Come for the low wages, stay for the people: Labour relations and the adoption of Industry 4.0 in Japanese automotive plants in CEE

Abstract:

Over the last 25 years Central and Eastern Europe became an important production base for the automotive industry. However, economic integration and development in the region has led to rapid increase in wages and decrease in unemployment levels. As a result of these changes, original sources of competitive advantage for the automakers in CEE became depleted and many companies found themselves struggling for survival in increasingly adverse environmental conditions. Two main research questions of the proposed article are therefore: 1. What strategies Japanese automotive manufacturers adopt to cope with labour shortage and rising wages in CEE region? 2. How these strategies influence the adoption of Japanese-style production system? The proposed article is an outcome of a recent replication of 2003 study conducted by Japanese Multinational Enterprise Study Group (JMNESG) in Central and Eastern Europe. Findings are based on case studies of 15 existing and 4 liquidated Japanese automotive manufacturing companies in Poland, Czech Republic and Hungary. As a result we were able to identify a number of strategies adopted by the companies in the face of changing labour market conditions and obtain some insights into their influence on the adoption of Japanese production system. The findings of the proposed article focus on the interplay between the environmental forces and dynamic capabilities and can be positioned within the industrial labour relations or hybridization-evolution streams of research. The article aims to contribute to the existing literature in three ways. First of all, it describes a wide range of strategies that Japanese automakers employed in order to cope with labour shortage and rising wages including: pull out or relocation to countries with lower wages; development of multiskilled employees trough OJT; cooperation with local schools to secure candidates; utilization of temporary employment agencies; automation of the production process; utilization of immigrant workforce and last but not least advanced automation in the form of Industry 4.0. Secondly, based on the interviews and hybrid scoring of the manufacturing sites (Olejniczak et al. 2018) the article describes how each of these strategies affects the adoption of the Japanese-style production system. Finally, based on the interviews article illustrates the process and the extent to which Japanese automotive manufacturers in CEE choose to adopt Industry 4.0 solutions and as well as underlying reasons behind such adoptions including: German clients, availability of local workforce, capabilities or the influence of Japanese HQ. The findings from this study described in this article offer two main practical implications. First, comparative findings from Poland, Czech Republic and Hungary seem to suggest that quick fixes for the labour shortage problem such as utilization of temporary and immigrant might, in the long run, impede the development of core capabilities in terms of multiskilled workforce or the adoption of advanced automation. Second, the article sheds some light on how the adoption of Industry 4.0 will, in the coming years, reshape the industrial relations in CEE region and influence the existing production systems in the Japanese automotive companies.