We both are fascinated by the interaction of technology and industry. Warrian has followed the steel industry for a half century witnessing the transformation from the introduction of the basic oxygen process and electric arc mini-mills. Automotive is today steel’s biggest customer. Smitka has been visiting automotive suppliers for 30 years, primarily in Japan and the US, while focusing on research and teaching on the Japanese and more recently the Chinese economies. The auto industry looms large in our respective home areas, the Greater Toronto area in Ontario, and Detroit Michigan, though after a series of plant closings it is no longer important in rural Virginia, where Smitka resides. Through encounters at the Industry Studies Association, we coauthored a paper on technology in the auto industry. That led to this book.
Viewing the industry through the lens of technology is unique, and pulls together an array of themes. In the beginning—the late 19th and early 20th century—the auto industry was “high-tech,” replete with thousands of startups, and the contemporary equivalent of venture capital. Within 20 years, a dominant product architecture emerged, as did new production technologies, management methods, and distribution strategies. By the 1920s in the US, and with different timing, in Europe and Japan, dominant players emerged. By the late 1930s, the role of labor was being restructured, with the rise of unions and personnel departments. High profits eventually attracted entry, abetted by management that had come to focus on internal competition for power and not on the market. This is a familiar industrial dynamic where technology is central. Over the past 30 years, the industry has returned to its high-tech origins, in which new vehicles are built using steels and other materials that did not exist in 1980, with the drivetrain and safety systems replete with sensors and other electronics, all controlled by 100 million lines of software. We pick up that thread in our conclusion: will electric cars, autonomy, and new mobility models (Uber and others) prove disruptive?
The role of suppliers is another theme that arises naturally through a focus on technology. In the early years, the presence of suppliers facilitated entry. It is doing so again today, as evidenced by firms such as Tesla in the US and Geely in China. Car companies are by and large not in the business of writing software, or developing new sensors, or making new materials. The auto companies have spun off most of their internal parts manufacturing, focusing on vehicle design, final assembly, marketing, and technology integration. In such a decentralized system, what drives new technologies, and how are R&D efforts coordinated? We believe this book contributes to an understanding of those issues.
Technology does not consist of blueprints, but rather is embodied in production systems, in teams of engineers, and in management structures and methods. This broad perspective is crucial in several ways. First, it leads to a focus on the new geography within markets, and globalization across markets. Just-in-time management technologies underlie the growth of concentrated production regions in Europe and North America, reflected in the US, for example, in the closing of plants on the coasts and a recentralization of suppliers and assembly in an “auto alley.” In the background are changes in shipping technologies, from the growth of trucking to the development of containerization and roll-on/roll-off ships that facilitate movement across borders.
Technology is also central to understanding the rise of new producers. More than half of global production and consumption now takes place outside of the high-income markets of Europe, North America, and Northeast Asia. Two of the new national players, Mexico and Eastern Europe, are incorporated into the new geography of their neighboring higher-income regions. Their growth reflects the rise of a global industry, with centrally developed platforms using a common set of materials and components around the world. Technology can and is transferable, but that occurs through a gradual process of on-the-job training, complemented in some countries by formal apprenticeship programs and classroom training. That has led to a switch away from hire-and-fire factory labor to what Jürgens and Krzywdzinski (2016) term “New Worlds of Work” with low turnover and high skill content.
China is representative of new producers, with high levels of protection for the domestic market. As in many other countries, this led to rampant entry—in 2016 several dozen producers remained in business—and gross inefficiency. Despite that, the sheer size of the domestic market—it is larger than either North American or Europe—has allowed an array of firms to achieve scale. What will the role of China be, going forward? It is already engaged in low levels of exports on the basis of product differentiation, as specific Volvo and Buick models are only made in China and are exported to other markets. But that is a general phenomenon: the BMW plant in South Carolina is the sole global source for certain models and exports 70% of its output. The real question is rather one of technology: with R&D centers in Shanghai for virtually all of the major players in the global industry, suppliers, and assemblers, will China emerge as a third pole of global car development?
We have enjoyed pulling our thoughts together on these issues, and have labored to present them in a readable manner. This is not an academic book, so we have not burdened it with footnotes and references. It does, however, remain grounded in the work of researchers in an array of disciplines, as well as a sensitivity to management perspectives from interviews and engineering presentations at dozens of companies, from work experience inside factories, and from an interest—and in the case of Warrian, hands-on experience—in the realm of public policy. The latter is reflected in our willingness to take a stance on issues. We hope that also makes this a more compelling book.