p.1 

OAR Box 1313 

Prepped by LaTeia Shed 

Document Number: 

19) ll-A-33 

Docket Number: 

A-88-02 

Printed 6/12/2008 10:28:49 AM Sheet 19 of 99 
P.2 

A-88-02 

JUN 15 

H A 33 

ECONOMIC IMPACT ASSESSMENT OF EMERGING 

TECHNOLOGIES FOR CONTROLLING CHROMIUM 

EMISSIONS FROM CHROMIUM ELECTROPLATING OPERATIONS 

1.0 INTRODUCTION 

This report estimates the impact of control costs for three 

emerging technologies on the costs of chromium electroplating and on 

the prices of hard chrome-plated products. The emerging technologies 

which result in higher emission reductions are a composite mesh-pad 

mist eliminator (MPME), a packed-bed scrubber 1n combination with a 

MPME, and a fiber bed mist eliminator (FBME). The methodology to be 

used for estimates of economic impact is the same methodology that was 

used 1n Chapter 8 of the Background Information Document for the 

Chromium Electroplating NESHAP (hereafter the BID). 

For hard chromium plating, three products (automobiles, Industrial 

rolls and hydraulic cylinders) were analyzed to Illustrate the range of 

impacts that may occur across most hard chromium plated products. Two 

sets of economic Impact estimates are contained 1n this report. 

First, for each of the product markets, estimates of the Impact of the 

emerging technologies on both the cost of electroplating and the final 

price were calculated. The increase 1n the cost of chromium 

electroplating illustrates the potential for substitution away from 

chromium electroplating at the Input stage. The Increase in the final 

price of the product allows estimation of output reduction and the 

concomitant effects on revenue. 

Second, small business Impacts will be examined by considering 

the availability of capital for the emerging technologies and by 

conducting a closure analysis. 

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P.3 

( 

For comparison purposes the Impacts of the emerging technologies 

will be shown along with the Impacts of Control Option III in the BID. 

Control Option III contains two control-options; single packed-bed 

scrubbers and regular mesh-pad mist eliminators. 

A summary of the estimated Impacts 1s contained at the end, 

Section 5, of the report. Section 2 describes the methodology for' 

estimating the economic Impacts. Section 3 contains the impact 

analysis for the three product groups. Section 4 contains the small 

business analysis. 

2.0 METHODOLOGY 

Three product groups were selected to illustrate the economic 

Impacts associated with the emerging technologies for the chromium 

electroplating operations. The product groups selected Include 

automobile parts, Industrial rolls, and hydraulic cylinders 

(represented by backhoes). The product groups were selected to 

Illustrate the effect of each control option on hard plated products 

and on both capital and consumer goods. 

The analysis first isolates and quantifies the cost of the 

emerging technologies. Second, 1t compares the control costs for the 

emerging technologies per unit of model plant output to the direct 

costs of chromium electroplating a unit of output to determine 1f 

electroplating could be replaced by competitive coatings, materials, 

or processes. These first two steps provide an assessment of 

employment and small business Impacts for chromium operators, 

particularly job shops. 

For each of the three product markets studied, the following 

detailed description of the analysis supplements the above summary. 

In order to calculate the potential Increase 1n final price, the 

increase 1n the marginal control cost due to each control option 

must be estimated for each model plant. This calculation 

consisted of dividing the annualized control costs for a particular 

size plant by the number of units of output for that size of plant. 

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P.4 

Table 2-1 gives the capital costs and the annualized control 

costs for the emerging technologies. For comparison purposes Table 2-1 

also contains the control costs for Control Option III from the BID. 

Control Option III consists of either single packed-bed scrubbers or 

mesh-pad mist eliminators. Each model plant has a unique set of 

capital and annualized control costs based on Its production capacity. 

The annualized control costs were computed using a 10 percent discount 

rate and an equipment Hf e of 20 years. 

The costs shown 1n Table 2-1 are those for retrofitting an 

existing plant. The BID contains two sets of costs; retrofit and 

incremental costs for compliance 1f building a new electroplating 

facility. Retrofit costs are always higher and were chosen for 

calculations 1n all subsequent tables because retrofits to existing 

plants are expected to be the most common form of compliance. 

The calculation of the potential Increase 1n final price was done 

by first converting the model plant parameter of ampere hours per year 

to number of units of output for each of the model plants and each of 

the three product markets. Tables 1n Chapter 5 of the BID Hs t the 

production capacity of each of the model plants .1n terms of 

ampere-hours per year. The parameters of the products selected to 

Illustrate Impact were obtained from manufacturers of the products. 

These parameters included surface area plated, current density applied 

during the plating process, and plating time. These parametric values 

allowed an estimation of the ampere-hours per part needed to plate the 

surface area efficiently. Because the model plants' capacities were 

measured 1n ampere-hours per year, and the products analyzed were 

measured 1n ampere-hours per part, an estimate of the potential output 

per plant could then be calculated. In order to allow for the loading 

of parts 1n the tanks and general maintenance of the electroplating 

facilities, the model plants were assumed to operate at less than 100 

percent of their capacity. The capacity utilization rates for each 

plant size are displayed 1n Chapter 5 of the BID. 

Next an estimate of the cost per unit output of the selected 

product due to chromium electroplating was obtained. The cost was 

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TABLE 2-1. HARD CHROMIUM PLATING MODEL PLANT COST3 DATA 

(1988 $) 

••' • 

Small Model Plant Medium Model Plant Large Model Plant 

Control Capital Annualized Capital Annualized Capital Annualized 

Option cost, $ cost, $ cost, $ cost, $ cost, $ cost, $ 

III 

Single packed- 45,900 11,500 92,800 24,200 185,500 54,800 

bed scrubber 

or mesh-pad 

mist elimi- 28,900 9,500 82,500 29,900 156,300 69,000 

nators 

Emerging 

Technologies 

Composite mesh- 34,000 15,200 89,800 39,000 179,500 94,200 

pad mist 

eliminators 

Packed-bed 72,600 19,600 122,200 38,300 244,500 90,100 

scrubber/meshpad mist 

eliminators 

Fiber-bed 117,600 31,600 234,600 73,400 469,200 168,600 

mist 

eliminators 

•-•Retrofit costs; also exclude credits for chromic add recovery. 

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P.6 

defined as the direct cost of chromium electroplating the product or 

part exclusive of all other costs. 

Finally, by dividing the annualized/control cost by the firm's 

potential output, an estimate of the control cost Increase per unit 

was derived. 

Since the proposed pollution control devices are Intended, to -

reduce the emissions from the electroplating operation, the entire 

burden of the control costs must first be placed on the additional 

cost of electroplating, and not spread over the entire manufacturing 

operation. Hence, the analysis first had to determine 1f the manufacturers would continue to use chromium plated parts or switch to a 

substitute process. If manufacturers do substitute, the potential 

impact of the regulation would then be felt on chromic ad d manufacturers and suppliers and electroplating operators. Substitution away 

from chromium electroplating can only occur 1f a technically and economically suitable substitute 1s available. Furthermore, the degree 

of substitution possible 1s significantly less for hard chromium 

applications than for decorative chromium. 

3.0 ECONOMIC ANALYSIS OF THE SELECTED PRODUCTS 

This section discusses the economic Impact associated with 

applying each of the control options to the three products: 

automobile parts; Industrial rolls; and hydraulic cylinders 

(represented by backhoes). The analysis focuses on the effects on the 

final price of the product being studied and on the electroplating 

cost associated with the control costs of the control option. 

3.1 Automobile Parts. 

Domestically produced automobiles are equipped with a wide 

variety of chromium plated parts. Table 3-1 provides a 11st of most 

of the automobile parts that typically are hard chromium plated. The 

trend in recent years has been to reduce or eliminate certain 

decorative chromium plated automobile parts, however substitution has 

not occurred extensively for hard chromium plated parts. 

To investigate the economic Impacts on domestic automobiles, one 

model was chosen for an in-depth analysis. The largest selling 
P.7 

TABLE 3-1. LIST OF AUTOMOBILE PARTS TYPICALLY HARD 

CHROMIUM ELECTROPLATED 

Power Steering Shafts 

MacPherson Struts &/or 

Shock Absorber 

Components 

Valves 

Valve Lifters 

Piston Rings 

Seals 

-6-
P.8 

domestically-produced automobile for six consecutive years 1n the 

1980s was the Oidsmobile Cutlass/C1era. In 1985, the Cutlass/C1era 

accounted for 51.7 percent of OldsmobileJs unit sales, 12 percent of 

General Motors' unit sales, and 6.7 percent of total retail sales of 

domestically produced automobiles. In each of the 6 years, an average 

of 489,875 units of the Cutlass/C1era was sold.1 The Cutlass/C.lera. 

usually 1s equipped with a wide variety of chromium plated parts. 

As much as 7.4 square feet of total surface area 1s hard chromium 

plated. The electroplating cost may be as high as $106 (10 cents per 

square inch), or 1.2 percent, of the total retail price of the 

automobile. 

Table 3-2 displays the percent Increase in the cost for the hard 

chromium plated parts under Control Option III and the emerging technologies. For a small plant, the percent increase in cost ranges from 

12.468 (composite MPME) to 25.916 (FBME) percent. The percent Increase 

in cost ranges from 3.796 (PBS/MPME) to 7.273 (FBME) percent for the 

medium plant and from 3.244 (PBS/MPME) to 6.071 (FBME) for the large 

plant. The ability of firms to substitute for hard chromium plated 

parts is severely limited. The effect on medium and large plants will 

be small because of the absence of close substitutes for hard chromium. A 3.25 to 7.27 percent Increase for the medium and large plants 

will probably not cause substitution away from hard chromium. The 

12.47 to 25.92 percent increase for the small plants 1s Hkely 1n this 

instance to cause some shift in production from small to larger plants 

(see Section 4.0). The percent price increases for the automobile 

range from 0.03 for the large plant to 0.31 for the small plant. 

3.2 Industrial Rolls. 

The price of Industrial rolls can vary from a low of several 

hundred dollars to as much as $20,000, with most rolls 1n the price 

range of about $5,000 to $9,000. The cost of chromium electroplating 

Industrial rolls 1s largely a function of surface area (diameter x IT x 

length) and the thickness of the chromium to be deposited. Most 

industrial rolls are chromium plated to a thickness of between .001 

and .005 Inch, using a current density of approximately 2 amperes per 

square inch. Based on data obtained during emission testing, the 

-7-
TABLE 3-2. ESTIMATED PERCENT CHANGE IN CHROMIUM ELECTROPLATING COST, 

ESTIMATED PERCENT CHANGE IN THE FINAL PRICE, AND ESTIMATED DOLLAR AMOUNT (1988 $) 

CHANGE IN THE FINAL PRICE DUE TO VARIOUS CONTROL OPTIONS AND EMERGING TECHNOLOGIES: 

HARD CHROMIUM PARTS FOR REPRESENTATIVE AUTOMOBILE 

i 

CD 

I 

Control 

Option 

III3 

III D 

Emerging Technol 

Composite meshpad mist 

eliminators 

Packed-bed 

scrubber/meshpad mist 

eliminators 

Fiber-bed mist 

eliminators 

ogles 

Percent increase in 

electroplating cost 

model plant 

small 

9.431 

7.791 

12.468 

16.070 

25.916 

medium 

2.398 

2.963 

3.866 

3.796 

7.273 

size 

large 

1.973 

2.484 

3.392 

3.244 

6.071 

Percent price i 

model plant 

small 

0.111 

0.092 

0.147 

0.189 

0.305 

medium 

0.029 

0.036 

0.047 

0.046 

0.088 

ncrease 

size 

large 

0.018 

0.023 

0.031 

0.030 

0.055 

Dollar amount of 

increase 

price 

model plant size 

small 

10.00 

8.26 

13.22 

17.04 

27.48 

medium 

2.54 

3.14 

4.09 

4.02 

7.70 

large 

1.52 

1.91 

2.61 

2.50 

4.68 

3Based on single packed-bed scrubber. 

DBased on mesh-pad mist eliminator. 
P.10 

average surface area of an industrial roll 1s approximately 1,000 

square Inches. Table 3-3 shows this Information applied to an 

Industrial roll with a surface area of M)0 0 square Inches.3 

The electroplating cost as a percentage of the price of the final 

product, in this case a capital good, may differ for rolls with the 

exact same plating costs because of variations 1n roll thickness (riot 

plating thickness) prior to plating or 1n the quality of the steel 

substrate. For most industrial rolls, the cost of chromium electroplating 1s generally less than 10 percent of the final price. 

A more specific approach to estimating the electroplating cost 1s 

to assume a cost factor per square Inch. This cost factor 1s the cost 

of chromium plating excluding any Increase associated with the control 

options and the emerging technologies. The cost factors used for the 

analysis were 6 and 10 cents per square Inch for Industrial rolls 

plated to 1 mil thickness, and 30 and 40 cents per square Inch for 

Industrial rolls plated to 5 mils thickness. These cost factors were 

obtained from telephone Interviews with domestic manufacturers of 

industrial rolls and by reviewing data obtained from Information 

requested in Section 114 letters. 

Table 3-4 presents the potential output of 1,000 square Inch 

rolls plated to a thickness of 0.001 and 0.005 Inch for the model 

plants based on the production capacity (Ah/yr) of these plants. The 

small plant can produce 1,390 rolls and the large plant can produce 

44,440 rolls at a plating thickness of 1 mil. At a plating thickness 

of 5 mils, small model plants can produce 280 rolls and the large 

plants can produce 8,890 rolls. Table 3-5 presents the potential 

electroplating cost for hard chromium plated rolls for each size model 

plant under four distinct cost assumptions: 6, 10, 30, and 40 cents 

per square inch. 

Table 3-6 contains the estimated percentage Increase 1n the 

electroplating cost associated with the control options and the emerging 

3Any reasonably sized roll (e.g., a roll from 500 to 8,000 square 

Inches) would serve equally well for purposes of illustration 

because the plating time and, therefore, the ampere-hours per part 

can be approximated as a Hnear function of the surface area. 
p.11 

TABLE 3-3. PARAMETRIC VALUES: INDUSTRIAL ROLLS 

Plating 

thickness 

Surface 

area 

Current 

density 

Plating 

time 

cm 

2 (in2) A/M2 (A/ft2) (min.) 

Ampere hrs. 

per part 

25 (1) 6500 (1,000) 3,100 (288) 108 

130 (5) 6500 (1,000) 3,100 (288) 540 

3,600 

18,000 

TABLE 3-4. ANNUAL PLANT OUTPUT: 

INDUSTRIAL ROLLS3 

Surface Plating Plating Ah 

area thickness time per 

cm2 (in2) ym (mil) (m1n.) part 

Model plant size 

small medium large 

(output of 1,000 1n2 rolls) 

6500 (1,000) 25 (1) 108 3,600 

6500 (1,000) 130 (5) 540 18,000 

1,390 11,670 44,440 

280 2,330 8,890 

Production capacity 1s 5,000,000; 42,000,000; and 160,000,000 

ampere-hours per year for the small, medium, and large model plants, 

respectively. 

TABLE 3-5. ESTIMATED ELECTROPLATING COST PER PLANT PER YEAR: 

INDUSTRIAL ROLLS 

Price 

per Surface 

($) area 

am an* 

drn (in2) 

Estimated 

cost Plating 

per roll thickness 

($) um (mil) 

Estimated Annual Cost ($) 

model plant size 

small medium large 

0.01 6,500 

(0.06) (1,000) 

0.02 6,500 

(0.10) (1,000) 

0.05 6,500 

(0.30) (1,000) 

0.06 6,500 

(0.40) (1,000) 

60 

100 

25 (1) 83,000 700,000 2,667,000 

25 (1) 139,000 1,167,000 4,444,000 

300 130 (5) 84,000 699,000 2,667,000 

400 130 (5) 112,000 932,000 3,556,000 

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P.12 

TABLE 3-6. ESTIMATED PERCENT CHANGE IN THE HARD CHROMIUM 

ELECTROPLATING COST DUE TO THE VARIOUS CONTROL OPTIONS 

AND EMERGING TECHNOLOGIES: .INDUSTRIAL ROLLS 

WITH DIFFERING COSTiFACTORS 

Control 

Option 

III3 

IIID 

Composite 

PBS/MPME 

FBME 

III3 

IIIb 

Composite 

PBS/MPME 

FBME 

III3 

IIID 

Composite 

PBS/MPME 

FBME 

III3 

IIID 

Composite 

PBS/MPME 

FBME 

MPME 

MPME 

MPME 

MPME 

Plating 

thickness 

(Inches) 

O.OOI 

O.OOI 

O.OOI 

O.OOI 

0.001 

0.001 

0.001 

0.001 

0.001 

0.001 

0.005 

0.005 

0.005 

0.005 

0.005 

0.005 

0.005 

0.005 

0.005 

0.005 

Percent Increase 1n electroplating 

cost at 6 cents per 1n2 „ 

model plant 

small medium 

13.885 3.457 

11.446 4.271 

18.313 5.571 

23.614 5.471 

38.072 10.486 

Percent increase 1n « 

cost at 10 cent: 

model plant 

small medium 

8.273 2.074 

6.835 2.562 

10.935 3.342 

14.101 3.282 

22.734 6.290 

size 

large 

2.055 

2.587 

3.532 

3.378 

6.322 

;lectroplat1ng 

; per 1n2 

size 

large 

1.233 

1.553 

2.120 

2.027 

3.794 

Percent Increase 1n electroplating 

cost at 30 cents per 1n2 

model plant size 

small medium large 

13.690 3.462 

11.310 4.278 

18.095 5.579 

23.333 5.479 

37.619 10.501 

2.055 

2.587 

3.532 

3.378 

6.322 

Percent Increase 1n electroplating 

cost at 40 cents per 1n2 

model plant 

small medium 

10.268 2.597 

8.482 3.208 

13.571 4.185 

17.500 4.109 

28.214 7.876 

size 

large 

1.541 

1.940 

2.649 

2.534 

4.741 

3Based on single packed-bed scrubber. 

--•Based on mesh-pad mist eliminator. 

•11-
P.13 

technologies. The percentage Increase 1n the cost 1s inversely 

related to the assumed hard chromium finish cost factor (I.e., higher 

cost factors would have smaller percentage Increases 1n cost due to 

the compliance costs). 

Even though the increase 1n the electroplating cost could be as 

high as 38.082 percent for the small plant for the fiber-bed -

mist eliminator, 1t 1s unlikely that general substitution away from 

hard chromium plating will occur for the majority of industrial rolls. 

The cost Increase faced by the large to medium sized plants 1s 

approximately 3.794 to 10.501 percent for the fiber-bed mist eliminator, 2.027 to 5.479 percent for the packed-bed scrubber and 2.120 to 

5.579 for the composite mesh-pad mist eliminator; a more appropriate 

cost to compare with the substitutes for hard chromium. Small plants 

facing these larger cost Increases may be faced with Impacts (See 

Section 4.0). 

The newest potential substitute for hard chromium plating is 

electroless nickel, but this process 1s not satisfactory for most 

applications and is more expensive than hard chromium plating.2 

Moreover, the demand for industrial rolls 1s a derived demand, that 

is, a firm purchases the roll as an Intermediate good to produce Its 

own product. The demand for rolls 1s derived from the profitability 

of selling the final good, for example, newspapers. In other words, 

the willingness of a firm to pay for an additional unit of an 

intermediate good can be thought of as the marginal revenue expected 

to result from Its use.* Because the impact on the final goods 

associated with Industrial rolls 1s very small demand will not 

diminish for such goods. 

3.3 Hydraulic Cylinders — Backhoes. 

Hydraulic cylinders used 1n backhoes were selected for the 

economic Impact analysis because backhoes are widely used 1n the 

construction Industry and backhoe hydraulic cylinders are typical of 

hard chromium plated cylinders classified 1n SIC Code 3531. 

Table 3-7 presents a Hst of the hard chromium plated cylinders 

found in a typical backhoe and the diameter, length, and surface area 

of each cylinder that is chromium plated. Unit prices for hydraulic 

•12-
TABLE 3-7. LIST OF TYPICAL HARD CHROMIUM 

ELECTROPLATED BACKHOE CYLINDERS 

Number of Diameter Length 

Function cylinders (cm) 

Diameter Length Surface area3 Surface area 

(inches) (cm2) (1n2) 

CJ 

I 

boom 

crowd 

sling 

stabilize 

motor 

bucket 

boom 11ft 

loader 

bucket 

steering 

Totals 

Averages 

1 

1 

2 

2 

1 

2 

1 

1 

11 

11.43 

10.15 

10.15 

10.15 

8.9 

8.25 

8.89 

5.08 

9.12 

97.9 

83.8 

24.1 

51.5 

69.5 

75.8 

62.0 

24.1 

61.1 

4.50 

4.00 

4.00 

4.00 

3.60 

3.25 

3.50 

2.00 

3.59 

38.54 

32.99 

9.49 

20.28 

27.36 

29.84 

24.41 

9.49 

24.05 

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 

545 

414 

119 

255 

301 

305 

268 

60 

2,266 

271 

aSurface area 1s calculated by the following formula: (diameter x ir x length), 
P.15 

cylinders range from $55 to hundreds of dollars. A very common 

backhoe has a 11st price of a little more than $37,000.* 

As with Industrial rolls, the manufacturing costs of chromium 

plating hydraulic cylinders 1s largely a function of the surface area 

of the parts. The 11 hydraulic cylinders 1n a typical backhoe are 

chromium plated to a thickness of 0.001 Inch. Approximately 8-^160' 

amperes (at a current density of 288 A/ft2) are needed to plate all 11 

cylinders. 

Table 3-8 shows the potential output for the model plants 

producing chromium plated cylinders for an Individual backhoe. The 

large model plant could produce approximately 32 times the output of 

the small model plant. 

Through Interviews with Industry representatives, a reasonable 

estimate of the cost of chromium plating the hydraulic cylinders 

ranges from 3 to 6 cents per square Inch. Table 3-9 provides the 

potential electroplating costs per each size plant per year based on 

these cost factors. 

Table 3-10 contains the estimated percent Increase 1n 

electroplating cost for the emerging technologies and Control Option 

III. The fiber-bed mist eliminator could increase the cost by about 

75 percent for small plants; 21 percent for medium plants and 13 percent for large plants. The increases for the packed-bed scrubber and 

mesh-pad mist eliminator for the small, medium and large sized plants 

are approximately 46, 11 and 7 percent. For the composite mesh-pad 

mist eliminator the corresponding Increases are 36, 11 and 7 percent. 

Increases associated with the costs of medium and large size plants 

would not encourage substitution away from hard chromium. However, 

small plants will have difficulty competing with medium and large plants. 

Table 3-11 provides estimates of the potential dollar and 

percentage Increases 1n the final price of the backhoe. Because the 

only parts of a backhoe that are chromium plated are the hydraulic 

cylinders, and the total dollar value of chromium plated parts 1s 

small relative to the final price of the backhoe, the Impact on the 

final price from the fiber-bed mist eliminator would also be small, 

i.e., about 0.15 percent and 0.09 and 0.07 for the packed-bed 

scrubber and composite mesh-pad mist eliminator. 

-14-
P.16 

TABLE 3-8. OUTPUT PER PLANT PER YEAR 

AT 80 PERCENT CAPACITY: BACKHOE CYLINDERS 

Surface Plating Ah Output of cylinders 

area thickness per model plant size 

cm2 (1n2) 

14,600 (2,300) 

ym (mil) 

25 (1) 

backhoe 

8,160 

small 

620 

medium 

5,150 

.. large 

19,610 

TABLE 3-9. ESTIMATED ANNUAL CHROMIUM ELECTROPLATING COST: 

BACKHOE CYLINDERS 

Price per 

cm2 (in2) 

0.005 (0.03) 

0.01 (0.06) 

Surface 

area 

cm2 (in2) 

14,600 

(2,300) 

14,600 

(2,300) 

Cost 

per set o 

backhoe 

cylinders 

($) 

68 

136 

f 

small 

$42,200 

$84,400 

Cost per plant ($) 

model plant 

medium 

$350,000 

$700,000 

size 

large 

$1,333,000 

$2,666,000 

-15-
P.17 

TABLE 3-10. ESTIMATED PERCENT CHANGE IN THE COST OF 

HARD CHROMIUM ELECTROPLATING 

DUE TO THE VARIOUS CONTROL OPTIONS AND 

EMERGING TECHNOLOGIES: HYDRAULIC CYLINDERS FOR BACKHOES WITH 

DIFFERING COST FACTORS 

Control 

Option 

Cost factor 

$/1n2 

Percent Increase in electroplating cost 

model plant size 

small medium large 

III3 

IIIb 

Composite MPME 

PBS/MPME 

FBME 

III3 

IIIb 

Composite 

PBS/MPME 

FBME 

MPME 

0.03 

0.03 

0.03 

0.03 

0.03 

0.06 

0.06 

0.06 

0.06 

0.06 

27.251 

22.512 

36.019 

46.445 

74.882 

13.625 

11.256 

18.009 

23.500 

37.441 

6.914 

8.543 

11.143 

10.943 

20.971 

3.457 

4.271 

5.571 

5.471 

10.486 

4.111 

5.176 

7.067 

6.759 

12.648 

2.056 

2.589 

3.533 

3.380 

6.324 

3Based on single packed-bed scrubber. 

DBased on mesh-pad mist eliminator. 

MPME = Mesh-pad mist eliminator 

PBS/MPME = Packed bed scrubber and mesh-pad mist elmlnator 

FBME = Fiber-bed mist eliminator 

•16-
P.18 

TABLE 3-11. ESTIMATED DOLLAR (1988 $) AND PERCENT CHANGE IN THE 

FINAL PRICE DUE TO THE VARIOUS CONTROL 

OPTIONS: BACKHOES 

Control 

Option 

Dollar price Increase 

model plant size 

small medium large 

Percent price Increase 

model plant size 

small medium large 

III3 

IIIb 

Emerging 

Technologies 

18.76 

15.50 

4.71 

5.82 

2.80 

3.53 

0.054 

0.045 

0.013 

0.016 

0.008 

0.010 

Composite MPME 24.80 

PBS/MPME 31.97 

FBME 51.55 

7.59 

7.46 

14.29 

4.81 

4.60 

8.62 

0.071 

0.092 

0.148 

0.021 

0.021 

0.039 

0.014 

0.013 

0.025 

aBased on single packed-bed scrubber. 

bBased on mesh-pad mist eliminator. 

MPME = Mesh-pad mist eliminator 

PBS = Packed-bed scrubber 

FBME = Fiber-bed mist eliminator 

•17-
P.19 

4.0 SMALL BUSINESS IMPACTS 

All of the analyses of electroplating cost Increases for the 

emerging technology show that small plajifs face a differential 1n per 

unit output control costs compared to large plants. The effect of 

this differential Impact will be examined 1n this section, along with 

an analysis of the ability of firms to raise capital for the control 

expenditures. 

The average electroplating job shop 1s a small business with 

annual sales 1n 1986 of $1,134,900. Estimates Indicate there are 

presently 885 hard chromium job shops 1n the U.S.* The Small Business 

Administration (SBA) defines a small business 1n SIC 3471, Job Shops, 

by an employee size of 500 or less. Number of employees 1s not always 

a good criterion for designating small business for this analysis, 

because electroplating 1s a process and most reported data on number 

of employees includes people from other manufacturing processes. In 

addition, many large capacity operations are automated and only 

require a small number of employees. However the level of 500 

employees 1s used herein as the definition of small plants because 

there 1s good correlation between the data of Products Finishing magazine (see Bid Chapter 8) that shows that 75.7 percent of all 

electroplating plants 1n their survey have 500 employees or less and 

the fact that the small model plant 1n this analysis also accounts for 

76 percent of all chromium electroplating plants, to Illustrate, the 

small size model plant 1n this report 1s 5,000,000 ampere hours capacity. For hard chromium electroplating plants, 1,170 (or 76 percent) 

of the 1540 total hard plants fit the small model plant category. 

Therefore, there 1s a high UkeUhood that a small hard chrome 

electroplating plant 1s a small business. 

The Regulatory Flexibility Act (RFA) requires that special 

consideration be given to the Impacts of all proposed regulations 

affecting small businesses. As Just shown, there are a substantial 

number of small businesses performing hard chromium electroplating, 

many of which are job shops. The EPA has Issued RFA guidelines 

containing the following criteria for use 1n determining what 1s a 

"significant adverse economic impact" and what would therefore require 

the performance of a Regulatory Flexibility Analysis. 

-18-
P.20 

o Annualized compliance cost increases total costs of 

production by more than 5 percent, 

o Compliance costs as a percentage of sales for small plants 

are at least 10 percentage points higher than for large 

plants, 

o Capital costs of compliance represent a significant,port-ion 

of capital available to small entities, where available 

capital is measured by pretax cash flow minus annual capital 

expenditures, 

o The requirements of the regulation are likely to result in 

closures of small entities. 

The impacts associated with the control options and emerging 

technologies will have a negligible effect on the price of any final 

good, as shown in Section 3.0. Clearly, the cost of the hard chromium 

components of a final good (e.g., industrial rolls) is insignificant 

relative to the cost of other materials involved in the manufacture 

and distribution of the final good. Thus, the first criterion Hsted 

above for significant impacts is not satisfied. 

Table 4-1 presents control costs as a percent "of net sales for the 

three sizes of model plants. The control costs used to calculate 

these figures are from Table 2-1. Net sales figures are derived from 

the RMA Annual Statement Studies 1991 (see Appendix). Table 4-1 

indicates that control costs as a percentage of net sales for a small 

model plant are not ten percentage points higher than for large model 

plants for any control option. The greatest difference that could 

occur would be 4.7 percentage points if the fiber-bed mist eliminator 

control option is implemented. 

The third question arises as to whether capital can be obtained 

to finance the controls at hard plated shops. Financial ratio analysis will be used to make determinations about capital availability. 

Table 4-2 was constructed from financial data reported by Robert 

Morris Associates6 for the electroplating industry. A small firm with 

annual sales of $500,000 was selected. This size firm was selected as 

a form of worst-case analysis since it is at the lower end of the 

•19-
P.21 

TABLE 4-1. HARD CHROMIUM ELECTROPLATING CONTROL COST AS 

PERCENT OF SALES FOR SMALL, MEDIUM AND LARGE 

MODEL PLANTS 

Control option 

Mesh-Pad Mist Eliminator 

Control Costs 

Sales 

Control Costs as Percent 

Single packed-bed scrubber 

Control Costs 

Sales 

Control Costs as Percent 

of 

of 

Sal 

Sal 

es 

es 

small 

$9,500 

$600,476 

1.6 

$11,500 

$600,476 

1.9 

Model plant 

medium 

$29,900 

$3,650,496 

0.8 

$24,200 

$3,650,496 

0.7 

size 

large 

$69,000 

$28,118,286 

0.2 

$54,800 

$28,118,286 

0.2 

Emerging Technologies: 

Composite Mesh-Pad Mist Eliminator 

Control Costs 

Sales 

Control Costs as Percent of Sales 

$15,200 

$600,476 

2.5 

$39,000 

$3,650,496 

1.1 

$94,200 

$28,118,286 

0.3 

Packed-Bed Scrubber/Mesh-Pad Mist 

Eliminator 

Control 

Sales 

Control 

Costs 

Costs as Percent 

Fiber-Bed Mist Eliminator 

Control Costs 

Sales 

Control Costs as Percent 

of 

of 

Sales 

Sales 

$19,600 

$600,476 

3.3 

$31,600 

$600,476 

5.3 

$38,300 

$3,650,496 

1.0 

$73,400 

$3,650,496 

2.0 

$90,100 

$28,118,286 

0.3 

$168,600 

$28,118,286 

0.6 

-20-
TABLE 4-2. CAPITAL AVAILABILITY ANALYSIS FOR 

SMALL CHROMIUM ELECTROPLATING FIRM 

P.22 

Sales 

Profit Before Taxes without controls 

(@3.6% of sales) 

Profits After Taxes (3.0% of Sales) 

Profit Before Taxes with Controls 

Single packed-bed scrubber 

Mesh-pad mist eliminator 

Composite mesh-pad mist eliminator 

Packed-bed scrubber/MPME 

Fiber-bed mist eliminator 

Annualized Cost 

11,500 

9,500 

15,200 

19,600 

31,600 

$500,000 

18,000 

15,000 

6,500 

8,500 

2,800 

Neg. 

Neg. 

Depredation (4.2% of sales) 

Cash Flow (Profits & Depr.) 

Current Maturities Long-Term Debt (CMLTD) 

Total Assets (Sales/Assets = 2.57) 

Total Debt (56.9% of Assets 

Net Worth (43.1% of Assets) 

Current Assets (60.8% of assets) 

Current Liabilities (CA:CL=1.8) 

Interest 

Baseline Ratio 

New Ratios 

Single packed-bed 

scrubber 

Mesh-pad mist 

eliminator 

Composite mesh-pad mist 

eliminator 

Packed-bed scrubber/ 

mesh-pad mist 

eliminator 

Fiber-bed mist 

eliminator 

Critical threshold 

Capital 

$ 45,900 

28,900 

34,000 

72,600 

117,600 

Debt: 

21,000 

36,000 

17,143 

194,500 

110,865 

83,635 

118,256 

65,698 

13,304 

Outlays Net Worth CA:CL EBIT-s-I CF:CMLTD 

1.33 

1.82 

1.64 

1.69 

2.11 

2.59 

1.5 

1.80 2.35 

1.68 

1.72 

1.71 

1.62 

1.35 

1.51 

1.16 

0.93 

1.53 0.50 

1.2 1.2 

2.10 

1.73 

1.77 

1.60 

1.54 

1.34 

1.2 

•21-
P.23 

range of small firms and covers about 116 of the total of 1170 small 

hard chromium plants. The table shows how profits before taxes would 

be Impacted by the various costs of controls and also how a firm's 

financial ratios would be affected. 

These ratios are used by lenders to determine whether or not to 

loan money. (Outside financing would be needed by many small -chromium 

electroplating firms because the profits before taxes plus the 

depredation cash flow would generally be insufficient to pay for most 

sets of controls.) As Table 4-2 shows the debt-to-net worth ratio 

Increases significantly for a firm of this size under Control Option 

III and the emerging technology of composite mesh-pad mist eliminators. 

The ratio is 1.33 before controls and Increases to between 1.64 to 

1.82 with controls. Ratios above 1.0 are considered high to begin 

with and ratios above 1.5 are very high. The ratio Increases even more 

significantly for the remaining two emerging technologies from the 

base of 1.33 to 2.11 to 2.59. 

The current ratio (I.e. current assets divided by current liabilities) 1s 1.8 before controls and reduces to between 1.53 and 1.72 

after controls. This ratio 1s less affected because the assumption 

was made herein that the controls are financed by long-term debt. The 

reduction 1n the ratio 1s due to the current portion of the long-term 

debt being carried as a current liability. The performance of this 

ratio would not deter firms from obtaining financing for control 

systems. 

Cash flow over current maturities of long-term debt (CF: CMLTD) 

1s a ratio that lenders examine to determine the assurance that cash 

flow will be sufficient to repay debt principal. The small size 

firm's baseline ratio 1s 2.1. A similar ratio 1s earnings before 

Interest and taxes (EBIT) over Interest (baseline 2.35). Lenders look 

to these ratios to evaluate the adequacy of a company's earnings to 

cover Interest payments. 

The baseline CF: CMLTD ratio drops from 2.1 to between 1.34 and 

1.77. A ratio below 1.2 1s considered insufficient. The EBIT ratio 

changes from 2.35 to between 0.50 to 1.51. For the same insufficiency 

-22-
P.24 

level of 1.2 all of the emerging technologies produce ratios less than 

It should be remembered that the^above static analysis 1s 

performed with statistics that have a great deal of variability within 

them. The performance of firms varies from year-to-year and a certain 

number of firms enter or leave the business each year causing-the data 

to change along with effects from business cycles. The analysis above 

used median data for the financial ratios. As an example of the 

variation, although the median for the debt-to-net worth ratio was 1.3 

the values for the 25th and 75th percentiles were 0.5 and 2.8. Still 

using 1.5 as the ratio of acceptability for lenders, the variation 1n 

data for this ratio shows that over 25 percent of all firms start off 

with a ratio unacceptable to lenders. Some of these firms may be 

already headed for business closure or some may be 1n temporary 

difficulty where an Infusion of equity capital may be planned. 

Likewise for the ratio cash flow to current maturities of long-term 

debt the median 1s 2.1 while the other two quartlles (25th and 75th 

percentiles) are 1.7 and 5.6. 

For firms with sales above $500,000 the capital availability 

ratios quickly begin to Improve. However, some firms with sales above 

$500,000 are still Hkely to face capital availability problems when 

faced with the costs of a packed-bed scrubber 1n combination with a 

mesh-pad mist eliminator or the emerging technology of a fiber-bed 

mist eliminator. A firm would have to have sales of $2.1 million to 

get Its debt:worth ratio to 1.5 when faced with the costs of the 

packed-bed scrubber in combination with the mesh-pad mist eliminator. 

For the firm facing the costs of a fiber-bed mist eliminator that 

sales level would have to be $4 million. To bring the ratios for 

earnings before Interest and taxes ratio up to the threshold level the 

sales levels for firms facing those same two technologies would have 

to be $800,000 and $1,100,000. 

Closure potential (the fourth criterion) ties 1n directly with 

the availability of capital (the third criterion) and the Impact of 

the control costs on profits. Because the large and medium plants 

have more discretion over price than the small plants, small plants 

-23-
P.25 

that do not have their own market niche will bear a portion of the 

control cost differential 1n the form of reduced profitability. The 

small plants may only be able to pass on/10 to 20 percent of the 

control costs 1n the form of higher prices, because the Industry price 

will be established by the more efficient firms. 

The concern 1s whether the control cost that cannot be passed'on 

to consumers by small hard chromium plants would be significant enough 

to cause closures. A limited survey of job shops revealed that the 

majority of small job shops compete vigorously with large job shops 

for hard chromium plating. Thus, 1t cannot be claimed that all 

small plants have their own market niche and can pass these 

differential costs on to their customers. On the other hand, 1t was 

revealed that competition 1s based more on quality of service and 

delivery time than 1t 1s on price. For small plants that have their 

own market niche, some or all of the differential 1s Hkely to be 

passed on as price Increases due to the competitive advantage of the 

plants. On balance, however, 1t 1s Hkely that many small plants will 

have to absorb some compliance costs, causing profits to decrease. 

Whether or not the profit decrease would cause small plant closure 

requires an analysis of existing profit rates, cash flows, and net 

present values of small firms before and after effects associated with 

the controls. 

Two approaches were used to estimate this closure potential for small 

plants. In the first approach, a formula was used whereby the net 

present value (NPV) of the plant could be estimated with and without 

the control costs. Allowing for chromium electroplating operations to 

earn their cost of capital, the decision to close occurs when the 

control cost causes a plant's NPV to go from positive to negative. 

The formula 1s: 

20 

NPV = I [(1-.4) (EBTt-CCt)] + .8(WC) + .2(FA) 

t=l (l+r)t (1+r)20 (1+r)20 

where, 

-24-
P.26 

CC = Annual control costs absorbed by the hard chromium 

plating operations 

EBT = Earnings before taxes chromium plating operations 

WC = Working capital 

FA ' Fixed assets 

r = Cost of capital 

.4 = Combined federal, state, and local corporate Income 

tax rate. 

The assumptions Inherent In'the above formula are: 

0 Depredation cash flows of the operation will be used for 

sustaining capital expenditures 

o 80 percent of the operation's working capital value will be 

recovered at the end of 20 years 

o 20 percent of the operation's fixed asset value will be 

recovered at the end of 20 years 

o The cost of capital 1s 10 percent. 

This formula 1s particularly sensitive to the level of control 

costs absorbed. As shown earlier 1n this section, the small plants 

should be able to recover approximately 10 to 20 percent of the 

control costs through the price Increases of the larger job shop price 

leaders. The NPV calculations were therefore made with and without 

some control costs being passed on. 

Ninety-one companies with $1 million or less 1n assets 1n SIC 

codes 3471 and 3479 reported median earnings before tax profit rates 

(EBT) on sales of 3.6 percent for these companies' fiscal year 1989. 

For the same companies, the median sales to working capital (WC) ratio 

was 13.6 and the median sales to net fixed asset (FA) ratio was 7.1.7 

The NPV calculations show that plants with sales of $245,000 or 

less who could not pass on the control costs of Control Option III 

would close. For plants who could pass on one-tenth of their control 

costs, the closure point 1s about $220,000 1n sales. Under Control 

Option II the closure level 1s $70,000. For the composite mesh-pad 

-25-
P.27 

mist eliminator the closure level 1s $355,000 (assuming a cost passthrough of ten percent) while for the PBS/MPME technology the closure 

level 1s $458,000 and $738,000 for the fiber-bed mist eliminator. 

There are about 116 hard chromium job operations with sales less 

than $500,000.' The number of operations subject to Control Options 

III and II with sales of $220,000 or less and $70,000 or less'ls 51 

and 17 assuming proportional representation. Because 70 percent of 

the small hard chromium operations already have packed-bed scrubbers 

or mist eliminators, the number of plants Hkely to close due to 

Control Option III 1s 0.3 x 51 or about 15 plants and that due to 

Control Option II 1s 0.3 x 17 or 5 plants. These small plants 

constitute approximately 0.4 and 1.3 percent of the total of 1170 

small hard chromium job operations. 

For the composite mesh-pad mist eliminator, 25 plants would be 

closure candidates (116 plants less than $500K 1n sales x $355k + $500K 

x 0.7 with controls) or 2.1 percent of the small hard chromium job 

operations. Facing the need for a combination packed bed 

scrubber/mesh-pad mist eliminator, 32 plants or 2.7 of all small hard 

chromium job operations would face closure. For the fiber-bed mist 

eliminator 51 plants or 4.4 percent would be closure candidates. 

These estimates of closures are Hkely worst-case estimates for 

three reasons. First, the above calculations assume that all plant 

sales are attributable to direct electroplating only, and exclude 

sales revenue of ancillary operations such as polishing, grinding, 

etc. Because revenue and earnings before taxes would, 1n reality, be 

higher than revenues exclusively from the electroplating process, the 

above estimates represent an upper Hm1t. The second reason 1s that 

some small firms do have their own market niche and will be able to 

pass on the differential control costs. The third reason 1s that even 

though the number of electroplating plants 1s depicted herein as being 

stable over the next five years, there 1s a trend toward large plants as 

opposed to smaller plants. An unknown percentage of small plants 

would be expected to cease operations for economic reasons over the 

impact time frame, some of them possibly overlapping with the above 

estimated closures. 

-26-
P.28 

The above analyses were based on 30 percent of the plants having 

no controls 1n place. Another 30 percent of firms however already 

have control Option II 1n-place for whicli? the BID shows that the 

annualized control cost 1s $6,700 for a small plant. The closure 

sales level for these additional plants with the composite mesh-pad 

mist eliminator 1s $199,000 or 14 more plants (199/500 x 116 x-.3)v 

The remaining 40 percent of the affected firms have controls 

1n-place that are the equivalent of Control Option III. These firms 

would face an Increase 1n control costs to go from the costs they face 

under Control Option III to the emerging technology. For small plants 

the Incremental costs are $5,700 ($15,200 less $9,500). The closure 

point for such Incremental sales 1s $133,000 or 12 plants. Thus, a 

total of 51 plants or 4.4 percent of small hard chromium 

electroplating operations would face closure (25 uncontrolled plants, 

14 plants with baseline controls of Control Option II and 12 plants 

with baseline controls of Control Option III). 

These 51 plants would be closure candidates under the enhanced 

mesh-pad mist eliminator emerging technology unless some have their 

own market niche which would allow them to pass much of the cost 

Increase onto their customers. For the packed-bed scrubber/MPME 

emerging technology the total 1s 75 plants while for the fiber-bed 

mist eliminator the total 1s 139 plants. For all three emerging 

technologies the totals represent 4.4, 6.4 and 11.9 percent of all 

small hard chromium job operations. 

Table 4-3 summarizes the results of the NPV closure analysis. 

The far right column lists the potential number of closures under 

control option III and each emerging technology. The columns to the 

left of this column subcategorize the total number of closure 

according to the existing level of control at the facility. For 

example, 1t 1s estimated that a regulation requiring control 

equivalent to that of a composite mesh pad eliminator would close 25 

facilities without controls, 14 facilities currently using control 

option II, and 12 facilities that are currently utilizing control 

option III for a total of 51 closures. 

An alternative method to determine the number of potential plant 

closures can be performed based on the data presented 1n Table 4-4. 

-27-
R29^ 

TABLE 4-3. NUMBER OF PLANT CLOSURES 

USING THE NET PRESENT VALUE CLOSURE TEST1 

Control Option (CO.) 

Ill 

Emerging Technologies 

Composite MPME 

PBS/MPME 

FBME 

30 Percent, 

No Controls 

15 

25 

32 

51 

30 

C 

Percent, 

.0. II 

5 

14 

21 

40 

40 

C 

Percent, 

.0. Ill 

0 

12 

22 

48 

Xotal 

20 

51 

75 

139 

MPME «- Mesh-pad mist eliminator 

PBS = Packed-bed scrubber 

FBME * Fiber-bed mist eliminator 

•^Assuming ten percent of control costs passed on to consumers by 

small plants. 

-28-
P.30 

TABLE 4-4. NUMBER OF PLANTS, PLANT SIZE, INDUSTRY CAPACITY, 

AND PERCENT OF INDUSTRY CAPACITY — HARD CHROMIUM ELECTROPLATERS 

Model Percent 

plant Number Industry capacity of Industry 

size of plants Ampere hrs. (amp hrs) capacity 

Small 1,080 5,000,000 5,400,000,000 12.73 

Medium 310 42,000,000 13,020,000,000 30.69 

Large 150 160,000,000 24,000,000,000 56.58 

-29-
P.31 

This data shows that the bulk of the Industry capacity 1s provided by 

large plants. As a result, large plants will most Influence the price 

for hard chromium products and so will be able to pass on their 

Increased costs to the consumer. However, the smaller plants will be 

less able to pass on their full cost Increases. It is, therefore, 

assumed that any industry output reduction will be concentrated only 

1n the smaller, less efficient plants. 

Table 4-5 presents a range of percent price Increases compared 

against two elasticity values (I.e. -0.05 and -0.15) that represent 

the derived demand for hard chromium plated products. The numbers 1n 

the center of the matrix Indicate the number of plant closures for 

each percent price increase and elasticity value combination. The 

most Hkely percent price Increase would be a weighted average percent 

price Increase based on a plating cost of 40 cents per square Inch, 

plated to a thickness of 0.005 Inches and calculated as follows: 

3 

W = I (Mi Pi) . NC 

1-1 

where: 

W = Weighted average percent price Increase 

M = Market share for each model plant size 

P = Percent price Increase for each model plant size 

i = Small, medium and large size plants 

NC = Percent noncompliance 1n Industry (.30 percent) 

Using the electroplating costs for Industrial rolls 1n the bottom 

H n e of Table 3-5 and the price Increases 1n Table 3-6 for 40 cents 

per square foot at 0.005 Inches, the weighted average percent price 

Increases are 0.53 percent for Control Option II, 1.12 percent for 

Control Option III, 2.88 for the composite mesh-pad mist eliminator, 

3.29 for the packed-bed scrubber/MPME and 7.06 percent for the 

fiber-bed mist eliminator. 

•30-
P.32 

TABLE 4-5. NUMBER OF SMALL PLANT CLOSURES BASED ON PERCENT 

PRICE INCREASE AND ELASTICITY VALUE COMPARISONS 

Percent 

price Increase 

0.50 

0.53 II 

1.00 

1.12 III 

1.50 

2.00 

2.50 

2.88 CMPME 

3.00 

3.29 PBS/MPME 

3.50 

4.00 

5.00 

6.00 

7.00 

7.06 FBME 

8.00 

1 1 < 

-0.05 ISJ 

2 

4 

5 

6 

8 

11 

12 

13 

14 

15 

17 

21 

25 

30 

30 

34 

istldtles 

-0.15 

6 

7 

13 

14 

19 

25 

32 

37 

38 

42 

45 

51 

64 

76 

89 

90 

102 

-

II = Chevron Blade Mist Eliminator 

III = Mesh-pad mist elHnator or packed-bed scrubber 

CMPME = Composite mesh-pad mist eliminator 

PBS/MPME = Packed bed scrubber and mesh-pad mist eliminator 

FBME = Fiber-bed mist eliminator 

-31-
P.33 

Next the number of closures was estimated using the following 

formula: 

N * (W * E * 6)/S 

where 

N = Number of closures 

W =• Weighted average percent price 1ncrease/l00 

E = Price elasticity 

0 = Industry wide capacity for hard chromium electroplaters 

S = Ampere hours of capacity for a small model plant 

Thus a percentage price Increase of 1.12 for Control Option III and a 

price elasticity of -.15, coupled with an Industry wide capacity of 

42,420,000,000 ampere-hours and an ampere-hour capacity of 5,000,000 

for a small model plant would produce an estimated fourteen closures, 

price Increase of 7.06 percent for the fiber-bed mist eliminator 

emerging technology would lead to 90 closures. It should be noted 

that small plant closure analyses triggered by reduced Industry output 

represent a minimum number of small plants closures. There could 

still be a shift 1n remaining production from small to larger plants 

causing a greater number of small plant closures. 

Based on the two closure analyses presented above, this report 

assumes that 14-20 plant closures will potentially occur as a result 

of Control Option III. The capital availability analysis performed 

earlier suggests that those who close may be those who have difficulty 

raising capital. 

For the emerging technology of composite mesh-pad mist eliminator 

the two closure analyses suggest that the number of closures will 

range from 37-51 plants. Negative profits and capital availability 

are the reasons for these closures. For the packed-bed scrubber and 

mesh-pad mist eliminator emerging technology the range of plant 

closure estimates 1s 42-75 plants while for the fiber-bed mist 

eliminator technology the range is 90-139 plants. 

-32-
P.34 

Table 4-6 summarizes the estimated number of potential closures 

under each of the closure analyses performed. 

TABLE 4-6. SUMMARY OF CLC-SURE ESTIMATES 

Output 

NPV Reduction 

Analysis Analysis 

Composite mesh-pad mist eliminator 51 37 

Packed-bed scrubber/mesh-pad 

mist eliminator 75 42 

Fiber-bed mist eliminator 139 90 

5.0 SUMMARY 

A NESHAP regulation for the control of chromium emissions by the 

emerging technologies would have a very small impact on the prices of 

hard plated chromium products. Price increases for the emerging 

technologies would be about one and one-half times to two and one-half 

times as great as that of Control Option III but still less than 

one-half of one percent of the prices of the products studied. 

However there would be some impact on small businesses from two 

of the three emerging technologies. For the emerging technologies two 

of the four economic impact criteria for small business impacts are 

triggered. Capital availability would be a problem for the 116 

smallest hard chromium electroplating shops facing the packed-bed 

scrubber/mesh-pad mist eliminator and the fiber-bed mist eliminator 

emerging technologies. The impact on earnings from the emerging 

technologies would cause 37 to 139 of the small plants to close. This 

can be contrasted with Control Option III under which 14-20 small 

-33-
plants are projected to close. The range estimate for closures from 

the composite mesh-pad mist eliminator is 37 to 51; 42 to 75 for the 

packed-bed scrubber/mesh-pad mist eliminator and 90-139 for the 

fiber-bed mist eliminator. 

The composite mesh-pad mist eliminator impacts are slightly 

greater than the Control Option III but do not trigger significant 

small business impacts. However the impacts of the other two emerging 

technologies would cause capital availability problems and a larger 

number of closures than for the composite mesh-pad mist eliminator. 

6.0 REFERENCES FOR REPORT 

1. Motor Vehicle Manufacturers Association of the United 

States, Inc. MVMA Motor Vehicle, Facts and Figures 1989. 

Detroit. 1989. p. 73. 

2. Duncan, R.N. Electroless Nickel: Alternative to Chromium 

Coatings. Metal Progress. June 1985. p. 35. 

3. Friedman, L.S. Microeconomic Policy Analysis. New York, 

McGraw-Hill Book Company. 1984. p. 303. 

4. Telecon. Donato, S.A., JACA Corp., with Gary Tindel of John 

Deere, Moline, IL. March 17, 1987. Information on the 

average cost of the most commonly used backhoe and size of 

the hydraulic cylinders in the backhoe. 

5. Metal Finishing Job Shop Industry Profile 1985/86, 

Finishers' Management, Media/Market Bulletin. Glenview, IL. 

Finishers' Management. 1986. 

6. Robert Morris Associates. 1989 Annual Statement Studies. 

Philadelphia, PA. 1989. p. 135. 

7. Reference 8. 

8. Reference 7. 

-34-
P.36 

APPENDIX 

In order to calculate the figures-presented in Table 4-1, each 

model plant size was assigned an average net sales figure based on the 

financial data reported in the RMA Annual Statement Studies 1991 for 

firms in SIC 3471, Coating, Engraving, and Allied Services. The first 

step in deriving an average net sales figure was to sort the sales 

data from RMA so as to approximate a normal distribution. Of the 

total number of firms 20 percent were considered small, 67 percent 

medium, and 13 percent large. The average net sales for these three 

categories were then assigned to the appropriate model plant sizes. 

The sales figures thus derived for the small, medium and large plants 

are respectively, $600,476, $3,650,496 and $28,118,286. 

35"