Programme News (3) - Alfonso Fleury

The Second International GERPISA Programme

The issues to be addressed in the second GERPISA programme reflect, with great accuracy, the dilemmas and choices that Brazil currently faces regarding its automobile industry.

In the beginning of the 1990s, when the works of GERPISA were extended to Brazil, the main theme in the discussions about the Brazilian Automobile Industry (BAI), consisting of four transnational assembling companies (VW, GM, Fiat and Ford), was the remoteness of its survival due to the liberalisation of imports. Today, after a general turnaround, the BAI has largely surpassed its historic production peak levels, reaching the volume of 1.630.000 vehicles. The estimates for local production in the year 2000 range from a conservative 2 million to a hardly imaginable 3 million vehicles.

The first period (1990-1995) was characterised by the intense and creative efforts of local assemblers to redefine their relationship with parent companies, reorganize their plants, restructure their supply chains, negotiatewith their workers and, the most important, participate in the tripartite Sectoral Chambers, with unions and government, a mechanisme which created the necessary conditions for the realisation of the turnaround. In short, what has happened in the BAI was the emergence of new industrial models in brownfield sites, confirming the main hypothesis of the first GERPISA programme.

The period that is now beginning, will bring a quantitative and qualitative jump in local production, mainly based on new plants, built by both the "old" local producers and newcomers. VW has already started the construction of two new plants and Renault, Mercedes-Benz, Honda and ASIA Motors have officially announced investments in Brazil.

On one hand, the structure of those investments and the location of the plants were influenced by the eagerness of local governments (city councils) to attract the assembling companies, competing very toughly with all available means, specially fiscal incentives and free infrastructure, to have the privilege of hosting worldly-known companies.

On the other hand, from the perspective of the assembling companies, the rationality of decision-making derives from the search for coherence between strategic and organizational requisites and locational decisions. Thus, VW, Honda, Renault and Mercedes-Benz chose the Southern region of Brazil where the labour force has higher standards, the supply market is already established and the exploitation of markets, specially the Mercosur, is easier. The Koreans of ASIA Motors decided to install their truck plant in the Northeast of Brazil, where there is no industrial tradition and salaries are very low.

Therefore, in terms of the spatial reorganization of the automobile production in Brazil, the initial decisions of the above mentioned investment projects give support the hypothesis raised by GERPISA that "future performances will depend on the capacity of each individual company to master or homogenize different socio-productive systems".

At this point, there are three main lines of enquiry that can be identified in this new period of the BAI. The first is local (Brazilian) and micro: as the "old" plants are being refitted and modernised, it will be interesting to develop comparative analysis of the organizational models that were implemented and their relative performance compared to the new plants. It will be basically a discussion about brownfields and greenfields.

The second line of enquiry concerns the strategies of the Global Companies and the role of the subsidiaries in their global strategy. This is a meso level approach and is international in scope. The main questions are: is the role of the subsidiary operational only? Has the subsidiary any discretionary power in decision-making? Which administrative and technological functions are decentralised and how? How is the subsidiary linked with other subsidiaries?

Finally, the third issue concerns the relative position of Developing Countries in the process of globalization of the automobile industry. It may be considered a macro level approach. By comparing the strategies of the Global Companies in relation to different D.Cs. (say Brazil, Argentina, Mexico, Malaysia, etc.) it will be possible to identify different patterns of internationalization and the determinants of those strategies.

The problematic outline of the Second International Programme of GERPISA incorporates those issues and certainly will bring light to their discussion.