Case Study

Read the following case and answer all the questions that follow.

Automotive industry faces acute shortage of manpower, needs immediate solution (The Sun, 03April, 2022 10:10 AM) KUALA LUMPUR: Malaysia's automotive manufacturing industry is facing an acute shortage of workers which could derail the national automotive manufacturing (NAM) ecosystem if not resolved immediately.

Proton Vendor Association president Datuk Dr Wan Mohamed Wan Embong said the NAM ecosystem might collapse with the loss of more than 500,000 jobs and wiping out up to 4.5 per cent of national gross domestic product (GDP) if the manpower issues in the industry are not being addressed promptly. "Malaysia should allow foreign workers intake with no further delay and lower the recalibration cost of about three to five million illegal immigrant workers in order to address the shortage," he told Bernama recently. He said the current cost for legalization of illegal foreigners stands at RM4,500 per person, which is prohibitively expensive especially when the companies are struggling to recover from the Covid-19 pandemic, lockdowns and also recent flash floods. At the same time, Wan Mohamed also stressed that hiring of foreign workers by the automotive manufacturing ecosystem does not rob locals from the job opportunities as the industry has been putting lots of effort in hiring locals even though most of them often resign within six to 12 months of hiring. "We must understand that severe shortage derails the economic recovery for the automotive industry, causes stoppages and under production at original equipment manufacturers. "The current situation faced by the industry is that because vendors do not have enough workers and they cannot produce the parts, other vendors are being affected too, hence the production cannot move according to target," he said. He also explained that the situation has caused many car buyers to wait longer for their vehicles after orders been placed with a maximum waiting period of four months. Due to the labor shortage, he said the cost of manpower had also increased from RM80 per day last year to RM125 per day to date resulting in high turnover or higher wastages. Meanwhile, Perodua Suppliers Association president Musa Zahidin Ahmad Zaidee said the industry has been equipped with training facilities for the people especially for locals but unfortunately, many of them quit within a few months, leaving the vendors to face challenges in upskilling and increasing production to meet the demand. "We must also bear in mind that foreign workers are not cheap as it becomes costly with the accommodation, levy and permit expenses. This is why the legalization of illegal foreigners is crucial," he said. Moreover, he said, the automotive manufacturing industry needs 100 per cent operation in order to built a car which has 20,000 to 25,000 parts in total. "Even if 0.1 per cent of the suppliers could not operate, the whole line of a few thousand people cannot fix a car. This is the serious issue we are facing now," he pointed out. Apart from the shortages of manpower, Wan Mohamed said many vendors were also facing lack of capital to operate efficiently because of the prolonged economic, health and environment crisis such as Covid-19, flash flood and also ringgit depreciation especially in the last one year. "These people face lower revenue due to continued supply chain disruptions and operational stoppages due to the pandemic and shortage of raw material supply," he said. Therefore, he suggested the government should consider providing RM250 million soft loans at less than two per cent interest to all vendors in need to continue operating and save the whole ecosystem. -Bernama

Question 3: Recommend ways to overcome the operational challenges raised by the labor shortage.

[40 marks]