auto industry
- Advertisement -

Aug 29,2017

The automotive industry is a sector of prime importance for the ILO, not only because of its economic weight but also because of its history. Since the days of Henry Ford, the evolution of this industry regarding work organisation, modes of production and technology has often served as an inspiration for other economic sectors.

For many years, social dialogue has also played a fundamental role in its regulation from the local to the global levels. In most countries, the unionisation rate is higher in the automotive industry than in the rest of the economy.

- advertisement -

However, the industry is currently undergoing profound changes. From the rise of emerging economies and the development of new mobilities (such as car sharing or carpooling) to the increasing “digitalisation” of production and the need to build cleaner cars, these changes will no doubt have an impact on the quality and quantity of jobs in the future.


With this in mind, and with the support of the French government, the ILO’s Research Department has begun a multi-year partnership with the GERPISA research network to understand better what the future of work holds in store for the auto industry.

A new analysis of these changes is provided in a new ILO report, jointly prepared with the GERPISA.

The evolving production structures at regional and global levels

The report finds highly different trends in the different geographical areas covered, which differ according to several factors:

  • Regional development patterns (domestic or explore-lead growth models)
  • Institutional and political contexts (integration in a free-trade zone, role of the public authorities in support of demand, etc.)
  • Strategic choices made by companies (product positioning, relocation and subcontracting).

The report covers four regions: Western and Central Europe, North America including Mexico, China and India. For each of them, the report’s author, Tommaso Pardi, has developed scenarios of evolution and identified levels of actions for promoting decent work in the sector.

In China, for example, the sector has been driven primarily by the demand for premium cars among urban elites and has been controlled by foreign multinational manufacturers.

These companies implemented an advanced, capital intensive production system whose high costs had to be amortised by flexible use of the labour force and a high degree of subcontracting.

The result was a polarised hierarchy between urban wages earners at the top (who have good working conditions) and precarious migrant workers at the bottom (who do not).

Could we, for example, imagine a sustainable “New Deal” based on popular selling clean cars, new uses for the automobile like car sharing and carpooling, and the promotion of decent jobs?

The current rebalancing of the Chinese growth model combined with an upgrading of domestic companies and proactive public policies for the development of electric cars might have substantial impacts on jobs in the coming years.

India chose a different path. Rather than targeting urban elites, here, car sales have pursued the middle class. Maruti-Suzuki’s joint venture from the beginning of the 1980s, e.g. guaranteed the production of cars priced under USD 5,000.

For many years, car production was characterised by a high level of vertical integration, paternalistic management of the workforce and high wages.

Nevertheless, since the early 2000s, there has been a move to more liberal policies with negative social consequences. An influx of foreign investors intensified competition, which led to a pressure on wages and an increase in informal employment.

They contributed, among other factors, to a noticeable proliferation of social unrest. More recently, however, there was a rise in organised and institutionalised alliances between permanent and contractual workers, given the strong presence of trade unions in the car sector, which could result in a rebalancing of employment relations in the future.

In Western Europe and the USA, restructuring processes are, to a considerable extent the consequence of the relocation of production to Eastern Europe and Mexico.

They have led to a downward adjustment of jobs and labour conditions: wages stagnated, pressure for more labour flexibility increased and the labour force became more fragmented.

In these countries, the urge for an ecological transition might open a window of opportunity to change the current dynamics.

Could we, for example, imagine a sustainable “New Deal” based on popular selling clean cars, new uses for the automobile like car sharing and carpooling, and the promotion of decent jobs?

The global model vs the multi-domestic model: two different paths

The report also looks at how manufacturers are restructuring their production subsidiaries, and research and development centres, to respond to the demand from emerging markets.

The author distinguishes two ideal-typical strategies, the “global model” and the “multi-domestic model”.

The first model is characterised by centralised engineering, a trickle-down diffusion of innovation from the centre to the peripheries, and the compliance with the same industrial standards in all locations worldwide, to optimise costs.

It has been dominant for many years both regarding sales and jobs and can be associated with car manufacturers such as Volkswagen and Toyota.

According to Pardi, this model nevertheless shows some signs of strain. It does not seem easily adaptable to local market needs, its costs are high, and it produces socially problematic pressure for active labour flexibility and segmentation of the workforce.

The second model is just emerging and is exemplified by new practices developed, often at the margin, by manufacturers such as General Motors (Daewoo), Renault (Dacia and Kwid) or Suzuki (Maruti-Suzuki).

In these cases, cars are designed and developed specifically for the needs of a larger, middle-class population who want mobility at a reasonable cost.

Technological solutions are developed locally and often imply domestic suppliers.

This might have a substantial and positive impact on the development of local skills in R&D and production. One of the key challenges for the future of work in the car industry is to know if this multi-domestic model, still fragile and ambiguous within the enterprises concerned, will spread in the coming years.


Previous articleGoal setting vital for organisational growth
Next articleListed companies must publish pay ratios under new law
ADR Daily is a specialized news portal with a focus on providing authentic news, information and research analysis on Appropriate Dispute Resolution (ADR), Human Resource Management (HRM) and Industrial Relations Management (IRM) in Ghana and beyond. This platform serves as an information resource base for the progress of the ADR, HRM and IRM industries, and seeks to promote professionalism in ADR practice by supporting a network of ADR professionals within and across nations and continents. ADR Daily keenly encourages the mass adoption of ADR mechanisms, particularly negotiation, mediation and arbitration for the resolution of disputes in all spheres, through the publication of industry news and information, as well as by deploying innovative awareness creation engagements.