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The changes in the structure of the car industry.

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Introduction

INTRODUCTION THE CHANGES IN THE STRUCTURE OF THE CAR INDUSTRY Global restructuring Mass Re-structuring of the Car industry has taken place due to the high investment costs in the motor industry: this means that to make profits, manufacturers have to run plants at near capacity. In an effort to maintain profitability, European manufacturers have been intimately involved in the latest round of global restructuring/cross border restructuring. Recent significant events include: * Acquisition of Volvo by Ford; * equity swap joint venture between Fiat and GM; * the Daimler merger with Chrysler, followed by the integration of Mitsubishi into the group; * the sale of Rover Group by BMW, with Land Rover going to Ford; * the Renault-Nissan cross-shareholding, effectively a Renault take-over; * Volkswagen's take-over of Swedish truck maker Scania. Recent investments in the UK have occurred: * Ford/Jaguar at Halewood; * Peugeot at Ryton; and * Vauxhall (GM) at Luton and Ellesmere Port for example. For the sources please refer to the reference page under articles. Article 1 There are countervailing pressures, not least the need to be geographically near the market in order to improve responsiveness to changing demands, but these may not be sufficient to sustain manufacturing in the European Union in its current form. For the UK automotive industry these are pressing concerns. UK manufacturers have been strongly export-orientated, with much of the growth in production during the 1990s attributable to exports to the European Union. ...read more.

Middle

This mismatch is driving rapid reorganisation of the industry and consolidation. An overview of the car industry was published in 'The World in 2000'and included the following extracts: "It will be a bruising year for car companies, which are still the mainstay of manufacturing industry in most countries: a time of profitless prosperity. And as car companies go, so may go many others. They will have to cope both with a normal cyclical downturn in the market in most countries, and with the need to reinvent themselves. Most companies think the market will fall in 2000, putting further pressure on their slim profit margins. Tight credit and high interest rates have wrecked the car market as the government struggles to stabilise the economy after the crisis that began in 1998. Only DainlerChrysler and Volkswagen are making decent profits. General Motors and Ford are barely making money on their huge European sales. Fiat is actually losing money. All this will get worse in 2000. Growing consumer resistance to high prices in Britain (estimated to be about a fifth higher than continental markets) is spurring the European Commission to scrutinise "block exemption"5. When the exemption expires in 2002, it is unlikely to be renewed. So expect car prices in Europe to edge down, especially as the Euro promotes transparency and makes for a regional single market. In Britain both Volkswagen and Ford, faced with customers waiting for prices to fall, have had to promise to reimburse customers for any cuts that take place after their purchase." ...read more.

Conclusion

Such a model, which in essence builds on labour union demands for more and better work, allows us to avoid an employment crisis in the future, even in an age of structural excess capacity. The car industry on a global scale is overshadowing what is happening in the UK. The fact that Britain as a whole has not committed to joining the Euro is a major reason why big car manufacturers have not opened any production plants. There are other reasons aswell like in Eastern Europe labour is cheaper and workers work longer hours and a lot harder. This is due to their being less Trade Union interference. They all expect their industry to develop the way the car industry has. In an increasingly globalised marketplace, maturing industries will become steadily more concentrated. Only a small number of big companies will survive. The evolution of the world car industry has followed a complex pattern, although one that is common to many other products. The hundreds, perhaps thousands, of small car manufacturers at the beginning of the 20th century mostly went out of business or were absorbed into larger companies. They simply were not good enough to compete with the few companies that managed to master the technology and understand the market. As markets evolve, differentiation becomes steadily more important. Globalisation allows small producers that develop competitive advantages to deploy them on a world scale. Success in the motor industry comes not from size and scale but from developing competitive advantages in operations and marketing these advantages internationally. ...read more.

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