RESTRUCTURING AND INTERNATIONALIZATION OF THE EUROPEAN AUTOMOTIVE INDUSTRY

This article draws on Harvey’s theory of uneven development and spatio-temporal fix to conceptualize the changing geography of the European automotive industry based on the spatial profit-seeking strategies of automotive firms. It employs the spatial concept of integrated peripheries, in order to explain the growth of the automotive industry in peripheral regions and its contemporaneous restructuring in existing locations. The empirical analysis is based on 2124 restructuring events of large automotive industry firms in the European Union countries and Norway between 2005 and 2016, and on 91 interviews with foreign automotive industry subsidiaries conducted in Czechia and Slovakia between 2009 and 2015. Large differences in labor costs and other production costs across the European Union explain the growth in the East European integrated periphery and simultaneous restructuring in both traditional core regions and old integrated peripheries in Western Europe. The empirical analysis also confirmed the increasing internationalization and the decreasing role played by large domestic firms in the European automotive industry.

1. Introduction

Although the automotive industry is one of the most globalized industries (Dicken, 2015) because of the presence and production of large assemblers and leading (global) suppliers in all major markets, its geographic structure is based on functionally integrated macro-regional production networks and regional or local clusters of production (Frigant and Lung, 2002; Carrillo et al., 2004; Sturgeon et al., 2008). The main advantage of macro-regional integration is the more efficient territorial division of labor through macro-regional specialization, which allows for greater scale economies (Freyssenet and Lung, 2004). Free trade and reduced transportation costs allow firms to better exploit the uneven distribution of factors of production and socially constructed endowments through the more fine-grained territorial division of labor, which leads to greater territorial specialization (Harvey, 2005).

Despite major shifts in the global geography of the automotive industry (Sturgeon and Van Biesebroeck, 2011; Dicken, 2015), Europe continues to be one of the world’s main production regions by accounting for 23% of total vehicle production and 28% of total car output in 2016 (OICA, 2018). In 2016, the narrowly defined automotive industry (NACE 29) employed 2.5 million workers in the European Union (EU) (Eurostat, 2018), while the broadly defined automotive industry employed 3.3 million (ACEA, 2017). This makes the automotive sector one of the crucial manufacturing industries in the EU, especially when also considering its positive trade balance (€89.7 billion in 2016) and large spending on research and development (€50.1 billion in 2015) (ACEA, 2017). Since the 1990s, the geographic distribution of the European automotive industry has been affected by changes in its organization and production strategies (Frigant and Lung, 2002; Sturgeon et al., 2008), the economic and political liberalization in Eastern Europe (Lung, 2004), and its economic integration into the EU (Frigant and Miollan, 2014). These changes have had significant effects on employment and regional development across Europe and in adjacent automotive industry regions, such as in Turkey and Morocco (Layan and Lung, 2007; Jürgens and Krzywdzinski, 2009; Benabdejlil et al., 2016; Pavlínek, 2017).

This article seeks to contribute to the analyses of the European automotive industry by examining job creation and job losses by large automotive firms in the EU and Norway (henceforth EU + 1) between 2005 and 2016 and by investigating the investment and location decisions of foreign automotive companies in East-Central Europe (henceforth Eastern Europe). It aims to improve our understanding of the territorial development of the automotive industry through its expansion into peripheral regions adjacent to core areas and their integration into macro-regional production networks. I address five research questions: first, how can we conceptualize the changing geography of the European automotive industry? Second, what was the geography of job creation and job losses in the EU + 1 automotive industry between 2005 and 2016? Third, what were the underlying reasons behind the geography of job creation and job losses? Fourth, what kind of firms were driving the job creation and job losses in terms of their ownership (domestic or foreign) and nationality? Fifth, what were the most important types of restructuring events resulting in job creation and job losses? I analyze firm-level data on job creation and job loss in the EU + 1 countries, which also allows me to evaluate the degree of internationalization of the European automotive industry by examining the role of foreign and domestic firms in these processes. I also draw on 91 interviews with foreign automotive industry subsidiaries in Czechia and Slovakia in order to identify the most important reasons behind the investment and location decisions of foreign automotive firms to expand production into Eastern Europe.

In order to conceptualize the geographic expansion and restructuring of the European automotive industry, I draw on Harvey’s theory of uneven development and spatio-temporal fix (Harvey, 1982, 2001, 2005, 2010, 2014), which allows me to further develop the spatial concept of integrated peripheries as a particular form of spatio-temporal fix in the contemporary automotive industry (Pavlínek, 2018). The dynamic and relational view of the uneven development of the European automotive industry helps me understand uneven geographic trends in job creation and job losses. I argue that large national differences in labor costs and corporate taxes along with other cost-cutting reasons played an important role in the geographic restructuring of the European automotive industry between 2005 and 2016. Lower production costs in integrated peripheries created excess profit opportunities for automotive firms who responded by locating new production to these regions and, in the process, by restructuring their operations in existing automotive industry locations in Western Europe.

I begin with a conceptual discussion of the uneven development of the European automotive industry through the formation of spatio-temporal fixes. I show how this process of territorial expansion integrates peripheral areas into macro-regional production networks while, at the same time, triggering restructuring in existing locations. I also briefly review the development of integrated peripheries in the European automotive industry. Second, I explain the data and methodology employed in the empirical analysis. Third, I analyze the 2005–2016 job creation and job loss in the EU + 1 automotive industry and, based on company interviews in Czechia and Slovakia, I investigate the reasons for the investment and location behavior of foreign firms in the Eastern European integrated periphery. Fourth, I examine job creation and job losses in the EU + 1 automotive industry by the nationality of the firms, ownership and restructuring events. Finally, I summarize and evaluate the results in the conclusion.