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HARR Pete Dickenson examines the looming clash that is being prepared between the giants of the world car industry. Terisis recessions and weak upturns.
the 1990s part of depression which has followed the ending of the post-war boom in 1975.
The rise in the rate of profit in the 1980s was due mainly to the intensification of exploitation CAR HE 1990s WILL be a decade of economic for capitalism, characterised by long The crisis of long-term period of 5537 799 boom, investment was a third to place, for example in the in contrast to in the workplace. Compared to the years of the a half lower.
The investment in new technology which did take car industry with гоbotisation and computerisation, was used to cut costs leading to a fall in the workforce. This was the boom period when the implementation of new technology was an important Car Wars • 27
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factor in the rapid expansion of the market. The current world economic situation is consistent with a perspective of long-term depression, with weak recovery in the USA while in Europe, Germany, France, Italy and Spain are in recession. In Japan the economic slow down has led to a slashing in overseas direct investment, particularly to Europe, and it is unlikely that there will be any major new Japanese car production capacity added for the rest of the decade.
The development of the world car industry, now dominated by Japan, has been conditioned by the growth of protectionism over the past 15 years. The General Agreement on Tariffs and Trade (GATT) is in deep trouble. As the GATT talks have proceeded the trend to hidden protectionism has increased either through 'voluntary bilateral quotas mainly between Japan and the EC and Japan and the USA, all of course to the detriment of Japan, or protectionism through the implementation of restrictive safety or environmental standards.
Even if a cosmetic GATT deal is put in place, the trend to greater protectionism will continue. According to executive vice-president William Hoglund, quoted in the trade paper Automotive News, General Motors (GM) is ready to abandon its free trade philosophy and "co-operate with Ford and Chrysler on policies to keep the Japanese at bay". The more outspoken president of Chrysler, Lee Iacocca, put it more bluntly. "Japan is beating our brains out", he stormed to rapturous applause and a standing ovation at Detroit's Economic Club.
Protectionism, with the consequent fall in world trade, will compound existing economic problems caused by capitalism expanding production beyond the needs of the market in the late 1980s. Capitalist economic forecasts, although of limited accuracy, point to slow recovery in 1993 in the USA and the UK, zero or negative growth in Germany, Japan, Italy and France. It is still possible that the present economic conjuncture could deteriorate into a generalised world slump. The growth of nationalism and the unravelling of the EC will go hand in hand with economic crises and developing trade wars. This is the sombre background against which the bosses of the big car companies will take their strategic
decisions in the 1990s.
Japanese produce in their
companies US plants than Ford.
VEN THOUGH TOYOTA has not yet toppled E General Motors from the top spot in the
USA, the Japanese now dominate the world car industry. Japanese companies produce in their 28 • Car Wars
US plants more cars than Ford, and the Honda Accord has been the top selling car in the US for three of the past four years. Japanese makes have 27% of the market compared to Ford's 20%, and in the critical Californian market they have more than half. The true Japanese share of the US market is about 35%, because General Motors, Ford and Chrysler all sell Japanese-made cars under their own labels. In the high value-added luxury car market, once the preserve of the Big Three' of Ford, GM and Chrysler, Honda and Toyota, with their Accura and Lexus marks, are expanding rapidly.
How have the achieved their
Japanese dominant position?
Forecasts of sales in the three biggest markets, the USA, Japan and Germany, predict a slow but steady improvement over the next two years. But forecasts in the past have been wildly inaccurate. The anarchic nature of capitalism, particularly in its present phase, makes it very difficult to predict short-term fluctuations, as the car makers themselves realise. Car registrations in Germany in the first four months of 1993 were in fact down 20%. On the other hand, sales in the UK have increased 8% over the same period, although this increase has had an insignificant effect on the 20% fall in the European market.
Japan has 35% of world car sales, forecast to rise at least to 40% by the year 2000. This assumes a 20% growth in all car sales over the decade. If this doesn't materialise the Japanese share could be 50%, as other weaker manufacturers are pushed out of production. Continued depression in the 1990s will exacerbate world overcapacity and could push companies like Chrysler in the USA and Peugeot out of business.
How have the Japanese achieved their dominant position? There have been three phases of Japanese expansion: establishing a strong market presence through exporting; setting up manufacturing facilities in North America; and finally, building a manufacturing base in Europe. Manufacturing will in the future be expanded by developing the present 'transplant' or 'screwdriver assembly operations to include research and development (R&D) and design. However, this process, which has developed over the past ten years, has not been done to some master plan, but • has been an empirical response to the fear of protectionism, similar to the US auto industry's move into Europe before world war two.
The first stage in the expansion of the Japanese car industry led to the virtual elimination of European companies in North America. In 1970 European imports took 10.5% of the US market with the Japanese share at 4%. By 1985 the
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Japanese had 20% of the market with the Europeans down to 5.6%.
Since then this trend has continued.
Due the fear of to GENK.
protectionism Toyota, Honda and Nissan then established factories in ALENCIA.
the US which has pushed their current market share to 35%.
SAARLOUIS The market share of Japanese car firms in Europe has been limited by voluntary restraint, but it is significant that in Ireland and Denmark, where no restraints apply, they have 42% and 36% market share respectively. The advent of local production will mean that Toyota, Nisand Honda will push hard to increase market share in Europe.
The USA's 'Big Three' lost a record $7bn in 1991 and have started big cut backs in staff. GM has said that it will reduce its workforce by 74,000 and close 21 plants in the next three years, because while it has the capacity to supply 45% of the US market, its share is predicted to fall to 30% in the near future. For the moment the 'Big Three' are holding their market share due to voluntary restraint by the Japanese and the rising value of the Yen, but further contraction and huge job losses are inevitable on the basis of present trends.
The European car industry is following the British lead into deep recession in 1993.
The European car industry British lead into deep recession in 1993. Pressure on non-Japanese manufacturers will intensify as the market tightens at the same time as the new Nissan, Honda and Toyota factories build up production. Their capacity will increase to one million units in 1996 and could rise to 1.7m by the year 2000. Within Europe there is a surplus of about 2m in car and light van capacity, with the prospect of this rising to 3.2m by representing 18% of the market. In the light of this Ford of Europe's operational chief, Bill Fike, declared that "the battle for Europe has begun" Volkswagen is predicting that car sales in Germany will fall by 20% in 1993 and in Europe by 16%. COLOGNE. OUR FIGHT IS YOUR FIGHT-UNITE AGAINST FORD 1988: Ford workers call for international solidarity. All the main continental markets are collapsing, | Italy, France and Spain. The depth of the crisis is such that even Nissan is cutting back its projected increase in production levels after a 12% fall in sales in the first four months of 1993. The formerly profitable continental European about the high complaining manufacturers are wages' and 'feather bedding of their workers, foreshadowing the end of the relative industrial peace and so-called consensus approach between management and union tops as attacks on pay and conditions are mounted.
Volkswagen, the most successful European car maker with 17% market share, has warned that it has slumped into loss in the final quarter of 1992 and it is facing widespread short time working and further job cuts.
-HE TREND OF growing dominance by Japan of the world car industry is clear, implying large scale plant closures and massive redundancies by the established Western firms. In the context of economic crisis it is likely that one or more firms will go to the wall or be the largest, General broken up, perhaps even Motors. In Europe, Ford is in a weak position and the closure of a major plant is possible, although its global position will protect it more than a company like Peugeot.
the position of car The economic crisis weakens workers but at the same time changes in technology have had the opposite effect. The use of just in production techniques (see box) and the integration of production internationally, means that strikes can have a devastating impact very severely hit quickly. Production at Renault was by a strike at one of its factories in Cleon in November 1991. The workers struck against a 2.5% pay offer and threatened redundancies. Within Car Wars • 29
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A Japanese 'HE EXECUTIVES OF Western car corpor- Tations are preoccupied with adopting the methods of lean production' to meet the new competitive pressures. Lean production has its origins in Japan, particularly in the Toyota company. The phrase was originally linked to new production methods like just in time' (JIT), where stock levels were kept to a minimum, *designing for quality, 'computer aided design and manufacture' (CADCAM) and flexible manufacturing systems' (FMS). The bosses at General Motors, Ford etc, now see the term as part of a more traditional agenda, super-exploitation of their workers and attacks on the conditions won in the post-war boom.
The initial success of Toyota and the other Japanese car makers was based on the conditions that followed the smashing of the power of Japanese unions in the 1950s, particularly the influence of the Communist Party, accomplished with the active support of the American occupation Docile company unions were formed in the private sector, while wages and conditions were nearly at the level of the ex-colonial countries. Capital investment per worker was then lower than in the West, which, combined with superexploitation, led to high profit rates. The Japanese production system developed in the 1950s and 1960g with a background of shortages of land, machinery and foreign exchange: just in time' was introduced in response to these pressures. Toyota realised that taking in I ten days production was stopped at six factories in France, one in Belgium and one in Holland. 80,000 workers were laid off or put on short time as a result of the dispute. Work also stopped Volvo 400 series which uses Renault The strike at Cleon, which makes gear-boxes and engines, had such a quick and devastating impact because of the computor stock control techniques used by the management. This allowed low levels of stocks to be kept without getting production bottlenecks but it also meant that any disruption of supply had an immediate impact. All the car makers are using this method. The for example, Ford strike in Britain in 1988, quickly affected output at Cologne and Genk. This increased the new technology has significantly potential bargaining power of the unions. The weak position of management at Ford was shown recently by a leaked secret document in which an assessment was made of strike risks if a programme of bringing in outside contractors was accelerated. The document warns that the whole 30 • Car Wars 'miracle'?
large batches of components was inefficient in terms of the need for land for storage. They also found that large batches were linked with high quality failure rates. 'Just in time", involving small batches, got over these problems and also allowed specifications to be updated more rapidly. Toyota operated a system of a network of sub-contractor suppliers, the keiretsu, which were situated near to their plant and were closely integrated with it, to the point where the suppliers were completely dependent on the customer. This made just in time' very efficient. By the 1980s a labour shortage had developed and Toyota used its power to poach workers from its suppliers. This, together with high land prices, forced many component makers in the keiretsu to move to outlying parts of the country where land and labour were still available. As a result Toyota were forced to begin to dismantle the just in time system by opening a parts distribution centre in Toyota City. This development shows that the efficiency of the Japanese car makers is beginning to be undermined, although reports in the West speculating on the downfall of the Japanese car industry are premature. Capital investment per worker is still higher than in the USA or Europe, living standards are lower and organised labour is still slumbering.
at Toyota shows that just in time developed in a unique environment and it will be very difficult for Ford or General Motors to reproduce it to get the same benefits.
of Ford Europe operations would be halted in three days if lorry drivers walked out in Britain, a devastating comment on the vulnerability of companies with integrated trans-national businesses. The 1990s will be a decade of remorseless crisis, a real possibility of a slump and trade wars. Under these conditions workers in Asia and the West will have to have a programme to fight vicious management attacks. The central theme of this programme must be internationalism. Co-operation at shop steward level, building of concrete structures, is essential to stop worker being set against worker and to exploit the vulnerability of the big car companies with their internationally integrated production systems. When the organised workers do move into action they will quickly become aware of their enormous power and the doubts and uncertainties of the past period will quickly be swept aside. A more detailed examination of the case of Ford and the strategies open to the unions will appear in a future edition.
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