(FORTUNE Magazine) – In a big gray brick building in Highland Park, Michigan, a half-dozen technicians and engineers in shirt sleeves are hard at work killing American ingenuity. Armed with air-powered socket tools, screwdrivers, and hammers, they are tearing apart showroom-new cars--a red Ford Aspire here, a blue Chrysler Neon over there. They dissect subassemblies, weigh each component, videotape and time the procedures. Black wire electrical harnesses are removed and hung on tall white boards as if they were the innards of cats on display for a freshman anatomy class.

This most unusual lab is the Vehicle Recycling Development Center, a joint effort of the Big Three automakers that went into full operation last summer. Specialists from collaborating recycling associations do most of the demolition, but engineers from Chrysler, GM, and Ford visit frequently to observe, often to participate. The aim is to teach the Big Three to better design cars for easier dismantling--for instance, by improving access to key parts for future removal.

The men and women at the new center are riding the hottest new production trend in the world: design for disassembly (DFD). The goal is to close the production loop, to conceive, develop, and build a product with a long-term view of how its components can be refurbished and reused--or disposed of safely--at the end of the product's life. In a world where the costs of disposal are rising, ease of destruction becomes as important as ease of construction.

The idea has fired manufacturers from Rochester, New York, to Palo Alto, from Tokyo to the tiny village of Uebersee in the Bavarian Alps. Siemens coffeepots and Caterpillar tractors, Xerox photocopiers and Eastman Kodak cameras, American PCs and Japanese laser printers, German locomotive engines and Canadian telephones--plus many other products--are beginning to be built to be taken apart.

The forces behind this newfound environmentalism have more to do with return on capital than with a return to nature. Unlike prior environmental schemes, green manufacturing holds out the promise for companies to do well as they do good. Some American companies, including Xerox and Kodak, are already coining money designing for disassembly and component reuse.

Green machines, with their emphasis on reducing parts, rationalizing materials, and reusing components, are proving more efficient to build and distribute than conventional ones. That's because green production meshes with today's favored manufacturing strategies: global sourcing, design for manufacture, concurrent engineering, and total quality.

If that isn't enough, new laws across Europe will soon compel manufacturers of everything from autos to telephones to take back used product. In Germany, the root of the green movement, manufacturers are already responsible for the final fate of their products' packaging.

This green wave of German legislation is rolling across the Atlantic--and don't think Republican control of Congress can stop it. While chances of German-type product take-back legislation are nil in this Congress, it doesn't matter: The Germans have established a de facto global manufacturing standard. U.S. companies wishing to compete globally must start making products that will comply with the green dictates of the huge European market. "Things are moving too fast, with 12 countries already participating in green manufacturing," says Joanna D. Underwood, president of Inform, a New York City-based company that advises corporations on environmental matters.

Green product design could also be the antidote to an astonishing depletion of the earth's mineral riches. And it might cut the amount of junk that threatens to flood landfills in the industrial world. Design dictates a whole chain of events both pre-and post-manufacturing that governs the use, or misuse, of natural resources. Take raw materials extraction, for instance. Judicious use of finished materials like steel could reduce mining demand that totals 20,000 pounds annually for each American. The consequences of this are enormous. According to the National Academy of Sciences, 94% of the stuff that is pulled out of the earth enters the waste stream within months.

European lawmakers are encouraged by the fact that Germany's packaging take-back legislation is working. It has worked so well that the private company organized by manufacturers to collect and dispose of packaging materials has been gathering too much trash--almost going broke in the process because sufficient facilities to remold plastics, for instance, are not in place. But the take-back law reduced the amount of packaging waste by 600 million tons, or 4%, during its first two years of operation.

Although corporations fight such regulations, the green laws in Germany have stimulated companies to develop imaginative ways to market goods with less packaging. Colgate, for instance, designed a toothpaste tube that stands on its head, sans box; it now sells some products that way in the U.S. too.

Hewlett-Packard's workstation designers in Germany literally moved the packaging inside, substituting plastic foam for the metal skeleton that holds interior parts, thus reducing the need for metal inside and for wrapping outside. A polypropylene foam chassis has cutouts for each component so that all nestle snugly. Channels cut in the foam carry cooling air and cabling to connect the components. The new chassis reduces transport packaging by 30%, while disassembly time has been cut 90%. This idea will be applied to H-P personal computers as well.

Luckily for manufacturers, the main principles of DFD--use fewer parts and fewer materials, use snap-fits instead of screws --also fit into modern efforts to make assembly more efficient, such as concurrent engineering and total quality control. Concurrent engineering brings different specialists into a design team from the beginning; DFD experts fit into these teams easily. And waste is an enemy of total quality management; hence, DFD also fits in here nicely.

Theoretically, anything from a coffeemaking machine to a Caterpillar tractor can be designed for disassembly. The more value in an item, of course, the more sense it makes to reuse its parts.

Some examples follow of how valuable products are being redesigned in the U.S. and in Germany to fit what the Germans call the new closed-loop economy:

AUTOMOBILES. Almost everywhere cars are built, efforts are in high gear to make them more suitable for disassembly and to reuse component parts. Obviously, no one wants to make a car fall apart. Cost, customer appeal, and performance still come first. But car companies are changing some of the ways of automaking to enhance autobreaking. BMW estimates that by the end of this decade, 20 million cars a year in Europe will make return trips, 250,000 of them BMWs. To put this many cars into reverse, BMW and other German automakers have been setting up experimental disassembly plants and even executing new-car models to learn more about how to take them apart.

BMW's 1991 Z1 Roadster, whose plastic side panels come apart like the halves of a walnut shell, is an example of a car designed for disassembly. One of the lessons learned, says spokesman Rudolf Probst, is that glue or solder in bumpers should be replaced with fasteners so that the bumpers can come apart more easily and the materials can be recycled. BMW is also changing instrument panels. In the past they were made of an assortment of synthetics glued together. Now BMW uses variations of polyurethane, foam, and rubber so the panel can be recycled in one piece. BMW has pushed the recycled portion of a car to 80% by weight and is aiming for 95%. Francois Castaing, Chrysler's vice president for vehicle engineering, says the U.S. will be in that range by the end of the decade. Volkswagen, too, is on the bandwagon and is planning recycling centers throughout Germany.

The Germans could take a lesson from the U.S. and its robust, market-based auto-recycling industry. "Frankly," says Chrysler's Castaing, "I prefer the more natural, more cost-effective way of what happens in the U.S. We don't have to involve the government and to subsidize anybody in any fashion." Arguably the world's most efficient auto recycler, the U.S. already reuses a remarkable 75% by weight of nearly every American car. Cars are first stripped of valuable parts such as engines, generators, alternators, and other components that can be refurbished and resold by some 12,000 auto parts recyclers. Next, the metal carcasses wind up in the gaping maws of some 200 shredders that reduce the metal skeletons to steel fragments, which are shipped to steelmakers to make more new car bodies. This is already a profitable, multibillion-dollar-a-year business in the U.S. But it is also fraught with problems, such as disposing of tires, glass, and plastic. Green manufacturing--thinking these problems through beforehand--can lower recycling costs dramatically and reduce environmental hazards.

COMPUTERS. There are probably insect species with longer life cycles than a PC--now obsolete less than 12 months after it leaves the factory, according to scientists at Carnegie-Mellon University. "Seventy million obsolete computers are sitting in the basements of various organizations and will eventually end up in landfills if they are not recycled," says the university's D. Navin-Chandra. "Today two computers become obsolete for every three purchased. By 2005, the ratio will be 1 to 1, which means we should be able to recycle computers as fast as we make them. For this reason, recycling must be treated like any regular manufacturing task."

In the U.S., laws concerning toxic wastes are scaring computer makers and other manufacturers out of their wits. Reason: If their old machines wind up in landfills and commence polluting the ground, the makers are held responsible. So most U.S. computer companies have begun so-called reverse distribution for old machines, especially from big customers. Some big corporate computer buyers are now writing take-back clauses into purchase orders. The users simply don't want to be burdened with storehouses full of obsolete hardware.

Disassembling old computers isn't new. It began a few years ago, mainly to retrieve precious metals like gold and platinum. These metals were used in larger quantities in the older machines, deposited as paths to connect chips on a board. The boards were then sold to chip retrievers, which resold the chips to such users as toy manufacturers.

Computer makers that can reduce the number of parts and the time it takes to disassemble a PC will profit when the product, like a sort of silicon salmon, returns to its place of origin. IBM, H-P, Digital Equipment, and other makers are rapidly introducing DFD technology across the board. As early as 1991, IBM designed two models of its PS2E both for easier disassembly and lower energy consumption. Now all IBM designers are being urged to switch to green schemes. For more than a year H-P has used a DFD approach to build all 12 models of its Vectra PC. Each Vectra now contains only three screws, a construction that also allows easy upgrade by users. "Our customers love it," says Gilles Bouchard, who heads Vectra's mechanical design team in Grenoble, France.

Siemens Nixdorf's green PC41, introduced in 1993, contains 29 assembly pieces, vs. 87 in its PCD-2, built in 1987. The green PC is assembled in seven minutes and can be taken apart in four; the older PCD-2 took 33 minutes to put together and 18 minutes to take apart. The new PC also has only two cable connections, vs. 13 in the old one.

For more than three years, in Research Triangle, North Carolina, IBM has been practicing take-back and disassembly at a facility called the Engineering Center for Environmentally Conscious Products. (It might think about disassembling that name.) The computer colossus is evaluating how such collection could be done at minimal cost, or even at a profit, says center director J. Ray Kirby. IBM takes back its old machines in eight European countries for a small fee, as do most other computer manufacturers.

H-P, which has been in the disassembly business longer than IBM, already runs a profitable operation, according to executives there. DEC says its Resource Recovery Center in Contoocook, New Hampshire, is "cost effective." Germany's Siemens Nixdorf, on the other hand, says its recycling is not yet profitable because not enough old machines are being processed.

H-P's record with its workstations is unparalleled. It rebuilds and recycles every machine that's returned. Says Tom Korpalski, H-P's manager of product stewardship for small computers: "In the hierarchy of the three R's of design for the environment, the first two--reduce [the number of product parts] and reuse [the parts]--rank above recycling."

TELEPHONES. When monopoly prevailed in telephony, manufacturers leased telephones and then refurbished and rebuilt them to lease anew. The breakup of the Bell System disrupted this process, since most phones are now purchased rather than leased. But profitable leasing continues in Canada. In a big plant outside Toronto, Northern Telecom breaks down old telephones, puts their innards into new plastic housings, and sends them out again.

Beyond that traditional activity, Northern Telecom is switching to companywide DFD. "We're on the threshold of moving to a new platform that will truly change the philosophy behind our entire product strategy," says Margaret Kerr, senior vice president for environment and ethics at Northern Telecom in Toronto.

AT&T, moving a bit more deliberately, is in the midst of a demonstration project called "green product realization" to generate guidelines for green product design.

ENGINES. Sometimes DFD occurs naturally. In a bustling plant in the quaint Bavarian village of Uebersee at the edge of the Alps, the German engine manufacturer Deutz Service International, a subsidiary of Klšckner Humboldt Deutz, rebuilds thousands of Deutz engines a year. They are used in machines ranging from tractors to locomotives. "We noticed that a market had developed for replacement Deutz engines," says Bruno Baum, the plant manager. "Our engines are built in such a way that they are extremely easy to take apart and put back together."

This DFD occurred by happy circumstance. Explains Baum: "A popular trend in the 1970s called for a lot of the metal pieces to be soldered together, pieces that used to be held together with screws. It makes production cheaper, but also makes it hard to recover many of the parts. Fortunately, we didn't go along."

Deutz engine users around the world noticed the ease of disassembly, and small companies sprang up specializing in rebuilds. Deutz decided it wanted that business for itself. It now buys more than 5,000 old engines a year and last year turned them into 3,500 remanufactured versions--"as good as new," says Baum--that sell for up to 25% less than new engines. Adds Baum: "A product take-back law would only be to our advantage because we already fulfill its requirements. Our competitors don't." The company plans to rebuild in the U.S.

Fortune 500 companies such as IBM, Ford, and Digital Equipment have joined consortiums at universities such as Carnegie-Mellon, the University of California at Berkeley, and Tufts to learn more about green product design. The Department of Commerce plans to help small companies master the techniques at the Great Lakes Manufacturing Technology Center in Cleveland.

Also coming to manufacturers' aid today are sophisticated software programs such as the pioneering ReStar from Green Engineering Corp. of Pittsburgh. A brainchild of Carnegie-Mellon's D. Navin-Chandra and his associates, who founded the company less than a year ago, ReStar carries a hefty price tag: $19,600. (You can even get it downloaded via Internet.) But the user gets a remarkable amount of help. First and foremost, ReStar answers the key question about disassembly: Exactly where and when do you stop it before you start losing money? Navin-Chandra calls this "the crux of successful disassembly."

A ReStar user can also determine what materials to employ most profitably and whether the retired product should be bought back or sold to a third-party recycler. To make ReStar do its magic, the user enters data on each part that goes into the design, including the part's weight and material content. Each point at which parts connect is also described and identified from a roster in ReStar's database. If the database lacks that information, the user can add new joint- and material-type descriptions to the database. The assembly is described in terms of geometric relationships between the parts. For each direction from which a target part can be removed, for instance, the user lists the other parts that have to be removed before the target part comes off.

From the geometric relationships entered into the database, ReStar creates a 3-D model of the entire assembly. With that information, the program can identify all possible stages of disassembly of the product, from partial to complete. It selects the best strategy by calculating the economic consequences of moving to each stage.

The user can have ReStar generate disassembly plans with full cost and timing information. Navin-Chandra calls ReStar's "what if" capability the program's "biggest feature." The model also keeps track of such questions as: How much has been spent on disassembly until now? Are separated parts composed of compatible materials? If not, how much will it cost to get rid of them? Among ReStar's early users: Motorola (to design a yet un-identified consumer product), Whirlpool, IBM, and a German affiliate of Daimler Benz.

Valuable lessons come from two successful green manufacturers. Kodak and Xerox have moved well beyond the what-if stage, though each took a different path.

Kodak learned the hard way. In the late 1980s a group of engineers came up with a disposable 35-mm camera called Fling. The project got lukewarm support from top management because the idea ran counter to Kodak philosophy. Alan Vandemoere, who participated in the project, says Kodak's belief was "that God intended people to buy a roll of film and a camera and use the film to load the camera."

Indeed, Fling went bung. It sold poorly, and its name enraged environmentalists. Vandemoere's group didn't give up. One engineer devised a double lens that enabled the camera to take wide-angle shots. Creating a panoramic view with a $10 camera was novel. They also developed an underwater version and renamed the camera FunSaver 35. The new model soared--but it still ticked off environmentalists. And for good reason: Hundreds of thousands of returned cameras ended up in landfills.

Eager to recycle the camera, the engineers proposed DFD and component reuse. Kodak management yawned. It woke up when a U.S. Congressman gave the company his Wastemaker of the Year Award for the disposables. Recalls Vandemoere: "My phone rang and one of our senior managers asked, 'Remember that stupid idea you guys had? How long would it take you to implement it?' " Not long, Vandemoere said.

By the end of 1990, Kodak had converted the disposable cameras to recyclable ones. The previously ultrasonically welded camera case was redesigned to snap apart easily. The customer would deliver it to a photofinisher, which would return it to Kodak for a small fee. Kodak hired Out-Source, a New York State-sponsored organization that employs handicapped people, to break down the cameras.

In the recycling center, the covers and the lenses are removed. Plastic parts are ground into pellets and molded into new camera parts. The camera's interior--its moving parts and electronics--are tested and reused up to ten times. By weight, 87% of a camera is reused or recycled. Kodak sold about 30 million disposable cameras worldwide in 1993. The flash version of the FunSaver is the company's fastest-growing and most profitable product.

Xerox launched its green manufacturing program four years ago under the banner of cost savings. Says Jack C. Azar, corporate manager for environmental design and resources conservation: "We demonstrated to our senior management that we could probably do it very cost effectively and increase our productivity in the process."

Xerox had already been saving $200 million a year through reuse of parts; the focus on green design upped that by $50 million. Selling senior management on the benefits of wholesale green manufacturing, from DFD to remanufacturing and recycling of parts, is paying off at the rate of about $500 million a year.

At first Xerox disassembled without having designed for it. The cartridge assembly, for instance, was welded together ultrasonically and had to be torn apart by hand. Xerox replaced that demolition disassembly with a design that anticipates recycling. Potentially reusable parts were put in easily accessible places; snaps replaced screws. Common parts, such as plastic panels, were standardized for use in different products. Engineers were taught the elements of disassembly. A 35-person team called Asset Recycle Management Organization helped master the new discipline.

As Kodak, Xerox, and other companies have learned, the topsy-turvy world of DFD suddenly turns the gang in the lab into corporate strategists. It challenges them to take a much wider view of design than they've been taught. The most important lesson learned, says Donald Bloyer, an H-P senior product design engineer with 27 years experience, is not to be rigid. Coping with sometimes contradictory notions and demands, a designer must juggle quality and reliability with green engineering. In building its popular DeskJet printers for disassembly, H-P found, for instance, that a snap-fit--one of the icons of DFD--just doesn't always work best, so it uses standardized screws instead. It's pointless and wasteful to make a green product that's no good.

Recycling has brought another interesting fact to light: Used or refurbished parts sometimes work better than new ones. This is particularly true in digital electronics. A memory chip or a microprocessor, unless it has suffered repeated thermal insults or physical damage, is virtually immortal, since the only moving parts are electrons. So Fox Electronics, a fast-growing San Jose reclaimer and reseller of chips, doesn't even bother to test old chips it resells. The reason: What the trade calls "infant mortality" of new chips during initial tests is 5%, but Fox discovered that old chips are more reliable--only 2% die.

But old beliefs die even harder. Cheap cameras notwithstanding, getting Americans to buy retread products as new will be a tough sell. Xerox is meeting some resistance to selling or leasing refurbished photocopiers as new, even though they carry the same warranty as machines with all new parts. Car buyers will likely balk at a new car with a refurbished alternator. It's one thing to buy a new Ford with 50 reground plastic soda bottles making up its grille liner. But its another to accept a used part--refurbished or not--that moves or rotates and wears down with use.

"We still have some educating to do," concedes Xerox's Azar. "There are pockets in the consumer base--and that includes government agencies-that keep saying, 'We only want 100% new products.' " Azar is pleased that late in 1993 the Clinton Administration, in an end run around Congress, issued an executive order that urges (but doesn't require) federal agencies to buy green products like refurbished photocopiers.

No one knows how many of today's products are green. Maybe 5%, maybe 10%. But in ten years, predicts IBM's Kirby, all products will be made for disassembly and refurbishing--turning both the earth and some companies a greener shade.