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The Impact of the 2008–2009 Crisis

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Dependent Growth: Foreign Investment and the Development of the Automotive Industry in East-Central Europe

Abstract

This chapter examines the impact of the 2008–2009 economic crisis on the automotive industry. The uneven nature of the crisis contributed to the gradual shift in production from traditional core areas of the global automobile industry to selected less developed economies. In this context, the chapter analyses the firm-level effects of the economic crisis in the Czech and Slovak automotive industries as two examples of automotive industry peripheries that were integrated in the European automobile production system and experienced rapid production increases after 1990. The analysis draws on unique data collected during a survey of 274 Czech-based and 133 Slovak-based automotive firms conducted in Fall 2009 and Spring 2010, 98 company interviews conducted with automotive firms in Czechia in 2010 and 2011, and 30 interviews conducted in Slovakia in 2011. Changes in revenues, production and employment during the economic crisis are compared between Czechia and Slovakia, and are analyzed according to ownership, the involvement of firms in the automotive value chain and firm size. The chapter also investigates plant closures and relocations in the Czech and Slovak automotive industries during the 2008–2009 economic crisis.

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Notes

  1. 1.

    All interviews were conducted by the author and two members of his research team.

  2. 2.

    In this chapter, ECE denotes the region composed of ten former state socialist countries, which are now EU members (Bulgaria, Czechia, Estonia, Latvia, Lithuania, Hungary, Poland, Romania, Slovakia, and Slovenia). Central Europe denotes the region composed of Czechia, Hungary, Poland, Slovakia and Slovenia.

  3. 3.

    In this chapter, North America is defined as the North American Free Trade Agreement (NAFTA) area composed of Canada, Mexico and the United States.

  4. 4.

    Africa is excluded from this discussion because of its small vehicle output compared to other major world producing regions. Africa’s 2011 vehicle production was 541,596, which was less than half of vehicle output of tiny Czechia (OICA 2016).

  5. 5.

    Compared to 2010, in 2015 the total vehicle production increased by 17.0%, the output of passenger cars grew by 17.6% and the production of LCVs by 25.5%. The output of heavy trucks decreased by 18.8% and buses by 17.7% mainly because the 2015 figures for heavy trucks and heavy buses exclude the production of several EU countries and the output of Scania and Daimler trucks (OICA 2016).

  6. 6.

    I consider the following countries to constitute the traditional global automotive industry core: France, Germany, Italy, Japan, Sweden, Britain and the United States. However, the contemporary global automotive industry core is composed of France, Germany, Italy, Japan, South Korea and the United States because the top 17 automotive transnational corporations (TNCs) in the world, each producing more than one million vehicles annually and collectively accounting for 85% of the total global vehicle production in 2008, were all based in these five countries (OICA 2016).

  7. 7.

    NACE 34, used until 2008, refers to the NACE Rev. 1.1 classification of the automotive industry and NACE 29, introduced in January 2009, refers to its NACE Rev. 2 classification. These two classifications are not fully compatible because NACE 29 is 16.2% broader than the former NACE 34 when measured by value added. The reason is the addition of manufacture of electrical and electronic equipment for motor vehicles and manufacture of automobile seats to NACE 29 compared to former NACE 34.

  8. 8.

    Employment in the narrowly defined Slovak automotive industry (NACE 29) is unavailable. For the sake of comparison, job losses in the broadly defined Czech automobile industry (NACE 29 + 30) reached 27,210 or 15.2% of the pre-crisis employment. As opposed to NACE 29, Czech employment in NACE 30 increased during the economic crisis from 15,921 in the second quarter of 2008 to 16,674 in the third quarter of 2009 (CSO 2011).

  9. 9.

    All unpaired t-tests were conducted at the 95% confidence interval.

  10. 10.

    Among the Czech-based surveyed firms, there were 101 fully foreign-owned firms and 14 majority foreign-owned firms. There were also seven firms that were 50% foreign-owned. For the purposes of this chapter, I have considered these firms to be majority foreign-owned. There were 131 fully domestic-owned firms and two majority domestic-owned firms. In Slovakia, there were 56 fully foreign-owned firms, nine majority foreign-owned firms, including two that were 50% foreign-owned, 68 fully domestic-owned and one majority domestic firm.

  11. 11.

    Interview with a plant manager of the German-owned supplier of door systems and seat systems, November 16, 2010.

  12. 12.

    The decline in the number of temporary workers was not tested because of the small number of cases.

  13. 13.

    Each cable harness assembled for VW-Group’s luxury SUVs requires 10.5 h of work compared to 7 h required for Škoda Octavia and 5 h for Škoda Fabia.

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Authors and Affiliations

  1. Department of Geography and Geology, University of Nebraska at Omaha, Omaha, NE, USA

    Petr Pavlínek

  2. Department of Social Geography and Regional Development, Faculty of Science, Charles University, Prague, Czech Republic

    Petr Pavlínek

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  1. Petr Pavlínek
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Pavlínek, P. (2017). The Impact of the 2008–2009 Crisis. In: Dependent Growth: Foreign Investment and the Development of the Automotive Industry in East-Central Europe. Springer, Cham. https://doi.org/10.1007/978-3-319-53955-3_2

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