For more information
Call 1-800-351-0222
Call 1-800-351-0222
EUROPEAN AUTO INDUSTRY IN 1990S.
Term Paper ID:25589
Get This Paper Free! or
Essay Subject:
Background & trends, effects of formation of European Union, competition, production, impact of global business environment, innovations, mergers.... More...
8 Pages / 1800 Words
11 sources, 20 Citations,
APA Format
$32.00
More Papers on This Topic
Paper Abstract:
Background & trends, effects of formation of European Union, competition, production, impact of global business environment, innovations, mergers.
Paper Introduction:
Introduction
The 1998 merger between Germany's Daimler-Benz and America's Chrysler Corporation brought into sharp focus the increased globalization of the automobile industry. For most of the twentieth century, Europe's motorcar industry was highly regionalized, with some companies having "captive" markets through protectionist barriers imposed by governments. By the end of the century, however, the trend was toward open markets, both in Europe and abroad, and the European motorcar manufacturers found that they had to modify their production techniques, marketing strategies and even their corporate alliances in order to survive. This research examines trends in the European motorcar industry during the 1990s, the factors in the business environment which influenced the industry, and the effects that the single Eu
Text of the Paper:
The entire text of the paper is shown below. However, the text is somewhat scrambled. We want to give you as much information as we possibly can about our papers and essays, but we cannot give them away for free. In the text below you will find that while disordered, many of the phrases are essentially intact. From this text you will be able to get a solid sense of the writing style, the concepts addressed, and the sources used in the research paper.
18. Duringthe first half of 1998, sales were up more than seven percent than in thesame period of 1997. 18A). 18). 69). BMW, for its part, implemented flexible schedulingas early as 199 at its Regensburg plant. Daimler-Benz, for example, agreed to produce the Swatchcar in a joint venture with key suppliers. Europe's industrychief: We need a common voice. The Renault closure was particularlyworrisome to the Belgians since, per capita, Belgium is the largestproducer of cars in the world, although the five largest factories belongto foreign (non-Belgium) companies ("Europe's Great Car War," 1997, p. (1998, November 23). 75. (1997, September 15). At the Ford Focus plant in Saarlouis, Germany, outsidesuppliers have facilities within the "industrial park" where they producecomponents which are assembled in their entirety into the motorcar. (1997, September 1). Prior to the formation of the EuropeanUnion, individual nations (or manufacturers) would have to lobby for accessto such markets and would have only their small home market with which tobargain. Coups and coupes. Europe's great car war. For most of the twentieth century, Europe's motorcarindustry was highly regionalized, with some companies having "captive"markets through protectionist barriers imposed by governments. 36). Most European manufacturers have imitated the successful manufacturingtechniques of the Japanese, but Japanese manufacturers remain among themost productive of European manufacturers. This prevents laying off workers during downturns,and increases the options available to the company as demand changes(Carter, 1998, p. The mergers and acquisitions which have taken place in the199 s are likely to continue, and some traditional European manufacturesare likely to disappear altogether by 2 2 ("Going, Going," 1997, p. Analysts recognized that whilesales were increasing, they were doing so at a decreasing level. Industry Week, p. That subsidy was ended inthe end of 1996, and sales, which had been boosted by the subsidy, felloff. Bruce, K. The European motorcar industry is likely to see increasedconsolidation in the next several years, characterized by alliances amongEuropean manufacturers as well as across regional borders (such as theDaimler-Chrysler merger), and the result is likely to be increasedcompetition among global giants. (1999, February 22). 69-7 . It is rumored that Renault andNissan might forge a strategic alliance, although this is generally seen asa marriage of two weak partners ("Renissant?" 1999, p. At that facility, workerstypically average four nine-hour workdays each week, but may be required towork Saturdays at no extra pay. Ford workers in Germany areinitially hired on a six-month contract which then may be extended to 12 or18 months. The car in front is still Japanese.The European, p. 18). At 2.6 meters long, the Swatchcar is much smaller than other European cars, and its success is far fromassured. Driven to a deal. This reduces its research and development costs and helps dilutedownturns in the environment (Carter, 1998, p. When the EU began discussion of a common currencyin the mid-199 s, and when the euro became fact in the beginning of 1999,consumers again held off on major purchases to see how the currency wasreceived throughout the world. Now that they are competing throughoutEurope, marketing costs have increased significantly, to the point thatthey are more than double the costs of marketing in the United States.Discounts are responsible for some of these costs, as are additionalpromotional efforts which have a more direct effect on sales ("Europe'sGreat Car War," 1997, p. 2 H). 69). 36. By the endof the century, however, the trend was toward open markets, both in Europeand abroad, and the European motorcar manufacturers found that they had tomodify their production techniques, marketing strategies and even theircorporate alliances in order to survive. The Influence of the European Union on the Industry For many years, Europe was a highly fragmented motorcar market withseparate markets for separate nations. As a result, Ford has seen a 25 percent improvement in themanufacturing of the Focus over the Escorts which were previouslymanufactured at this facility (Carter, 1998, p. The European Union also makes it easier for industry activists to seekremedy from trading partners for equal access to markets. There was also speculation thatFiat was actively seeking a buyer for its car division ("Fiat May Follow,"1999, p. Car firms put the brakes on. 19). This gives the company greater flexibility in terms of meetingdemand for its products. 68. Cameron, D. (1996, August 8). In 1997, for example, theNissan factory at Sunderland was the most productive of any European carplant; the General Motors factory at Eisenach was the second mostproductive, and Toyota's plant at Burnaston in the UK came in third(Cameron, 1997, p. Farhi, S., & Kurylko, D. In this highly competitive environment, companies must improve theiroperating margins by reducing costs and increasing productivity, and somecompanies have found innovative ways to accomplish this. When manufacturerswere assured of protected markets in their home countries, they were ableto keep their marketing costs down. Germany has the shortest working hours of any major industrial nationin the world combined with the highest wages. InItaly, the government removed financial incentives for individuals topurchase new cars; this caused a decline in demand for all cars, includingFiat, in that country ("Coups and Coupes," 1998, p. 2 H-21H. Influential Factors in the Business Environment Europe endured a recession in the late 199 s which affected luxurycars more than small cars, but which had a widespread effect on theindustry as a whole and which helped to contribute to the overcapacity ofthe industry. Automotive plants continue to operate at well below theircapacity due to sagging demand, and it is the productivity gains which havebeen responsible, in part, for the need to implement more flexible workstructures at plants. This trend, and theflexibility for workers and managers that it offers, is setting the tonefor additional changes within the industry. 45. The Economist, p. 21H). Fiat suffered particular setbacks during 1998 when the collapse of theBrazilian economy (where Fiat has a large market) and a depressed Italianmarket meant that the company's motorcar division barely broke even. (1999, March 2 ). Korean cars, forexample, are imported to various nations within Europe, but European carsare nearly nonexistent in Korea. Introduction The 1998 merger between Germany's Daimler-Benz and America's ChryslerCorporation brought into sharp focus the increased globalization of theautomobile industry. Nonetheless, other manufacturers, including Ford and Peugeot,have developed similar vehicles based on the Swatch concept (Brierley &Moss, 1996, p. Increasingly, European manufacturers in many different types ofindustries are learning from their Japanese counterparts about the benefitsof just-in-time manufacturing techniques. 75). Ford agreed to acquire Volvo'sautomotive group in early 1999, and announced plans to keep the currentVolvo product line intact, but to introduce new models with appeal to theAmerican consumer (Bruce, 1999, p. Carter, M. Until these purchase taxes are removed, theEU will not truly have a single market with equal access for allmanufacturers. Auto manufacturers have focused on introducing many new models inorder to attract customers, but such innovation increases research anddevelopment costs, and makes it difficult for companies to recover theirinvestment. 75). Afterthe European Union became fact in 1992, the industry began to consolidateand the European manufacturers faced competition not only from traditionalrivals based in Japan and the United States, but also from other Europeanmanufacturers. Forbes, p. 18A. (1998, October 3). Even with the formation of the EU, however, there remain someimpediments to free trade within the European car market. (1999, February 15). The Economist, pp. 18). BusinessWeek, p. Representatives from French manufacturers Renault and Peugeot lobbiedthe French government to subsidize retirement for older automotive workers,but were unsuccessful in their efforts ("Europe's Great Car War," 1997, p.7 ). Onceprotected by regional trade barriers and government action, European carmakers must now compete not only against Japanese and Americanmanufacturers, but against other European car makers pursuing a pan-European strategy. Over thecourse of the decade, Mercedes set about to reinvent itself. There arepurchase taxes on new automobiles in some countries (Denmark and Greece,for example), but not in others (France and Germany). During periods of uncertainty, consumersput off making significant buying decisions, particularly for purchasessuch as automobiles (Farhi & Kurylko, 1997, p. (1997, August 28). References Brierley, D., & Moss, N. The Economist, p. 65).DaimlerChrysler, which was formed in 1998 by the merger of Germany's andAmerica's large manufacturers, had considered acquiring Nissan, but hasapparently decided against the deal. Automotive News, pp. (1997, March 8). The improvements in productivity which have been made at Europeanplants are not necessarily all positive so far as European manufacturersare concerned. Thus Renault closed a Belgian factory (which meant a loss of3,1 jobs) in 1997, the same year that Ford closed a British factory(with 13 jobs), also in 1997. Going, going, gone. Renissant? Mercedes-Benzhas, in particular, changed its product image during the course of the199 s. When the decade opened, the traditional Mercedes was a solidlybuilt sedan with a high price point. Background and Trends The mid- to late 199 s were characterized by overcapacity in theEuropean motorcar industry despite some increases in sales growth. (1999, February 8). At the 1998 Paris Motor Show, more than 4 new models wereintroduced to the car-buying public ("Coups and Coupes," 1998, p. Workers do not receive overtime pay, butdo receive overtime credits which can be used for holiday or whenproduction slows down. The companymanaged to preserve its hard-won reputation for quality, and Mercedessedans continue to be favored by embassy staffs and German taxis, butMercedes now also markets the CLK coupe, the SLK roadster and the M-classfour-by-four (built in the United States, but popular among Europeanconsumers, as well) (Carter, 1998, p. Mercedes products were recognized fortheir reliability and quality, but not for their innovation. 19. 2 H). TheEuropean, p. Time, p. Volkswagen is well-positioned to endure such changes in theenvironment since it has four brands in the market (Volkswagen, Audi, Skodaand SEAT), and since it uses the same technology across its productplatform. 18). With the formation of the European Union, those manufacturers whichenjoy significant economies of scale are those which are likely to see themost benefit. 18). 68).Volvo has been acquired by Ford, Volkswagen owns Audi and Rolls-Royce, andAmerica's General Motors owns Opel, Vauxhall, 5 percent of Saab, and hasmanufacturing partnerships with Suzuki, Isuzu and Toyota ("Global Motors,"1999, p. This research examines trends inthe European motorcar industry during the 199 s, the factors in thebusiness environment which influenced the industry, and the effects thatthe single European Union are likely to have on the industry. Such consolidations are likely to continue as manufacturers try toposition themselves to take advantage of the single European Union.Smaller car manufacturers will not enjoy the same cost savings as theirlarger counterparts, and the incentive to benefit from the single market,as well as increased competition from increasingly global competitors, willhelp bring about fewer competitors and larger companies in Europe. The European Union has also been able to implement voluntaryagreements regarding carbon dioxide emissions among the three majorEuropean automotive manufacturing countries (Germany, France and Italy).These agreements are designed to reduce fuel consumption by 25 percent by2 5. With the formation of a single trading bloc, the bargaining powerof the EU and its member nations increases substantially (Farhi & Kurylko,1997, p. During the downturn that many European car manufacturers saw in themid-199 s, companies began to close factories in nations where they werenot based. This provides greater flexibility in the market, but also resultsin mixed sales performance since older models may be outsold by thecompetition. 65. 26. During the years immediately following the formation of the EU, demandin Europe wavered as consumers determined what the effect of the EU wouldbe on their own lives. Productivity at European car factories is up, butdemand is slowing, and it is unclear whether smaller manufacturers willsurvive in market where government subsidies have disappeared along withtrade barriers. 45). During 1996, the French government offered up to 7, francs toanyone trading in an older car for a new model. 26). Fiat may follow in Volvo's footsteps. Italy was not the only country which offered subsidies to promote carsales. Sales began to slow in mid-1998, and sales were noexpected to increase more than four percent for the year as a whole over1997 ("Coups and Coupes," 1998, p. Car industry stuck in theslow lane. Just as the EU has greater lobbying power with regard to foreignmarkets, it also has considerable power with regard to its own industries.Automotive manufacturers are reluctant to forego access to a singleEuropean market (as opposed to the fragmented markets which used to exist)and are so more willing to work with regulators in order to meet emissionand fuel consumption standards (Farhi & Kurylko, 1997, p. T. Global Motors. These taxes have thenet effect of increasing the price of automobiles in some countries anddampening demand as a result. This applies to the motorcarindustry, as well. The single market created by the European Union has brought with itother difficulties, such as increased marketing costs. Thusdashboards, engines, wiring harnesses and body subassemblies are all sentto the Focus factor on conveyor belts and "just-in-time" to be incorporatedinto the Focus. Conclusion The European motorcar industry is an industry marked by intensecompetition which has undergone significant changes during the 199 s. Speculation about the next round of mergers and acquisitions isrunning high at the end of the 199 s. It isexpected that by 2 1, sales will have fallen ten percent from their 1998levels (Carter, 1998, p. In some cases, nationalmanufacturers dominated the market in their respective countries. The European, p. 2 H). 75).Some companies, such as Ford, continue to offer a mixture of old and newmodels. Prices declined, rather than increased, as a result (Farhi& Kurylko, 1997, p. Daimler-Benz and Volkswagen have been successful at introducing newtypes of cars and new approaches to business during the 199 s well beyondthe competition.
If this paper is not what you are looking for, you can search again:
or
We can write a Custom Essay just for you.
Browse Essays by Subject