La Lettre du GERPISA

no 117 (novembre 1997)

During last June's conference, Julie Froud, Colin Haslam, Sukhdev Johal and Karel Williams questioned a certain number of currently accepted hypotheses relative to the study of automobile firms, and proposed to expand and enlarge the scope of studies on automobile companies. The last GERPISA session was devoted to taking a closer look at their proposals and to outlining a certain number of future research axes. In general, our research considers firms to be essentially constructors. Their activity is represented as being one of production above and before all: hence, one follows the chain leading towards the creation of value, from conception to sales, including a close look at suppliers and assembly. In general, this "industrial" vision of firms is not contested, however, it often neglects numerous other activities belonging to this sector.

One of these includes the importance of used vehicles in the automobile market. The structure and importance of the used vehicle market varies according to the country and is difficult to evaluate. It is estimated to be as important as the market for new automobiles in Great Britain, and even superior to this when transaction numbers are compared. Automobile firms can not ignore this particular market since it contributes to structuring the global automobile market which is essentially based on renewing itself. Secondly, a series of other important activities linked to the automobile exist, and automobile financing constitutes one of them. Many diverse forms exist (traditional credit systems, leasing,...) and their importance has increased over time. Other activities concern the use of automobiles: service, upkeep, repairs, fuel, or even taxes and insurance. All this data allows our colleagues to develop more precise ideas which they then insert into a more global matrix otherwise known, for the time being, as "motoring", the automobile sector or activity. Within this totality, services are expanding more than production per se. For example, in the United Kingdom employment has increased in the service sector, and declined in the production sector. Over a period of fifteen years, the ration has gone from 1/1 to 1/3. In fact, this evolution corresponds to a transfer of employment towards activity where workers are on the lowestrung of the hierarchy and where working conditions are more precarious. In any event, this questions the hypothesis stating that services have become auxiliary activities of production: they can even be more important than producing new and used vehicles. This proportion modification would stand out even more if the trend disassociating the use of a vehicle from its ownership were pursued, as the evolution of different forms of automobile rental points out. The increase of services coupled with production slow-down in Europe have encouraged firms to question the role of their productive activities. Though a look at industrial history underlines that only a few firms transferred the main portion of their activity from production to some other domain, many firms have nonetheless diversified their activities. This evolution can reinforce complementary activities parallel to industrial activity per se, such as providing credit or automobile rental networks, but it can also adhere to a simple diversification plan. In the long run, it is difficult for a firm to concentrate only on production. Activity diversification varies according to the size of the firm. For example, GM and Ford revenues seem to rely much more on their financial activities than Toyota or Fiat.

As one may observe, the process takes into consideration a increasingly larger group of activities for firms, oftentimes operating in the wings. But as new domains are introduced into the field of observation, other more confusing elements risk entering as well. It has thus become necessary to define the proposed matrix in a more precise manner : does it correspond to firm activity, or to that of the automobile sector? A clear limitation of what should and should not be included is required. Karel Williams offers two criteria in this endeavor: first of all, presence of this activity in the company's accounting books, and secondly the fact that this activity be linked to demand, that it respond to as pecific and necessary usage of the automobile (for example, fuel). In fact, the plethora of situations encourages us to pursue our reflection. Indeed,certain activities (such as the a forementioned case of finances) are important ones in certain firms, and not at all or very little in others. On the contrary, activity such as repairs and upkeep or even distribution are sometimes provided for by automobile firms, but sometimes are very efficiently provided for by other independent firms. In the final analysis, these activities often determine the value outcome in the automobile sector. In addition, national characteristics in this sector play a very important role; for example, Great Britain stands out among other countries in several domains.