The Proton Vendors Association (PVA), representing 77 companies in the automotive components sector in Malaysia, recently voiced their grievances in a letter dated Oct 23 to Proton Holdings Bhd. This was reported by The Edge yesterday. The letter, signed by PVA President Thomas Lim Teck Ling, highlights concerns about the adverse effects of increasing operating costs on their businesses.
Challenges Faced by Proton Vendors
PVA’s letter emphasizes the unwillingness of Proton Holdings to make price adjustments, even in light of the higher minimum wage sanctioned by the Malaysian government in May 2022. The association claims that the agreed minimum manpower rate has been arbitrarily reduced without consultation. Additionally, PVA members, including units of major companies such as UMW Holdings Bhd and Sime Darby Bhd, have expressed difficulties in coping with fluctuating order levels, especially for Proton’s X70 and X50 models.
Proton Holdings’ Response
Proton Holdings, in response to the concerns raised by PVA, acknowledges receiving the letter and confirms discussions with Proton vendors. The company maintains a policy of not commenting on ongoing internal discussions but emphasizes its commitment to fair and constructive dialogue with partners. Proton Holdings highlights its impressive growth over the past 40 years, citing doubled purchase values from 2018 to 2022 and consistent year-on-year sales volume increases. The company attributes this progress to effective ecosystem management, compliance, adherence to policies, and successful issue resolution with partners.
Industry Perspectives
The automotive industry executives interviewed for this article provide varying perspectives on the situation. While some are unsympathetic towards vendors, citing past political connections, others recognize valid complaints. One industry expert notes that Proton Holdings tends to measure performance based on Chinese vendor standards, suggesting that vendors may need to adapt to these expectations. Despite differing opinions, there is a consensus that the strained relationship between Proton Holdings and PVA needs swift resolution for the benefit of both parties.
Government Involvement and Financial Overview
The Malaysian government’s soft loan of RM1.5 billion in June 2016 aimed at ensuring Proton Holdings’ sustainability is highlighted. While Proton was expected to pay dividends and repay the loan after a grace period, it appears that Govco Holdings Bhd still holds 1.2 billion redeemable convertible cumulative preference shares (RCCPS) in Proton Holdings, according to checks with the Companies Commission of Malaysia (SSM). The financial overview of Proton Holdings indicates a profitable year, with after-tax profit of RM201.58 million for the financial year ended December 2022.
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