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### Document

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# 19 ) ll-A-3 3
Docket Number: 

# A-88-0 2

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# A-88-0 2

JU N 1 5



# H A 3 3

ECONOMI C IMPAC T ASSESSMEN T O F EMERGING TECHNOLOGIE S FO

RCONTROLLIN GCHROMIUM EMISSION S FROM

CHROMIUM

ELECTROPLATIN GOPERATION S
1. 0 INTRODUCTIO N Thi s repor t estimate s th e impac t o f contro l cost s fo r thre e emergin g technologie s onth e cost s o f chromiu m electroplatin g andon th e price s o f har dchrome-plate dproducts . Th e emergin g technologie s whic hresul t inhighe r emissio nreduction s ar e a composit e mesh-pa d mis t eliminato r (MPME) , a packed-be dscrubbe r 1 ncombinatio nwit ha MPME , anda fibe r be dmis t eliminato r (FBME) . Th e methodolog y t o b e use dfo r estimate s o f economi c impac t i s th e sam e methodolog y

tha t wa s use d1nChapte r 8 o f th e Backgroun dInformatio nDocumen t fo r th e Chromiu m Electroplatin g NESHA P (hereafte r th e BID) . Fo r har dchromiu

m plating , thre e product s (automobiles , Industria l roll s andhydrauli c cylinders ) wer e analyze dt o Illustrat e th e rang e o f impact s tha t ma y

occu r acros s mos t har dchromiu m plate dproducts . Tw o set s o f economi c Impac t estimate s ar e containe d1nthi s report . First , fo r eac ho f th e produc t markets , estimate s o f th e Impac t o f th e emergin g technologie s onbot hth e cos t o f electroplatin g andth e fina l pric e wer e calculated . Th e increas e 1nth e cos t o f chromiu m electroplatin g illustrates th e potentia l fo r substitutio nawa y fro m chromiu m electroplatin g a t th e Inpu t stage . Th e Increas e i nth e fina l pric e o f th e produc t allow s estimatio no f outpu t reductio nandth e concomitan t effect s o nrevenue . Second , smal l busines s Impact s wil l b e examine dby considerin g th e availabilit y

o f capita l fo r th e emergin g technologie s andb y conductin g a closur e analysis .



### -1 -P. 3 (

Fo r compariso npurpose s th e Impact s o f th e emergin g technologie s wil l b e show

nalon g wit hth e Impact s o f Contro l Optio nII I i nth e BID . Contro l Optio nII I contain s tw o control-options ; singl e packed-be d scrubber s andregula r mesh-pa dmis t eliminators . A summar y o f th e estimate dImpact s 1 s containe da t th e end , Sectio n5 , o f th e report . Sectio n2 describe s th e methodolog y for ' estimatin g th e economi c Impacts . Sectio n3 contain s th e impac t analysi s fo r th e thre e produc t groups . Sectio n4 contain s th e smal l busines s analysis . 2. 0 METHODOLOG Y Thre e produc t group s wer e selecte dt o illustrat e th e economi c Impact s associate dwit hth e emergin g technologie s fo r th e chromiu m electroplatin g operations . Th e produc t group s selecte dInclud e automobil e parts , Industria l rolls , an dhydrauli c cylinder s (represente db

y backhoes) . Th e produc t group s wer e selecte dt o Illustrat e th e effec t o f eac hcontro l optio nonhar dplate dproduct s ando nbot hcapita l andconsumer goods . Th e analysi s firs t isolate s andquantifie s th e cos t o f th e emergin g technologies . Second , 1 t compare s th e contro l cost s fo r th e emergin g technologie s pe r uni t o f mode l plan t outpu t t o th e direc t cost s o f chromiu

m electroplatin g a uni t o f outpu t t o determin e 1 f electroplatin g coul db e replace dby competitiv e coatings , materials , o r processes . Thes e firs t tw o step s provid e anassessmen t o f employmen t andsmal l busines s Impact s fo r chromiu m operators , particularl y

jo bshops . Fo r eac ho f th e thre e produc t market s studied , th e followin g detaile ddescriptio no f th e analysi s supplement s th e abov e summary . Inorde r t o calculat e th e potentia l Increas e 1 nfina l price , th e increas e 1nth e margina l contro l cos t du e t o eac hcontro l optio n mus t b e estimate dfo r eac hmode l plant . Thi s calculatio n consiste do f dividin g th e annualize dcontro l cost s fo r a particula r siz e plan t b

y th e numbe r o f unit s o f outpu t fo r tha t siz e o f plant .



### -2 -P. 4

Tabl e 2- 1 give s th e capita l cost s andth e annualize dcontro l cost s fo r th e emergin g technologies . Fo r compariso npurpose s Tabl e 2- 1 als o contain s th e contro l cost s fo r Contro l Optio nII I fro m th e BID . Contro l Optio nII I consist s o f eithe r singl e packed-be dscrubber s o r mesh-pa dmis t eliminators . Eac hmode l plan t ha s a uniqu e se t o f capita l andannualize dcontro l cost s base donIt s productio ncapacity . Th e annualize dcontro l cost s wer e compute dusin g a 1 0 percen t discoun t rat e andanequipmen t Hf e o f 2 0 years . Th e cost s show

n1 nTabl e 2- 1 ar e thos e fo r retrofittin g a n existin g plant . Th e BI D contain s tw o set s o f costs ; retrofi t and incrementa l cost s fo r complianc e 1 f buildin g a new electroplatin g facility . Retrofi t cost s ar e alway s highe r andwer e chose nfo r calculation s 1 nal l subsequen t table s becaus e retrofit s t o existin g plant s ar e expecte dt o b e th e mos t commo nfor m o f compliance . Th e calculatio no f th e potentia l Increas e 1nfina l pric e wa s don e b y firs t convertin g th e mode l plan t paramete r o f amper e hour s pe r yea r t o numbe r o f unit s o f outpu t fo r eac ho f th e mode l plant s andeac ho f th e thre e produc t markets . Table s 1nChapte r 5 o f th e BI D Hs t th e productio ncapacit y

o f eac ho f th e mode l plant s .1 nterm s o f ampere-hour s pe r year . Th e parameter s o f th e product s selecte dt o Illustrat e Impac t wer e obtaine dfro m manufacturer s o f th e products . Thes e parameter s include dsurfac e are a plated , curren t densit y applie d durin g th e platin g process , andplatin g time . Thes e parametri c value s allowe danestimatio no f th e ampere-hour s pe r par t neede dt o plat e th e surfac e are a efficiently . Becaus e th e mode l plants ' capacitie s wer e measure d1nampere-hour s pe r year , andth e product s analyze dwer e measure d1 nampere-hour s pe r part , a nestimat e o f th e potentia l outpu t pe r plan t coul dthe nb e calculated . I norde r t o allo w fo r th e loadin g o f part s 1nth e tank s andgenera l maintenanc e o f th e electroplatin g facilities , th e mode l plant s wer e assumedt o operat e a t les s tha n10 0 percen t o f thei r capacity . Th e capacit y utilizatio nrate s fo r eac h plan t siz e ar e displaye d1 nChapte r 5 o f th e BID . Nex t anestimat e o f th e cos t pe r uni t outpu t o f th e selecte d produc t du e t o chromiu m electroplatin g wa s obtained . Th e cos t wa s



### -3-P. 5

TABL E 2-1 . HAR D CHROMIU M PLATINGMODE L PLAN T COST 3 DAT A (198 8 $ )

••' • Smal l Mode l Plan t Mediu m Mode l Plan t Larg e Mode l Plan t Contro l Capita l Annualize dCapita l Annualize dCapita l Annualize d Optio ncost , $ cost , $ cost , $ cost , $ cost , $ cost , $
II I Singl e packed - 45,90 0 11,50 0 92,80 0 24,20 0 185,50 0 54,80 0 be dscrubbe r o r mesh-pa d mis t elimi - 28,90 0 9,50 0 82,50 0 29,90 0 156,30 0 69,00 0 nator s Emergin g Technologie s Composit e mesh - 34,00 0 15,20 0 89,80 0 39,00 0 179,50 0 94,20 0 pa dmis t eliminator s Packed-be d72,60 0 19,60 0 122,20 0 38,30 0 244,50 0 90,10 0 scrubber/mesh padmis t eliminator s Fiber-be d117,60 0 31,60 0 234,60 0 73,40 0 469,20 0 168,60 0 mis t eliminator s
•-•Retrofi t costs ; als o exclud e credit s fo rchromi c ad d recovery
.

-4
-P. 6

define da s th e direc t cos t o f chromiu m electroplatin g th e produc t o r par t exclusiv e o f al l othe r costs . Finally , b

y dividin g th e annualized/contro l cos t b y th e firm' s potentia l output , anestimat e o f th e contro l cos t Increas e pe r uni t wa s derived . Sinc e th e propose dpollutio ncontro l device s ar e Intended , t o - reduc e th e emission s from th e electroplatin g operation , th e entir e burde no f th e contro l cost s mus t firs t b e place donth e additiona l cos t o f electroplating , andno t sprea dove r th e entir e manufacturin g operation . Hence , th e analysi s firs t hadt o determin e 1 f th e manufac turer s woul dcontinu e t o us e chromiu m plate dpart s o r switc ht o a substitut e process . I f manufacturer s d o substitute , th e potentia l impac t o f th e regulatio nwoul dthe nb e fel t o nchromi c ad dmanufac turer s an dsupplier s andelectroplatin g operators . Substitutio nawa y fro m chromiu

m electroplatin g canonl y occu r 1 f a technicall y andeco nomicall y

suitabl e substitut e 1 s available . Furthermore , th e degre e o f substitutio npossibl e 1 s significantl y les s fo r har dchromiu m application s tha nfo r decorativ e chromium . 3. 0 ECONOMI C ANALYSI S O F TH E SELECTE D PRODUCT S Thi s sectio ndiscusse s th e economi c Impac t associate dwit h applyin g eac ho f th e contro l option s t o th e thre e products : automobil e parts ; Industria l rolls ; an dhydrauli c cylinder s (represente db

y backhoes) . Th e analysi s focuse s o nth e effect s onth e fina l pric e o f th e produc t bein g studie dando nth e electroplatin g cos t associate dwit hth e contro l cost s o f th e contro l option . 3. 1 Automobil e Parts . Domesticall y

produce dautomobile s ar e equippe dwit ha wid e variet y o f chromiu

m plate dparts . Tabl e 3- 1 provide s a 11s t o f mos t o f th e automobil e part s tha t typicall y ar e har dchromiu

m plated . Th e trendinrecen t year s ha s bee nt o reduc e o r eliminat e certai n decorativ e chromiu

m plate dautomobil e parts , howeve r substitutio nha s no t occurre dextensivel y fo r har dchromiu

m plate dparts . T o investigat e th e economi c Impact s ondomesti c automobiles , on e mode l wa s chose nfo r anin-dept hanalysis . Th e larges t sellin gP. 7



### TABL E 3-1 . LIS T O F AUTOMOBIL E PART S TYPICALL YHAR D

CHROMIU M ELECTROPLATE D

Powe r Steerin g Shaft s MacPherso nStrut s &/o r Shoc k Absorbe r Component s Valve s Valv e Lifter s Pisto nRing s Seal s

-6 -P. 8

domestically-produce dautomobil e fo r si xconsecutiv e year s 1 nth e 1980 s wa s th e Oidsmobil e Cutlass/C1era . I n1985 , th e Cutlass/C1er a accounte dfo r 51. 7 percen t o f OldsmobileJ s uni t sales , 1 2 percen t o f Genera l Motors ' uni t sales , an d6. 7 percen t o f tota l retai l sale s o f domesticall y

produce dautomobiles . I neac ho f th e 6 years , a naverag e o f 489,87 5 unit s o f th e Cutlass/C1er a wa s sold. 1 Th e Cutlass/C.lera . usuall y 1 s equippe dwit ha wid e variet y o f chromiu

m plate dparts . A s muc ha s 7. 4 squar e fee t o f tota l surfac e are a 1 s har dchromiu m plated . Th e electroplatin g cos t ma y b e a s higha s $10 6 (1 0 cent s pe r squar e inch) , o r 1. 2 percent , o f th e tota l retai l pric e o f th e automobile . Tabl e 3- 2 display s th e percen t Increas e inth e cos t fo r th e har d chromiu m plate dpart s unde r Contro l Optio nII I andth e emergin g tech nologies . Fo r a smal l plant , th e percen t increas e incos t range s fro m 12.46 8 (composit e MPME ) t o 25.91 6 (FBME ) percent . Th e percen t Increas e incos t range s fro

m 3.79 6 (PBS/MPME ) t o 7.27 3 (FBME ) percen t fo r th e medium plan t andfro

m 3.24 4 (PBS/MPME ) t o 6.07 1 (FBME ) fo r th e larg e plant . Th e abilit y

o f firm s t o substitut e fo r har dchromiu m plate d part s i s severel y

limited . Th e effec t o nmedium andlarg e plant s wil l b e smal l becaus e o f th e absenc e o f clos e substitute s fo r har dchro mium . A

3.2 5 t o 7.2 7 percen t Increas e fo r th e medium andlarg e plant s wil l probabl y

no t caus e substitutio nawa y fro m har dchromium . Th e 12.4 7 t o 25.9 2 percen t increas e fo r th e smal l plant s 1 s Hkel y 1 nthi s instanc e t o caus e som e shif t inproductio nfro m smal l t o large r plant s (se e Section4.0) . Th e percen t pric e increase s fo r th e automobil e rang e fro

m 0.0 3 fo r th e larg e plan t t o 0.3 1 fo r th e smal l plant . 3. 2 Industria l Rolls . Th e pric e o f Industria l roll s canvar y fro m a lo w o f severa l hundre ddollar s t o a s muc ha s $20,000 , wit hmos t roll s 1 nth e pric e rang e o f abou t $5,00 0 t o $9,000 . Th e cos t o f chromiu m electroplatin g Industria l roll s 1 s largel y a functio no f surfac e are a (diamete r xI T x length ) andth e thicknes s o f th e chromiu m t o b e deposited . Mos t industria l roll s ar e chromiu m plate dt o a thicknes s o f betwee n.00 1 and.00 5 Inch , usin g a curren t densit y o f approximatel y

2 ampere s pe r squar e inch . Base do ndat a obtaine ddurin g emissio ntesting , th e



### -7 -TABL E 3-2 . ESTIMATE D PERCEN T CHANG E I N CHROMIU M ELECTROPLATINGCOST , ESTIMATE D PERCEN T CHANG E IN TH E FINA

L PRICE , AN D ESTIMATE D DOLLA RAMOUN T (198 8 $ ) CHANG E I N TH E FINA

L PRIC E DU E T O VARIOU S CONTRO L OPTION S AN D EMERGIN

GTECHNOLOGIES : HAR D CHROMIU

M PART S FO

RREPRESENTATIV E AUTOMOBIL E

i C D I Contro l

Optio n

III 3

III D Emergin g Techno l Composit e meshpadmis t eliminator s Packed-be d scrubber/mesh padmis t eliminator s Fiber-be dmis t eliminator s ogle s Percen t increas e i n electroplatin g cos t mode l plan t smal l

9.43 1 7.79 1

12.46 8

16.07 0

25.91 6 mediu

m
2.39 8 2.96 3

3.86 6

3.79 6

7.27 3 siz e

larg e
1.97 3 2.48 4

3.39 2

3.24 4

6.07 1 Percen t pric e i

mode l plan t smal l

0.11 1 0.09 2

0.14 7

0.18 9

0.30 5 mediu

m
0.02 9 0.03 6

0.04 7

0.04 6

0.08 8 ncreas e siz e larg e
0.01 8 0.02 3

0.03 1

0.03 0

0.05 5 Dolla r amoun t o f

increas e pric e mode l plan t siz e smal l

10.0 0 8.2 6

13.2 2

17.0 4

27.4 8 medium

2.5 4 3.1 4

4.0 9

4.0 2

7.7 0 larg e

1.5 2 1.9 1

2.6 1

2.5 0

4.6 8

3 Base d o nsingl e packed-be dscrubber . D Base d o nmesh-pa dmis t eliminator .P.1 0

averag e surfac e are a o f a nindustria l rol l 1 s approximatel y 1,00 0 squar e Inches . Tabl e 3- 3 show s thi s Informatio napplie dt o a n Industria l rol l wit ha surfac e are a o f M)0 0 squar e Inches. 3 Th e electroplatin g cos t a s a percentag e o f th e pric e o f th e fina l product , inthi s cas e a capita l good , ma y diffe r fo r roll s wit hth e exac t sam

e platin g cost s becaus e o f variation s 1 nrol l thicknes s (rio t platin g thickness ) prior t o platin g o r 1 nth e qualit y o f th e stee l substrate . Fo r mos t industria l rolls , th e cos t o f chromiu m electro platin g 1 s generall y les s tha n1 0 percen t o f th e fina l price . A mor e specifi c approac ht o estimatin g th e electroplatin g cos t 1 s t o assum e a cos t facto r pe r squar e Inch . Thi s cos t facto r 1 s th e cos t o f chromiu

m platin g excludin g any Increas e associate dwit hth e contro l option s andth e emergin g technologies . Th e cos t factor s use dfo r th e analysi s wer e 6 and1 0 cent s pe r squar e Inc hfo r Industria l roll s plate dt o 1 mi l thickness , an d3 0 and4 0 cent s pe r squar e Inc hfo r Industria l roll s plate dt o 5 mil s thickness . Thes e cos t factor s wer e obtaine dfro

m telephon e Interview s wit hdomesti c manufacturer s o f industria l roll s an

db y reviewin g dat a obtaine dfro m Informatio n requeste di nSectio n11 4 letters . Tabl e 3- 4 present s th e potentia l outpu t o f 1,00 0 squar e Inc h roll s plate dt o a thicknes s o f 0.00 1 and0.00 5 Inc hfo r th e mode l plant s base donthe productio ncapacit y (Ah/yr ) o f thes e plants . Th e smal l plan t ca nproduc e 1,39 0 roll s andth e larg e plan t ca nproduc e 44,44 0 roll s a t a platin g thicknes s o f 1 mil . A t a platin g thicknes s o f 5 mils , smal l mode l plant s ca nproduc e 28 0 roll s andth e larg e plant s ca nproduc e 8,89 0 rolls . Tabl e 3- 5 present s th e potentia l electroplatin g cos t fo r har dchromiu m plate droll s fo r eac hsiz e mode l plan t unde r fou r distinc t cos t assumptions : 6 , 10 , 30 , and4 0 cent s pe r squar e inch . Tabl e 3- 6 contain s th e estimate dpercentag e Increas e 1 nth e electroplatin g cos t associate dwit hth e contro l option s andth e emergin g

3 An y reasonabl y

size drol l (e.g. , a rol l fro m 50 0 t o 8,00 0 squar e Inches ) woul dserv e equall y wel l fo r purpose s o f illustratio n becaus e th e platin g tim e and , therefore , th e ampere-hour s pe r par t canb e approximate da s a Hnea r functio no f th e surfac e area .p.1 1

TABL E 3-3 . PARAMETRI C VALUES : INDUSTRIAL ROLL S
Plating thicknes s Surfac e

are a Curren t

densit y Plating

tim e 

### c m 2 (in 2 ) A/M 2 (A/ft 2 ) (min. ) Amper e hrs . pe r par t 2 5 (1 ) 650 0 (1,000 ) 3,10 0 (288 ) 10 8 13 0 (5 ) 650 0 (1,000 ) 3,10 0 (288 ) 54 0 3,60 0 18,00 0

TABL E 3-4 . ANNUA

L PLANT OUTPUT : INDUSTRIA

L ROLLS 3

Surfac e Plating Plating A h are a thicknes s tim e pe r cm 2 (in 2 ) y

m (mil ) (m1n. ) par t Mode l plan t siz e smal l mediu

m larg e (outpu t o f 1,00 0 1n 2 rolls )
650 0 (1,000 ) 2 5 (1 ) 10 8 3,60 0 650 0 (1,000 ) 13 0 (5 ) 54 0 18,00 0 1,39 0 11,67 0 44,44 0 28 0 2,33 0 8,89 0
Productio ncapacit y 1 s 5,000,000 ; 42,000,000 ; an d 160,000,00 0 ampere-hour s pe r yea r fo r the small , medium , an d larg e mode l plants , respectively . TABL E 3-5 . ESTIMATE D ELECTROPLATIN GCOS T PERPLAN T PERYEAR : INDUSTRIA

L ROLL S
Pric e pe r Surfac e ($ ) are a 

### a m an* 

### dr n 

### (in

2 

### ) Estimate d cos t Plating pe r rol l thicknes s ($ ) u

m (mil ) Estimate d Annua l Cos t ($ )

mode l plan t siz e smal l mediu

m larg e 0.0 1 6,50 0 (0.06 ) (1,000 ) 0.0 2 6,50 0 (0.10 ) (1,000 ) 0.0 5 6,50 0 (0.30 ) (1,000 ) 0.0 6 6,50 0 (0.40 ) (1,000 ) 

### 60

10 0 2 5 (1 ) 83,00 0 700,00 0 2,667,00 0

2 5 (1 ) 139,00 0 1,167,00 0 4,444,00 0

30 0 13 0 (5 ) 84,00 0 699,00 0 2,667,00 0

40 0 13 0 (5 ) 112,00 0 932,00 0 3,556,00 0

-10 -P.1 2

TABL E 3-6 . ESTIMATE D PERCEN T CHANG E I N TH E HAR D CHROMIU M ELECTROPLATIN GCOS T DU E T O TH E VARIOU S CONTRO L OPTION S AN D EMERGIN GTECHNOLOGIES : .INDUSTRIA L ROLL S WIT H DIFFERIN GCOSTiFACTOR S

Contro l Optio n
III 3 III D Composit e PBS/MPM E FBM E

III 3 III b Composit e PBS/MPM E FBM E

III 3 III D Composit e PBS/MPM E FBM E

III 3 III D Composit e PBS/MPM E FBM E MPM

E

MPM E

MPM E

MPM E Platin

g thicknes s (Inches )
O.OO I O.OO I O.OO I O.OO I 0.00 1

0.00 1 0.00 1 0.00 1 0.00 1 0.00 1

0.00 5 0.00 5 0.00 5 0.00 5 0.00 5

0.00 5 0.00 5 0.00 5 0.00 5 0.00 5 Percent Increas e 1 n electroplatin

g cos t at 6 cent s pe r 1n 2 „ mode l plant smal l mediu

m 13.88 5 3.45 7 11.44 6 4.27 1 18.31 3 5.57 1 23.61 4 5.47 1 38.07 2 10.48 6
Percent increas e 1

n « cos t at 1 0 cent : mode l plant smal l mediu

m 8.27 3 2.07 4 6.83 5 2.56 2 10.93 5 3.34 2 14.10 1 3.28 2 22.73 4 6.29 0 siz e larg e 2.05 5 2.58 7 3.53 2 3.37 8 6.32 2 ;lectroplat1n

g ; per 1n 2 siz e larg

e 1.23 3 1.55 3 2.12 0 2.02 7 3.79 4
Percent Increas e 1

n electroplatin

g cos t at 3 0 cent s per 1n 2 mode l plant siz e smal l mediu

m larg

e 13.69 0 3.46 2 11.31 0 4.27 8 18.09 5 5.57 9 23.33 3 5.47 9 37.61 9 10.50 1 2.05 5 2.58 7 3.53 2 3.37 8 6.32 2
Percent Increas e 1

n electroplatin

g cos t a t 4 0 cent s pe r 1n 2 mode l plant smal l mediu

m 10.26 8 2.59 7 8.48 2 3.20 8 13.57 1 4.18 5 17.50 0 4.10 9 28.21 4 7.87 6 siz e larg e 1.54 1 1.94 0 2.64 9 2.53 4 4.74 1

3 Base d o n singl e packed-be d scrubber . --•Base d on mesh-pa d mis t eliminator . •11 -P.1 3

technologies . Th e percentag e Increas e 1 nth e cos t 1 s inversel y relate dt o th e assume dhar dchromiu m finis hcos t facto r (I.e. , highe r cos t factor s woul dhav e smalle r percentag e Increase s 1 ncos t du e t o th e complianc e costs) . Eve nthoug hth e increas e 1nth e electroplatin g cos t coul db e a s higha s 38.08 2 percen t fo r th e smal l plan t fo r th e fiber-be d- mis t eliminator , 1 t 1 s unlikel y tha t genera l substitutio nawa y from har dchromium

platin g wil l occu r fo r th e majorit y o f industria l rolls . Th e cos t Increas e face db y th e larg e t o medium

size dplant s 1 s approximatel y

3.79 4 t o 10.50 1 percen t fo r th e fiber-be dmis t elimina tor , 2.02 7 t o 5.47 9 percen t fo r th e packed-be dscrubbe r and2.12 0 t o 5.57 9 fo r th e composit e mesh-pa dmis t eliminator ; a mor e appropriat e cos t t o compar e wit hth e substitute s fo r har dchromium . Smal l plant s facin g thes e large r cos t Increase s ma y b e face dwit hImpact s (Se e Sectio n4.0) . Th e newes t potentia l substitut e fo r har dchromiu m platin g i s electroles s nickel , bu t thi s proces s 1 s no t satisfactor y fo r mos t application s andi s mor e expensiv e tha nhar dchromiu m plating. 2 Moreover , th e deman dfo r industria l roll s 1 s a derive ddemand , tha t is , a fir

m purchase s th e rol l a s anIntermediat e goo dt o produc e It s ow nproduct . Th e deman dfo r roll s 1 s derive dfro m th e profitabilit y o f sellin g th e fina l good , fo r example , newspapers . I nothe r words , th e willingnes s o f a fir m t o pa y fo r anadditiona l uni t o f a n intermediat e goo dcanb e though t o f a s th e margina l revenu e expecte d t o resul t fro

m It s use. * Becaus e th e impac t o nth e fina l good s associate dwit hIndustria l roll s 1 s ver y smal l deman dwil l no t diminis hfo r suc hgoods . 3. 3 Hydrauli c Cylinder s — Backhoes . Hydrauli c cylinder s use d1nbackhoe s wer e selecte dfo r th e economi c Impac t analysi s becaus e backhoe s ar e widel y use d1 nth e constructio nIndustr y andbackho e hydrauli c cylinder s ar e typica l o f har dchromiu

m plate dcylinder s classifie d1nSI C Cod e 3531 . Tabl e 3- 7 present s a Hs t o f th e har dchromiu m plate dcylinder s foundina typica l backho e an dthe diameter , length , andsurfac e are a o f eac hcylinde r tha t i s chromiu m plated . Uni t price s fo r hydrauli c

•12 -TABL E 3-7 . LIS T O F TYPICAL HAR D CHROMIU M ELECTROPLATE D BACKHO E CYLINDER S

Numbe r o f Diamete r Lengt h Functio ncylinder s (cm ) Diamete r Lengt hSurfac e area 3 Surfac e are a (inches ) (cm 2 ) (1n 2 )

C J I boo

m
crow d sling stabiliz e moto r bucke t boo m 11f t loade r bucke t steerin g Total s Average s 1

1 2 2 1

2 1

1 1 1 11.4 3

10.1 5 10.1 5 10.1 5 8. 9
8.2 5 8.8 9
5.0 8
9.1 2 97. 9

83. 8 24. 1 51. 5 69. 5
75. 8 62. 0
24. 1
61. 1 4.5 0

4.0 0 4.0 0 4.0 0 3.6 0
3.2 5 3.5 0
2.0 0
3.5 9 38.5 4

32.9 9 9.4 9 20.2 8 27.3 6
29.8 4 24.4 1
9.4 9
24.0 5 3,516. 9

2,673. 2 768. 8 1,642. 9 1,944. 0 1,965. 4 1,731. 3
384. 4 14,626. 9 1,751. 7 54 5

41 4 11 9 25 5 301

30 5 26 8

6 0 2,26 6 27 1

a Surfac e are a 1 s calculate db y th e followin g formula : (diamete r xi r xlength) ,P.1 5

cylinder s rang e fro

m $5 5 t o hundred s o f dollars . A ver y commo n backho e ha s a 11s t pric e o f a littl e mor e tha n$37,000. * A s wit hIndustria l rolls , th e manufacturin g cost s o f chromiu m platin g hydrauli c cylinder s 1 s largel y a functio no f th e surfac e are a o f th e parts . Th e 1 1 hydrauli c cylinder s 1na typica l backho e ar e chromiu m plate dt o a thicknes s o f 0.00 1 Inch . Approximatel y 8-^160 ' ampere s (a t a curren t densit y o f 28 8 A/ft 2 ) ar e neede dt o plat e al l 1 1 cylinders . Tabl e 3- 8 show s th e potentia l outpu t fo r th e mode l plant s producin g chromiu

m plate dcylinder s fo r anIndividua l backhoe . Th e larg e mode l plan t coul dproduc e approximatel y 3 2 time s th e outpu t o f th e smal l mode l plant . Throug hInterview s wit hIndustr y representatives , a reasonabl e estimat e o f th e cos t o f chromiu m platin g th e hydrauli c cylinder s range s fro

m 3 t o 6 cent s pe r squar e Inch . Tabl e 3- 9 provide s th e potentia l electroplatin g cost s pe r eac hsiz e plan t pe r yea r base do n thes e cos t factors . Tabl e 3-1 0 contain s th e estimate dpercen t Increas e 1n electroplatin g cos t fo r th e emergin g technologie s andContro l Optio n III . Th e fiber-be dmis t eliminato r coul dincreas e th e cos t by abou t 7 5 percen t fo r smal l plants ; 2 1 percen t fo r medium plant s and1 3 per cen t fo r larg e plants . Th e increase s fo r th e packed-be dscrubbe r and mesh-pa dmis t eliminato r fo r th e small , medium andlarg e size dplant s ar e approximatel y

46 , 1 1 and7 percent . Fo r th e composit e mesh-pa d mis t eliminato r th e correspondin g Increase s ar e 36 , 1 1 and7 percent . Increase s associate dwit hth e cost s o f medium andlarg e siz e plant s woul dno t encourag e substitutio nawa y fro m har dchromium . However , smal l plant s wil l hav e difficult y competin g wit hmedium andlarg e plants . Tabl e 3-1 1 provide s estimate s o f th e potentia l dolla r and percentag e Increase s 1nth e fina l pric e o f th e backhoe . Becaus e th e onl y part s o f a backho e tha t ar e chromiu m plate dar e th e hydrauli c cylinders , andth e tota l dolla r valu e o f chromiu m plate dpart s 1 s smal l relativ e t o th e fina l pric e o f th e backhoe , th e Impac t o nth e fina l pric e fro

m th e fiber-be dmis t eliminato r woul dals o b e small , i.e. , abou t 0.1 5 percen t an d0.0 9 and0.0 7 fo r th e packed-be d scrubbe r an

dcomposit e mesh-pa dmis t eliminator . -14 -P.1 6

TABL E 3-8 . OUTPU T PE RPLANT PE

RYEA R A T 8 0 PERCEN T CAPACITY : BACKHO E CYLINDER S

Surfac e Plating A hOutpu t o f cylinder s are a thicknes s pe r mode l plan t siz e cm 2 (1n 2 ) 14,60 0 (2,300 ) y

m (mil ) 2 5 (1 ) backho e

8,16 0 smal l



### 620 mediu

m 5,15 0 . . larg e

19,61 0

TABL E 3-9 . ESTIMATE D ANNUA L CHROMIU

M ELECTROPLATINGCOST : BACKHO E CYLINDER S

Pric e pe r cm 2 (in 2 ) 0.00 5 (0.03 )

0.0 1 (0.06 ) Surfac e

are a cm 2 (in 2 ) 14,60 0 (2,300 ) 14,60 0 (2,300 ) Cos t

pe r se t o backho e cylinder s ($ ) 6 8

13 6 

### f

smal l $42,20 0
$84,40 0 Cos t pe r plan t ($ )

mode l plan t mediu m $350,00 0
$700,00 0 siz e

larg e $1,333,00 0
$2,666,00 0

-15 -P.1 7



### TABL E 3-10 . ESTIMATE D PERCEN T CHANG E I N TH E COS T O F HAR D CHROMIU

M ELECTROPLATING DU E TO TH E VARIOU S CONTRO L OPTION S AND EMERGINGTECHNOLOGIES : HYDRAULI C CYLINDER S FORBACKHOE S WIT H

DIFFERINGCOS T FACTOR S

Contro l Optio n Cos t facto r

$/1n 2 

### Percen t Increas e inelectroplatin g cos t mode l plan t siz e smal l medium larg e III 3 III b Composit e MPM E PBS/MPM E FBM E III 3 III b Composit e PBS/MPM E FBME MPM E 0.0 3

0.0 3 0.0 3 0.0 3 0.0 3 0.0 6 0.0 6 0.0 6 0.0 6 0.0 6 27.25 1

22.51 2 36.01 9 46.44 5 74.88 2 13.62 5 11.25 6 18.00 9 23.50 0 37.44 1 6.91 4

8.54 3 11.14 3 10.94 3 20.97 1 3.45 7 4.27 1 5.57 1 5.47 1 10.48 6 4.11 1

5.17 6 7.06 7 6.75 9 12.64 8 2.05 6 2.58 9 3.53 3 3.38 0 6.32 4

3 

### Base do nsingl e packed-be dscrubber . D 

### Base do nmesh-pa dmis t eliminator . MPM E = Mesh-pa dmis t eliminato r PBS/MPM E = Packe dbed scrubbe r an d mesh-pa dmis t elmlnato r FBM E = Fiber-be dmis t eliminato r

•16 -P.1 8

TABL E 3-11 . ESTIMATE D DOLLA R(198 8 $ ) AN D PERCEN T CHANG E I N TH E FINA L PRIC E DU E T O TH E VARIOU S CONTRO L

OPTIONS : BACKHOE S

Contro l Optio n Dolla r pric e Increas e

mode l plan t siz e smal l mediu m

larg e Percen t pric e Increas e

mode l plan t siz e smal l mediu m

larg e III 3
III b Emergin g Technologie s 18.7 6

15.5 0 4.7 1

5.8 2 2.8 0

3.5 3 0.05 4

0.04 5 0.01 3

0.01 6 0.00 8

0.01 0

Composit e MPM E 24.8 0 PBS/MPM E 31.9 7 FBM E 51.5 5 7.5 9 7.4 6 14.2 9 4.8 1

4.6 0 8.6 2 0.07 1

0.09 2 0.14 8 0.02 1

0.02 1 0.03 9 0.01 4

0.01 3 0.02 5

a Base do nsingl e packed-be dscrubber . bBase do nmesh-pa dmis t eliminator . MPM E = Mesh-pa dmis t eliminato r PB S = Packed-be dscrubbe r FBM E = Fiber-be dmis t eliminato r

•17 -P.1 9



### 4. 0 SMAL L BUSINES S IMPACT S Al l o f th e analyse s o f electroplatin g cos t Increase s fo r th e emergin g technolog y

show tha t smal l plajif s fac e a differentia l 1npe r uni t outpu t contro l cost s compare dt o larg e plants . Th e effec t o f thi s differentia l Impac t wil l b e examine d1nthi s section , alon g wit h ananalysi s o f th e abilit y o f firm s t o rais e capita l fo r th e contro l expenditures . Th e averag e electroplatin g jo bsho p1 s a smal l busines s wit h annua l sale s 1n198 6 o f $1,134,900 . Estimate s Indicat e ther e ar e presentl y

88 5 har dchromiu

m jo bshop s 1nth e U.S. * Th e Smal l Busines s Administratio n(SBA ) define s a smal l busines s 1nSI C 3471 , Jo bShops , b y a nemploye e siz e o f 50 0 o r less . Numbe r o f employee s 1 s no t alway s a goo dcriterio nfo r designatin g smal l busines s fo r thi s analysis , becaus e electroplatin g 1 s a proces s andmos t reporte ddat a o nnumbe r o f employee s include s peopl e fro m othe r manufacturin g processes . I n addition , man y

larg e capacit y

operation s ar e automate dandonl y requir e a smal l numbe r o f employees . Howeve r th e leve l o f 50 0 employee s 1 s use dherei na s th e definitio no f smal l plant s becaus e ther e 1 s goo dcorrelatio nbetwee nth e dat a o f Product s Finishin g maga zin e (se e Bi dChapte r 8 ) tha t show s tha t 75. 7 percen t o f al l electroplatin g plant s 1nthei r surve y hav e 50 0 employee s o r les s and th e fac t tha t th e smal l mode l plan t 1nthi s analysi s als o account s fo r 7 6 percen t o f al l chromiu m electroplatin g plants , t o Illustrate , th e smal l siz e mode l plan t 1nthi s repor t 1 s 5,000,00 0 amper e hour s capa city . Fo r har dchromiu m electroplatin g plants , 1,17 0 (o r 7 6 percent ) o f th e 154 0 tota l har dplant s fi t th e smal l mode l plan t category . Therefore , ther e 1 s a highUkeUhoo dtha t a smal l har dchrom e electroplatin g plan t 1 s a smal l business . Th e Regulator y

Flexibilit y

Ac t (RFA ) require s tha t specia l consideratio nb e give nt o th e Impact s o f al l propose dregulation s affectin g smal l businesses . A s Jus t shown , ther e ar e a substantia l numbe r o f smal l businesse s performin g har dchromiu m electroplating , man y o f whic har e jo bshops . Th e EP A ha s Issue dRF A

guideline s containin g th e followin g criteri a fo r us e 1ndeterminin g wha t 1 s a "significan t advers e economi c impact " andwha t woul dtherefor e requir e th e performanc e o f a Regulator y Flexibilit y

Analysis . -18 -P.2 0

o Annualize dcomplianc e cos t increase s tota l cost s o f productio nb

y mor e tha n5 percent , o Complianc e cost s a s a percentag e o f sale s fo r smal l plant s ar e a t leas t 1 0 percentag e point s highe r tha nfo r larg e plants , o Capita l cost s o f complianc e represen t a significant,port-io n o f capita l availabl e t o smal l entities , wher e availabl e capita l i s measure db y preta xcas hflo w

minu s annua l capita l expenditures , o Th e requirement s o f th e regulatio nar e likel y t o resul t i n closure s o f smal l entities . Th e impact s associate dwit hth e contro l option s andemergin g technologie s wil l hav e a negligibl e effec t onth e pric e o f an y fina l good , a s show

ni nSectio n3.0 . Clearly , th e cos t o f th e har dchromium component s o f a fina l goo d(e.g. , industria l rolls ) i s insignifican t relativ e t o th e cos t o f othe r material s involve di nth e manufactur e an ddistributio no f th e fina l good . Thus , th e firs t criterio nHste d abov e fo r significan t impact s i s no t satisfied . Tabl e 4- 1 present s contro l cost s a s a percen t "o f ne t sale s fo r th e thre e size s o f mode l plants . Th e contro l cost s use dt o calculat e thes e figure s ar e from Tabl e 2-1 . Ne t sale s figure s ar e derive dfrom th e RM A Annua l Statemen t Studie s 199 1 (se e Appendix) . Tabl e 4- 1 indicate s tha t contro l cost s a s a percentag e o f ne t sale s fo r a smal l mode l plan t ar e no t te npercentag e point s highe r tha nfo r larg e mode l plant s fo r an y

contro l option . Th e greates t differenc e tha t coul d occu r woul db e 4. 7 percentag e point s i f th e fiber-be dmis t eliminato r contro l optio ni s implemented . Th e thir dquestio narise s a s t o whethe r capita l ca nb e obtaine d t o financ e th e control s a t har dplate dshops . Financia l rati o analy si s wil l b e use dt o mak e determination s abou t capita l availability . Tabl e 4- 2 wa s constructe dfro m financia l dat a reporte db y Rober t Morri s Associates 6 fo r th e electroplatin g industry . A smal l firm

wit h annua l sale s o f $500,00 0 wa s selected . Thi s siz e firm wa s selecte da s a form o f worst-cas e analysi s sinc e i t i s a t th e lowe r en do f th e

•19 -P.2 1

TABL E 4-1
. HAR D CHROMIU M ELECTROPLATIN G CONTRO L COS T A S

PERCEN T O F SALE S FO R SMALL , MEDIU M AN D LARG E MODE L PLANT S

Contro l optio n

Mesh-Pa d Mis t Eliminato r Contro l Cost s Sale s Contro l Cost s a s Percen t Singl e packed-be d scrubbe r Contro l Cost s Sale s Contro l Cost s a s Percen t 

### o f

of 

### Sa l

Sa l es

es smal l

$9,50 0 $600,47 6 1. 6

$11,50 0 $600,47 6 1. 9 Mode l plan t

mediu m

$29,90 0 $3,650,49 6 0. 8

$24,20 0 $3,650,49 6 0. 7 siz e larg e

$69,00 0 $28,118,28 6 0. 2

$54,80 0 $28,118,28 6 0. 2 Emergin g Technologies : Composit e Mesh-Pa d Mis t Eliminato r Contro l Cost s Sale s Contro l Cost s a s Percen t o f Sale s $15,20 0 $600,47 6 

### 2. 5 $39,00 0

$3,650,49 6 

### 1. 1 $94,20 0 $28,118,28 6 

### 0. 3 Packed-Be d Scrubber/Mesh-Pa d Mis t Eliminato r Contro l Sale s Contro l Cost s

Cost s 

### a s Percen t Fiber-Be d Mis t Eliminato r Contro l Cost s Sale s Contro l Cost s a s Percen t 

### o f

o f Sale s

Sale s $19,60 0

$600,47 6 3. 3
$31,60 0 $600,47 6 5. 3 $38,30 0

$3,650,49 6 1. 0
$73,40 0 $3,650,49 6 2. 0 $90,10 0 $28,118,28 6 0. 3
$168,60 0 $28,118,28 6 0. 6

-20

-TABL E 4-2 . CAPITAL AVAILABILIT YANALYSI S FO R SMAL L CHROMIU

M ELECTROPLATINGFIR

M P.2 2

Sale s Profi t Befor e Taxe s withou t control s (@3.6 % o f sales ) Profit s Afte r Taxe s (3.0 % o f Sales ) Profi t Befor e Taxe s wit hControl s Singl e packed-be dscrubbe r Mesh-pa dmis t eliminato r Composit e mesh-pa dmis t eliminato r Packed-be dscrubber/MPM E Fiber-be dmis t eliminato r Annualize dCos t 11,50 0 9,50 0 15,20 0 19,60 0 31,60 0 $500,00 0

18,00 0
15,00 0

6,50 0 8,500 2,80 0 Neg
. Neg
. Depredatio n(4.2 % o f sales ) Cas hFlo w (Profit s & Depr. ) Curren t Maturitie s Long-Ter m Deb t (CMLTD ) Tota l Asset s (Sales/Asset s = 2.57 ) Tota l Deb t (56.9 % o f Asset s Ne t Wort h(43.1 % o f Assets ) Curren t Asset s (60.8 % o f assets ) Curren t Liabilitie s (CA:CL=1.8 ) Interes t

Baselin e Rati o Ne w Ratio s Singl e packed-be d scrubbe r Mesh-pa dmis t eliminato r Composit e mesh-pa dmis t eliminato r Packed-be dscrubber / mesh-pa dmis t eliminato r Fiber-be dmis t eliminato r Critica l threshol d Capita l

$ 45,90 0 28,90 0 34,00 0 72,60 0
117,60 0 Debt : 21,00 0 36,00 0 17,14 3 194,50 0 110,86 5 83,63 5 118,25 6 65,69 8 13,30 4 Outlay s Ne t Wort hCA:C L EBIT-s-I CF:CMLT D

1.3 3

1.8 2 1.6 4 1.6 9 2.1 1

2.5 9 1. 5 1.8 0 2.3 5

1.6 8 1.7 2 1.7 1 1.6 2 1.3 5 1.5 1 1.1 6 0.9 3

1.5 3 0.5 0 1. 2 1. 2 2.1 0

1.7 3 1.7 7 1.6 0 1.5 4

1.3 4 1. 2

•21 -P.2 3



### rang e o f smal l firm s andcover s abou t 11 6 o f th e tota l o f 117 0 smal l har dchromiu

m plants . Th e tabl e show s ho w profit s befor e taxe s woul d b e Impacte db

y th e variou s cost s o f control s andals o ho w a firm' s financia l ratio s woul db e affected . Thes e ratio s ar e use db y lender s t o determin e whethe r o r no t t o loanmoney . (Outsid e financin g woul db e neede db y man y smal l -chromiu

m electroplatin g firm s becaus e th e profit s befor e taxe s plu s th e depredatio ncas hflo

w woul dgenerall y

b e insufficien t t o pa y fo r mos t set s o f controls. ) A s Tabl e 4- 2 show s th e debt-to-ne t wort hrati o Increase s significantl y fo r a fir

m o f thi s siz e unde r Contro l Optio n II I andth e emergin g technolog y o f composit e mesh-pa dmis t eliminators . Th e rati o i s 1.3 3 befor e control s an dIncrease s t o betwee n1.6 4 t o 1.8 2 wit hcontrols . Ratio s abov e 1. 0 ar e considere dhig ht o begi n wit han dratio s abov e 1. 5 ar e ver y high . Th e rati o Increase s eve nmor e significantl y

fo r the remainin g tw

o emergin g technologie s fro m th e bas e o f 1.3 3 t o 2.1 1 t o 2.59 . Th e curren t rati o (I.e . curren t asset s divide db y curren t liabi lities ) 1 s 1. 8 befor e control s an dreduce s t o betwee n1.5 3 and1.7 2 afte r controls . Thi s rati o 1 s les s affecte dbecaus e th e assumptio n wa s mad e herei ntha t th e control s ar e finance db y long-term

debt . Th e reductio n1nth e rati o 1 s du e t o th e curren t portio no f th e long-term deb t bein g carrie da s a curren t liability . Th e performanc e o f thi s rati o woul dno t dete r firm s fro m obtainin g financin g fo r contro l systems . Cas hflow

ove r curren t maturitie s o f long-term deb t (CF : CMLTD ) 1 s a rati o tha t lender s examin e t o determin e th e assuranc e tha t cas h flow wil l b e sufficien t t o repa y deb t principal . Th e smal l siz e firm' s baselin e rati o 1 s 2.1 . A simila r rati o 1 s earning s befor e Interes t andtaxe s (EBIT ) ove r Interes t (baselin e 2.35) . Lender s loo k t o thes e ratio s t o evaluat e th e adequac y o f a company' s earning s t o cove r Interes t payments . Th e baselin e CF : CMLT D rati o drop s fro m 2. 1 t o betwee n1.3 4 and 1.77 . A rati o below

1. 2 1 s considere dinsufficient . Th e EBI T rati o change s fro

m 2.3 5 t o betwee n0.5 0 t o 1.51 . Fo r th e same insufficienc y

-22 -P.2 4

leve l o f 1. 2 al l o f th e emergin g technologie s produc e ratio s les s tha n

I t shoul db e remembere dtha t the^abov e stati c analysi s 1 s performe dwit hstatistic s tha t hav e a grea t dea l o f variabilit y withi n them . Th e performanc e o f firm s varie s fro m year-to-yea r an da certai n numbe r o f firm s ente r o r leave th e busines s eac hyea r causing-th e dat a t o chang e alon g wit heffect s fro m busines s cycles . Th e analysi s abov e use dmedia ndat a fo r th e financia l ratios . A s a nexampl e o f th e variation , althoug hth e media nfo r th e debt-to-ne t wort hrati o wa s 1. 3 th e value s fo r th e 25t hand75t hpercentile s wer e 0. 5 and2.8 . Stil l usin g 1. 5 a s th e rati o o f acceptabilit y fo r lenders , th e variatio n1 n dat a fo r thi s rati o show s tha t ove r 2 5 percen t o f al l firm s star t of f wit ha rati o unacceptabl e t o lenders . Some o f thes e firm s ma y b e alread y heade dfo r busines s closur e o r some ma y b e 1ntemporar y difficult y

wher e anInfusio no f equit y capita l ma y

b e planned . Likewis e fo r th e rati o cas hflow t o curren t maturitie s o f long-term deb t th e media n1 s 2. 1 whil e th e othe r tw o quartlle s (25t hand75t h percentiles ) ar e 1. 7 and5.6. Fo r firm s wit hsale s abov e $500,00 0 th e capita l availabilit y ratio s quickl y

begi nt o Improve . However , some firm s wit hsale s abov e $500,00 0 ar e stil l Hkel y t o fac e capita l availabilit y problem s whe n face dwit hth e cost s o f a packed-be dscrubbe r 1 ncombinatio nwit ha mesh-pa dmis t eliminato r o r th e emergin g technolog y o f a fiber-be d mis t eliminator . A

fir m woul dhav e t o hav e sale s o f $2. 1 millio nt o ge t It s debt:wort hrati o t o 1. 5 whe nface dwit hth e cost s o f th e packed-be dscrubbe r i ncombinatio nwit hth e mesh-pa dmis t eliminator . Fo r th e fir

m facin g th e cost s o f a fiber-be dmis t eliminato r tha t sale s leve l woul dhav e t o b e $ 4 million . T o brin g th e ratio s fo r earning s befor e Interes t an dtaxe s rati o upt o th e threshol dleve l th e sale s level s fo r firm s facin g thos e same tw o technologie s woul dhav e t o b e $800,00 0 and$1,100,000 . Closur e potentia l (the fourt hcriterion ) tie s 1ndirectl y wit h th e availabilit y

o f capita l (th e thir dcriterion ) andth e Impac t o f th e contro l cost s o

nprofits . Becaus e th e larg e andmedium plant s hav e mor e discretio nove r pric e tha nth e smal l plants , smal l plant s

-23 -P.2 5

tha t d o no t hav e thei r ow nmarke t nich e wil l bea r a portio no f th e contro l cos t differentia l 1nth e for m o f reduce dprofitability . Th e smal l plant s ma y

onl y b e abl e t o pas s on/1 0 t o 2 0 percen t o f th e contro l cost s 1

nth e for

m o f highe r prices , becaus e th e Industr y pric e wil l be establishe db y th e mor e efficien t firms . Th e concer n1 s whethe r th e contro l cos t tha t canno t b e passed'o n t o consumer s b

y smal l har dchromiu

m plant s woul db e significan t enoug h t o caus e closures . A limite dsurve y

o f jo bshop s reveale dtha t th e majorit y

o f smal l jo bshop s compet e vigorousl y wit hlarg e jo bshop s fo r har dchromiu

m plating . Thus , 1 t canno t b e claime dtha t al l smal l plant s hav e thei r ow nmarke t nich e andcanpas s thes e differentia l cost s ont o thei r customers . O nth e othe r hand , 1 t wa s reveale dtha t competitio n1 s base dmor e onqualit y o f servic e an d deliver y tim e tha n1 t 1 s o

nprice . Fo r smal l plant s tha t hav e thei r ow nmarke t niche , som

e o r al l o f th e differentia l 1 s Hkel y t o b e passe do

na s pric e Increase s du e t o th e competitiv e advantag e o f th e plants . Onbalance , however , 1 t 1 s Hkel y tha t man y

smal l plant s wil l hav e t o absor bsom

e complianc e costs , causin g profit s t o decrease . Whethe r o r no t th e profi t decreas e woul dcaus e smal l plan t closur e require s a nanalysi s o f existin g profi t rates , cas hflows , andne t presen t value s o f smal l firm s befor e andafte r effect s associate dwit h th e controls . Two approache s wer e use dt o estimat e thi s closur e potentia l fo r smal l plants . I nth e firs t approach , a formul a wa s use dwhereb y th e ne t presen t valu e (NPV ) o f th e plan t coul db e estimate dwit handwithou t th e contro l costs . Allowin g fo r chromiu m electroplatin g operation s t o ear nthei r cos t o f capital , th e decisio nt o clos e occur s whe nth e contro l cos t cause s a plant' s NP V t o g o fro

m positiv e t o negative . Th e formul a 1s :

2 0 NPV = I [(1-.4 ) (EBT t -CC t ) ] + .8(WC ) + .2(FA ) t= l (l+r) t (1+r) 2 0 (1+r) 2 0 where ,

-24 -P.2 6

C C = Annua l contro l cost s absorbe db y th e har dchromium platin g operation s EB T = Earning s befor e taxe s chromiu m platin g operation s WC = Workin g capita l F A ' Fixe dasset s r = Cos t o f capita l

. 4 = Combine dfederal , state , andloca l corporat e Income ta xrate . Th e assumption s Inheren t In'th e abov e formul a are : 0 Depredatio ncas hflow s o f th e operatio nwil l b e use dfo r sustainin g capita l expenditure s o 8 0 percen t o f th e operation' s workin g capita l valu e wil l b e recovere da t th e en

do f 2 0 year s o 2 0 percen t o f th e operation' s fixe dasse t valu e wil l b e recovere da t th e endo f 2 0 year s o Th e cos t o f capita l 1 s 1 0 percent . Thi s formul a 1 s particularl y sensitiv e t o th e leve l o f contro l cost s absorbed . A s show nearlie r 1nthi s section , th e smal l plant s shoul db e abl e t o recove r approximatel y 1 0 t o 2 0 percen t o f th e contro l cost s throug hth e pric e Increase s o f th e large r jo bsho ppric e leaders . Th e NP V

calculation s wer e therefor e mad e wit handwithou t som e contro l cost s bein g passe don . Ninety-on e companie s wit h$ 1 millio no r les s 1nasset s 1nSI C code s 347 1 and347 9 reporte dmedia nearning s befor e ta xprofi t rate s (EBT ) onsale s o f 3. 6 percen t fo r thes e companies ' fisca l yea r 1989 . Fo r th e same companies , th e media nsale s t o workin g capita l (WC ) rati o wa s 13. 6 andth e media nsale s t o ne t fixe dasse t (FA ) rati o wa s 7.1. 7 Th e NPV calculation s sho

w tha t plant s wit hsale s o f $245,00 0 o r les s wh o coul dno t pas s onth e contro l cost s o f Contro l Optio nII I woul dclose . Fo r plant s wh o coul dpas s o none-tent ho f thei r contro l costs , th e closur e poin t 1 s abou t $220,00 0 1nsales . Unde r Contro l Optio nI I th e closur e leve l 1 s $70,000 . Fo r th e composit e mesh-pa d

-25 -P.2 7

mis t eliminato r th e closur e leve l 1 s $355,00 0 (assumin g a cos t pass througho f te npercent ) whil e fo r the PBS/MPM E technolog y th e closur e leve l 1 s $458,00 0 an

d$738,00 0 fo r the fiber-be dmis t eliminator . Ther e ar e abou t 11 6 hardchromiu m jo boperation s wit hsale s les s tha n$500,000. ' Th e numbe r o f operation s subjec t t o Contro l Option s II I an dI I wit hsale s o f $220,00 0 o r les s an d$70,00 0 o r less'l s 5 1 an d1 7 assumin g proportiona l representation . Becaus e 7 0 percen t o f th e smal l har dchromiu m operation s already

hav e packed-be dscrubber s o r mis t eliminators , th e numbe r o f plant s Hkel y t o clos e du e t o Contro l Optio nII I 1 s 0. 3 x5 1 o r abou t 1 5 plant s andtha t du e t o Contro l Optio nI I 1 s 0. 3 x1 7 o r 5 plants . Thes e smal l plant s constitut e approximatel y 0. 4 an d1. 3 percen t o f th e tota l o f 117 0 smal l har dchromiu

m jo boperations . Fo r th e composit e mesh-pa dmis t eliminator , 2 5 plant s woul db e closur e candidate s (11 6 plant s les s tha n$500 K1nsale s x$355 k + $500 K
x0. 7 wit hcontrols ) o r 2. 1 percen t o f th e smal l har dchromiu m jo b operations . Facin g th e nee dfo r a combinatio npacke dbe d scrubber/mesh-pa dmis t eliminator , 3 2 plant s o r 2. 7 o f al l smal l har d chromiu m jo boperation s woul dfac e closure . Fo r th e fiber-be dmis t eliminato r 5 1 plant s o r 4. 4 percen t woul db e closur e candidates . Thes e estimate s o f closure s ar e Hkel y worst-cas e estimate s fo r thre e reasons . First , th e abov e calculation s assume tha t al l plan t sale s ar e attributabl e t o direc t electroplatin g only , an dexclud e sale s revenu e o f ancillar y operation s suc ha s polishing , grinding , etc . Becaus e revenu e andearning s befor e taxe s would , 1nreality , b e highe r tha nrevenue s exclusivel y fro m th e electroplatin g process , th e abov e estimate s represen t a nuppe r Hm1t . Th e secondreaso n1 s tha t som e smal l firm s d o hav e thei r ow nmarke t nich e andwil l b e abl e t o pas s onth e differentia l contro l costs . Th e thir dreaso n1 s tha t eve n thoughth e numbe r o f electroplatin g plant s 1 s depicte d herei na s bein g stabl e ove r th e nex t fiv e years , ther e 1 s a trendtowar dlarg e plant s a s oppose dt o smalle r plants . A nunknow npercentag e o f smal l plant s woul db e expecte dt o ceas e operation s fo r economi c reason s ove r th e impac t tim

e frame , som

e o f the m possibl y

overlappin g wit hth e abov e estimate dclosures .

-26 -P.2 8

Th e abov e analyse s wer e base don3 0 percen t o f th e plant s havin g no control s 1nplace . Anothe r 3 0 percen t o f firm s howeve r alread y hav e contro l Optio nI I 1n-plac e fo r whicli ? th e BI D show s tha t th e annualize dcontro l cos t 1 s $6,70 0 fo r a smal l plant . Th e closur e sale s leve l fo r thes e additiona l plant s wit hth e composit e mesh-pa d mis t eliminato r 1 s $199,00 0 o r 1 4 mor e plant s (199/50 0 x11 6 x-.3) v Th e remainin g 4 0 percen t o f th e affecte dfirm s hav e control s 1n-plac e tha t ar e th e equivalen t o f Contro l Optio nIII . Thes e firm s woul dfac e a nIncreas e 1 ncontro l cost s t o g o fro m th e cost s the y

fac e unde r Contro l Optio nII I t o th e emergin g technology . Fo r smal l plant s th e Incrementa l cost s ar e $5,70 0 ($15,20 0 les s $9,500) . Th e closur e poin t fo r suc hIncrementa l sale s 1 s $133,00 0 o r 1 2 plants . Thus , a tota l o f 5 1 plant s o r 4. 4 percen t o f smal l har dchromium electroplatin g operation s woul dfac e closur e (2 5 uncontrolle dplants , 1 4 plant s wit hbaselin e control s o f Contro l Optio nI I an d1 2 plant s wit hbaselin e control s o f Contro l Optio nIII) . Thes e 5 1 plant s woul db e closur e candidate s unde r th e enhance d mesh-pa dmis t eliminato r emergin g technolog y unles s some hav e thei r ow nmarke t nich e whic hwoul dallo w them t o pas s muc ho f th e cos t Increas e ont o thei r customers . Fo r th e packed-be dscrubber/MPM E emergin g technolog y

th e tota l 1 s 7 5 plant s whil e fo r th e fiber-be d mis t eliminato r th e tota l 1 s 13 9 plants . Fo r al l thre e emergin g technologie s th e total s represen t 4.4 , 6. 4 an d11. 9 percen t o f al l smal l har dchromiu

m jo boperations . Tabl e 4- 3 summarize s th e result s o f th e NPV closur e analysis . Th e fa r righ t colum

nlist s th e potentia l numbe r o f closure s unde r contro l optio nII I an deac hemergin g technology . Th e column s t o th e lef t o f thi s colum

nsubcategoriz e th e tota l numbe r o f closur e accordin g t o th e existin g leve l o f contro l a t th e facility . Fo r example , 1 t 1 s estimate dtha t a regulatio nrequirin g contro l equivalen t t o tha t o f a composit e mes hpa deliminato r woul dclos e 2 5 facilitie s withou t controls , 1 4 facilitie s currentl y usin g contro l optio nII , an

d1 2 facilitie s tha t ar e currentl y utilizin g contro l optio nII I fo r a tota l o f 5 1 closures . A nalternativ e metho dt o determin e th e numbe r o f potentia l plan t closure s canb e performe dbase donth e dat a presente d1nTabl e 4-4 . -27 -R29 ^



### TABL E 4-3 . NUMBE RO F PLAN T CLOSURE S USINGTH E NE T PRESEN T VALU E CLOSUR E TEST 1

Contro l Option(CO. ) Il l Emerging Technologie s Composit e MPM E PBS/MPM E FBM E 3 0 Percent , N o Control s 1 5

2 5 3 2 5 1 3 0

C Percent , .0 . I I 5

1 4 2 1 4 0 4 0

C Percent , .0 . Il l 0

1 2 2 2 4 8 Xota l

2 0

5 1 7 5 13 9



### MPM E « - Mesh-pa dmis t eliminato r PB S = Packed-be dscrubbe r FBM E * Fiber-be dmis t eliminato r •^Assumin g te npercen t o f contro l cost s passe do nt o consumer s b

y smal l plants .

-28 -P.3 0

TABL E 4-4 . NUMBERO F PLANTS , PLAN T SIZE , INDUSTRYCAPACITY , AN D PERCEN T O F INDUSTRYCAPACIT Y— HAR D CHROMIU

M ELECTROPLATER S

Mode l Percen t plan t Numbe r Industr y capacit y

o f Industr y siz e o f plant s Amper e hrs . (am phrs ) capacit y
Smal l 1,08 0 5,000,00 0 5,400,000,00 0 12.7 3 Mediu m 31 0 42,000,00 0 13,020,000,00 0 30.6 9 Larg e 15 0 160,000,00 0 24,000,000,00 0 56.5 8

-29 -P.3 1



### Thi s dat a show s tha t th e bul k o f th e Industr y capacit y

1 s provide db

y larg e plants . A s a result , larg e plant s wil l mos t Influenc e th e pric e fo r har dchromiu

m product s ands o wil l b e abl e t o pas s onthei r Increase dcost s t o th e consumer . However , th e smaller plant s wil l b e les s abl e t o pas s onthei r ful l cos t Increases . I t is , therefore , assume dtha t any

industr y

outpu t reductio nwil l b e concentrate donl y 1nth e smaller , les s efficien t plants . Tabl e 4- 5 present s a rang e o f percen t pric e Increase s compare d agains t tw

o elasticit y

value s (I.e . -0.0 5 and-0.15 ) tha t represen t th e derive ddeman dfo r har dchromiu m plate dproducts . Th e number s 1n th e cente r o f th e matri xIndicat e th e numbe r o f plan t closure s fo r eac hpercen t pric e increas e andelasticit y valu e combination . Th e mos t Hkel y

percen t pric e Increas e woul db e a weighte daverag e percen t pric e Increas e base dona platin g cos t o f 4 0 cent s pe r squar e Inch , plate dt o a thicknes s o f 0.00 5 Inche s andcalculate da s follows : 3 W = I (M i Pi ) . N

C 1- 1 where :
W = Weighte daverag e percen t pric e Increas e M = Marke t shar e fo r eac hmode l plan t siz e P = Percen t pric e Increas e fo r eac hmode l plan t siz e i = Small , mediu

m an dlarg e siz e plant s NC = Percen t noncomplianc e 1nIndustr y (.3 0 percent ) Usin g th e electroplatin g cost s fo r Industria l roll s 1nth e bottom H n e o f Tabl e 3- 5 an

dth e pric e Increase s 1 nTabl e 3- 6 fo r 4 0 cent s pe r squar e foo t a t 0.00 5 Inches, th e weighte daverag e percen t pric e Increase s ar e 0.5 3 percen t fo r Contro l Optio nII , 1.1 2 percen t fo r Contro l Optio nIII , 2.8 8 fo r the composit e mesh-pa dmis t eliminator , 3.2 9 fo r the packed-be dscrubber/MPM E an d7.0 6 percen t fo r th e fiber-be dmis t eliminator .

•30 -P.3 2



### TABL E 4-5 . NUMBE RO F SMAL L PLAN T CLOSURE S BASE D O N PERCEN T PRIC E INCREAS E AND ELASTICIT YVALU E COMPARISON S

Percen t pric e Increas e

0.5 0 0.5 3 I I 1.0 0 1.1 2 II I 1.5 0 2.0 0 2.5 0 2.8 8 CMPM

E 3.0 0 3.2 9 PBS/MPM

E 3.5 0 4.0 0 5.0 0 6.0 0 7.0 0 7.0 6 FBM

E 8.0 0 

### 1 1 < -0.0 5ISJ 

### 2 4 5 6 8 1 1 12 1 3 1 4 1 5 1 7 2 1 25 3 0 3 0 34 istldtle s

-0.1 5


### 6 7 1 3 1 4 1 9 2 5 3 2 3 7 3 8 4 2 4 5 51 6 4 7 6 8 9 9 0 10 2 -



### I I = Chevro nBlad e Mis t Eliminato r II I = Mesh-pa dmis t elHnato r o r packed-be dscrubbe r CMPM E = Composit e mesh-pa dmis t eliminato r PBS/MPM E = Packe dbe dscrubbe r andmesh-pa dmis t eliminato r FBM E = Fiber-be dmis t eliminato r

-31 -P.3 3

Nex t th e numbe r o f closure s wa s estimate dusin g th e followin g formula :
N * ( W * E * 6)/ S
wher e
N = Numbe r o f closure s W = • Weighte daverag e percen t pric e 1ncrease/l0 0 E = Pric e elasticit y 0 = Industr y

wid e capacit y

fo r har dchromiu

m electroplater s S = Amper e hour s o f capacit y fo r a smal l mode l plan t
Thu s a percentag e pric e Increas e o f 1.1 2 fo r Contro l Optio nII I anda pric e elasticit y

o f -.15 , couple dwit ha nIndustr y wid e capacit y

o f 42,420,000,00 0 ampere-hour s an danampere-hou r capacit y o f 5,000,00 0 fo r a smal l mode l plan t woul dproduc e a nestimate dfourtee nclosures , pric e Increas e o f 7.0 6 percen t fo r th e fiber-be dmis t eliminato r emergin g technolog y

woul dleadt o 9 0 closures . I t shoul db e note d tha t smal l plan t closur e analyse s triggere db y reduce dIndustr y

outpu t represen t a minimu

m numbe r o f smal l plant s closures . Ther e coul d stil l b e a shif t 1nremainin g productio nfro m smal l t o large r plant s causin g a greate r numbe r o f smal l plan t closures . Base donth e tw

o closur e analyse s presente dabove , thi s repor t assume s tha t 14-2 0 plan t closure s wil l potentiall y occu r a s a resul t o f Contro l Optio nIII . Th e capita l availabilit y analysi s performe d earlie r suggest s tha t thos e wh o clos e ma y b e thos e wh o hav e difficult y raisin g capital . Fo r th e emergin g technolog y o f composit e mesh-pa dmis t eliminato r th e two closur e analyse s sugges t tha t th e numbe r o f closure s wil l rang e fro

m 37-5 1 plants . Negativ e profit s andcapita l availabilit y ar e th e reason s fo r thes e closures . Fo r th e packed-be dscrubbe r and mesh-pa dmis t eliminato r emergin g technolog y th e rang e o f plan t closur e estimate s 1 s 42-7 5 plant s whil e fo r th e fiber-be dmis t eliminato r technolog y th e rang e i s 90-13 9 plants .

-32 -P.3 4

Tabl e 4- 6 summarize s th e estimate dnumbe r o f potentia l closure s unde r eac ho f th e closur e analyse s performed .

TABL E 4-6 . SUMMARYO F CLC-SUR E ESTIMATE S

Outpu t NP V Reductio n Analysi s Analysi s Composit e mesh-pa dmis t eliminato r 5 1 3 7 Packed-be dscrubber/mesh-pa d mis t eliminato r 7 5 4 2 Fiber-be dmis t eliminato r 13 9 9 0

5. 0 SUMMAR Y A NESHA P regulatio nfo r th e contro l o f chromium emission s b

y th e emergin g technologie s woul dhav e a ver y smal l impac t onth e price s o f har dplate dchromium products . Pric e increase s fo r th e emergin g technologie s woul db e abou t on e andone-hal f time s t o two andone-hal f time s a s grea t a s tha t o f Contro l Optio nII I bu t stil l les s tha n one-hal f o f on e percen t o f th e price s o f th e product s studied . Howeve r ther e woul db e som e impac t onsmal l businesse s from two o f th e thre e emergin g technologies . Fo r th e emergin g technologie s two o f th e fou r economi c impac t criteri a fo r smal l busines s impact s ar e triggered . Capita l availabilit y woul db e a proble m

fo r th e 11 6 smalles t har dchromium electroplatin g shop s facin g th e packed-be d scrubber/mesh-pa dmis t eliminato r andth e fiber-be dmis t eliminato r emergin g technologies . Th e impac t o nearning s from

th e emergin g technologie s woul dcaus e 3 7 t o 13 9 o f th e smal l plant s t o close . Thi s ca nb e contraste dwit hContro l Optio nII I unde r whic h14-2 0 smal l

-33 -plant s ar e projecte dt o close . Th e rang e estimat e fo r closure s fro m th e composit e mesh-pa dmis t eliminato r i s 3 7 t o 51 ; 4 2 t o 7 5 fo r th e packed-be dscrubber/mesh-pa dmis t eliminato r an d90-13 9 fo r th e fiber-be dmis t eliminator . Th e composit e mesh-pa dmis t eliminato r impact s ar e slightl y greate r tha nth e Contro l Optio nII I bu t d o no t trigge r significan t smal l busines s impacts . Howeve r th e impact s o f th e othe r tw o emergin g technologie s woul dcaus e capita l availabilit y problem s anda large r numbe r o f closure s tha nfo r th e composit e mesh-pa dmis t eliminator .

6. 0 REFERENCE S FORREPORT 1 . Moto r Vehicl e Manufacturer s Associatio no f th e Unite d States , Inc . MVM

A Moto r Vehicle , Fact s andFigure s 1989 . Detroit . 1989 . p . 73 . 2 . Duncan , R.N . Electroles s Nickel : Alternativ e t o Chromium Coatings . Meta l Progress . Jun e 1985 . p . 35 . 3 . Friedman , L.S . Microeconomi c Polic y Analysis . Ne w

York , McGraw-Hil l Boo k Company . 1984 . p . 303 . 4 . Telecon . Donato , S.A. , JACA Corp. , wit hGar y

Tinde l o f John Deere , Moline , IL . Marc h17 , 1987 . Informatio nonth e averag e cos t o f th e mos t commonl y use dbackho e andsiz e o f th e hydrauli c cylinder s inth e backhoe . 5 . Meta l Finishin g Jo bSho pIndustr y Profil e 1985/86 , Finishers ' Management , Media/Marke t Bulletin . Glenview , IL . Finishers ' Management . 1986 . 6 . Rober t Morri s Associates . 198 9 Annua l Statemen t Studies . Philadelphia , PA . 1989 . p . 135 . 7 . Referenc e 8 . 8 . Referenc e 7 .

-34 -P.3 6

APPENDI X

Inorde r t o calculat e th e figures-presente di nTabl e 4-1 , eac h mode l plan t siz e wa s assigne danaverag e ne t sale s figur e base donth e financia l dat a reporte dinth e RM A Annua l Statemen t Studie s 199 1 fo r firm s i nSI C 3471 , Coating , Engraving , andAllie dServices . Th e firs t ste pi nderivin g a naverag e ne t sale s figur e wa s t o sor t th e sale s dat a from

RM A s o a s t o approximat e a norma l distribution . O f th e tota l numbe r o f firm s 2 0 percen t wer e considere dsmall , 6 7 percen t medium , and1 3 percen t large . Th e averag e ne t sale s fo r thes e thre e categorie s wer e the nassigne dt o th e appropriat e mode l plan t sizes . Th e sale s figure s thu s derive dfo r th e small , medium andlarg e plant s ar e respectively , $600,476 , $3,650,49 6 an d$28,118,286 .



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