By Vera Šćepanović, CEU PhD Candidate, Political Science
(And the Japanese, don’t forget them. The well-justified worries over Detroit seem to have made everybody forget about “the rest” of the US auto industry – 2008 was a bad year for the carmakers all around, but apart from that for all we know the East Asian transplants in the US have all been rather alive and well. Which sort of spoils the possibilities for sectoral generalisations. True, they found a different way to make cars – the one that calls for fewer skilled workers, no unions and more adversarial labour relations. All that means for the VoC framework is that the I-make-machines-you-make-chips division of labour between CMEs and LMEs may have been a tad too rough if usefully illustrative shorthand.)
The answer, I suspect, lies in the incompleteness of the framework, which is essentially that of a production model. There’s one way in which the stubborn clinging of the Big Three to their big expensive cars and big expensive workforce makes sense, and that’s if we conceive of it as a giant, if restricted, Fordist scheme to secure the market. Which only makes sense if we believe that these multinational juggernauts are that dependent on the US market. Surprisingly enough, that really seems to be the case.
Contributions of North American and rest-of-the-world operations to GM’s global net profit, 1960-2007 (compiled from annual reports, based on Bruno Jetin:2004)
Contributions of North American and rest-of-the-world operations to Ford’s global net profit, 1960-2007 (compiled from annual reports, based on Bruno Jetin:2004
The financial crisis of 2008 caused an awful drop of the car sales in the US across all market segments. The small car segment suffered the least (only – 1.1%, as compared to the -18% in the industry), but the small car segment in the US market represents only about 15% of the overall sales (as compared to West European market where the market share of the equivalent segment is 27%). The fact that the US manufacturers choose to focus on the bigger, more expensive and less fuel-efficient cars is therefore the function of their dependence on the US market with its peculiar characteristics (which, incidentally, may also have limited their success internationally, given the different preferences in other markets, and has also made them more vulnerable to the downturn which took a greater toll on the large and luxury segments). Forcing the Big Three to rethink their production strategy and start making smaller, fuel-efficient cars or innovate in the direction of hybrid and electric cars in exchange for the bailout will only work if there is a market to sell them. And taking a cue for Toyota’s decision to delay the production of its Prius hybrid in the US indefinitely, one suspects that the times are not propitious.
This is all not to say that the Big Three are not ripe for restructuring or that the humanity is not in a dire need of a cleaner solution for transportation. But the two may not go together as smoothly as we would like to think they should. The Varieties of Capitalism is a story of how every wheel of the system comes together like clockwork, but we just might be seeing them grind each other to halt.
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