Monthly Archives: February 2020

Restructuring and Geographic Change in the Auto Industry

Motor vehicle producers are among the world’s most recognizable brands. Thanks to elaborate marketing, nameplates like Ford, Toyota, and Volkswagen are familiar to consumers around the world. Consumers are attracted to the ruggedness of Ford, the reliability of Toyota, or the style of Volkswagen. Yet the driving experience—comfort, performance, and reliability—primarily is not set by the company whose name is on the dashboard, but by the hundreds of suppliers of the vehicle’s parts.

Think about the radio in the center console of your vehicle. A vehicle is put together from hundreds of components like the radio. These components range from pistons and cylinders to door handles and steering wheels. And a radio, in turn, consists of many individual parts, such as knobs and wires and sensors, not to mention nuts and bolts and screws. Disaggregating a vehicle in this fashion reveals a highly complex supply chain involving thousands of parts and almost as many individual companies.

The motor vehicle industry is composed of two types of manufacturers: assemblers and parts makers. First, a handful of assemblers, usually referred to in this book as carmakers, put together vehicles at several dozen final assembly plants in the United States. Second, several thousand parts makers, usually referred to in this book as suppliers, produce the roughly 15,000 parts that go into the vehicles (Australia Department for Environment and Heritage 2002).

Until the late twentieth century, U.S. carmakers produced most of their own parts themselves and dominated the suppliers of the parts that they did purchase (see Chapter 2). In the twenty-first century, responsibility for making many parts has been passed to independently owned suppliers. Several thousand companies, employing more than 670,000 workers, produce several hundred billion dollars worth of parts every year for new vehicles assembled in the United States.