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Ruy Quadros
Sérgio Queiroz
This paper is concerned with the implications of strategies and the associated centralisation of R &
globalisation for the constitution and distribution of D in industrialised countries would lead to the
innovation and design capabilities in the Brazilian weakening of the already feeble capability in
and Argentinean auto industries. Design product and process development in the Mercosur
competencies are understood as the human and countries. However, research findings have shown
material resources devoted to the accumulation of that the picture is more complex than the initial
knowledge in product and process development in hypothesis. These results are discussed in the
both car makers and component suppliers. It is following sections. Section 3 analyses the available
considered that such capabilities are (and will be) indicators of R&D activities in the motor vehicle
crucial for the definition of the role played by the sector and its distribution between Argentine and
subsidiaries of assemblers and trans-national Brazil. The relatively medium size of the Mercosur
suppliers located in Mercosur and, therefore, for car industry (2 million unit’s production) helps
the competitiveness of the industry in the region. explain why there is some localisation of R&D
The paper is based on the results of collective activities. More important, the integration of the
research which has focused the effect of Argentinean and Brazilian operations has led to the
globalisation of the car industry for firm displacement of Argentinean design activities
technological activities.1 Although the towards Brazil, the largest operation within the
investigation covers both assembler firms and area. Our survey has found approximately 1.900
suppliers, the paper addresses only the former. engineers working in design activities in the
Our point of departure (section 2) was the idea Brazilian sample (being 1.500 in car makers’
that assemblers' and suppliers' globalisation facilities), as compared to a few tens in Argentine.
Thus the influence of scale on the localisation of
1
The research project – "Globalisation and design competencies is clear. Even tough they are
Technological Capabilities in the Automobile modest as compared to developed country
Production Chain in Mercosur" (Quadros et al. 2.000) –
has been funded by IPEA (the Brazilian Federal Institute practices, R&D in the Brazilian auto industry
for Applied Economic Research). The research team has account for an important share of the innovation
comprised John Humphrey, Flávia Consoni, Ionara effort of the entire Brazilian industry. Moreover,
Costa and Rodrigo Rodrigues, in addition to the authors.
The authors are grateful for their contribution, while there are signs that such activities have been
assuming entire responsibility for this paper. growing recently, and the paper argues that this
36 Actes du GERPISA n° 32
reorganisation affects the technological existent First, both multi-regional and trans-regional
and future activities in the Mercosul countries. The configurations are forms of globalisation therefore
question addressed is: what are the effects of distinct from the more fragmentary multi-domestic
globalisation and the correspondent new strategies framework. What is characterised as multi-regional
of automobile firms on the development of is an organisation in which the company’s main
technological capabilities in the Mercosul region? functions are structured according to regional
We started from the hypothesis that the spaces, which are inter-related but keep a certain
globalisation strategies could lead to the re- degree of autonomy. As the case of GM shows,
centralisation of technological activities in more with its bi-centrical structure based on North
developed centres – not necessarily the home America and Europe, the integration in a
country of the company – therefore weakening worldwide scale is limited.
local capabilities. The case of Volkswagen is The trans-regional company (as in the case of
illustrative. As part of its global industrial Ford) is in search of an integration of its activities
restructuring, VW decided that it will no longer at the world level. It implies a greater degree of
produce specific models for specific markets as it homogeneity in the company’s operations and a
always has done in Brazil. Its platform strategy will more centralised control of strategic decisions.
move towards few and global platforms, as other It is important to notice that this strategy
competitors have already done. Accordingly, its restrains much more the conditions for local
Brazilian R&D unit, with approximately 450 adaptation than the multi-regional does. In a way,
engineers working on product and process the trans-regional model assumes a trend of
development, will have to be progressively increasing homogeneity of markets, products,
assigned other tasks. There is a real threat that, in tastes, etc. In that case, the necessity of local
this reconfiguration of the global R&D network of adaptation, which has traditionally been in the case
VW, the Brazilian subsidiary’s R&D faces a status of the automobile industry an important reason to
degrading. carry out technological activities in different
However, in the following sections we develop places, would diminish. And that would certainly
the idea that the effects of globalisation are mixed, lead to a concentration of R & D in fewer centres.
weakening, in fact, some local capabilities but also However, there is no evidence of such a trend
strengthening others. The reason is that the results and that is why there is not a clear convergence of
strongly depend on the strategy. And the strategies strategies of automobile companies towards the
vary considerably, as Bélis-Bergouignan, trans-regional, the more global model. So, the
Bordenave and Lung (1996) pointed out. reformulated hypothesis presented in this paper is
Following their typology, the differences that the effects of globalisation on the development
between the multi-regional and the trans-regional of technological capabilities in the automobile
configurations, typified by GM and Ford, industry of Mercosul is related to the strategies
respectively, have significant implications upon the adopted by firms. Some observed strategies
way the R&D network is reorganised globally. The towards centralisation may lead to a reduction of
specific consequences on the roles assigned to capabilities or, at least, a reduction in the pace they
R&D teams in the Mercosur region will be further could be accumulated in the Mercosur countries.
explored in section 4. As it will be shown, the more But there may also be some opportunities for less
centralised approach that characterises the trans- developed centres to be integrated in the global
regional configuration tend to deflate technological R&D network of some companies in more positive
activities in Brazil or Argentina while the multi- ways.
regional can – although not necessarily – sustain
those activities and even improve them. Let’s here
develop a little bit more the concepts of Bélis-
Bergouignan, Bordenave and Lung in order to
better understand the results that will be presented.
38 Actes du GERPISA n° 32
2
The PAEP/SEADE (Pesquisa da Atividade
Econômica Paulista) is an economic survey which has
comprised various aspects of technological diffusion and
innovation in firms. The survey was carried out in
1997/98, referring to 1994/96. For further
methodological details see (Quadros et. Al. 2.000b).
3
As 70% of the auto industry is located in São
Paulo, the equivalent share at national level is smaller.
Table 1. - Graduate Staff in R&D on Total Firm Employees by Industrial Sector (*)
State of São Paulo - Brazil – 1996 (ISIC 2 digit)
3
Toyota
Honda
Mercedes
2 Renault
Fiat
GM
Ford
1 VW/Audi
0
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998
The contrast between the Brazilian and the THE IMPLICATIONS OF ASSEMBLERS’
Argentinean situations seems to bear the major DIFFERENT PRODUCT POLICIES ON THE
influence of scale of operation as a factor to CONSTITUTION OF DESIGN
explain the localisation of R&D activity (Dunning COMPETENCIES
1994). First, the scale of production in Mercosur
was mentioned with emphasis by many of our Even tough scale of operation is a major factor
interviewees as the primary reason to invest in influencing the localisation and distribution of
local engineering capability. Production in the R&D activities in Mercosur, the findings of our
region reached its peak in 1997, with 2,4 million research suggested that it is not the only one. The
units, while production capacity today is above 3,3 type of product policy adopted by assemblers,
million. As suggested by the Fiat do Brazil particularly their approach to the globalisation of
industrial manager, in such a relatively large platforms and models, has important consequences
market (and given its future prospect) competition on the tendency for increasing or decreasing local
requires a complete competency building, which design activities.
comprises product engineering competency. In this paper, we understand type of product
Second, the scale gap between Brazil and policy or product portfolio management as related
Argentina, in a moment of integration of to the propensity of the assembler to adopt a
operations, seems to explain why the constitution glocalisation strategy (van Tulder and Ruigrok
of design competencies has been further 1993) 1, that is, to adopt platform derivatives and
concentrated in Brazil, together with other eventually a new platform which is suited to the
management competencies. Out of the 2,4 million needs of emerging markets. In order to simplify,
units production in Mercosul, in 1997, 2 million we could consider that two basic categories follow
were manufactures in Brazil. In fact, the Brazilian from this criterion.
technological centres/units of GM, VW and Fiat On the one hand, there is the group of
provide technical support for product adaptation assemblers truly inclined to glocalisation, like
and re-engineering in other South American General Motors and Fiat. These two assemblers are
countries. the ones which have engaged strongly in designing
However, if put in a global perspective, the regional derivatives of their global platforms
information on engineer employment reveals how (Table 2, line 8). GM’s Corsa sedan, wagon and
limited are R & D activities in the motor vehicle pick-up, as well as Astra sedan were developed in
industry in Mercosur. As informed by interviewees, Brazil, to meet the preference of Mercosur
any of the major R & D centres of car assemblers consumers. Fiat accumulated experience, in the late
in Europe employs more than 5.000 engineers 80s, in designing derivatives from the Uno
each. It has been reported that the Volkswagen platform. More important, these two assemblers are
group employs approximately 7.000 engineers for the only which pushed glocalisation to the point of
product development in the VW Wolfsburg centre, developing a specific platform to meet emerging
and 4.000 more in the Audi centre. The Brazilian markets needs – a Third World platform (Table 2,
product development group comes third, with 450 line 2). This is the case of Fiat’s Palio platform
product engineers. The Brazilian development (project 178) and of GM’s project Blue Macaw,
group centralises most of the development work whose first launching is expected for later this year.
carried out in South America, as there is no other On the other hand, Ford and Renault stand as
such a concentration of VW product engineers in examples of a more “orthodox” approach to
South American countries. Similar situation was globalisation, one which searches for a truly global
found at General Motors and Mercedes Benz. As in car. In this case, although re-engineering of
the case of VW, their Brazilian development units components is still carried out (mainly due to road
serve the needs of the Argentinean subsidiary. The
1
enormous gap in the magnitude of engineer We owe the adaptation of van Tulder and
workforces reveals in fact the different functions Ruigrok’s concept to the understanding of the
assemblers’ globalisation approaches in Mercosur to
performed by these R & D centres, which is a point John Humphrey, who has been part of our research
to be developed in the next section. team.
Actes du GERPISA n° 32 41
conditions) the room for local//regional body which adopt a multi-regional approach to
derivatives is much less, and there is no room for a globalisation, and a glocalised product policy, are
Third World car. It has to be added that the case of the assemblers who have increased their R&D staff
Renault is quite different from Ford, since the and infra-structure, in the late 90’s. The most
escalation of Renault´s operation in Mercosur impressive investment has been made by GM,
countries is very recent, whereas Ford has been whose Technological Centre in São Caetano
operating in Brazil and Argentina since the late employed more than 1.000 people (400 engineers),
60´s and has built, during the phase of import in 1999. Ford, which is the typical trans-regional
substitution a considerable product engineering firm, with a concept of truly global cars, has
area in Brazil, for designing local models. reduced its engineering staff from more than 400
Ford abandoned completely the local/regional (early 90’s) to a little more than 100. Ford states
model approach. VW is somehow moving from that there is no need for a large engineering unit in
glocalisation to orthodox globalisation. Until mid Mercosur, since the main job to be carried out is
90’s, VW owed much of its success in Brazil and the re-engineering of platform and components in
Argentine to the marketing of local models, based order to meet poorer roads. Moreover, Ford relies
on local platforms, designed to meet local needs on its suppliers, to a great extent, to do so.
(the main example is the VW Gol). Yet, the search The case of VW and its transition to trans-
for a reduced number of global platforms has lead regionalisation puts a question mark on what is
the firm to announce a shift of product policy. VW going to happen to design competencies
do Brasil has just issued what is considered the last accumulated along decades. This is a major
generation of the Gol. concern for its product engineers. While it is
From this point, it is working on a global expected that there will be some room for further
platform (Project P24) which seems not to be developing some local special competencies, which
focused specifically in emerging markets. The can integrate the global VW R&D activity, as in
conclusion of the project is expected for next year. the case of designing smaller engines (1.000 cc and
These different approaches to product below), the product development staff of VW do
globalisation have had important consequences for Brasil fears the project of Wolfsburg for integrating
the constitution of design competencies, as can be their current activities in the global distribution of
seen in Table 2 (lines 5, 6 and 7). GM and Fiat, tasks.
Ruy Quadors
UUNICAMP – Politica - Brésil
Sérgio Queiroz
University of Sussex - SPRU
Grande-Bretagne
42 Actes du GERPISA n° 32
Table 2. - Product Strategy and Product Development Activity and Resources in the MERCOSUR Assembly
Industry – 1999
GM FIAT VW
All market segments All segments with All segments with
1. Product Strategy
with one brand two brands two brands
2. B platform for Yes Yes Yes but abandoning
emerging markets
For all For all market For all market
3. Local Production market segments segments except segments except for
(at Mercosur) except for for large platform large platform
large platform
4. Scale of Operation BR: 416.000 BR: 414.000 BR: 491.000
(Units of autovehicles AR: 45.000 AR: 95.000 AR: 67.000
manufactured in 1998)
5. Engineers BR: 400 BR: 150 engineers BR: 450 engineers
Employed engineers (only AR: nil AR: nil
in Product and product devel.)
Process Development AR: nil
6. Tendency of BR: increased BR: increased BR: decreased
Engineer Employment
Large number of test Modest number of Large number of test
7. Technological
laboratories and test laboratories laboratories and
Infra-structure
prototype and prototype prototype building
(in Brazil)
building build.
Participation in Blue
Participation in Participation in PQ
Macaw from concept
project 178 from 24 for local input to
Design of sedan,
the concept global platform
8. Nature of wagon and pick-up
Design of sedan, Design of last issue
Product Development derivatives of Corsa
wagon and pick-up of local B platform
Activities in Brazil Design of
derivatives of Palio (Gol) and derivatives
sedan derivative of
Design of 1.000 cc Design of 1.000 cc
Astra Design of 1.000
engines engines
cc engines
Source: research interviews, ANFAVEA and ADEFA
Actes du GERPISA n° 32 43
Suite Table 2. - Product Strategy and Product Development Activity and Resources in the MERCOSUR Assembly
Industry – 1999
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