Berlin Workshop, 29 30 November 2007 Competence development and relocation dangers in the automotive industry in Poland Boleslaw Domanski Robert Guzik Krzysztof Gwosdz Jagiellonian University, Poland
Agenda How has automotive industry in Poland changed in the last decade? How has Poland s position in the European division of labour changed? What are the competences of producers located in Poland? What are the underlying localized capabilities? To what extent the threat of relocation of automotive activities from Poland? Toyota engine plant in Jelcz
The role of automotive industry in Poland (2006) - 6.5% of manufacturing employment - 8.3% of foreign inward investment - 15.2% of manufacturing production - 20.4% of Polish exports VOLVO bus plant in Wrocław
Automotive exports and imports of Poland, 1995-2006 Exports 20.5 bn USD in 2006 2.5 bn USD in 1999 0.6 bn USD in 1992
Balance of foreign trade in automotive products, 2006 (billion euro) Source: Eurostat
Polish automotive exports and imports by country in 2005
Structure of automotive exports of CE countries, 1996 & 2006 Source: Pavlinek, Domański, Guzik (forthcoming)
350 300 250 200 150 100 50 0 Gross value added per unit personnel cost in the automotive industry (NACE 34), 2004 (simple wage adjusted labour productivity) 310 313 215 236 260 182 160 140 144 148 131 120 114 ITALY BELGIUM SWEDEN UNITED KINGDOM FRANCE SPAIN AUSTRIA NETHERLANDS CZECH REPUBLIC SLOVAKIA HUNGARY POLAND Source: Eurostat GERMANY
fgh Automotive suppliers: broad scope and differentiation 2,600 automotive producers, including more than 250 foreign plants 180 greenfield plants built by foreign investors since 1995 48 out of the top 100 global automotive suppliers are active in Poland 9 out of the top 10 global automotive suppliers: 39 factories and 4 R&D 19 automotive R&D centres new industrial park in Tychy, Upper Silesia
Toyota engine plant in Jelcz fgh Local competences of automotive suppliers: quality certificates (number of plants) Total 2000 2006 134 445 Domestic 2000 2006 74 242
Toyota engine plant in Jelcz fgh Local competences of automotive suppliers: managers (percentage of 135 foreign-owned affiliates with a Polish chief executive) 67% 37% 27% 36% American German French Total
Competitiveness of plants fgh located in Poland in comparison to plants located in Western Europe 1 lagging behind Western Europe 3 similar to WE 5 better than in WE 1 2 3 4 5 Non-production competences Product complexity Technology Productivity Quality Organization of production Labour motivation Adaptability Fast response
governance Firms - competences -strategies - activities dynamic localised capabilities Territory - economic structure - society and culture - institutions governance regional and local development 1 Dynamic localised capabilities are tangible and intangible assets embodied in people, firms and governance institutions, as well as in various relationships between them in a particular territory Localised capabilities include skills and attitudes of the workforce and entrepreneurs, the quality and reliability of suppliers and a broad range of local institutions, including public authorities
governance Firms - competences -strategies - activities dynamic localised capabilities Territory - economic structure - society and culture - institutions governance regional and local development 1 There are generic capabilities and industry-specific capabilities governance Localised capabilities are dynamic and relational They are continuously created, reproduced, enhanced or eroded by the relationships between the activity of firms and the attributes and development of the particular territory (country, region or town)
Polish automotive industry, 2005
Foreign greenfield investment in automotive industry as of December 2005
Source: Gwosdz, Micek (2008)
The threat of relocation of automotive activities from Poland WHEN? 5-10 years 15-20 years WHAT? Which activities? Which firms? From where? WHY? Factors encouraging relocation Factors stimulating embeddedness Kirchhoff plant in Mielec
Factors and forces behind the threat of relocation of automotive activities from Poland + rising labour costs, which may especially affect labour-intensive cost-sensitive production + strategic decisions made abroad + limited non-production competences, technological dependence + the secondary role of indigenous producers Volkswagen engine plant in Polkowice
Factors and forces preventing relocation of automotive activities from Poland + combination of high quality, rising productivity and cost advantages + economies of scale + reliability and reputation (based on local capabilities) + gradual development of product mandate of foreign subsidiaries responsibility for design and manufacturing of certain components (trend towards joint location of R&D and manufacturing) + most companies can afford and are prepared to pay much higher wages + broad and diversified supplier networks + strong linkages with German and other West European producers, partly supported by advantages of proximity (short delivery time and low logistic costs) GM plant in Gliwice
Berlin Workshop, 29 30 November 2007 Competence development and relocation dangers in the automotive industry in Poland Thank you for your attention Boleslaw Domanski Robert Guzik Krzysztof Gwosdz Jagiellonian University, Poland
Position of the company in a supply chain according to origin of capital high quality, productivity and competitive cost are not sufficient conditions for indigenous firms to become first-tier and major second-tier suppliers; they lack financial and human resources to provide design and high-volume 1
The future of automotive production in Poland Will the trend for locating non-production competences in Poland be continued? Can the advantages of high motivation and fast response be sustained? How long manufacturing of labour-intensive products can avoid delocalization from Poland? Can indigenous companies move up the value chain? Kirchhoff body parts plant in Gliwice