Pile of Scrap Ep. 7: Scrap Legends: SA Recycling Part #1

Scrap Legends: SA Recycling Part #2 available here.

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George Adams and John Sacco

Transcription

John Sacco: Pile of Scrap. And today — you love that name.

George Adams: I do. It cracks me up.

John Sacco: We're here today with the President and CEO of SA, George Adams. So ‘S’ stands for Sims, ‘A’ stands for Adams. And when we first met, it was Adams’ Steel. Now, it's SA Recycling.

George Adams: I wanted it to be AS recycling, but ‘ass’ recycling didn't work so well, so it had to be SA Recycling, so.                                  

John Sacco: That's probably the best move. And, who had to convince you of that? Well, tell us a little bit, George. You know, welcome. Thank you for joining us. You know, you — you've taken your company and you've grown it throughout — you’re now one of the, I don't know, are you semi-pri — what are you? Because you're half private, half public.

George Adams: It's a private company. We just have a public partner.

John Sacco: You have a public partner. Okay. So, as far as privately held scrap companies goes in America, you're probably the largest. Have you surpassed Alter?

George Adams: Oh, I don't know. We're probably certainly up there. I think Alter has a lot more money than we do.

John Sacco: Well, they have gambling boats. Alright, so let's tell us a little bit about this SA — how this all came together because it's part of the history before we get into the real back history. So, everybody needs to know what is SA, how Sims Adams came together.

George Adams: So, Adams’ Steel was, you know, our family business located in the southern California area and we had reached a point where we couldn't grow anymore. We were running up against without having a dock and it was really difficult to get a dock in Los Angeles and Long Beach. There just weren’t any available. You know, the space was all taken up and so we had the opportunity to do a joint-venture with Hugo New and — or, I'm sorry, it’s Sims. It was called Sims Hugo New at the time, but an opportunity to joint-venture with them and that gave us access to a dock. And so, we did a 50/50 joint-venture. That was in 2007. And, that was forming SA Recycling. And really, ‘SA’ was just supposed to be a placeholder name. We are going to come up with some really cool name, but it just — just kind of stuck.

John Sacco: All we need is two C’s and a O, then we have Sacco Recycling and we're good, okay?

George Adams: Exactly right.

John Sacco: Alright. So, George, tell us a little bit about your start in the scrap business and your family — how it all started because I think it's an interesting story. I know it, but I think the people who will listen to this podcast would like to know that.

George Adams: You know, my father had a had a little scrap yard. This was in the early 70s. And, I mean, I was driving a truck and, you know, late in high school. And, I was working at the yard certainly in the later years and it's just where I grew up. And so, it's really all I've ever done. I'm an attorney by schooling, but I never practiced law. The, you know, my first job at the company, we had landfills and I picked scrap out of the trash. The first one — I had worked there full time, I had a crew of guys at the landfill and we were — I drove the roll-up truck up there every morning and we picked the scrap metal and recyclables out of the landfill and I brought it back to the yard at the end of the day.

John Sacco: Okay, so you were —

George Adams: That was 1976 — ’77.

John Sacco: Okay, so you're doing that, but yet you still — you end up going to law school. So, there's progression. What was that? Is that your dad telling you, “George, we need an attorney in the family” or is that you, that you wanted to know the law?

George Adams: No. What happened is that as the company was growing — because — because the —you figure in 1977, I start working with the company full-time. I was 21 and so I didn't go back to law school until I was 24. So, the company had grown quite a bit by then. What was happening is I was talking to my attorneys and I didn't know what the hell they were talking about. And, so they would say, “there's no privity of contract” or they would say, “that's a tort” and I just had no idea what they were talking about. And so, I figured out that I could go back to school at night and I could become an attorney and it took me four years. So, I went to work every morning at six o'clock in the morning. I got out of work at six o'clock at night, had to be at school by 6:30. Went straight through winter, spring, summer, and fall. All four seasons. Went straight through the —

John Sacco: You're in southern California. There's two seasons: summer and spring.

George Adams: Yeah.

John Sacco: There's no winter, there's no fall.

George Adams: Well anyway, but straight — straight through the year. It took me four years. And so, I wasn't — I was never going to take the Bar because I wasn't going to practice law.

John Sacco: So, did you take the Bar?

George Adams: I did. And my classmates called me so many female anatomy words that I got shamed…

John Sacco: And did you —and you did pass the Bar.

George Adams: I did pass the Bar, but —

John Sacco: You have an interesting story about law school — how you had to get through it because you had a habit of falling asleep?

George Adams: Well, you know, so obviously I was working all day and then by the time I got out of — by the time I got out of class at 10:30 at night. And so, trying to study after you've been working — after you worked 12 hours that day was always difficult. So, I would walk along the riverbed and I’d listened to tapes. Back then, they were cassette tapes and I had a player that would play them at high speed and so it would play the — it would —normal people talk about 200 words a minute —180 to 200 words a minute. I had a tape player that would play it at 600 words a minute and so… And then it had a pitch control so you didn't sound like Mickey Mouse because they were talking really fast and I would just walk up and down the river with my dog and as long as I was walking, I wouldn't fall asleep. And so, I would just play the tapes over and over and over again for each class. But they’re the Bar review tapes and that's how I got through law school.

John Sacco: That's really quite fascinating. You know, and you still don't sleep.

George Adams: Well.

John Sacco: You may be in an ISRI meeting or two, but other than that, I don't know you to sleep. So, okay. So, now you're — you become a lawyer. You're still in the scrap business — you've grown your scrap business. But in 19 — I met you first in ‘86 or ‘85 and when I met you, first time, you were in bankruptcy.

George Adams: So, it wasn't a bankruptcy yet. Okay. So, when I first met you, the state of California had shut down my shredder. And so, the — they've shut down my shredder and they had put the — they had declared the waste that California was — declared the waste that was hazardous and we had PCPs in a waste and so they've declared the waste hazardous and — or had to declare the waste hazardous and they stopped my shredder. So, that was March of 2000… No, I’m sorry.

John Sacco: 1980.

George Adams: That was march of 19… Let’s see, when the hell was that? ‘87? Yeah, March of ‘87. And so, I came up here with Dave Williams and your father — your family, you guys gave me a baler — a shear baler to keep us going because…

John Sacco:  Well, at first, it was a 4,200.

George Adams: Okay, a baler.

John Sacco: That's right. It was because that was the — Dave Williams on his watch calculating how many tons a day you did.

George Adams: Yeah, no one else — no one else would help me, but you guys gave me a baler and that got me a — that allowed me to ship my tin because I couldn't run my shredder and that got me going until I could get the permit to get the shredder going again.

John Sacco: Okay. So, at some point you have to declare bankruptcy, right?

George Adams: So, we didn't declare bankruptcy…

John Sacco: Okay, you never did go officially into bankruptcy…

George Adams: No, no, no. We were forced into bankruptcy. So, Richard Neu in Wichita — you know, they kind of got together — David Chrea. They bought up a couple of my creditor’s claims and they filed or, they put up the money to file an involuntary bankruptcy against me. And so — and then they dragged us into court and when we got into court, we lost. So, because when the bank — what happened is when the state of California —when the state of California shut my shredder down, my bank panicked — Mitsui Bank. And so, they seized my line of credit and they bounced all my checks. So, they bounced over half a million dollars worth of checks. That was Friday the 13th, March, 1987. So, they'd bounced over half a million dollars worth of checks. And so, then Richard had one of his law school buddies, an attorney basically — they bought three of those creditor claims and with three creditor claims, $27,000 worth of creditor claims, they could — they were able to file an involuntary bankruptcy against me.

John Sacco: Okay. So, now you're in the depths of all this? No financing. Okay. We gave you — my dad, you know, convinced my brother and I, “Okay. It's a good idea to give George a baler, he has the tonnage.” At any point during all this, did you think you're going to give up and this is no longer for you or it's just the chip group bigger on your shoulder? What happened during this? Because it's a personal thing at this point for you.

George Adams: You know, it's not even so much a question of the chip growing bigger as — or even thinking about quitting. In the first place, you know, growing up, of all of the things my father taught me, it's that you just don't quit, you know, my father pounded in my head since I was little that no matter how many times you get knocked down, you got back up again. And he always said it and he would tell me over and over again, “if you always get back up, then you can't be beat.” He says, “you're never beaten until you don't get back up.” And so, it was never really a question about quitting just because it's just not in my makeup. And the — and I was confident I could beat this. It was — I just, I knew I could beat it.

John Sacco: Well, okay. Not only did you beat it… To look back from 1987 to 2019, you're ginormous in the respect of where you were and how you came. Tell us — and you did —you've done a lot of this through acquisition. Tell us about your first acquisition when you've made your first — you were going to go buy your first scrap yard, you're coming out of all this stuff. Now, you're going — now you're going to grow.

George Adams: But, it didn't really happen that way. What happened was — what happened is that the — when we finally, you know, we sued Hugo New. We finally settled that lawsuit. We were finally able to get the company out of bankruptcy, settled with the bank, settled with the state on, you know, on a cleanup plan for the waste. And so that's 1990 or 1991 — thereabouts. And so, we're flat broke, had a $5 million liability and it has this waste pile that we had to get rid of. The city of Anaheim had taken away our business license and our use permit and that's the situation we're in. But you know, we had the right to operate for five years to clean up the pile. And in that five years we were, we got our use permits back, we've got our business license back and we shipped the waste out. And so — but what happened is because we were able to settle those environmental problems, then people started coming to us with their environmental problems. And so, when the yard down in El Centro — can't think what the hell the family's name was — but anyway, the family that owned that yard down there, the owner had passed away. Well, the family had the yard, but it had all kinds of environmental problems. And so, when we — when we started talking to them, then they were satisfied that we could clean the problem up because we had cleaned our problem up. When Bob Lewon was handling the bankruptcy for Hiuka. And, Mitsui had bought all the assets but wouldn't take place in Bakersfield here, wouldn't take a mid-city, wouldn't take a couple of places because of all their environmental problems. Bob Luan came to me and said, “do you want to buy these places?” Because he trusted me to be able to clean up the environmental problems. And so, really, through all the problems of our environmental problems, then, you know, we started buying companies that had environmental issues because we knew what to do and I wasn't afraid of them. And so, when you've been through what we've been through, you know, environmental problems just isn’t scary. And so, we started buying those and then, really, we started buying companies that had debt problems and solving some problems because I'd been through it all.

John Sacco: So, you understood. So, you educated yourself through your issues that you had. That became its own form of a master's degree, a doctorate, and how to get yourself out of these things and that created opportunity.

George Adams: Certainly, I would've rather skipped that education. But certainly, it allowed me — it certainly taught us, you know, what to do in environmental problems and how to buy companies or how to handle, you know, companies that were in trouble.

John Sacco: You know, we'll get to the environmental because the environmental issues of 20 years ago and what we're facing today is different. We'll get to that. But, let's look at SA today. How many employees does that SA Recycling company have now?

George Adams: I think we're 2,700.

John Sacco: That's a lot of employees. Okay, and how many facilities are you running now?

George Adams: 77, I think. Soon to be 78.

John Sacco: Soon to be 78. I got to hand it to you, George. That's a lot of growth and in a really short period of time. So, tell me about — what is the crown jewel of all the SA yards? What's the crown jewel?

George Adams: I mean, still our dock, you know, Terminal Island is still probably are, you know, are the yard and most people like to come see just because loading ships and that kind of stuff, but my yard Long Beach is really nice and beautiful facilities in Georgia. I mean, I have a lot of really — every state has, you know, one or two really nice facilities that we’re — figure we’re in ten states and so, each one has its own charm, but of all of them, you know, the one in Terminal Island —

John Sacco: You have this —this electric crane at Term —

George Adams: Terminal — that’s in Terminal Island.

John Sacco: Right. Tell us a little bit about that because I think it's when people see it, it's hard to really truly understand the size of it and its capacity and what it can do.

George Adams: I mean, look, it's a Liebherre 550. It's a — I think it's the nicest scrap loading crane in the country. Although, I think Sims is going to buy 600, so maybe they'll beat me, but theirs is not here yet. So, right now mine's still nicer, but the — I think it's the nicest scrap loading crane in the country. It's — it's just badass. I mean, it’s all you can say. It's badass. The guy sits —

John Sacco: How many feet up off the ground is that guy?

George Adams: He's about 90 — he's 33 meters, I think. So, what, like a hundred feet.

John Sacco: Is there an elevator in that thing? Or, you guys —

George Adams: No. No elevator.

John Sacco: So, the job description for that is you got to be in physically — you guys got to be in great shape and climate

George Adams: Yeah, you got to be able to get up there. But, he’s so high up, he can see down to the holds of the ship. It’s all computer-controlled, so when he swings, like if the — if the pan is sitting here, when he swings to the — to the ship to dump the pan and he pushes a button that goes back to where it was, he pushes the button, it goes back to there until you got to move it. It's really badass. It’s a beautiful crane.

John Sacco: Do you ever operate it?

George Adams: What's that?

John Sacco: Yeah. You’re — you’re — One thing people need to know about you: you're in your scrapyards…

George Adams: Every day.

John Sacco: Wearing your hard hat, working the equipment. How often do you run that crane?

George Adams: So, I've never actually loaded the crane. I mean, I've swung it and moved it and that kind of stuff.

John Sacco: Okay. But you actually haven't loaded a ship yet.

George Adams: Because the — there's a lot of long shore issues with me, doing that.

John Sacco: Oh, that's right. It’s a union. You're not a union yet — Oh. Alright. We won't — we won't touch that. We won't broach that. You haven't done it. So, you haven't broken any regulations. So, with your company of your size, what's your capex budget on an average?

George Adams: I mean, you know, it depends on the year. You know, I mean, obviously, if businesses were bad, it's going to be less. But, this year will be 65 million bucks… 70, not counting acquisitions.

John Sacco: That’s a lot of money. Look, you have stated art facilities. You're heavy into automation. Is that your downstreams? Where — where's the money? Where did the money go this year? When you approved your budget, what kind of investments and equipment were you making into your facilities?

George Adams: I mean, look, certainly we've put a lot of money in the downstreams. You know, what's — what's happened with China. I've had to change a lot of different stuff. Wash lines, twitch sensors, you know, there's a lot of bunch of stuff I've had to do because of the change of regulations in China, but then we’re concrete and environmental, you know, doing different stuff. New tractors, tier four engines, you know, stuff that has to be replaced, whether it's trucks or tractors. And that's really an endless —

John Sacco: Yeah, we — this last year we spent money and having to get to the tier four levels from our trucks, our rolling stock. Even for our excavators that we use for our demo site at Sierra Recycling and Demolition. We had to make that investment. So, let’s talk a little bit about — let's go to environmental because it kind of segues, you know, it's part of your capex budget. Today in California, the environmental issues that DTSC is trying —it — or, they're claiming ASR auto shred — auto shredder residue is hazardous material. What other — and stormwater — but you know, you've got yards from California all through the south into Georgia. Is California your biggest nightmare for the environmental issues as far as the regulatory burden or is it caught up everywhere else?

George Adams: There's more problems in California in all the states put together and by 10. So, California is, you know, tries to do everything it can to put you out of business. Other states try and encourage your business, wants your business, like your business. You know, the — California comes into your yard looking to do everything they can to — to do it —to get a “gotchu” and to find you. Other states don't, so.

John Sacco: So, we're here at Sierra. Okay. We're in Bakersfield. We're basically a desert. We get 5.8 inches of rain a year and here at Sierra we're going to spend $575,000 on new stormwater technology that nothing even leaves our parking lot. It drives me crazy. Rainwater that drops on our parking lot that doesn't touch scrap has to be sampled. Yet, the DMV, Lowe's, Home Depot and every other major business in the state of California that has a parking lot doesn't have to test their water.

George Adams: Well, there's certainly — there's certainly nothing fair about the DTSC in their — the way they regulate scrapyards. You'd figure in all other states, the recycling business is looked at as a green business and helping the environment. In California, we are polluters and they wish we weren't here. So, unless your aluminum cantor of newspaper recycler, then they think that's okay. But other than that, they don't want you here.

John Sacco:      What's the biggest regulation change coming down the pike that scares you the most? And the state of California? Or wherever that may be?

George Adams: Well, I mean, look, they're trying to regulate shredder waste and trying to make our facilities hazards waste that have, you know, with shredders. And so, I mean, for us, that's the third rail. I mean, we'll fight it to the death just because you can’t — you just can't do that.

John Sacco: We need automobile shredders because what are we going to do with the automobiles?

George Adams: Exactly. But you know, state of California, as far as they're concerned, if they went to China or they went out of state, they'd be fine with that.

John Sacco: China's not taking our scrap

George Adams: Well, that's — this is recent though. But in the past, they were fine with it going anywhere, but being recycled in California. So, I mean, the head of the CalEPA told me as much in my office at Terminal Island. So, you know, he basically told me the guys that were working there would get other jobs and that, you know, we didn't need that type of industry in California.

John Sacco: A state that wants to be green wants to axe the biggest green that — the largest tonnage of recyclables.

George Adams: But they don't —

John Sacco: It's crazy.

George Adams: But, they don’t look at it that way. I mean, it's just — it's a different thought process. So, you know, they look at carcerating as being an illegal hazardous business, which needs to be regulated to the max and it's only place in the world that it's done that way because you understand, what happens is that California in 1983, which is how started the whole — all my environmental problems, changed the standard from a acetic acid to citric acid. So, if you think about it, if you take and throw trash in a landfill, the reason it decomposes is because it's in an anaerobic environment and it forms a mild form of the acetic acid and then that breaks down the carbon chains, right? So, when you're going to test for heavy metals, you put those — that waste — in a concentrated form of the acetic acid. A little stronger than what you find in the landfill and you see if anything will come out. And so — and that's how it's done all over the world and in every state in the country except for California. And the reason no other country and no other state — because normally other states follow California. But since 1983, no one has because it's stupid. Why would you use anything other than citri— other than acetic acid? California uses citric acid. You don't find citric gas on a landfill. So, why use citric acid to test for heavy metals? But, that's what California uses. Even so, you're never going to find it in a landfill. It's absolutely ridiculous to test for cit — use citric acid. But that's what they use. There's two soluble leads in nature, lead nitrate and lead citric. If this plastic bottle was made out of lead and I had water in it and I drank it, as long as I don't scrape my teeth on it, I can drink water out of this lead bottle. It's not going to hurt me because lead is not soluble in water. But if I start pouring orange juice in here, I'm going to die because lead citrate is a solu — is soluble.

John Sacco: There seems to be — look, Sierra — we're under the same — we don't have auto shredders like you do, but we still have to fight all the craziness, but common sense regulation… there's no common sense in it anymore, especially in our industry and everybody wants to be green, but nobody seems to understand what the investment it takes to be — to keep this stuff from landfills. You can't have cars all over the street. That is going to pollute this state at a far greater level than a controlled environment, which your yards are controlled environments.

George Adams: No question.

John Sacco: Well, you know, let's — well, we did get a victory when we sued this — who did we sue? Cal Recycle.

George Adams: Cal Recycle because they were trying to make us report our tonnages so that they could say that it was waste aversion. So, we won that one. We’ll win this hazardous waste one too.

John Sacco: You're an optimist, aren't you? I'm a realist. Okay. People think I'm a pessimist because realist and optimists are so close and not — you know, realist and pessimists are real close. But the optimist, he's at a different level.

George Adams: You know, my glass is always overflowing, so.

John Sacco: Over — it’s not half anything. See, I look at a glass. It's half. It's not half empty. It's half. But, you know, that's neither here nor there.

Conclusion: This has been a Sierra International Machinery original audio series. Thanks for listening. Please share this podcast and make sure to subscribe.

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