The Impact of the European Community on the European Motor Vehicle Industry and its Subsidiaries

Abstract

The European Community continues to move forward in its quest to integrate, standardize, and simplify the movement of goods and services within Europe. The community has made many advances, but the process has not been easy. The challenge lies in the fact that member nations must give up much of their national sovereignty to become part of a larger unified Europe. Discrepancies in national interests and priorities have complicated the process and issues such as a common foreign policy, common military and common currency are difficult issues to tackle. With Germany's recent ratification of Maastricht, or the Treaty on European Union, the future of a unified Europe looks more promising. The coming decade will be an important one for Europeans and citizens around the world as Europe prepares itself for the challenges of the twenty-first century. The impact of this new Europe will, first and foremost, influence the economic sector and the way the world does business. Industry will be affected in numerous ways including new standards, more integration, larger markets, fewer barriers to trade, facilitated movement of factors of production, and lower overall costs. Free movement of labor and capital will result and people will be able to work and study in any part of the community. These changes will in tum influence society at large as less expensive products of higher quality, and greater variety are offered. The transportation industry will play an important role in the movement of goods and services in the new Europe. It is an industry that is made up primarily of the automobile sector and its subsidiaries which together employ over two million people in the EC. The industry has seen a great deal of restructuring, and merging in the past few years and this phenomenon is expected to continue in the future. Growth in the industry has slowed considerably from what it was in the early eighties. The motor vehicle industry and its subsidiaries have, therefore, shifted their focus to address this trend and face the fierce competition from Asia and Japan in particular. The goals are to become more responsive to changes in the determinants of demand such as consumer taste, and to create more flexible production processes that employ high-technology systems and produce products of higher quality. Changes in consumption habits, increasing demand for higher environmental standards, and the political changes that have been sweeping the world, have posed challenging new questions to the industry. The industry's answer to these challenges will largely determine the future of the sector. New markets in Eastern Europe and the former Soviet Union will provide potential for the future, but many challenges remain. The focus on the environment has forced automobile manufacturers and their suppliers to look for new ways of manufacturing products that are more environmentally friendly and utilize alternative energy sources. Finally, the global recession and its expected negative effect on consumer demand and consumption changes have forced manufacturers to shift their focus to offer automobiles of greater value and with less time spent on development. The automobile and accessory industries have a bumpy future ahead of them. The European Community will aid these and other industries in facing the challenges of the twenty-first century, but it cannot be expected to solve the industry's problems. A flexible and more responsive production process in which the environmental concerns are also addressed should be the number one concern. The penetration of new markets will then follow and the industry should again see the growth it saw in the early eighties. The catalyst in this process will be European Community as it provides the standards and other norms to facilitate restructuring and greater competitiveness for industry in the next century.