Factors behind international relocation and changes in production geography in the European automobile components industry

Lampón, Jesús F. and Lago-Peñas, Santiago (2013): Factors behind international relocation and changes in production geography in the European automobile components industry.

Abstract

This article analyses business strategies in the automobile sector to determine the key factors behind production relocation processes in automobile components suppliers. These factors help explain changes in production geography in the sector not only in terms of location advantages but also from a perspective of corporate strategies and decision-making mechanisms within firms. The results obtained from an empirical study in Spain during the period 2001-2008 show how the components sector has used relocation to meet the requirements for efficiency imposed by automobile manufacturers. The search for lower labour costs, production concentration and specialisation in order to obtain economies of scale and improved productivity are found to be the main factors determining relocation in the sector. These processes are facilitated by the operational flexibility of the multinational firms that dominate the sector which allows them to transfer resources internationally. Lean supply, technological requirements for production processes and the integration of production plants in the institutional environment are the main barriers to such processes of mobility, and may also determine the geographical destination of migrated production.

• Item Type: MPRA Paper
• Language: English
• Keywords: Production relocation, automobile components sector, geography, Spain, Europe
• Subjects: F - International Economics > F2 - International Factor Movements and International Business > F22 - International Migration; L - Industrial Organization > L6 - Industry Studies: Manufacturing; L - Industrial Organization > L6 - Industry Studies: Manufacturing > L62 - Automobiles ; Other Transportation Equipment ; Related Parts and Equipment

References

[1] Aláez R and Barneto M (2008) Evaluating the risk of plant closure in the automotive industry in Spain. European Planning Studies 16(1): 61–80.

[2] Alonso JL, Lampón JF and Vázquez XH (2006) Estrategias de aprovisionamiento en el sector español del automóvil: situación actual y perspectivas. Universia Business Review 9:14–27.

[3] AMADEUS: http://amadeus.bvdep.com

[4] Amburgey T, Kelly D and Barnett W (1993) Resetting the clock: the dynamics of organizational change and failure. Administrative Science Quarterly 38: 51–73.

[5] Andreff W (1996) Les multinationales globales. Paris : La Découvert.

[6] Becattini G and Rullani E (1995) Système local et marché global: le district industriel. In: Rallet A and Torre A (eds) Économie industrielle et économie spatial. Paris: Economica, pp.171–192.

[7] Bélis-Bergouignan MC, Bordenave G and Lung Y (2000) Global strategies in the automobile industry. Regional Studies 34(1): 41–53.

[8] Bilbao J and Camino V (2008) Proximity matters? European Union enlargement and relocation of activities: the case of the Spanish automotive industry. Economic Development Quarterly 22: 149–166.

[9] Brown R (2000) Clusters, supply chains and local embeddedness in Fyrstad. European Urban and Regional Studies 7(4): 291–305.

[10] Camuffo A, Furlan A, Romano P and Vinelli A (2006) The process of supply network internationalization. Journal of Purchasing and Supply Management 12(3): 135–147.

[11] Chanaron J (2004) Relationships between the core and the periphery of the European automotive system. International Journal of Automotive Technology and Management 4(2/3): 198–222.

[12] Chu WW (2011) How the Chinese government promoted a global automobile industry. Industrial and Corporate Change 20(5): 1235–1276.

[13] Coe NM, Hess M, Yeung HW, Dicken P and Henderson J (2004) Globalizing regional development: a global production networks perspective. Transactions of the Institute of British Geographers, New Series 29: 468–484.

[14] Cuervo JA and Guillén M (2005) Outsourcing, offshoring, deslocalización: consideraciones generales y reflexiones sobre el caso español. Tercer Foro Hispano Alemán, Fundación Rafael del Pino, Madrid.

[15] Das A and Handfield R (1997) Just-in-time and logistics in global sourcing: an empirical study. International Journal of Physical Distribution and Logistics Management 27 (3/4): 244–259.

[16] Dicken P (2007) Global shift: mapping the changing contours of the world economy. London: Guilford.

[17] ERM (European Restructuring Monitor): http://www.eurofound.europa.eu.

[18] European Commission (2012) CARS 2020: Action Plan for a competitive and sustainable automotive industry in Europe.

[19] Freyssenet M, Shimizu K and Volpato G (2003) Globalization or regionalization of the European car industry? Basingstoke: Palgrave-Macmillan.

[20] Frigant V (2009) Winners and losers in the auto parts industry: trajectories followed by the main first tier suppliers over the past decade. In: Freyssenet M (ed) The automobile industry in the 21st century. New perspectives for a changing market. New York: Palgrave Macmillan.

[21] Frigant V and Layan J (2009) Modular production and the new division of labour within Europe: the perspective of French automotive parts suppliers. European Urban and Regional Studies 16(1): 11–25.

[22] García J, Lampón JF and Vázquez XH (2005) El modelo PSA-Vigo: claves de eficiencia productiva y logística en un entorno ajustado. Economía Industrial 358: 331–338.

[23] González-Benito J and Spring M (2000) JIT purchasing in the Spanish auto components industry: implementation patterns and perceived benefits. International Journal of Operations and Production Management 20(9): 1038–1061.

[24] Handfield R (1993) A resource dependence perspective of Just-in-time supply management. Journal of Operations Management 11(3): 289–311.

[25] Humphrey J and Memedovic O (2003) The global automotive industry value chain: what prospects for upgrading by developing countries. UNIDO Sectorial Studies Series Working Paper, Vienna.

[26] Ibusuki U, Kobayashi H and Kaminski PC (2012) Localisation of product development based on competitive advantage of location and government policies: a case study of car makers in Brazil. International Journal of Automotive Technology and Management 2(2): 172–196.

[27] Jürgens U and Krzywdzinski M (2009) Changing east-west division of labour in the European automotive industry. European Urban and Regional Studies 16(1): 27–42.

[28] Klier T and Rubenstein J (2006) Competition and trade in the U.S. auto parts sector. Chicago Fed Letter (222): 1–4.

[29] Lambert D (2001) The supply chain management and logistics controversy. In: Brewer AM et al. (eds) Handbook of logistics and supply chain management. London: Elsevier Science.

[30] Lamming R (1993) Beyond partnership strategies for innovation and Lean supply. Hemel Hempstead: Prentice Hall International.

[31] Layan J and Lung Y (2007) Les nouvelles configurations de l'espace automobile Méditerranéen. Région et Développement 25 : 157–176.

[32] Layan J and Lung Y (2008) Attractivité et agglomération de l'industrie automobile au Maroc et en Tunisie: une analyse comparative. Cahiers du GREThA 20: 1– 25.

[33] Lung Y (2004) The changing geography of the European automobile system. International Journal of Automotive Technology and Management 4(2/3): 137–165.

[34] Matthyssens P and Van den Builte C (1994) Getting closer and nicer: partnerships in the supply chain. Long Range Planning 27(1): 72–83.

[35] Mehra S and Inman R (1992) Determining the critical elements of Just-in-time management. Decision Sciences 23(1): 160–174.

[36] Miemczyk J and Holweg M (2004) Building cars to customer order: what does it mean for inbound logistics operations? Journal of Business Logistics 25(2): 171–197.

[37] Motta M and Thisse JF (1994) Does environmental dumping lead to delocation? European Economic Review 38: 563–576.

[38] Mouhoud EM (2006) Mondialisation et delocalization des enterprises. Paris: La Découverte/Repères.

[39] Patchong A, Lemoine T and Kern G (2003) Improving car body production at PSA Peugeot Citröen. Interfaces 33(1): 36–49.

[40] Pavlínek P and Janák L (2007) Regional restructuring of the Škoda Auto supplier network in the Czech Republic. European Urban and Regional Studies 14(2): 133–155.

[41] Putnam R (1993) Making democracy work: civic traditions in modern Italy. Princeton: University Press.

[42] Richardson J (1993) Parallel sourcing and supplier performance in the Japanese automobile industry. Strategic Management Journal 4: 339–350.

[43] Sadler D (1998) Changing inter-firm relations in the European automotive industry: increased dependence or enhanced autonomy for components producers? European Urban and Regional Studies 5: 317–345.

[44] Sleuwaegen L and Pennings E (2006) International relocation of production: where do firms go? Scottish Journal of Political Economy 53(4): 430–446.

[45] Sutherland D (2005) OEM-supplier relations in the global auto and components industry: is there a business revolution? International Journal of Automotive Technology and Management 5(2): 234–251.

[46] Van Tulder R (2004) Peripheral regionalism: the consequences of integrating Central and Eastern Europe in the European automobile space. In: Carillo J, Lung Y and Van Tulder R (eds) Cars: carriers of regionalism? Basingstoke: Palgrave.

[47] Wafa MA, Yasin MM and Swinehart KD (1996) The impact of supplier proximity in JIT success: an informational perspective. International Journal of Physical Distribution & Logistics Management 26(4): 23–34.

[48] Wells P and Rawlinson M (1994) The new European automobile industry. London: Macmillan.