The Central and East European Automotive
Industry Restructuring
Petr Pavlinek (University of Nebraska at Omaha, USA, Foreign
Visiting Fellow, SRC, 2001-02)
The author
I have come to the Slavic Research Center of the Hokkaido
University
to study the profound changes that have been taking place in the
automotive industry of Central and Eastern Europe (CEE) since 1990. My
work is based on several field research visits to the Czech Republic
that included in depth interviews conducted with key informants (plant
managers, trade union leaders and ministry officials) in car factories,
car component plants and governmental institutions. The automotive
industry restructuring in the 1990s
involved a number of complex issues that my research addresses, such as
the effects of price and trade liberalization in the early 1990s,
privatization of the industry, including various privatization methods
used to privatize different plants with their various outcomes, the
role of foreign capital in the process of privatization and
restructuring, and the transformation of car assemblers and component
suppliers relationships. Geography of the industry is being rewritten
as some plants have closed down while others have been built. The life
of communities and entire regions has been affected and more changes
are underway. How do these changes fit into the overall picture of
economic transformation in CCE? What can the analysis of car industry
restructuring tell us about the post-1989 economic change as a whole in
CEE?
I have quickly realized that to understand the complexity of these
changes, it is important to set my analysis in the historical context
and in the context of changes the European car manufacturing
experienced in the past ten to fifteen years. Some people may say that
the analysis of underdeveloped and obsolete state socialist car
manufacturing cannot help us very much in
understanding the post-1989 restructuring. However, a closer look at
the
production trends and trade patterns, for example, helps me understand
some
developments that took place in the 1990s. For example, the collapse of
Czech truck manufacturing was largely due to its overexposure to the
CEE
markets as the Czech truck manufacturers expanded their production to
serve
the Council for Mutual Economic Assistance (CMEA) markets especially
after
1970. While about 40% of both passenger cars and trucks produced in
Czechoslovakia
between 1980 and 1989 were exported, 96% of truck exports went to the
CMEA
markets but only 32% of passenger cars were exported to CEE. No history
of truck exports to highly competitive Western markets had devastating
consequences
for the Czech truck manufacturers after their domestic and CMEA markets
largely disappeared after 1989. They could not easily switch to Western
markets because they had no sale and distribution networks outside CEE,
their products were unknown outside CEE and their trucks were not
competitive because of their low quality.
The West European car industry was transformed in the 1980s and 1990s
largely as a response to the Japanese challenge after the Japanese
manufacturers established factories in the region. The dramatic changes
the West European car industry underwent during this period were
quickly introduced in CEE after 1989. They included, among others, new
ways of production (various forms of 'lean' manufacturing and
just-in-time production), new forms of industrial relations within
factories and among assemblers and component suppliers, new ways of
work organization and recruitment strategies. It is impossible to
understand the CEE automobile industry restructuring without
comprehending these industry-wide trends taking place outside the
region.
All these changes led to changing geographies of automotive production
in CEE. In terms of national production, substantial differences exist
between Russia with its huge internal market on the one side and the
rest
of CEE on the other side. So far, Russia has not seen any significant
influx
of foreign direct investment (FDI) into its automotive industry for a
number of reasons, while FDI was the most important force that
transformed the passenger car industry in the rest of CEE with the
exception of Ukraine and
Yugoslavia where the passenger car production virtually collapsed. The
effect
of FDI was the most profound in the case of Poland, Czech Republic,
Slovakia,
Hungary and Slovenia and led to rapidly growing production as Figures 1
and 2 show. Hungary and Slovakia had the first passenger car assembly
plants
ever built on their territories in the 1990s.
While these developments seem to be positive, a number of questions
remain to be answered regarding the role of FDI in the region. Has the
CEE automobile sector become excessively dependent on external forces
as multinational companies located outside the region make
all-important strategic decisions? Is research and development
(R&D) being transferred abroad and what does
it mean for CEE in terms of potential erosion of national R&D
capacities? Are these developments simply reinforcing the peripheral
role of the region not only in the automotive industry but also in the
European (and global) economy as a whole? I believe that researchers
need to scrutinize these developments critically to better understand
them.
The foreign visiting fellowship at the SRC allows me to fully
concentrate on these complex issues in a way I could never accomplish
at my home university because of my teaching and administrative
responsibilities there. This is why I appreciate the opportunity to
spend ten months focusing on my research at the SRC so much. The Slavic
Research Center is a wonderful place to
work and I will always be very grateful to the SRC faculty and staff
for
this exceptional chance to live and work in Japan.
Figure1:Index.of passenger car production in selected
CEE countries,1989-2000.
Source:Data from stastical yearbooks of countries
involved,various years.
Figure 2:Passenger car assembly in Slovakia(left) and Hungry
(right),1992-2000.
Source:Data from Financial Times(2000),Economist Intelligence
Unit(2001).
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