a compliant stormwater runoff system, an ATM-style payment system plus landscaping and exterior facades. “We’ve spent $1 million on equipment alone in the past three years,” he says.

The Scrap Metal Division operates from the same 4-acre parcel in northern Las Vegas where AAEQ conducts its engine core and parts business. It operates a truck scale with a radiation detector for incoming loads as well as a floor scale for smaller purchases.

AAEQ is expanding its commercial and industrial scrap services, says Scott, and now has placed containers with about 30 customers in southern Nevada. Its processing capabilities are centered around a two-ram HRB series baler made by Harris, Peachtree City, Ga. “The consistent advice I got was to buy a baler that seemed bigger than we needed, because we could grow into it,” says Scott of the reasoning that went into buying the rebuilt machine in 2006.

He candidly admits he feeds the machine forms of scrap for which it wasn’t designed (including many ferrous grades). “We’re pretty harsh on it,” he says of his baler, but adds that the machine has stood up well to its treatment. “I can’t even begin to tell you how happy that machine has made me,” he adds.

He’s equally complimentary of the Genesis VersiPro shear attachment the company has mounted to a skid steer and uses to prepare long and bulky scrap for the baler. AAEQ has purchased two of the units since it entered the scrap business.

As of early 2010, the company’s employees and equipment are handling about 500 tons per month of ferrous scrap and a growing amount of copper, aluminum and other types of nonferrous scrap flowing across its retail scales.

CORE AND NON-CORE BUSINESSES

The company’s plan is to nurture and grow AAEQ Scrap Metal, and Scott notes that being in Clark County, Nev., which has seen its population nearly triple from 700,000 to 2 million in the past 20 years, provides plenty of opportunity in that area.

While many avenues of growth are available and can be considered, Scott sees opportunity in the retail scrap sector. “We know what our niche is: We’re a scrap collector dealing with the peddlers and the small commercial and industrial generators,” he remarks.

The company is finding ways to put its retail scrap brand in front of the people of southern Nevada, taking part in an effort to collect items that have been abandoned in the desert (the “Don’t Waste Nevada” initiative) and in another cooperative effort with Clark County, Nev., to scrap traded in gasoline-powered lawn mowers for those willing to purchase (at a discount, sponsored by the lawn mower manufacturer) new electric mowers.

The Stolberg family’s background in the used engine cores and parts business has provided it with an approach to scrap buying and selling that is familiar to veterans with decades in the scrap business. “We don’t focus on the top line as much as we do the bottom line,” he says of the company’s willingness to avoid chasing large volumes with low margins as one of its primary goals. “You’ll never go broke making a profit,” he quips.

Although it now has more than 100 employees at its three locations combined, Scott says AAEQ still very much operates as a family business, with family members who are comfortable with the roles they play. “For a family business, it’s pretty harmonious,” says Scott.

The establishment of operations in the West may have helped make the balance and harmony possible. “If my brother and I were in the same building, it might not always be the same way,” Scott jokes of his relationship with his brother William (Billy), who oversees AAEQ’s operations in Chicago and Blue Island.

Scott and Billy’s father Aaron subsequently moved to Las Vegas and remains involved in the business. “My father is now 84 years old, but he still comes to work almost every day and contributes,” says Scott.

AAEQ can still be considered a fledgling scrap company, but Scott is confident its managers and employees can transfer the proven skills they have in the engine cores and parts business and apply them successfully to the scrap recycling sector.

Citing AAEQ’s “outstanding customer service and high degree of integrity,” Scott says the company is well positioned to expand its presence in Southern Nevada’s scrap processing and recycling industry.

The author is editor-in-chief of the Recycling Today and can be contacted at btaylor@gie.net.


 

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