The effect of EU enlargement on the size and geographical structure of the automotive industry in CEE

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The effect of EU enlargement on the

size and geographical structure of the

automotive industry in CEE

J.R. Kuiken

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The effect of EU enlargement on the size and

geographical structure of the automotive

industry in CEE

The author is responsible for the content of this thesis. Master Thesis

International Business & Management Faculty of economics and business University of Groningen

Author: Drs. J.R. Kuiken

Supervisors: Mr. Drs. H.A. Ritsema Dr. B.J.W. Pennink

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Abstract

This explorative research analyzes the effect of EU enlargement on the size and geographical structure of the automotive industry in Central Eastern Europe. The analysis consists of comparing size and geographical structure before and after enlargement and by investigating in the factors that determine the size and geographical structure. Although EU enlargement only happened recently, this research shows that the effect of enlargement is certainly visible. Accordingly, the discussion of the results leads to hypotheses in which is stated that the trend that existed before enlargement, with great differences between countries, has deepened, and a shift eastwards is visible. EU enlargement has been pointed out as an underlying factor in the factors responsible for the changes in size and geographical structure after enlargement.

Keywords: Automotive industry, Central Eastern Europe, EU enlargement, European Union,

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Preface

This master thesis has been created in order to finalize the master International Business & Management at the University of Groningen, The Netherlands. The thesis is the result of several months of research and has formed the last challenge for me as a student. I would like to take this opportunity to thank a few people, who supported me in one way or another throughout the research process.

Firstly, I would like to thank my first supervisor Henk Ritsema for his comments and time, even when time was hardly available, especially in the last stage of this research. He made a great effort to give me the necessary comments on the early versions. This is greatly

appreciated. Furthermore, my second supervisor Bartjan Pennink had a very supportive role as well. The first ideas for this thesis originate from a conversation between him and me regarding IB&M graduation. Also in the last stage, our discussion helped me placing this research in the right perspective. Both supervisors often pointed in the right direction, where sometimes I was already heading to without knowing it myself. Hereby, I would like to express my gratitude for this.

Last but not least, I would like thank my family, friends and my girlfriend for their support.

Groningen, August 2008

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List of abbreviations

ACEA - European Automobile Manufacturers Association

ASEAN - Association of Southeast Asian Nations

CEE - Central Eastern Europe

Comecon - Council for Mutual Economic Assistance

EBRD - European Bank for Reconstruction and Development

EFTA - European Free Trade Area

EU - European Union

Eurostat - Statistical Office of the European Communities

FDI - Foreign Direct Investment

IMF - International Monetary Fund

OECD - Organisation for Economic Co-operation and Development

OICA - Organisation Internationale des Constructeurs d’Automobiles

UN - United Nations

UNCTAD - United Nations Conference on Trade and Development

WIR - World Investment Report

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1 Introduction

1.1 Introduction to the research topic

The automotive industry has been one the most important manufacturing industries in the twentieth century. It was quite literally an engine of growth through its large scale and through its connections with other industries. Europe is one of the three major regions in the global automotive industry and is said to be the largest and most lucrative of all the global regions in the 1990s (McLaughlin & Maloney, 1999). The European region is known for its very own characteristics like the fact that it primarily remains a collection of more or less integrated national markets. These national markets cause for different circumstances and the competition between automotive producers is fierce. Therefore it is necessary for automotive producers to find the optimal production location. Emerging markets have become a good alternative location and nowadays it is believed that a shift occurs in the automotive industry; a shift towards emerging markets.

Central and Eastern European (CEE) countries are characterized as emerging markets. These countries have been undergoing severe changes since the Soviet Union fell apart in the early 1990s. When plan-economy eventually failed, it has set in motion a transformation which changed the course of all these countries that are seeking to rebuild their markets and reintegrate into the world economy. In this process, possibilities for economic integration with other market economies in Europe and elsewhere in the world started to arise. The automotive industry is often considered a key representative of the modern manufacturing industry and therefore the automotive industry is believed to have played an important role in the

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1.2 Research design

Not only can a significant development in car production facilities in Central Eastern Europe be observed, but the CEE transition countries show great differences as being a global

automotive production location (Radosevic & Rozeik, 2005). There have been several studies (Havas, 1997; Pavlínek, 2003; Radosevic & Rozeik, 2005) that deal with the automotive industry in Central and Eastern Europe. These studies find the presence of an uneven

development across the region, with great differences between countries. Differences occur in the number of produced automobiles as well as in (foreign) investments and market share. The uneven development is believed to have several reasons, but it is merely a fact that the potential of CEE countries as a global production location has not been fully exploited. Further exploitation is considered to be a matter of time. Since the automotive industry is an internationally orientated industry, further development of the region is more or less

influenced by international cooperation and integration.

On January 1st, 2004, a certain number of the CEE countries took a big step in the process of integration in the European economy by joining the European Union. These countries are Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia, and Slovenia1. On January 1st 2007, Romania and Bulgaria joined as well which resulted in a European Union of 27 member states (Figure 1).

Figure 1: EU enlargement and Central Eastern Europe

The enlargement has a certain impact on the CEE region. Since every industry has its own specific characteristics, as does the automotive industry, the impact of enlargement will not be the same in every industry.

1_{Malta and Cyprus also joined January 1}st_{2004, but are not mentioned here for not being part of CEE.}

EU-15 CEE EU-27 CEE

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Mainly due to the fact that EU enlargement has only happened recently, little has been written about the effect of EU enlargement on the CEE automotive industry. Some studies predict the effects of enlargement on CEE countries in general (Dupuch, 2004) and very few studies (Radosevic & Rozeik, 2005) name some of the possible effects on the automotive industry. Moreover, the shift of the automotive industry towards emerging markets requires attention. Until now there has been, with the exception of Radosevic & Rozeik (2005), little written on the globalisation of the automotive industry in CEE, although it is widely recognized that emerging markets are considered to be an upcoming production location and that the automotive industry in these countries is in a phase of transition (Dicken, 2003).

1.2.1 Research objectives

This leads to the aim of this study, which will be to investigate in the automotive industry in Central Eastern Europe and more specifically in the effect of enlargement of the European Union. This study will investigate in what ways EU enlargement affects the automotive industry in the CEE region. Did EU enlargement for example further deepen the uneven development between countries in the region or did it cause a flattening process? Because of the size of the automotive industry and its economic effects, any effect that EU enlargement has, is of importance. Even relative small effects caused by EU enlargement can have considerable consequences (Rhys, 2004).

Because EU enlargement took place in 2004 and little is written on the subject, this research can be typified as exploratory. The objective of explorative research is stated by Kotler et al. (2006, p. 122) as: ‘to gather preliminary information that will help define problems and suggest hypotheses'. According De Leeuw (1996) it explores unknown domain and strives for generating ideas or hypotheses. Therefore, the ultimate objective of this study is to state hypotheses, based on collected information, concerning the effect that EU enlargement has on the automotive industry in Central Eastern Europe, and in this way contribute to the

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1.2.2 Research question

The research objectives can be translated into the following research question:

In order to answer the main research question a number of sub-questions have been formulated.

The first step is to review theory. Therefore, the first sub-question is the following:

1. What does previous research indicate concerning the effect of EU enlargement on the industry in CEE?

Since every industry has its own characteristics, the effect will not be the same on every industry. Furthermore, since the automotive industry is one of the most global industries, it is hard to speak of the automotive industry in CEE as being on itself. It is obviously connected with the automotive industry in the rest of the world, and will also be affected by changes in the global automotive industry. To be able to place enlargement of the EU in the right context the second sub-question is the following:

2. What is the role of CEE in the global automotive industry?

To be able to conclude anything concerning the effect of EU enlargement, one has to

investigate in the development of the automotive industry in CEE countries before and after EU enlargement. This following sub-question is aimed at the first step in this investigation:

3. What development in the size and geographical structure of the automotive industry in CEE countries can be observed before EU enlargement?

The automotive industry in a specific country or region is influenced by a number of factors, but not every factor is equally important. The analysis of the CEE automotive industry before enlargement will lead to the ability to point out the most significant and relevant factors that determined the size and geographical structure of the industry in the CEE countries.

4. What factors determined the size and geographical structure of the automotive industry in CEE before EU enlargement?

When the automotive industry in CEE before the enlargement has been examined, the

following step is then to investigate in the more recent situation after EU enlargement and aim at finding out whether or not changes have taken place.

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5. What development in the size and geographical structure of the automotive industry in CEE countries can be observed after EU enlargement?

When this relative recent situation has been investigated, the possibility arises to see whether or not EU enlargement has an effect, and subsequently how large the effect is. Hereafter, one is able to discuss changes in the factors that determine the size and geographical structure.

6. What changes can be identified in the factors that determine the size and geographical structure of the automotive industry in CEE after EU enlargement and how does EU enlargement fit in?

The methods used to answer these questions are described in the following paragraph.

1.3 Methodology

Firstly, previous research is reviewed as described by the first sub-question. This means going into literature that predicts the consequences of enlargement or in other ways can help explain the impact of EU enlargement on the automotive industry. Previous research suggests

scenarios regarding economic integration in Europe and the path that the new EU members are likely to follow. These scenarios can later be used to reflect on the data regarding the automotive industry to see which scenario appears to be unfolding. Furthermore, the role of CEE in the global automotive industry, as stated in sub-question 2, will be examined by means of analysis of the global automotive industry, based on literature. This analysis will start on a global level in order to get a complete picture of the sector and will zoom in on the European region. Basically, by comparing size and geographical structure before and after EU enlargement, one is actually comparing two different situations (see figure 2).

Figure 2: Factors that determine size and geographical structure before and after

enlargement

F = Factor

Size and geographical structure of the CEE automotive industry

Fn Fn Fn

AFTER enlargement

Fn

Fn Fn Fn

BEFORE enlargement

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The effect of EU enlargement will become visible by comparing these two situations. Sub-questions 3 and 4 aim at describing the situation before enlargement, which is the left side of figure 2. The development before EU enlargement will be examined by analyzing data regarding this period and by means of reviewing and analyzing previous research that described the industry in this period. The period before enlargement begins at the start of transition in the early 1990s and ends with year before EU enlargement 2003.

To be able to answer sub-question 5, development of size and geographical structure after enlargement has to be examined; this is in the right part of figure 2. The investigation of development after EU enlargement includes the collection of data regarding this period, because no previous research has done so. This period starts with 2004 and ends with the present, which means 2008. Data will be collected from different sources like automotive agencies. When data regarding this period is collected, it will be empirically analyzed to determine whether or not the enlargement had an impact on the size and structure (and subsequently how large this impact has been) in CEE countries.

Using both the theoretical component and the empirical component will accordingly lead to the ability to discuss the effect of EU enlargement. This discussion is also aimed at answering the last sub-question and will accordingly lead to a number of hypotheses regarding the effect of EU enlargement on the size and geographical structure of the automotive industry in CEE.

1.4 Limitations

Because EU enlargement of CEE countries has taken place in 2004, a limited amount of data can be gathered regarding the years in which a number of the CEE countries are part of the EU. Therefore, this thesis is to be seen as a first effort to analyse the impact that EU

enlargement has on the automotive industry in CEE. Beforehand it can already be stated that more research is required to be able to fully explain the effect of EU enlargement on the longer term.

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1.5 Thesis outline

Firstly, the theoretical context around EU enlargement is part of the second chapter after which analysis of the role of CEE in the global automotive industry will be described in chapter 3. Hereafter, the development of the industry in the Central and Eastern European countries before enlargement is subject of chapter 4. Subsequently, chapter 5 will analyze the industry after EU enlargement. Furthermore, the gathered information combined with relevant theories around industry development and EU enlargement will lead to hypotheses. Finally, a conclusion will be drawn and implications will be discussed in chapter 6. Figure 3 graphically presents the different parts of the study in a research model.

Figure 3: Research model

Ch.4: Assess CEE automotive industry pre-EU enlargement

Ch. 6: Conclusion & discussion

Ch.5: Investigate in CEE automotive industry post-EU enlargement

CH.5: Consider effect of EU enlargement on CEE automotive industry Ch.3: Analysis CEE in the

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2 The effect of EU enlargement on European industry

2.1 Introduction

This chapter will investigate in previous research regarding EU enlargement as stated in the first sub-question. The first part of this chapter will shortly address industry-government relations in the EU. Furthermore, previous research gives several prospects regarding economic integration and the development of European economic geography after EU enlargement. These prospects can help explain the development in the automotive industry after enlargement.

2.2 Government - industry relations in the EU

The enlargement of the European Union that involved the first CEE countries took place in 2004. The enlargement, which involved 10 countries, was the largest in the history of the union. More recently, in 2007, Romania and Bulgaria also joined the European Union which led to a union of 27 member states (figure 4). The enlargement of 2004 was the largest in number of countries.

Figure 4: The European Union of 27 member states

2_{Not part of Central Eastern Europe} 3_{Not part of Central Eastern Europe}

Joined in 2004 Joined in 2007

Czech Republic Bulgaria

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All countries that fall onto the border between Europe and Asia have a claim for EU

membership. Nowadays, a country must first sign a stabilization and Association Agreement with the EU. However, in the current Treaty of Nice is stated the EU cannot have more than 27 members. Unless this is changed, it is impossible for the EU to enlarge beyond the current 27 members. The Treaty of Lisbon was aimed at this change, but this treaty is currently in abeyance because of the Irish rejection on June 12th, 2008.

A prospective member country must be able to put the EU rules and procedures into effect. Accession requires the country to have created the conditions for integration by adapting its administrative structures. In addition, the EU must be able to integrate new members: it needs to ensure that its institutions and decision-making processes remain effective and accountable (derived from site European Commission). When these conditions are met, a country is eligible to join the EU.

Before the CEE countries joined the European Union, the prospective members had to meet the Copenhagen criteria4:

 political: stability of institutions guaranteeing democracy, the rule of law, human rights and respect for and protection of minorities;

 economic: existence of a functioning market economy and the capacity to cope with competitive pressure and market forces within the Union;

 acceptance of the Community acquis: ability to take on the obligations of membership, including adherence to the aims of political, economic and monetary union.

National policies in the years before enlargement were aimed at meeting these criteria. After joining the EU, national policies in some way have to find their reflection in the EU policy. In other words, EU enlargement has a certain impact on the relationship between government(s) and industry in the CEE countries.

Since the first car manufacturers started internationalizing, the automotive industry has been influenced by policies of national governments like regulation and intervention. Due to globalization, automotive companies have sought ways to escape for example restrictions on

4

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growth, competitiveness, high local costs, market saturation and increasing fragmentation (Worral et al, 2002). In this process of globalizing, the automotive industry has to deal with state policies.

Previous research in the field of government-industry relations has taken different

perspectives and different levels of aggregation. Before the 1980’s, research was primarily dominated by a top-down approach, also referred to as the ‘classic’ approach. The approach seeks to understand and explain differences between national political systems when

accounting for the development of industrial policies and patterns of government-industry relations (McLaughlin & Maloney, 1999). This approach relies on a system-level point of view. A quotation in the influential study of Wilks and Wright (1987) captures the research questions of many studying government-industry relations since then:

“It remains an open but important question whether government-industry relationships may vary more significantly or consistently between sectors than between nations. (….) Whether sectoral characteristics are more significant than variations in national characteristics is an empirically unresolved question”

In their study, Wilks and Wright (1987) argued for a disaggregated, bottom-up approach, which was likely to reveal a diversity of governing structures at the sectoral level, belying the broad characterization of the classic approach. This approach extended in a policy network approach in the research to government-industry relations. The policy network approach refers to the clusters of actors forming around specific policy areas and programs within the political system (McLaughlin & Maloney, 1999). The defining characteristic of the policy network approach is the greater emphasis to sectoral level governing structures instead of system-level variables.

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2.3 Prospects of EU enlargement

The European Union is considered to be a system of multi-level governance and a central arena for transnational co-operation and supranational problem solving, where institutions at different levels regulate policies with a wide range of instruments and procedures on an expanding scope of policy fields (Maurer et al, 2003). The conceptualization of the EU as a system of multi-level governance is considered to be rather complex (Payne, 1997): ‘within which state and sub-state, public and private, transnational and supranational actors all deal with each other in complex networks of varying horizontal and vertical density’. Richardson (1996) points out that the EU is a complex and unique policy-making system and that this multi-level policy-making environment is rather unpredictable. Both Richardson (1996) and Peterson (1995a) are therefore very careful to point out that the policy making process is that complex that no one theory can explain EU decision making. In this thesis, the objective is to look for the impact of EU enlargement on a specific industry in the CEE region, so there is no need to go further into conceptualizing policy making on EU level, but rather into the

consequences of implementation.

In general, two different sources of potential benefits of EU integration can be identified, namely an improvement in the allocation of resources and the accumulation of further resources (Baldwin, 1995). Identifying possible benefits does not say anything about possibilities of development as do scenarios. Previous research suggests such a scenario.

In fact, there are two different scenarios as described by Dupuch et al (2004) regarding the future prospects of the European economic geography. Both will be shortly described here. The first scenario suggests that ‘the predominance of intra-industry trade within European nations results in weak specialization’. This is reason for optimism for European member states as this scenario gives reason to believe that the macro-economic convergence of the member states will actually take place. Opposite stands the scenario which is supported by economists like Paul Krugman. He argues that according the new economic geography (NEG) framework more integration will lead to increased specialization resulting from inter-industry comparative advantages. The outcome of this scenario is that a core periphery schema is expected to occur as a result of vertical linkages. These NEG models are mentioned to suggest that economic integration leads to a spatial core-periphery schema resulting in higher

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Another report (CGP, 1999) is taking stand in between the two scenarios. It stated that intra-European trade is mainly oriented as intra-industry, but that traded goods are mostly vertically differentiated. Thus, countries face structural and technological asymmetries and this might lead to agglomerated production structures. However, polarization is less likely to happen between nations than regions, because nations have more homogeneous production structures.

Dupuch et al (2004) are trying to establish whether the new EU members (joining in 2004 and later) are more likely to follow an intra-industry specialization path or, on the other hand, a deeper specialization according to traditional comparative advantages. Results of this study show that sectoral divergence resulting from agglomeration economies is likely to persist through a high-skilled core attracting increasing intensive activities and a low-skilled

periphery. Dupuch et al (2004) suggest that Central European countries are likely to follow a model based on catching up, industrial diversification and intra-industry trade, while Eastern European countries could durably lag behind. The study furthermore states that the Central European countries Slovenia, Czech Republic, Slovakia and parts of Hungary and Poland will form the core and the Eastern countries will likely have a role as periphery to the core

countries.

2.4 Conclusion

A brief review of previous research regarding industry-government relations shows that research has taken several perspectives and different levels of aggregation, but no matter which approach, an identification of stakeholders is necessary. Furthermore, different

scenarios have been described that give a prospect of how the European economic geography might evolve, including the prospects of CEE. In a later phase of this research, data regarding the automotive industry can be reflected on these scenarios to see which scenario seems to be unfolding. The following chapter will take the next step in creating the ability to do so

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3 The role of CEE in the global automotive industry

3.1 Introduction

Every industry has its specific characteristics, as does the automotive industry. The aim of this chapter is to describe the role of CEE in the global automotive industry, as stated in the

second sub-question. The automotive industry will be analyzed based on the detailed description of the (evolution of the) global automotive industry by Dicken (2003) which involved the production of automobiles, the changing dynamics of the market and the

globalisation of the industry. The final paragraph will give specific attention to the European region.

3.2 The manufacturing of automobiles

The automotive industry essentially is a manufacturing industry. In fact, it was the key manufacturing industry of developed countries in the most part of the twentieth century. In terms of organization, it is one of the most global of all manufacturing industries. Contrary to other manufacturing industries like the textile and clothing industry, the automotive

industry is an industry of large corporations that are organizing their activities along

internationally integrated lines. The industry was a major engine of growth; between 1960 and 2000 the global production of cars increased three-fold (Dicken, 2003).

The industry is also characterized as an assembly industry. A wide range of components is brought together from many different firms. The production chain (figure 5) consists of three separate processes before assembly can take place; the manufacturing of bodies, of

components and of engines and transmissions. These different processes which are part of the production chain do not have to take place in the same location. Thus, the automotive industry allows for production in different geographical locations. This was not the case in the

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Figure 5: The production chain of automobiles

Source: Dicken, 2003

3.3 The production of automobiles

The automotive industry has been a great example of mass production. This started with Henry Ford’s introduction of the car assembly line in 1913. Cars and later other vehicles were produced in large numbers in gigantic assembly plants. This mass production as developed by Ford brought automobiles into the reach of many customers.

This method of production however had one primary limitation of low flexibility, or in other words; its rigidity. The costs and time of switching to a different car model were considered very great because the whole assembly line had to be adjusted and prepared. In the 1970s, some revolutionary changes have been introduced, which some say were triggered by the oil crises, starting with the introduction of lean production. This term was introduced to

differentiate mass production from the way of working that was gaining terrain. Lean production originated in Japan and drove the auto industry to the ability to reduce costs per unit and at the same time produce an even wider range of products. After this, the industry has been slowly moving towards the concept of mass customization in which cars are built only when an actual order from the client has been received.

To be able to achieve a more customer oriented production process, a more intensive

coordination with suppliers was needed. Indeed, one of the most significant developments in the automotive industry in the last decade according to Dicken (2003) is the changing

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which used to be based on short-term contract aimed at minimizing costs. However, this relationship in a flexible production system has to be different from that in a situation of mass production. It has to be functionally close, and design and production of components needs close cooperation (Dicken, 2003). Costs of design and production can be shared across modules which can be built in a variety of different models (Radosevic & Razeik, 2005). In short, new forms of relationships between end-producers and suppliers are emerging

throughout the automotive industry. This is an example of the changing environment, which is also subject of the following paragraph.

3.4 Market characteristics

Historically, demand for automobiles has played an important role in the evolvement of the global map of the automotive industry. Production is organized in a market-oriented way. This for the most part explains the development of production facilities within large consumer markets. Here, the relative high demand gives opportunity to achieve economies of scale. According to Dicken (2003), the changing demand for automobiles has three major characteristics:

 It is highly cyclical

 There are long-term (secular) changes in demand

 There are signs of increasing market segmentation and fragmentation

Trends for demand also differ in different parts of the world. Demand is growing slowest in Western Europe and North America and fast in some East Asian countries. Eastern Europe is expected to see a major surge in demand (WIR, 2006).

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Table 1: Old and new models of competition in the automotive industry

‘Old’ model of competition ‘New’ model of competition

‘Domestic model (competition based on exporting from home country supply-base)

‘Global’ model (day-to-day production functions are organized on a regional and global basis)

Emerging markets as dumping grounds for old models and production equipment

Emerging markets as locations for building leading-edge productive capacity

Export-led industry (firms from different countries compete through markets)

Network-led industry (each major firm is producing within each major market) Source: Radosevic & Rozeik, 2005

3.5 Globalization of the automotive industry

Automotive production primarily takes place through assembly which is concentrated in three main areas: Europe, East Asia and the USA. Together these three areas account for 80% of the world automotive output (ACEA, 2007). The upcoming Asian manufacturers might be one of the most crucial events in this process of globalization, because these manufacturers were almost non-existent in the international market the 1960s. These firms were getting bigger just by growing and expanding and became world players between 1970 and 1980.

Figure 6: Global production of automobiles

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Dicken (2003) argues that due the concentration of the industry in these three areas (see figure 6), some major shifts occurred in the past decades. This shift involves the development of Central Eastern Europe as a global automotive location. Dicken (2003) notes that:

“The automobile industries in the former Soviet bloc countries of the Russian Federation and Eastern Europe are currently in a phase of transition. In the latter area, the industry is

becoming increasingly integrated into that of the EU.”

In order to understand this, one has to understand the characteristics of the major producers in the changing automotive industry.

3.5.1 Corporate concentration

The automotive industry is not only concentrated geographically, but also concentrated ‘organisationally’. While in the first years of production the automotive manufacturers in Western markets were producing for their respective national markets, this gradually changed throughout the years. The industry is now controlled by a small number of very large firms. In 2000, the top four car manufacturers produced 44% of the world total, while in 1999 the ten largest companies produced almost 80% of the world total (McLaughlin & Maloney, 1999). In 2006, the ten largest companies produced almost 70% of the world total (see also Table 2).

Table 2: The world’s top 10 producers in 2006

Company Country of origin Worldwide production

GM USA 8 926 160 Toyota Japan 8 036 010 Ford USA 6 268 193 Volkswagen Germany 5 684 603 Honda Japan 3 669 514 PSA France 3 356 859 Nissan Japan 3 223 372 Chrysler USA 2 544 590 Renault France 2 492 470

Hyundai South Korea 2 462 677

Source: Based on OICA statistics

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(McLaughlin & Maloney, 1999). Indeed, in the 1990s, one could observe several acquisitions and takeovers in which also the large corporations were involved. For example, the American company Ford acquired British firms Aston Martin and Jaguar, while German VAG acquired Skoda and Spanish Seat. These are just some examples of the acquisitions that have taken place in the 1990s. Kang & Sakai (2000) conclude that around 80% of these alliances in the automotive industry during the late 1990s were cross-border. This again corresponds with the high degree of internationalization in the industry. In figure 7, the organizational relationships of the leading firms in the world automotive industry are displayed.

Figure 7: Organizational relationships in the automotive industry

Source: Dicken (2003)

These companies are becoming increasingly organized cross-border. Therefore, one can nowadays hardly speak of an American company; one should say the company that originated in the U.S.

3.6 The European region

The automotive industry is one of Europe’s most important industries. According to ACEA5, the automotive industry forms the backbone of the European economy. It is described as ‘the

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engine of Europe’ because of ‘its economic and social importance and the historical role it has played in the development of the continent’ (ACEA, 2007).

The industry employs 2 million people in manufacturing alone and it reportedly supports an estimated ten to twelve million more jobs. While the firms VAG (Volkswagen Group), FIAT, Renault and PSA form the most important European companies, and still have a majority in market share, globalization brought American and later Japanese companies to Europe. In 2007, Japanese companies had a 13,6% market share in Europe6 (ACEA). American

companies Ford (10,7%) and GM (9,6%) also accounted for a substantial part of production. However, demand for automobiles in the mature market Western Europe is only growing slowly. Rapid growth in the automotive industry is linked to new demand instead of

replacement demand, and the latter forms 85% of demand in mature markets. CEE is seeing a rise in demand and therefore not only attractive as a manufacturing location in the new model of competition, but also as a potential market. This was only part of the reason for European car manufacturers to invest in CEE countries. It was actually the combination of the market characteristics as described above with the introduction of Japanese manufacturers, who were more productive and produced better quality vehicles. In other words; the Japanese presence further intensified the fierce competition (Pavlínek, 2003). This led, next to the new industrial model described in paragraph 3.4, to a spatial reorganisation of the automotive industry in Europe, which involved the exploitation of CEE countries.

3.7 Conclusion

The role of CEE in the global automotive industry is one of an emerging region. The

automotive industry is one the most global industries and globalisation has led, together with other factors, to a corporate concentration in the industry. Corporate concentration, fierce competition and the new model of competition in the industry have led to a shift towards emerging markets. The following chapter will deal with Central Eastern Europe as an automotive production location before enlargement.

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4 The automotive industry in CEE before enlargement

4.1 Introduction

In this chapter, the development of the CEE automotive industry before EU enlargement will be described. The aim is firstly to determine size and geographical structure, and secondly to derive the factors that determined the size and geographical structure of the industry in the period before enlargement as stated in sub-questions 3 and 4. This means that the left part of figure 8 is clarified in this chapter.

enlargement

F = Factor

The first paragraph gives a short introduction of transition countries, after which the size and geographical structure are examined. Hereafter, the start of transition is described. The

remains of the chapter, which is aimed at pointing out the factors that determined the size and geographical structure, are organized around the factors of the diamond model (Porter, 1990). This model enables a description of how national (or regional) factors influence competitive advantage within individual industries (Grant, 1991). Since competitiveness is primarily based on the productivity with which a country or region produces goods or services (Garelli, 2002), the model is a good starting point when investigating the size and geographical

structure of the automotive industry in the CEE region. Most importantly, the model allows for a dynamic approach, which is essential because this research takes a time series into consideration. The diamond model (Appendix A) contains four principle attributes that determine the competitive advantage of a country or region, namely demand conditions,

Fn Fn Fn

Fn

Fn Fn Fn

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factor conditions, related and supporting industries and firm strategy, structure and rivalry. The most important factors for each of these attributes in the development of the industry are based on Radosevic & Rozeik (2005), who described the key features of restructuring in the automotive industry in CEE from the start of transition until the early 1990s.

4.2 Countries in transition

Right before the end of the decennium, on the 9th of November 1989, the Berlin Wall was taken down. This was seen as a symbol for the fall of communism, which until then dominated all of the Eastern European and most Central European countries. The fall of communism called for a complete restructuring of the economic organization and a shift in the behavior of producers and consumers. This shift from a centrally planned economy towards a free market or capitalist economy has been labeled transition.

It became apparent that the transition countries were much behind in economic development compared to Western European countries. Economic expectations were therefore a rise in economic efficiency and increased growth. However, to be able to do this, reforms were necessary. The key elements of transition reform were macro-stabilization, price and market reform, restructuring and privatization and redefining the role of the state (Fischer & Gelb, 1991). The role of the state can actually be seen as an underlying factor and related to all other elements, because governments influence all the other elements.

The initial conditions at the start of transition varied amongst the CEE countries, and some countries are and were more successful than others in their respective development process (De Melo et al, 1997). The outcome of transition is often considered to be a combination of initial conditions and the chosen path of development.

In the early 1990s, at the start of transition, the automotive industry in Central Eastern Europe was not significant globally. It was far behind Western standards. During the socialism regime the industry did not keep up with for example technological developments. The transition towards capitalism brought a wind of change. The following paragraph deals with

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4.3 Size and geographical structure

Several factors like market size potential and inherited competencies in automotive assembly coupled with strategies of foreign investors have led Poland and the Czech Republic to be the two leading production locations (Radosevic & Rozeik, 2005). Pavlínek (2003) adds Slovenia to these two countries and notices the highest growth rate in these three countries. When taking a look at figure 9, indeed these countries score the highest in production in number of units.

Figure 9: Automotive production in CEE, 1990-2003

Source: Radosevic & Rozeik (2005)

Concerning car production trends, one can state that the same countries as in overall production statistics show the highest scores. Although it has to be noticed that Poland experienced a decline after 1999, as indicated in figure 10.

Figure 10: Car production trends 1989-2002

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Russia and Romania experienced a small decline in car production. Hungary and Slovakia, both not part of figure 10, also showed relative high growth rates in the period until EU enlargement (OICA).

4.3.1 Uneven development in size and geographical structure

The development until 2004 has shown some great differences between countries, especially concerning automotive production. While Central European countries Poland, Czech Republic, Slovenia, Hungary and Slovakia experienced the fastest growth and produced the most

vehicles, the other CEE countries were lagging behind or even experienced a decline. Albania, Bulgaria, Croatia and Macedonia as well as the Baltic States played only a very small role in the automotive industry, with the presence of only a few component suppliers. Russia on the other hand has hardly allowed foreign investments. Therefore, the Russian market is still dominated by domestic companies and production is almost entirely aimed at the domestic market. Ukraine has not received much FDI either, and has experienced relative small overall production numbers, but has shown some growth since 2001. The same holds for Romania, where the automotive industry was hardly present during the 1990s but has been showing growth since the early 21st century. Turkey, by some authors (Havas, 1997; Pavlínek, 2005) considered to be outside the CEE region, has not played an important role until the early 21st century. The following paragraphs will go into the factors that determined the size and geographical structure before EU enlargement, starting with the start of transition.

4.4 The start of transition

Before the fall of the Soviet Union, the CEE automotive industry was characterized by three general types of development (Richet & Bourassa, 2000):

 Manufacturing based on indigenous development, technology, and car making traditions of the pre-WW2 period (mostly Czechoslovakia and GDR)

 Production developed using Western licences (mostly Poland, Romania and Yugoslavia)

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The start of transition is not said to have introduced new trends (Radosevic & Rozeik, 2005). However, three crucial developments affected the industry immediately after the collapse of state socialism (Pavlínek, 2000). Firstly, the fall of socialism coincided with the fall of Comecon (Council for Mutual Economic Assistance) which caused the breakdown of

established trade flows in the region. This mainly affected car producers in smaller countries that depended on export to other members, because they did not have the capacity to switch to Western markets.

Furthermore, the local domestic markets also collapsed due to the sudden availability of cheap used cars imported from Western countries. Lastly, the CEE markets became very interesting for Western car manufacturers to invest in and trade with. These manufacturers had better equipment and better cars to offer. These developments together made it extremely difficult, if not impossible, for domestic car producers to survive (Pavlínek, 2002).

In fact, all of the major automotive manufacturers were taken over by foreign manufacturers (Radosevic & Rozeik, 2005). It mainly happened through privatization; the manufacturers were taken apart and sold to foreign firms or investors. This process was nearly finished in 1994, when with the exception of a few companies all automotive assemblers were privatized. Exceptions in this process were Russia and Yugoslavia. Russian domestic companies were able to survive thanks to its relative large domestic market and the high import tariffs on foreign cars. Yugoslavia knew a period of war followed by economic sanctions throughout the 1990s.

4.5 Firm strategy, structure and rivalry - Company strategy

In general, the world automotive market is dominated by companies originating from the three major regions Europe, the U.S. and East Asia. The American companies GM and Ford both have a high degree of internationalization in their car production and are the longest established international producers. Ford opened its first European site in 1911 and nowadays three-quarters of overseas production takes place in Europe, the same as for GM. In the mid 1990s, both companies executed a substantial strategic and structural reorganization (Dicken, 2003). Ford combined U.S. and European operations into a single operation. GM’s

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Originally, the European companies have been more limited in terms of location. VAG’s strategy has been the most international with, outside its main location in Germany, a production location in Spain where it invested in Spanish company SEAT. With the start of transition, VAG very quickly started investing in CEE by taking a 70% interest in Skoda from the Czech Republic. Both French companies PSA and Renault historically have a strong focus towards their home market regarding production. PSA resulted from a merger between

Citroën and Peugeot, also both French companies. In the beginning of the twentieth century, with the exception of VAG and in less extent Fiat, European companies were still rather oriented towards their home market regarding production, compared to the American companies.

Whereas GM and Ford have been present in Europe for decades, the East-Asian companies came to Europe in the 1980’s. Before the early 1980’s, Toyota had no overseas production locations and Nissan only had 3% of its production located outside Japan. In this period, the strategy of these companies changed drastically and is ever since aimed at presence in each of the three major markets. Toyota now has a joint venture relation with French PSA to develop and assemble cars for the European market (Dicken, 2003). This resulted in the opening of a new plant in the Czech Republic. For the Korean companies, the late 1990s were hard times due to the 1997 financial crisis. Result of the crisis was that only two companies survived, namely Hyundai and Daewoo7. However, in 2002, Daewoo was taken over by GM. Suzuki, another company originally from Japan, and Daewoo, now both part of GM, are the two leading (former) Asian companies in CEE. Daewoo actually became a very aggressive entrant in Europe by investing heavily in overseas production in Poland, Romania, Ukraine and other emerging countries outside Europe.

The largest share of the CEE market is owned by European companies. Regarding the four big European companies, VAG (VW), Fiat, Renault and PSA, VAG obviously has the largest share of the market (figure 11).

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Figure 11: Market share in CEE in 2003

Source: Radosevic & Rozeik (2005)

VAG has the largest share in the Czech Republic and Slovakia, Suzuki in Hungary and Renault in Romania. The countries with no production plant of the largest companies, Croatia and Macedonia, show a more even market distribution. The same can be said about the Poland, although Poland is a front runner in automotive production.

The market shares of individual countries can be found in Appendix B. The market share correlates with the production trends of individual companies. Figure 12 indicates that Opel Poland saw a decline in production in the 2000-2002. This reflects on the car production statistics of the country which saw a similar decline, as one can see in figure 9.

Figure 12: Production trends of individual companies 1990-2003

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VAG is again front runner according to these statistics with both the rise in production of Volkswagen Pozman and the largest amount of units produced by Skoda. Basically, the European companies were the most present in the period before enlargement, but the American and Asian companies seemed to have discovered CEE as a production location which mostly appears from GM’s (Daewoo’s) presence in Poland and Hungary and from Suzuki’s presence in Poland.

4.6 Factor conditions - The role of foreign direct investment

In the early 1990s, as described in paragraph 4.4, almost all car producers in CEE countries were privatized. With the process of privatization, and the disappearance of domestic car producers, the automotive industry in CEE became dependent on foreign companies and thus on foreign investment. Industrial restructuring of CEE countries in general has been greatly dependent on foreign direct investment (FDI), and it is presumed that privatization was just the beginning of the process that was meant to attract foreign investors in the automotive industry. The following step was to attract foreign investment.

In general, two types of FDI can be distinguished. Brownfield FDI is an investment in an existing company and greenfield FDI is characterized by setting up new operations. Examples of brownfield investments are the purchase of Skoda by VAG, Daewoo’s purchase of

Automobile Craiova and the more recent purchase of Dacia by Renault. As mentioned before, these examples were all existing state companies which were privatized and then purchased by multinational companies and integrated into their respective production networks. Greenfield investments were mostly aimed at Hungary and Poland like the opening of an assembly plant by GM in Katowice, Poland.

Since the CEE automotive industry is driven by FDI (Radosevic & Rozeik, 2005),

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Figure 13: Automotive FDI in CEE, 1990-2003

Source: Pavlínek (2003)

Front runners in receiving FDI were Poland, Czech Republic and Hungary. The main reasons for investing in the CEE countries differ from country to country. Several papers address the determinants of FDI in transition economies (Bevan, 2000; Resmini, 2000; Lankes, 1996). In reality, there is a combination of factors in which the cost reducing strategies and/or market potential of the country has to be complemented by other necessary factors. These conditions are mainly characterized by good transportation and communication infrastructures,

geographical proximity to major markets, incentives for foreign investors, and, overall, a positive business environment including political stability (Pavlínek, 2003).

FDI has shown to have positive effects on growth and restructuring in the automotive industry. FDI investments brought capital, technology, know how and access to foreign markets.

Therefore, it can be stated that the role of FDI in the CEE automotive industry has been, and is likely to continue to be, crucial (Pavlínek, 2005).

4.7 Demand conditions - Trade

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foreign car import. Initially, tariffs were important motivational devices for attracting FDI in CEE (Radosevic & Rozeik, 2005). Companies that invested in CEE countries had a way to ease their market position and ‘compensate’ for the investments that were made.

In the automotive industry, the main trading partner for the CEE countries is formed by the EU-15. Between 1993 and 1999, trade increased 3,5 times from 6.8 to 24 billion Euro (Eurostat). By far the three largest partners of CEE countries are Germany, Italy and France. In the 1990s, these three countries together accounted for somewhere between 70% and 90% of trade between EU-15 and CEE. This has everything to do with the origin of the major automotive companies; German VAG, Italian Fiat and French PSA and Renault. In short, one can state that trade data strongly reflects FDI and strategies of respective companies

(Radosevic & Rozeik, 2005).

4.8 Related and supporting industry - Automotive clusters

The relation between the automotive companies and suppliers is not exactly the same in the old and new model of competition. However, the car industry remains an assembly industry with many parts in modern cars, and consequently, the relations with suppliers are important. Although the automotive industry allows suppliers to perform production of different parts in different locations, there are clear advantages of being closely located like low transport costs and learning possibilities. This last point is important because according to Sperling (2004), the CEE industry is not yet able to deliver world standards in terms of labor productivity. A ‘follow the leader’ strategy is often adopted by suppliers when a company sets up operation in another country. Radosevic & Rozeik (2005) state that around car manufacturers in CEE countries supplier parks are often set up in which activities between assemblers and suppliers is coordinated. An extrapolation of such coordination is the Slovenian automotive cluster ACS. This cluster is characterized as an association based on economic interest of its members uniting Slovenian automotive suppliers. Its members' aim is to reinforce the competitiveness and create greater added value:

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Another example is the Pannon Automotive Cluster in Hungary which was formed in 2000 and created an industrial network for the automotive industry. Cluster policy can also be useful by providing links between members, supporting cooperation with suppliers of tools and design. These two clusters are said to bring value, and the fact that the two countries in which they are set up are front runners in production supports this. But the examples of the Hungarian and Slovenian cluster are more an exception than rule, because most CEE governments do not have an active policy to form such clusters.

4.9 Conclusion

The automotive industry in CEE until the enlargement in 2004 has been characterized by an uneven development between countries. Countries show great differences in size.

Geographically, the Central European countries are ahead compared to the other CEE countries. In the process of development, an important role was played by the national governments through privatizing state companies and through attracting FDI by means of tariff and cluster policy. The industry is considered to be largely export oriented. One can see that although European companies are the most present in CEE, many European companies, and especially the original French companies, were still mainly oriented towards their home markets concerning production. American companies and lately also the East-Asian

companies, both in principle more internationally organized than the European companies, seemed to have discovered CEE as a production location, but are not ahead compared to European companies in terms of production in the CEE region.

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5 The automotive industry in CEE after enlargement

5.1 Introduction

The previous chapter focused on the development of the automotive industry until EU enlargement and derived the factors that were for a large part responsible for the size and geographical structure of the automotive industry in CEE. The left part of figure 14 is now clarified. This chapter will aim at clarifying the right part.

enlargement

F = Factor

The aim of this chapter is firstly to answer sub-question 5 by examining the development of the size and geographical structure of the automotive industry after the enlargement and possibly to find deviations in comparison to the (uneven) development that occurred pre-enlargement. The factors that explain size and structure after enlargement as stated in sub-question 6 are attended in the second part of this chapter. This chapter is organized as follows. Firstly, the methods of analyzing and the collection of data are discussed. Hereafter, the size and geographical structure in EU member and non member countries is being described and discussed. Lastly, the determining factors are attended and also discussed.

5.2 Method of analysis and data collection

Basically, by comparing development in size and structure before and after EU enlargement, one is actually comparing two different situations. Both situations consist of a time series

Fn Fn Fn

Fn

Fn Fn Fn

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consisting of a number of years. The period after enlargement is obviously shorter than the period before enlargement. In other words; the two time series are not exactly equal. This makes it difficult to compare the two periods in absolute terms. Therefore, this research will focus on establishing trends that have occurred and changes that have taken place. This can take form in for example drastic changes in produced vehicles or received investments.

Collecting data that can be used to analyse the automotive sector after EU enlargement, means coping with two major issues. Firstly, EU enlargement only happened in 2004, causing the data to be very recent, namely from 2004 up to and including 2007. This results in having to find sources that are publishing regularly and up to date. Second, data concerning the

countries in CEE is not easily available. For the countries that joined the EU, data from 2004 and more recent, concerning the automotive industry, is mostly available. For the non EU members, it is a little harder since these countries do not report to any European organization. Therefore, data for these countries is collected from different sources.

Firstly, the European Automobile Manufacturers Association (ACEA) gives quarterly statistics concerning automobile production. Furthermore, the International Organization of Motor Vehicle Manufacturers, also known as OICA (Organisation Internationale des

Constructeurs d’Automobiles), consists of a network of 43 national trade associations around the world, including all major automobile manufacturing countries. OICA also publishes production statistics which can be used to investigate in size and geographical structure.

The diamond model (Appendix A) that was used to describe the structure of the industry in the previous chapter contains four principle attributes, namely demand conditions, factor conditions, related and supporting industries and firm strategy, structure and rivalry. For both groups of countries, new EU members and non EU members, these attributes will be

addressed as much as possible, although data is not available for all attributes.

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5.3 Size and geographical structure

5.3.1 EU member countries

The role of the automotive industry has not been the same in every country. Chapter four showed the differences between countries until enlargement. One great difference occurred in the production of automobiles. The production of automobiles is a good indicator when examining the size of the industry after enlargement. Production sites are located all over Europe, but this is not an even distribution. Some countries relatively produced a lot of vehicles and others were lagging behind. Appendix C gives an overview of the situation regarding the production sites as it was at the end of 2004. As one can see, there are no production sites in the Baltic States and Bulgaria. In any case, the role of the Baltic States in the Central Eastern European automotive industry is considered to be very small (Radosevic & Rozeik, 2005). No reports have been found of new sites in either the Baltic States or Bulgaria since 2004. Therefore, regarding the analysis of production, these countries are not taken into consideration. One can consider the number of produced vehicles a good indicator of the size of the industry in a specific country. Figure 15 indicates that of the EU countries, Czech Republic and Poland are still the two leading production locations; they show the highest production numbers.

Figure 15: Number of produced vehicles over the years of membership, 2004-2007

0 200000 400000 600000 800000 1000000 2003 2004 2005 2006 2007 Year P ro d u c e d v e h ic le s Czech Republic Hungary Poland Slovakia Slovenia Romania

Data derived from ACEA reports 2007 and 2008, OICA 20048

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In the first year after enlargement, 2004 compared to 2003, none of the countries except for Poland experienced growth. Czech Republic, Hungary and Slovakia even experienced a decline in production in their first member year. Over the years 2003 to 2007, Czech Republic experienced a growth rate of 230%; production multiplied by 2.3. Hungary shows a similar number with 2.2, as does Slovakia with 2.6. Poland, one of the front runners, experienced a 2.4 rate. Slovenia showed the lowest rate, 1.7. Romania joined only in 2007 and did, not like the other countries, which experienced decline in the year after joining, experience growth in this year. The growth over four years was actually relative high in Romania: 2.5. Figure 16 shows the growth rates over the years of membership. On average, the number of produced vehicles in these 6 countries experienced significant growth. The average growth rate was 2.3, meaning that in four years of EU membership, the production of automobiles more than doubled. Only Czech Republic and Slovenia show showed a similar growth rate in the total period before enlargement.

Figure 16: Growth rates in production over the years of membership, 2004-2007

0 0,5 1 1,5 2 2,5 3 Czech Republic

Hungary Poland Slovakia Slovenia Romania*

Czech Republic Hungary Poland Slovakia Slovenia Romania*

5.3.2 Non member countries

A number of non-member countries do not show any activity in the automotive sector or only produce components. The five countries that do show significant numbers of produced

vehicles are part of figure 17. Russia and Turkey are the two leading countries and are the most producing countries in the CEE region, although Czech Republic and Poland are not far behind.

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Figure 17: Number of produced vehicles over the years of membership, 2004-2007 0 500000 1000000 1500000 2000000 2003 2004 2005 2006 2007 Year P ro d u c e d v e h ic le s _Russia Ukraine Serbia Belarus Turkey

Data derived from ACEA reports 2007 and 2008, OICA 2007

Growth rates in the non-member countries (figure 18) are showing different patterns than member countries. Ukraine shows a very high growth rate. Turkey shows a similar growth rate as the EU members, while Serbia actually experiences a decline in production. Russia and Belarus both show a small growth.

Figure 18: Growth rates in production over the years 2004-2007 for non EU members

0 0,5 1 1,5 2 2,5 3 3,5 4

Russia Ukraine Serbia

(&Montenegro)

Belarus Turkey

5.3.3 Discussion concerning size and geographical structure

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patterns. Subsequently, one can see significant development of the industry in some of the non member countries, namely Ukraine, Turkey and also Russia.

Presumptions and predictions (Radosevic & Rozeik, 2005) stated that the general trend in development of the automotive industry was not likely to be broken by EU enlargement. Data in paragraph 5.3 supports this, as trends have not been broken and neither have radical

changes been determined. Therefore, one can state that the trend is not broken by EU enlargement. In fact, it can be taken one step further. The countries that were ahead before enlargement only increased their lead and thereby the trend did not only resume; it actually became more apparent. This leads to the first hypothesis:

Hypothesis 1: The trend that existed (before enlargement) deepens after enlargement.

In practice, it means that the difference between countries that are ahead, namely Czech Republic, Poland, Hungary, Slovakia and Slovenia with the other countries will only increase. Following the research of Dupuch et al (2004) in which different scenarios for new EU

members are described, this fits in the core periphery scheme as they suggest.

Dupuch et al (2004) also suggest that Eastern European countries could durably lag behind. In the automotive industry, Eastern European countries showed a lack of production before enlargement. However, since enlargement, some of the more eastern countries have been showing growth. Romania, Ukraine, Turkey and also Russia show growth in production and except for Russia also showed growth in exported automotive products. Therefore, the second hypothesis is the following:

Hypothesis 2: EU enlargement causes a shift eastwards to occur in the CEE automotive industry.

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5.4 Determining factors

The first two sections 5.4.1 and 5.4.2 will present the data regarding the factors and in the last section 5.4.3 the data will be discussed.

5.4.1 EU members

The automotive industry in CEE has been very dependent on foreign investments. Also, after European enlargement, it is believed to remain crucial to attract investments (Radosevic & Rozeik, 2005). Therefore, to be able to foresee trends one has to investigate in the number of received investments. Table 3 gives the investments in new automotive supplier plants. The total number of investments in the three years of EU membership (2004-2006) is 174, while in the same period (2001-2003) before membership, there were 111 investments. So there have been considerably more investments in the membership years than before. It seems like a wave of investments hits the EU member states. Regarding individual countries; most investments went to the Czech Republic (45), Slovakia (41) and Poland (37). The largest step forward obviously has been made by Slovakia, and also Romania received significantly more investments.

Table 3: Number of investments in new automotive supplier plants

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Czech Republic 4 3 8 14 11 19 23 13 20 12 Slovakia 1 2 0 5 2 2 7 17 18 6 Poland 10 12 9 5 6 7 4 12 17 8 Romania 1 2 0 3 4 2 4 10 7 13 Hungary 11 5 4 7 6 4 10 6 6 5 Slovenia 0 1 0 0 0 0 0 2 1 1

Source: Ernst & Young investment monitor

The effect of EU enlargement on the size and geographical structure of the automotive industry in CEE

The effect of EU enlargement on the

size and geographical structure of the

automotive industry in CEE

J.R. Kuiken

The effect of EU enlargement on the size and

geographical structure of the automotive

industry in CEE

Abstract

Preface

Table of contents

List of abbreviations

1 Introduction

1.1 Introduction to the research topic

1.2 Research design

1.3 Methodology

1.4 Limitations

1.5 Thesis outline

2 The effect of EU enlargement on European industry

2.1 Introduction

2.2 Government - industry relations in the EU

2.3 Prospects of EU enlargement

2.4 Conclusion

3 The role of CEE in the global automotive industry

3.1 Introduction

3.2 The manufacturing of automobiles

3.3 The production of automobiles

3.4 Market characteristics

3.5 Globalization of the automotive industry

3.6 The European region

3.7 Conclusion

4 The automotive industry in CEE before enlargement

4.1 Introduction

4.2 Countries in transition

4.3 Size and geographical structure

4.4 The start of transition

4.5 Firm strategy, structure and rivalry - Company strategy

4.6 Factor conditions - The role of foreign direct investment

4.7 Demand conditions - Trade

4.8 Related and supporting industry - Automotive clusters

4.9 Conclusion

5 The automotive industry in CEE after enlargement

5.1 Introduction

5.2 Method of analysis and data collection

5.3 Size and geographical structure

5.4 Determining factors