Car Manufacturing
Facing an uncertain future

Mass production of cars, developed by Henry Ford before 1914, depended on product standardization, special-purpose equipment, and the elimination of skilled labour in direct production. Ford saw the vast potential for cheap, reliable transport in the American Midwest, and his 'Model T' sold in unprecedented numbers. In Discussion Paper No. 131, Steven Tolliday and Research Fellow Jonathan Zeitlin identify the limitations to the Fordist model of production. They argue that changed market conditions and new technologies pose a fundamental challenge to the motor car industry.
Although Ford's strategy at first appeared to be universally applicable, Tolliday and Zeitlin argue that its success depended on specific features of the US market at the time, i.e. its enormous size, prosperous but isolated farms and small towns, egalitarian income distribution and homogeneous tastes. European markets were smaller and more fragmented, and a strategy based on price competition and economies of scale proved far less effective. Even in the US market, General Motors overtook Ford in the 1920s through more differentiated products and annual model changes. US and European car producers nevertheless continued to regard Fordism as an ideal production strategy to be pursued as far as the market allowed.

By the 1970s, however, the modified Fordist systems practiced by US and European car manufacturers were breaking down. The diversity required for marketing conflicted with the standardization required for low-cost mass production. Maintenance and work scheduling problems frequently interrupted production; inventory and work-in-progress accumulated; and high volume output was pursued at the expense of product quality. In many industrial sectors a new system of production has arisen, which Tolliday and Zeitlin term flexible specialization. It depends on combining flexible, general-purpose equipment with a skilled, adaptable labour force to manufacture an increasingly diversified range of products for which economies of scale are of diminishing importance.

Automobile manufacturers in every country are experimenting with advanced technology, greater product diversity and more flexible methods of production. Computer assisted design and manufacturing (CAD/CAM) systems have reduced the lead time for the introduction of new models. The use of common components and subsystems facilitates the generation of new variants. Flexible automation equipment and changes in job design have lowered minimum efficient scales of operation in many stages of component production and assembly. Substantial economies of scale remain, however, particularly in R&D and the manufacture of major components such as engines and gearboxes. This has encouraged joint ventures by smaller producers.

Tolliday and Zeitlin argue that the final outcome of these changes is still uncertain. Current trends range from reducing rigidities in a broadly standardized production line to conscious efforts at achieving maximum flexibility. Increased automation can lead to smaller batch sizes and a more broadly skilled workforce, or to 'workerless factories' and complex sequences of transfer machines. Overall skill levels are rising, but this may lead to greater interchangeability between semi-skilled jobs or to new job categories which cut across old definitions of skilled and semi-skilled. The future of the car industry and its workers will be determined not by intrinsic imperatives of markets and technology but by the responses to these changes of corporate managements, trade unions and national governments, the authors conclude.


Between Fordism and Flexibility: The Automobile Industry and its Workers - Past, Present and Future
Steven Tolliday and Jonathan Zeitlin

Discussion paper No. 131, October 1986 (HR)