Obsolete spare parts, ageing fleet contributed to millions in losses for Rapid Bus, says Auditor-General’s Report

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The report found that the purchase of spare parts for China-made buses from manufacturers Dong Feng, Anyuan, King Long and Shenlong, from 2013 to 2015, did not use Vendor Management Inventory (VMI), which could have minimised stock holdings and unnecessary procurements. — Picture by Choo Choy May
The report found that the purchase of spare parts for China-made buses from manufacturers Dong Feng, Anyuan, King Long and Shenlong, from 2013 to 2015, did not use Vendor Management Inventory (VMI), which could have minimised stock holdings and unnecessary procurements. — Picture by Choo Choy May

KUALA LUMPUR, Sept 28 — A total of 13 types of spare parts worth RM1.54 million went unused and eventually became obsolete, while another 12 types of spare parts worth RM281,583 were damaged, contributing to massive losses for Rapid Bus, the Auditor-General’s Report 2019 Series 2 has revealed.

The report found that the purchase of spare parts for China-made buses from manufacturers Dong Feng, Anyuan, King Long and Shenlong, from 2013 to 2015, did not use Vendor Management Inventory (VMI), which could have minimised stock holdings and unnecessary procurements.

“Rapid Bus had to keep a stock of spare parts for its vehicles. But when the Dong Feng, Anyuan and Shenlong buses were taken out of service around 2016 and 2017, it resulted in 13 types of spare parts worth RM1.54 million not being used and becoming obsolete.

“A further check found that 12 types of bus spare parts (consumable spares) worth RM281,583 were damaged.

“All of these spare parts were procured from 2015 to 2019 ... The disposal of these spare parts amounting to RM1.82 million will be carried out in 2021,” said the report.

The review also found that the cost of bus spare parts increased by RM10.45 million (22.3 per cent) to RM57.26 million in 2019, from RM46.81 million in 2018. For 2020, the cost went up by another RM4.90 million (8.56 per cent) to RM62.16 million.

“The increased maintenance costs due to the age of the buses and the high price of spare parts for different bus models affected the operating expenses of Rapid Bus,” said the report.

The report added that Rapid Bus set a loss target for Earnings Before Interest, Taxes, Depreciation, and Amortisation (EBITDA) for the period 2017 to 2020 as the company’s revenue could not cover the operating costs that were increasing annually.

For 2017, Rapid Bus did not achieve the EBITDA target set as it recorded a loss of RM217.38 million, which was higher than the loss target of RM207 million.

“Based on the Minutes of the Rapid Bus Board of Directors Meeting No. 2/2018 dated April 23, 2018, the presentation of the audited financial statements for the year 2017 showed that the company’s income increased but could not cover the total expenses. Among the factors that contributed to the increase in expenditure were the increase in staff costs compared to the previous year due to the Collective Agreement (CA) with the Trade Union and the annual salary increase,” said the report.

The EBITDA target set for 2020 was also not achieved as Rapid Bus recorded a loss of RM282.39 million, which was higher than the loss target of RM268.50 million.

The loss for 2020, however, was attributed to the implementation of the movement control order in response to the Covid-19 pandemic.

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