The European Automobile Industry

Contents

1. Introduction

2. The European automobile industry in global markets
2.1 Output
2.2 Global trade and its affect on Europe
2.3 The influence of demand on automobile industry

3. Technological change, changing of production and changing of organization of production
3.1 From craft Production to mass production
3.2. Lean Production in Europe
3.3 Strategic Alliances and collaborations
3.4 Greenfield Investment

4. Jobs in automobile Industry
4.1. Labour force
4.2. Structure of labour

Conclusion

Bibliography

1. Introduction

The automobile industry is the key industry in the second part of the twentieth century. Its significance is evident particular in cause of its assemblers. Nowadays 3-4 million people are employed directly in the automobile industry and a further 9-10 million in the manufacture of components and materials. Additional 6 Million people are employed in selling and servicing the vehicles. This leads to number of 20 million employees in this industry (Dicken 1992, p. 268). It is stated as the major industry of the 4th long Kondratief-wave (Blotevogel 2001, p. 203).

Likewise the automobile industry often is mentioned as a prototype of globalized models of production activity and investment. It is one of the first industries to delocalize its activities and become truly “global” (Nunnekamp 2000, p.1).

“If any sector can be represented the features of globalization it is the automotive industry” (World Trade Agenda 2000, p.1).

As symptoms of this process Vickery (1996) mentions the significance of foreign direct investment (FDI) and production thru subsidiaries companies. He mentions the international network of strategic alliances and collaborations. Production main markets and transnational trade are situated in OECD countries and the 10 largest transnational corporations (TNC) are producing 71% of the world output of vehicles. 14 of the 100 largest companies and 5 of the 10 largest TNC’s are automobile producers (Nunnekamp 2000, p.12). In many national economies automobile industry has a major function. Therefore politics of industry and trade play a key role to protect the national automobile industry (Blotevogel 2001, p. 203).

This work focuses on the European automobile industry and attempts to illustrate its advantages and problems. It is divided into 4 sections. First output, trade and market situation of the European automobile industry is outlined. Second changes in production and organisation systems of vehicle producers are discussed. The third part deals with the development of work and jobs in Europe’s automobile industry and finally a conclusion and a panorama is tried to be drawn.

2. The European automobile industry in global markets

Roundabout 75% of world automobile production is produced in the Triad. The European market is one of the most important for car sales and car production. Since the 1970s big changes in European automobile production have been happened.

2.1 Output

During the last 50 years the automobile industry has increased in its world production immensely. World production of cars rose from 13.3 million in 1960 up to 36.1 million in 1995 (Vale 1999, p. 115). Automobile production in Europe increased from 5,34 million in 1960 up 14,19 million in 2003^[1].

The evolution of automobile industry can be divided into three phases. In the first phase American producers dominated the world production until the 70s. From the 70s up to the beginning of the 80s a bipolarization was developed between American and European car producers. During the 80s Japanese automobile industry gained power and forced a tripolarization of the world automobile market (Vale 1999, p.114) and until now a domination of the Triad in automobile industry can be recognized.

In Europe France and Germany are the dominating producers since 1960. In 1995 Germany produced 13% of worlds automobile production, which is almost equal to its share in 1960 (14%). Between 1960 and 1989 German automobile industry grew with average annual change of 5,2%. France remained its output with a share around 9% from 1960 until 1998. Specific is the decline of United Kingdom’s car producers who had a share of 10.4% in 1960 and a share 3.7% in 1989. Even the absolute production did not raise in that time the United Kingdom. A remarkable growth took place in Spain. In 1960 Spain produced circa 43.000 cars and in 1989 1.6 million cars were produced there (Dickens, p. 272). In 1995 Spain’s output was 1.9 million (Vale 1999, p. 115) and in Table 1b it can be seen that its output is even larger in 1998. United Kingdoms automobile producers had a total breakdown in the 1970s and a rebuilding of its automobile production system during the 1980s by Japanese transplants. Spain gained share of world automobile production when European companies expanded production into it. In the United Kingdom and in Spain nowadays the production is strongly export orientated towards European market (Hudson & Schamp 1995, p. 221). In 2002 European Unions automobile production fell by 1% in comparison to 2001. Only new construction places Portugal, Spain and the United Kingdom raised their production in that period. As can been seen in table 2 production of all other EU-15 countries dropped in during this time.

Table 1a Share of world automobile production by major producing countries, 1980-1989

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Source: Nunnekamp 2000, Globalisierung der Automobilindustrie: Neue Standorte auf dem Vormarsch, traditionelle Anbieter unter Druck?. Kieler Arbeitspapier No.1002. Kiel. Table 7a

Table 1b Share of world automobile production by new producing countries 1980-1998

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Source: Nunnekamp 2000, Globalisierung der Automobilindustrie: Neue Standorte auf dem Vormarsch, traditionelle Anbieter unter Druck?. Kieler Arbeitspapier No.1002. Kiel. Table 7b

Table 2: Motor vehicle production by country 2001 –2002

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Source: OICA

2.2 Global trade and its affect on Europe

A considerable amount of European vehicle production is exported, even as a huge part of Europeans single markets demand is covered by imports. Trade between European especially between European Unions countries usually is larger than trade between European countries and the rest of the world. Almost three-quarters of Western European automobile trade are intra-regional. Altogether European Unions automobile industry made a surplus of 9,1% in 2002 exports-imports (Sura 2003, p. 6). As Table 3 shows there are enormous differences in the ratio of imports and exports between individual European countries. Sweden and Germany have surplus of 33,4% and 32,5%. Also Spain and France have a surplus each around 13% whereas Italy and the United Kingdom have a shortfall of 40,8% and 37,8%. These shortfalls and surpluses are the result of complex strategies of TNC’s with European production base. Nearly all inflow of automobiles to Europe is from Asia but the surplus of 9,1% is equalized by an outflow of luxury cars to North America. Japan has not only a trade surplus towards Europe but also towards North America. Today Europe is an important market for Japanese exports. The export of Japanese cars to Europe and North America has been heavily restricted by so-called voluntary export restraint agreements (Dicken et al. 1995, p.4s). This leads as well to the point that the current tendency toward internationalisation differs from previous phases. Additional to exports and imports of automobiles FTI has become more and more important when production is shifted into other countries (Nunnekamp 2000, p.7). Not only voluntary export restraint agreements led to the raising of FTI. Furthermore changing in pattern of demand for automobiles have a heavy influence on the strategies of automobile producers. In 2002 Japanese and Asian cars have been very successful on European market and have won new shares. For example Toyota, Suzuki, Hyundai and Kia had each a surplus of over 8% on the German market^[2]. Today 64% of.

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^[1] Frankfurter Allgemeine Sonntagszeitung, 04.01.2004

^[2] Süddeutsche Zeitung, 12.5.2003