KUALA LUMPUR • High-tech home appliance maker Dyson told Reuters it has cut ties with supplier ATA IMS following an audit of the Malaysian company's labour practices and allegations by a whistle-blower, sending ATA shares plunging.
ATA, which is already being investigated by the United States over forced labour allegations, confirmed that Dyson has terminated its contracts and has been in talks with its customer over the audit findings.
Shares in ATA, which makes parts for Dyson's vacuum cleaners and air purifiers, tumbled 30 per cent yesterday to their lowest since April last year after the Reuters report.
According to ATA, Dyson accounts for almost 80 per cent of its revenue.
The termination is a significant blow for Malaysia, a major electronics manufacturing hub that has faced scrutiny this year over claims that migrant workers are being subjected to abusive working and living conditions.
Dyson, which has its headquarters in Singapore and is privately owned by British billionaire James Dyson, said it received the results of an audit of working conditions at ATA early last month.
It said it had learnt in September about allegations from a whistleblower at an ATA factory and had commissioned a law firm to investigate those claims.
"Despite intense engagement over the past six weeks, we have not seen sufficient progress and have already removed some production lines," said Dyson, in response to questions from Reuters.
"We have now terminated our relationship with six months of contractual notice. We hope this gives ATA the impetus to improve and enables an orderly withdrawal in the interests of the workers they employ."
In a statement to the Malaysian stock exchange, ATA said it will continue to manufacture and supply for Dyson until June 1 and that its board was looking into the validity of Dyson's termination notice.
ATA also said it had taken immediate steps to engage Dyson and advisers after it was notified of the summary of the labour audit. It added that it will continue to actively look into the findings.
ATA had in May denied allegations of forced labour at its factories after a prominent rights activist said the US authorities were going to scrutinise the company's work practices.
The activist, Mr Andy Hall, shared a letter the US Customs and Border Protection had sent him informing him it had agreed to investigate an ATA unit after he flagged complaints received from workers.
In July, the US State Department put Malaysia on a list with more than a dozen countries, saying it had not made progress in eliminating trafficking of workers.
More than half of ATA's 8,032 employees are foreigners, according to the firm's latest annual report.
Dyson rejected allegations earlier this year regarding excessive hours and cramped living conditions for ATA workers, citing multiple prior audits it said had not found any issues involved in its supply chain.
Mr Hall said Dyson's decision to terminate the relationship would have huge implications for the thousands of workers employed at ATA and Dyson should provide redress for ATA workers.
The Malaysian government must also bear some responsibility, he added, saying that he had made multiple complaints in the past year to the government about ATA.