|La Lettre du GERPISA||no 118 (decembre 1997)|
What lessons can we learn in comparing automobile industries which operate within different emerging countries ? John Humphrey and Jorge Carillo's visit to Paris, along with the help of Mario Salerno and Bruno Jetin, have allowed us to compare and contrast the case of India and Mexico.
The Mexican economy has experienced rapid development in certain branches : electronics, chemistry, computer technology, not to mention the automobile industry, which in only a few years has increased the number of employment opportunities from 300,000 to 500,000. G.M. and its subsidiaries, for example, employ 91,000 people. In this industry, exports - almost exclusively destined to the dominant United States - are increasing and play a major role. Supplier activity has also taken on a more important role and become more specialized. For example, the production of electric harnasses now covers practically all of the United States market, and has concentrated in a region that Jorge Carillo calls the "harnass valley". Indeed, Mexican automobile production can be divided into three groups : constructors (whose production is taking on more diversified forms), suppliers (located in the maquiladoras), and another group of suppliers, half of which are subsidized by the national government. The maquiladoras present very specific characteristics : an overwhelming presence of foreign capital, a very rapid growth rate (more than 20% per year), accentuated specialization and deregulation.
In the years to come, the organization of the automobile branch will surely be transformed. At present, it is above all based on manpower, representing 75 to 80% of employment. There is also a great number of women workers. Salaries, which represented 11% of the average American salary, have been cut to 9%, although plant productivity has started to reach the same level of American plants, an explanation for delocalization. What kind of influence will NAFTA have over the next few years with the abolition of customs tariffs in 2002 ? It will reduce the impact of the maquiladoras's regulatory specificity by partly diminishing their status. However, this change could also prove not to be as spectacular as imagined. Indeed, for many years it was believed that automobile companies would relocate massively towards the northern border and the maquiladoras zone, but center and center-western regions have also developed : the proximity of the United States has an impact on the maquiladoras insofar as the level of salaries and workforce stability are concerned, including quality problems as well. The development of the automobile sector involves both traditional types of factories as well as new types (greenfield plants).
The automobile industry in India was also born several decades ago, more or less within the framework of a national and protected industrial development plan. It nevertheless remained a modest industry for quite some time. Since the beginning of the 1990s, it has experienced a spurt of growth, encouraged by more liberal policies and economic deregulation : occupying an emblematic position, the automobile industry is now given special attention by the Indian government. However, in light of foreign companies attempting to relocate to India, the government is implementing an opaque case-by-case policy. In relocating to India, many of these foreign firms hope to profit from the enormous potential market the country's population could offer in the event of distinct economic growth : at present, statistics point to one automobile for 300 inhabitants. A large number of foreign firms have already set up their factories and have entered into competition with national constructors. Only a few produce 100,000 or more cars per year : Suzuki-Maruti, Ford, Fiat and today probably Hyundai.
Up until now, the Indian automobile industry has experienced very limited growth, even though all types of two-wheel vehicles occupy a very important place in the transportation market. Firms have not developed an authentic small car, and their production is far too expensive for the vast majority of the population. In addition, regions welcoming foreign relocations are often rural, yet attempt to adopt industrial characteristics. Finally, the existence of laws and specific industrial relations protect workers relatively well, limiting a firm's liberty in managing its workforce.
Parallel to constructors, national suppliers are numerous and dispersed : approximately 6000 small-scale suppliers exist, and half of their production is devoted to spare parts. However, they risk being phased out by foreign constructors who have a tendency of bringing along their own suppliers. Indeed, Indian suppliers have less experience in normalization and standardization quality, and are less capable of achieving economies of scale. Therefore, agreements between constructors and suppliers are based on previous arrangements which thus encourage constructors to deal with the same suppliers. In addition, the tendency of transnational firms to centralize conception does not favor Indian firms. However, local suppliers practice attractive and competitive prices. Another crucial question has to do with the capacity of Indian constructors to pursue their activity in the future. Though they lack innovative and conceptual qualities, they do offer very good after-sales services which is an important factor in India. What kind of relationship can exist between Indian and transnational firms ? Progressive marginalization by the latter, a division of the market in function of products, industrial and commercial cooperation ?
Mexico and India differ greatly in their production and employment volumes, the role of transnational capital, the extent of exports, and industrial relations. The Brazilian case is also very different from several standpoints, insofar as the regional power of its market is concerned, or experimentations carried out by firms in the realm of production organization. Nevertheless, these countries raise similar questions relative to production organization or industrial relations. For example, in the constructor/supplier relationship, how can strategies privileging local installations and others aiming at economies of scale be articulated ? Criteria may vary according to the type of product, thus to fixed costs, the diversity or importance of transportation costs. In any case, the role geographic proximity plays in the quality of an industrial relationship should perhaps be relativized. In another area, that of industrial relations, the image of "greenfield" plants serving as a privileged means of flexibility should also be revised, because the absence of or initial weakness of unions has not prevented reaction on the part of workers when facing what they feel is, precisely, a far too flexible management.