New Automobile Spaces

The major issue for the group would be to think of market and production together, to work out how the process of the internationalization of the automobile industry can allow necessary links to be made between these two dimensions. The scenario of globalization which favors freedom of exchange and the opportunistic behavior of firms, presents an interesting perspectives for companies which know how to take advantage of opportunities for making profit. But neglecting to regulate the whole growth in demand, could lead to an increase in the problem of overcapacity in production. It is therefore conceivable to outline spaces for intermediate regulation corresponding to forms of regional integration both for industrialized countries and developing countries.

The traditional automobile regions

In the traditional automobile regions which still account for 80% of world production, it is important to study, in a comparative way, the transformations in progress in the automobile industry within these countries and the forms of the processes of regional integration.

The redistribution within the automobile system

"Globalization is associated with the increase in worldwide competition, particularly obvious in the automobile industry, which has lead to a destabilization in wage relations in industrialized countries. The modification in the ways of dividing up income have an immediate effect on the demand of automobiles (confirmation of cyclical fluctuations, reorientation of the demand towards new products, even towards the secondhand market). At the same time pressure from competition forces manufacturers to reduce costs while increasing the variety of their range, which leads them to both internationalize and externalize an increasing part of the activity of production to the advantage of equipment suppliers (for design, manufacturing and assembly of component-systems relative to functions).

All these developments shift the competitive confrontation to new domains: the development of financial activities, the reorganization of the distribution and the maintenance of vehicles. New multinational actors are emerging in the automobile industry, both upstream (multinational equipment supplying firms) and downstream (groups concerned with distribution and maintenance) which reshape the positions and the power of the actors within the "automobile system". At the same time, considering the prospective reflection related to the technological evolution of the product and the social usage of the automobile, the manufacturers are led to position themselves vis-à-vis a more vast ensemble which is the need for mobility of activities and individuals. This general trend of the rise in the dimension of "service" in the automobile system deserves to be specified in a context where productive rationalization is continuing to reduce industrial employment in a significant way, this evolution being able to take different directions depending on the countries and regional spaces concerned.

A comparative analysis of the forms of regional integration

Around the three automobile poles of the Triad (USA, Europe, Japan), we can note regional integration processes which concern both countries with an automobile tradition and developing countries. Considering the diversity of these (zone of free-exchange, economic and monetary union, bilateral and multilateral relations), it would be useful to specify if the processes of integration influence the conditions of linking the market and production, both in the central countries and in the modes of associating the "peripheral spaces".

Is the rise of the developing countries irreversible ?

The significant rise in demand in the developing markets is accompanied with a speeding up of investments of multinational automobile firms (manufacturers and equipment suppliers) in these countries. It is therefore important to analyze the following three points in greater depth:

what type of international insertion will there be for these countries in the world automobile industry?
what effects will there be in the developing countries ?
what consequences will there be for the traditional automobile countries ?

What type of international insertion ?

It seems possible to differentiate three possible types of trajectories for the developing countries:

Certain of them can hope to develop a "national automobile industry" by taking advantage of the transfer of technology of the multinational firms. This perspective has already been contested however on the level of "continent-countries": if China is getting involved in such a project, India has given up on it, wherein lies the interest of doing a comparative study of these two countries. Where do Russia and the CEI countries stand ? What sort of credibility can we give to national policy in Malaysia or Indonesia (The Philippines) ?
regional integration could develop, even under the domination of foreign multinational firms, on condition that the diversity of the countries present allows the countries concerned to gain some margins of autonomy. The current example we have is Mercosur, within which Brazil is confirming its place as regional leader in South America. Will this type of integration be able to resist the attraction of the free-trade North American Pole ? Is it likely to be reproduced elsewhere (for example with South Africa or Turkey in the roles of regional leaders, of the African continent and the Middle East respectively) ?
Finally, certain developing countries are directly integrated in central regions of the north: Mexico in the ALENA, the countries of central and eastern Europe in the European Union, South East Asia in the poles of Japan or more recently South Korea. The conditions of this integration need to specified, all the more so because they do not appear to arise from a simplistic schema of a central peripheral type.

What transformations will there be in the developing countries ?

In the framework of a mode of international insertion, the developing automobile countries are experiencing profound transformations. These transformations are very different in nature, as some of these so called developing countries have very old automobile industries, present since the beginning of the century (especially in South America), while others have completely new mechanics and automobile industries.

The starting point is the fantastic automobile market growth in these countries (with annual growth rates of over 10 or even 20 %). It is important to point out this dynamism and to apprehend its limits as it is not irreversible as precedent cases remind us. This demand is not homogenous as it is very much segmented, which means that we must take account of the different components (fleets of taxis, administrations, companies, households) and the type of product concerned (small or big cars, new or second-hand cars, adapted "Asian car" type vehicles. As well as that the car needs to be apprehended in relation too the other modes of transport ( two-wheel, collective transport, etc.).

The growth and the stabilization of private demand is largely related to wage relations and their transformation in these countries, hence the need to specify the modalities of the formation and the distribution of income which are at the origin of demand. If we are speaking about the middle class, are these dependent on an income in the form of a salary or on other sources of income ? As for salaries, what modes of payment are being generalized ? Which brings us to the study of work organization in so far as the two dimensions are closely linked.

The rapid development of automobile production leads to the setting up of new establishments which are likely to experiment with original forms of production organization. Thus, Brazil seems to be a place where "modular consortium" and its variants are being experimented by the various manufacturers. This development leads to profound restructuring in the equipment supplying industry of these countries, with the establishment of the strengthening of United States, European or Japanese multinational subsidiaries and a transformation of the local industry. Conditions are not necessarily the same in South East Asia or in South America (the latter seems more orientated towards an economy of scale). Are there different trajectories there ?

Finally, the development of the market like automobile production seems highly dependent on public intervention to orient demand (the policy of the "popular car" in Brazil for example) and to control of free access to the market by the foreign manufacturers or equipment suppliers. This public intervention through local authorities also has an effect on the localization of the industry which creates a new automobile geography in these countries (the end of dualism in Mexico, the decline of the ABC region in Brazil).

What consequences will there be for the industrialized countries ?

The analysis of the rise of the developing countries would be incomplete if we did not take into account the side-effects on the traditional automobile spaces. The consequences can be appreciated in terms of employment (without giving in to the alarm bells on the negative effects of relocation), the widening of the "world-space" of national firms (specifying the differentiated geographical orientation of American, European, Japanese and Korean manufacturers) not to forget the experience (transfer of technology) that multinational firms can gain from their production experimentation in the developing countries (cf. the case of Volkswagen in Brazil or the Czech Republic).

A minimum base of information on the developing countries

To try to answer the research questions, it would be desirable to gather a minimum ensemble of homogenous information on all the different developing countries (especially the biggest), both for demand and automobile production.

With regard to demand it would be necessary to know:

The general conditions: The size of the population, the amount of people with cars, the income (level, growth, mechanisms for distribution), the rate of urbanization, the road infrastructure, the other means of transport (collective or two-wheeled), the taxation on vehicles and fuel.
The markets: the sale of new vehicles (volume, division by segment, ventes captives aux flottes??????????? etc.), the sale of second-hand cars, the type of models commercialized (global/adapted car, "popular car",...), the system of distribution.

For automobile production (offer), we would need to know the recent developments with regard to:

General conditions:
- the commercial policy (tariff and non-tariff barriers), control over foreign investments, demands related to the amount of local content
- industrial and national technological policy
- education, training and research
- the place of trade unions and collective negotiations
The national automobile industry (assembly and parts)
- Production: volume type, of products
- external exchange (importations, exportations): value, volume, type of products (SKD, CKD, or BU vehicles, mechanic organs and parts), commercial partners
- the principal industrial establishments of the manufacturers, the equipment suppliers (foreign multinationals and local firms); the presence of design activities.
Production organization:
- the size of establishments, the level and the forms of integration of production activities
- the diffusion of the different forms of organization (fordist, just-in-time, "modular consortium", etc.)
- work relationships (team work, methods of payment, flexibility of work, etc.) and administration structures.

This list of information is a basis for work which is liable to be specified in a more operational way. Its aim is to emphasize the real need to gather basic information to proceed with an efficient comparative analysis according to the modalities which will be outlined in the coming weeks.

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