Vanishing Value Chains and the Decline of Industrial Districts: The Case of the Brazilian Automotive Industry

Whilst the automotive industry has always been a global one, a trend from the 1980s to early 2000s was a move towards leaner workforces in the automotive majors, and a greater reliance on a closely intergrated network of suppliers in close spatial proximity to major car plants. This enabled the automotive major to closely monitor production and logistics, and quality, whilst simplifying employment relations, facilitating numerical flexibility and reducing direct labour costs.  Local industrial clusters made for complementarites, the development of a deep local skills and knowledge base, and a high degree of functional flexibility.  It also meant that improvements in labour standards in the automotive major were often then mimicked by suppliers, on account of the need to intensify productivity and to closely integrate practices with those of the major.  In some cases (in the Brazilian instance, a contested process), this lead to suppliers  even assuming responsibility for aspects of assembly on the premises of the relevant automotive major.  The automotive industrial clusters model has, however, come under intense threat in recent years.  This has been due to two developments. The first is a global over-capacity in the automotive industry, and secondly, through the entrance and rise of ultra low cost suppliers of basic constituent components in South Korea, and, above all, China.  This has disrupted dense clusters of established relations within local supplier networks, and, indeed, made it very much more difficult to monitor quality and labour standards down the supply chain.   Based on case studies conducted in the Brazilian automotive industry, this study explores the nature and dynamics of this process, trends, likely future developments, and the implications for theory.