Auto SMEs going bankrupt

LAHORE: Pakistan Association of Auto Parts and Accessories Manufacturers (PAAPAM) has said that the auto parts industry was facing the worst crisis in the history of Pakistan on account of the domino effect of dollarization-- spiralling inflation, freight rates, and tariff of utilities.

The association in its statement issued on Monday said mounting bank interest, skyrocketing material cost, and crunch of working capital has bankrupted the SMEs working in the automotive parts sector.

PAAPAM Chairman Abdur Razzaq Gauhar and Senior Vice Chairman Abdul Rehman asked the Original Equipment Manufacturers (OEMs) to justify their unwillingness to understand and implement vendors’ requests to maintain their historic profit returns, instead of freezing them permanently, in spite of rising input costs. They warned after vendors caved in that the OEM would be the next to fall.

They demanded that the OEMs should ensure immediate indexation of all frozen costs like labour, electricity, gas/RLNG, financial costs, tooling, exchange rate impact, consumables, like oil and tools, transportation, and packing, in addition to payments terms of seven days and a consistent level of profit, as per past mutually agreed policy.