Table Of ContentSurfing the Global Tide
Automotive Giants and How to Survive Them
Michael S. Wynn-Williams
Surfing the Global Tide
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Surfing the Global
Tide
Automotive Giants and
How to Survive Them
Michael S. Wynn-Williams
© Michael S. Wynn-Williams 2009
Softcover reprint of the hardcover 1st edition 2009 978-0-230-57924-8
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accordance with the Copyright, Designs and Patents Act 1988.
First published 2009 by
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ISBN 978-1-349-36786-3 ISBN 978-0-230-23359-1 (eBook)
DOI 10.1057/9780230233591
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10 9 8 7 6 5 4 3 2 1
18 17 16 15 14 13 12 11 10 09
C
ONTENTS
List of tables vii
List of figures viii
List of abbreviations x
Acknowledgements xii
Chapter 1 Raising the leviathan 1
1.1 Growth of a global industry 2
1.2 The Budd Paradigm lays the foundation 4
1.3 Defining the automobile industry paradigm 7
1.4 The automobile paradigm and the
full-function model 8
Chapter 2 Fundamentals of scale 20
2.1 Economies of size 20
2.2 Production costs 27
2.3 Survivor analysis 36
Chapter 3 Economies of scale in the automobile industry 41
3.1 Survivor analysis of the automobile industry 42
3.2 From plant size to economies of scale 49
3.3 Conclusion 71
Chapter 4 Structuring the firm 72
4.1 Company structure 72
4.2 Unitary and multidivisional governance
structures 88
Chapter 5 Constructing the automobile industry paradigm 100
5.1 Paradigm revolutions 101
5.2 Constructing the automobile industry
paradigm 102
5.3 Vertical integration of the automobile
paradigm 108
5.4 Resultant size and shape 121
5.5 Conclusion 128
v
vi Contents
Chapter 6 Approximating to the automobile industry
paradigm 131
6.1 Introduction 132
6.2 Subscale production 134
6.3 Internal approximations to the automobile
paradigm 136
6.4 External approximations to the automobile
paradigm 141
6.5 Opportunities raised by globalization 152
6.6 Reassessing the full-function structure 173
6.7 Conclusion 182
Chapter 7 Opening the door to China 183
7.1 The rise and fall of British Leyland/
Rover Group 184
7.2 MG Rover: autonomy and sustainability 200
7.3 MG Rover assets: reconstructing the
international vertical joint venture 209
7.4 Conclusion 214
Chapter 8 The paradigm in the automobile industry
of the future 217
8.1 Current state of the industry 218
8.2 Reaching beyond the automobile industry
paradigm 227
8.3 Paradigmatic views of other industries 232
8.4 Closing remarks 237
Epilog 2009: the battle for the United States 239
Bibliography 244
Index 266
L
IST OF TABLES
1.1 Top automobile producing countries, 2007 4
3.1 Top 13 automobile producing nations, 2006 43
3.2 Top 20 automobile manufacturers, 2005 48
3.3 Japanese powertrain capacity in the US, 2004 55
3.4 Japanese assembly operations in the US, 2004 57
3.5 Global R&D expenditure, June 2005–June 2006 62
3.6 R&D expenditure per model, June 2005–June 2006 64
6.1 Plant site selection criteria 166
7.1 Longbridge production output, 1999–2004 203
7.2 MG Rover R&D expenditure, 2003–5 206
7.3 Global R&D expenditure, 2003–4 207
7.4 MG Rover R&D productivity 207
vii
L
IST OF FIGURES
1.1 Fundamental arguments to the automobile industry
paradigm 9
1.2 Company cost curves and industry scale curve 11
1.3 Typical full-function automobile producer 13
1.4 Automobile industry paradigm 14
1.5 Proposed VJV between development and production
partners 16
1.6 Proposed IVJV between MG Rover and SAIC 18
2.1 Fixed cost, variable cost, and total cost in the short run 28
2.2 Plant cost in the short run 29
2.3 Alternative plant sizes for long-run planning 30
2.4 Marginal cost in the long and short run 32
2.5 The LAC for two plants 35
3.1 Total global automobile production, 1975–2005 44
3.2 Global production share of output, seven ranges 45
3.3 Global production share, five output ranges 46
3.4 Production share for the industry leaders, 1975–2005 47
3.5 Global production output for top five manufacturers,
1975–2005 47
3.6 Theoretical economies of scale for panel stamping 52
3.7 Economies of scale for BIW production 54
3.8 Economies of scale for powertrain production 56
3.9 Economies of scale for final assembly 58
3.10 LAC curve for R&D, various industries 60
3.11 Economies of scale for R&D 65
3.12 LAC curves for a prototypical integrated
automobile firm 66
3.13 Automobile company exploiting acceptable
economies of scale 67
3.14 SATC curve for a prototypical integrated automobile
firm 68
3.15 The SATC and LAC curves for automobile industry
firms 70
viii
List of figures ix
4.1 Typical full-function producer 74
4.2 Toyota Group’s domestic and international structure 98
5.1 Typical full-function automobile producer 109
5.2 Full-function model quantified 122
5.3 Automobile industry paradigm 123
6.1 Vertical joint venture between A. O. Smith and GM 176
6.2 Vertical joint venture between Rootes Group and
Iran Khodro: Iranian standpoint, 1993 180
7.1 Honda and BL joint venture 1981: the Triumph Acclaim 192
7.2 Honda and BL link and scale alliance 1987: Project XX 193
7.3 Proposed IVJV between MG Rover and SAIC 208
7.4 IVJV style relationship between Ricardo
2010 R&D and SAIC 213
8.1 Light vehicle production output and forecast, 2004–12 226
8.2 Proliferation of Toyota Corolla platform 330N 227
8.3 Suggested IVJV between Harland & Wolff and a
shipbuilding company 234
