Parts Makers Must Halt Production Line to Recover Dues from Automaker / No Other Way to Collect Payments Exists

Saipa's heavy debts to parts makers have put the vehicle production chain under serious strain. Now parts makers are proposing an alternative approach to collecting dues from the automaker, but can this be a viable solution for debt recovery?

According to Ambassador Arjan, the heavy debt of car manufacturers to parts manufacturers is still one of the serious challenges of the country's car manufacturing chain. In the meantime, Saipa is also facing a large amount of unpaid claims from component manufacturers; This issue has been followed by the protest of the activists of this industry and now the component makers are looking for holding meetings to determine the assignment of these demands. One of the proposed proposals is that if the car manufacturer is unable to pay in cash, a part of the parts manufacturers' claims will be settled in the form of cars. But is it basically possible to implement such a solution and can the delivery of the car instead of paying the claims be the answer to the problems of the parts manufacturers?

The finished price of the car is about 20% related to the activities that are carried out directly in the car manufacturing and the major part of the production cost, i.e. about 80%, is related to the parts making / it is logical that the majority of the resources obtained from the sale of the car will also be allocated to pay the claims of the parts makers

In the same context, Mahmoud Najafisehi, a member of the board of directors of the Association of Homogenous Powertrain Industries and Automobile Parts Manufacturers of the country, referring to the past agreement between the parts manufacturers and the automobile manufacturers regarding the allocation of financial resources, told Ambassador Arjan: In the past, an agreement was formed between the parts manufacturer and the automobile manufacturer in Iran Khodro, according to which it was decided that about 20 to 25% of the amounts received by the automobile manufacturer will be given to the automobile manufacturer and the other 75% will be deposited into the account of the parts manufacturer.

Emphasizing that this mechanism has economic logic, he said: the finished price of the car is about 20% related to the activities that are carried out directly in car manufacturing, and the major part of the production cost, i.e. about 80%, is related to parts manufacturing. Therefore, it is logical that the majority of the resources obtained from the sale of the car will be allocated to pay the demands of the parts manufacturers.

When the automaker receives the car's cash or presale and financing, there's no reason to delay payment of the parts maker's claims for five or six months.

Referring to the current conditions of car sales, he said: Now the car manufacturer receives the car in cash or pre-sale and receives its financial resources. In such a situation, there is no reason to delay the payment of the parts maker's claims for five or six months. The automaker won't even let workers' salaries or other expenses be a day late, but the parts maker doesn't feel that obligation.

The high costs of the car manufacturer are transferred to the parts manufacturer

Stating that the cost structure of car manufacturers is also effective in this situation, Najafisehi explained: the car manufacturer is faced with high costs and very heavy overhead, and finally, a significant part of this cost pressure is transferred to the component manufacturer. However, not all existing problems can be justified in this way, and the bowl broke all the problems on the part maker.

Criticizing the performance of component makers in this regard, he added: Of course, the component makers themselves are not 100% blameless. When the car manufacturer sees that the parts manufacturer still does not stop its production line and delivers the required part as soon as possible, despite the pending demands, it naturally does not create an incentive to put pressure on itself.

He continued: When the parts maker continues production and delivers the parts on time even in spite of the car manufacturer's heavy debts, it is natural that the car manufacturer does not prioritize the payment of his claims. Any set will probably have the same behavior in such a situation.

Referring to an experience of his meetings with the managers of Iran Khodro, this activist in the field of components explained: A few years ago, during the period when I was active in the association, I attended a meeting with the previous board of directors of Iran Khodro. At that time, the car maker said that importing is both more profitable and easier for him.

Emphasizing that such an approach puts more pressure on component manufacturers, he said: In a situation where resources are spent on imports instead of paying component manufacturers' demands, it is natural that problems in the component manufacturing chain will intensify. In such a situation, instead of being dedicated to domestic production and component makers, the financial resources will be diverted.

Pointing out that the existing problem is not limited to the association or the automobile industry, Najafisehi said: This issue is not unique to the association and unfortunately, in today's society, from the highest official and legal organizations to the smallest organizations, in many cases there is no proper prioritization between national interests, union interests, and individual interests.

Emphasizing that this order has been reversed in practice, he said: the officials should first consider the national interests, then the union interests and finally the individual interests, but currently in many cases this process is happening the other way around. For this reason, the executive body can also use the existing differences and divisions between organizations and union activists.

Expressing his concern about the continuation of this process, Najafisehi stated: In the current situation, the only action that may be able to change this situation is to stop the production line. He announced this issue to the car manufacturer at the same time and is still concerned about it.

By stating that stopping the production line can have wide-ranging consequences, he explained: if one day the production line of major car manufacturers is stopped, concern about this issue will be formed from the highest management and government levels to industrial managers and various groups; Because there is a concern that workers working in automobile factories will come to the street. In such a situation, there will be no other way but to pay serious attention to the demands of the production chain.

He added: Of course, this stop should not be in such a way that the car manufacturer can leave one part maker out of several suppliers and switch to another supplier. If a part has two or three sources of supply, the automaker can prioritize paying some parts makers and leave out others.

In the end, he emphasized that the component manufacturers are not blameless in the formation of the current situation, and said: these issues exist, but unfortunately, the component manufacturers are also partly to blame for creating this situation. Because during the past years, they have allowed such conditions to continue and put a lot of pressure on this industry.