January 2004JIBS Book Review

Globalization or Regionalization of the American and Asian Car Industry?

By: Michel Freyssenet, Koichi Shimizu and Guiseppe Volpato (eds.)

Palgrave Macmillan in association with GERPISA, 20031403905827

Reviewed By: Peter Wad

Copenhagen Business School

The three editors of the two books are co-director (Freyssenet) and members (Shimizu, Volpato) of the Steering Committee respectively of GERPISA (Permanent group for the study of the automobile industry and its employees). This international research network counts 350 members in 27 countries (2002) and has been based in France since it was established in 1981 by Michel Freyssenet and Patrick Fridenson at the School for Advanced Social Science Studies, Paris. In 1992 GERPISA became an international research network and started its first research program (1993-96) on the ‘Emergence of new industrial models’ under the research directors, Robert Boyer and Michel Freyssenet. A second research program (1997-1999) was titled ‘The automobile industry: Between globalization and regionalization’ and this was directed by Michel Freyssenet and Yannick Lung. A third program (2000-2002) under supervision of Yannick Lung investigated the topic ‘Co-ordination of knowledge and competencies in the regional automotive systems’ with support from the European Union. At present the GERPISA network is trying to consolidate its approach and findings into a new analytical framework and developing a new research program (website: www.gerpisa.univ-evry.fr ).
The books under review are outputs of the second research program addressing the question of automobile globalization or regionalization. The authors rely on the findings of the first program which critically addressed the ‘One Best Way’ paradigm developed by the USA-based International Motor Vehicle Program (IMVP), a global automobile research program headquartered at the Massachusetts Institute of Technology (MIT) since 1980. In the famous book, ‘The Machine that Changed the World’ (1991), the IMVP-researchers, Womack, Jones and Roos argued that ‘lean production’ (coined by John Krafcik) is a universal best practice of automobile manufacturing in the international automobile industry making it possible to double production and quality at low costs compared to mass production.
The GERPISA network developed an alternative understanding of international automotive manufacturing, the ‘Productive Models’ approach, emphasizing the mutual and dynamic conditioning of productive systems and their environment. In short, the ‘productive models’ paradigm contends, contrary to the MIVP-lean production thinking, that it is impossible to outline one universally most productive model because the contexts will vary, and hence, several productive models may be equally competitive at the same time (Volpato 2003). Where the IMVP-researchers contended that ‘lean production’ is a universal manufacturing methodology based on Japanese experiences but a-cultural and transferable, GERPISA researchers identified three successful ‘productive models’: VW represents the ‘Sloan model’ originally developed by GM in the mid-20th century; Toyota the model of ‘permanent reducing costs at constant volume’; and Honda the model of ‘innovation and flexibility’. In the conception of the GERPISA framework, ‘lean production’ is a conceptual hybrid of the Toyota model and the Honda model and hence, a contradictory and unsustainable concept of automobile manufacturing.

The two GERPISA-books explore what has happened to key automobile manufacturers in the American, Asian and European car industry during the last decades of internationalization, regionalization and globalization. In an identical ‘Introduction’ in both volumes the editors summarize the main findings of the contributors: “They show the diversity of ways and forms of internationalization, the reversibility of these processes observed in the past, the restrictive conditions of profitability in overseas operations, and the prevalence of regionalization in spite of globalization attempts since the early 1990s” (p.1 in both volumes). Based on their adherence to a regional perspective on contemporary automobile manufacturing the editors have organized the material into regional volumes instead of one integrated ‘world’ volume. Moreover, they have settled on two automobile regions - the American and Asian car industry, and the European car industry - instead of three (the ‘Triad’) or four (adding ‘emergent automobile markets in developing countries’). Finally, the two books are edited as individual books which can be read separately while containing identical articles (the Introduction and a statistical comparison of American, Asian and European automobile companies) or compatible articles (the Conclusion). By implication, they seem to assume that readers are also regionalized in their mindset!
The comparative and quantitative analysis of internationalization processes and outcomes among automobile firms in the two ‘regions’ is made by Bruno Jetin in a very systematic and competent way. Jetin concludes, firstly, that automobile makers are not global companies, with Japanese car manufacturer Honda as the exception – maybe! Secondly, that only few firms have made transplants into profitable undertakings during the 1990s, i.e. avoiding loss-making years, including Toyota, Honda, Suzuki, Renault, PSA, GM and probably VW; and even fewer firms have been profitable in all years in their country of origin (Toyota, Honda, Suzuki and Scania) and at a global scale (the same four firms). However, Scania is a truck & bus making company while the other three are car manufacturers, and hence, only Japanese firms have been able to stay profitable every year throughout the 1990s-era of globalization (in one case, Suzuki, with an affiliation to America GM). Thirdly, and finally, Jetin concludes that the three firms articulating the three productive models of the late 20th century, Toyota, Honda and VW, are internationalized relatively well, with Honda and VW among the top four and Toyota ranked as number seven out of 16 automobile firms measured in terms of Jetin’s global synthetical index, comprising an average of indexes of commercial revenue, production, total asset and workforce. Jetin warns that profitability does not necessarily come with internationalization. In fact, nationally generated productive models need to be hybridized during their processes of internationalization if they are to become profitable and successful. This hybridization affects their basic model consisting of their ‘profit strategy’ and their ‘company government compromise’, argues Jetin and he simultaneously question whether the three ‘production models’ can and will be renewed or transformed. To answer this question Jetin calls upon the methodology applied by GERPISA researchers, the trajectory analysis of specific firms’ change processes, passing on the challenge to other authors.

In the volume on American and Asian car industries separate articles analyses the internationalization processes of GM and Ford; Toyota; Nissan; Honda; and the Korean automobile makers, Hyundai, Kia, and Daewoo. Gérard Bordenave and Yannick Lung write the exciting story of the two US automobile giants and their intertwined internationalization strategies, with Ford being the risk-taking firm and GM being the more cautious and conservative firm aiming to match Ford’s attempt to catch up and outdo GM. Both corporations tried and failed, and Ford to a higher degree than GM, to implement ‘world car’ projects and had to settle on regional production models with some more centralized functions like R&D.

Chrysler, one of the ‘Big three’ US automobile corporations, is treated as part of the DaimlerChrysler trajectory and included in the volume on the European car industry which also comprises articles on VW, Renault, Fiat Auto, PSA Peugeot Citroën, BMW and Rover. Holm-Detlev Köhler stages the Chrysler story as ‘A Nice Marriage or a Nightmare?’ underlining the subordination of Chrysler to German Daimler in the wake of the merger or acquisition and loss-making performance. The skepticism among GERPISA researchers about mergers and acquisitions as mechanisms for successful internationalization is dramatically articulated in the articles on Renault by Michel Freyssenet, titled ‘Renault: Globalization, But For What Purpose?’ and on BMW and its acquisition and divestment of Rover by Andrea Eckardt and Matthias Kelmm.

In each book one article addresses the distribution and service sub-industry indicating the variety of environments. The book on the European car industry allows for a specific and depth-going chapter on the internationalization process of a key automobile supplier firm (France-based Valeo). This minimalist treatment of 1st tier TNC supplier companies in the two books is a drawback because these firms have gained tremendous corporate leverage even against the automobile manufacturers. Neither the GERPISA nor the IMVP research networks have delivered depth-going and comprehensive volumes about these firms and their trajectories or manufacturing paradigms.

Both books are concluded with a common article by the three editors on the same theme with the same orientation: Regionalization of the (American and Asian/European) Automobile Industry, More than Globalization. Here the editors apply the GERPISA explanatory framework on the trajectories and performance of internationally operating car manufacturers. This means that successes and failures of various car makers and their profit strategies are accounted for in terms of the internal coherence of product policy, productive organization and employment relationship and their acceptability by the firm’s stakeholders (‘company government compromise’), and the external fit between the profit strategy and the ‘growth mode’ that characterizes the countries in which the firm is operating. Although these concluding articles are complex and well argued the editors seem to be writing against the ‘One Best Way’ paradigm of the IMVP-research network instead of demonstrating how their ‘productive models’ can not only incorporate ‘lean production’ thinking but also be operationalized for practical purposes like benchmarking. However, such an endeavor may be part of the upcoming fourth GERPISA research program. All in all, the two books demonstrate the viability of the network’s permanent pursuit of understanding the dynamic and change of automobile makers embedded in regional, multi-regional or cross-regional competitive environments.

Volpato, Guiseppe (2003) Automobile industry analysis and theory. A different equilibrium between “lean organization” and “productive models”. Paper. Eleventh GERPISA International Colloquium, Paris, June 11-12, 2003.

Womack, James P.; Daniel T. Jones and Daniel Roos (1991): The Machine that Changed the World (1991): New York. Harper Collins.

Published at http://aib.msu.edu/JIBS/BookReviews/HTML/2004-01.html
Reviewed on: January 23, 2004
(c)2004 - Academy of International Business

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