KUALA LUMPUR: Proton Holdings Bhd's collaboration with Chinese automaker Geely has not marginalised local vendors and suppliers, says industry specialist Hezeri Samsuri.
He emphasised that the utilisation of locally sourced parts in car manufacturing has actually increased.
According to Samsuri, the heightened utilisation of local components is under close scrutiny by the Ministry of Investment, Trade, and Industry (MITI).
In light of the concerns raised by suppliers and vendors affiliated with Proton with regards to escalating operational expenses, Hezeri said there will always be vendors who are dissatisfied.
"According to my sources, there are many other vendors who are willing to take the slots vacated by them. MITI should also do surprise inspections of not only car companies but also the vendors.
"We do not want vendors who are assembling imported parts and then claiming them to be local. Some sort of local raw material should be in play," he told Business Times.
The Proton Vendors Association (PVA) comprising 77 companies, claimed that they are facing severe financial strains due to escalating operational expenses and a lower volume of sales.
PVA is recognised as a representative of the automotive components sector in Malaysia. Members of the association include units of large outfits like UMW Holdings Bhd, Sime Darby Bhd, Sapura Group Bhd, Pecca Group Bhd, APM Automotive Holdings Bhd (part of the Tan Chong group of companies), and EP Manufacturing Bhd.
According to Datuk Low Kok Chuan, president of the Malaysia Fujian Chamber of Commerce and Industry (MFCCI), despite PVA reaching out to Proton to address the challenges they are encountering, their appeals have been disregarded.
Low emphasised that many vendors are currently grappling with financial distress attributed to dwindling orders, especially since early last year, leading to an unsustainable business environment.
Expressing concern over the potential ramifications, he cautioned that if this situation persists, it could lead to many vendors going bust, affecting thousands of workers across the automotive industry chain.
He attributed the root cause to Proton's failure to fulfill the promised quantity of parts orders for its X50, X70, and X90 models, which has resulted in a significant reduction in production output by almost 50 per cent.
Consequently, many vendors are experiencing financial losses, forcing some to cease operations altogether, he said.
Low also criticised Proton's decision to import competitively priced locally assembled (CKD) parts from China, citing the reluctance of Malaysian vendors to reduce prices as the rationale behind this move.
Such actions, according to him, have further strained the relationship between Proton and PVA.
Ricky Tan, the treasurer-general of MFCCI and the auditor for PVA, claimed that even though Proton had originally contracted with vendors to supply parts for 1,500 cars each month, that number has now dropped to only 200 to 300 cars per month.
"Some members have suffered financial losses as a result of this significant decline in part orders. The PVA members were forced to establish production facilities and engage a large workforce when they obtained orders from Proton to supply parts for 1,500 cars. The number of cars has drastically decreased as of late. Many companies are currently moving to loss-making in this volume game," he told Business Times.
In response to the concerns raised by vendors, Proton affirmed its readiness to engage in fair discussions with all PVA members, except those unable to provide clear evidence regarding the issues raised.
"At Proton, we create an equitable and respectful business environment with our partners built on our unwavering commitment to fair and firm business dealings.
"To achieve this, we collaborate closely with PVA, the official representative for all 116 Proton vendors, having frequent discussions and joint initiatives that are mutually beneficial," it said in a statement yesterday.
Acknowledging the difficulties faced by certain vendors, Proton reiterated its commitment to open dialogue.
The national car company also expressed empathy for the challenges they are encountering.
Proton underscored its history of transparent and constructive dialogue and affirmed its dedication to maintaining this approach in the long term.
"We recognise the importance of resolving these matters quickly by working closely with all parties involved and inviting engagement via official channels to resolve them at the appropriate time," it added.
Meanwhile, Hezeri said that vendors that are significantly impacted might have to close down, but he noted that many automotive vendors do not depend on one manufacturer alone.
Although there are many reasons why a company has to wind down, he said this matter still requires investigation.
"The closure of the Goodyear factory in Shah Alam is a good example of how it is part of their US$1 billion cost-cutting effort. Hoping for cheap labour alone will be a short term solution as workers demand a higher salary.
"I would say the future for Malaysia is in the manufacturing and production of high tech components due to our increasing labour costs.
"Cars nowadays are littered with computers and high-tech components, and it is high time that Malaysia become a producer and not just an assembler," he said.
Universiti Kuala Lumpur Business School economic analyst Associate Professor Aimi Zulhazmi Abdul Rashid said one of the conditions given by the government when Geely offered to partially acquire Proton was to develop and enlarge the local vendor network and increase the local parts percentage.
"A study should be conducted to determine whether the target has been achieved on the back of globalisation of the first national car icon.
"A good comparison would be the second car project in Perodua, the supply chain of parts. Good points from both projects must be shared in order to boost and develop the local automotive industry," he added.