Global car, everyone?

Global car, everyone? image

Text: Tito F. Hermoso / Photos: Brent Co, Manufacturer Press | posted November 21, 2012 11:42

The evolution of the global car

The Global fad

Every car exec utters the same spiel as their global company sells global cars for global market tastes. It's not just to crow about their company's expertise in making products that appeals to everybody. It's mainly more about making everybody desire their products over everybody else's. And, let's not forget, besides selling a lot of cars, they should be making a profit on every car they sell. For that, globalization also means sourcing the world for the best supplier of raw materials, parts and labor that can improve the car company's bottom line. With the world's logistics just as global in scope and reach, optimizing costs is an achievable goal.

Inventor's intent

But was making a global car ever in the cards for those who invented the car more than a hundred years ago? Most inventors were romantic challengers to convention who merely wanted to prove that a horseless carriage can be invented. Then, there were also the visionaries who dreamt of a car for every man or family. To this we add the businessmen who saw that making and selling a car for every man or family, meant making money.

A supplier problem

The tinkerers and inventors of the late 19th century didn't really have much to go by. Their primary and main problem was suppliers for parts that also needed to be invented. Next, the knowledge to find substitutes in case no parts makers and suppliers can be found. That usually meant nearby, as in the next town or just over the state line. Their backbone networks were the suppliers of the existing transportation industry. The blacksmiths and farriers of the horse trade, the rail road and steam locomotive industry and the steel giants. Car inventors found allies with budding inventors of the new fangled electric light, oil and coal industry, the better to co-opt them in their amusing and playful endeavor [or obsession] which many imagined had potential. The History of the automobile is littered with literally thousands of start-up inventors that only made it to the almanac with a grainy black and white photo to boot.

Military jealousy

Determination is what the likes of Karl Benz, Gottlieb Daimler, Emile Delahaye, Rene Panhard, et al had in droves so they kept at it until they could make enough copies of their automobiles to sell or publicize and promote that they were on to something. In Europe, where the Victorian-era fascination for invention synergized with the mass production ideals of the 'Industrial Revolution', the automobile was a toy for the royal, elite and aristocracy. The royals with military roots saw a war potential for the automobile so many of its production techniques were kept secret, especially from neighboring rival kingdoms. This was not going to be the jump-off point for any kind of globalization, except that by conquest by force of arms. When World War I broke out, the opposing imperial and republican armies in Europe were almost exclusively fought with armaments and transport equipment from their own country or its allies.

Ford Model T


With a background like this, one can better appreciate the concepts and subsidiary ideas that Henry Ford introduced to the automobile as a global consumer good. Though he saw the 50 United States as a huge market in itself for his novel assembly line, he also believed in the rising income of the working class to afford his cars. By being a volume producer, he knew he can bend more than just the ear of parts suppliers. Ford also had a knack for recognizing inventors and out of the box thinkers like himself. His era was the era of vertical integration; i.e. owning or at least absolutely controlling everything that matters - cradle-to-grave -in making his products from an unbroken chain of businesses that lived and died to supply Ford. His River Rouge plant in Dearborn, Michigan concentrated all raw materials processing from coke to Model T kits in this massive factory. It was to prove to be the locus of what would grow to be a 5-state, 2-country [USA and Canada] region of rival car makers and car parts suppliers, cashing in on Economies of scale and proximity to production centers. Ford went so far as to transform a portion of the Amazon to a copy of Dearborn in order to plant rubber so that Ford would no longer be at the mercy of the high prices charged by the Dutch and British owned rubber plantations of the Far East.

The Global T and DMG

Ford, categorically, was the first global volume car producer. In the mid twenties, Ford wanted to export his business model of the Model T as working class car so he put up an assembly plant in Britain to produce right hand drive cars for that market. There were others who exported cars to other markets, trying out what we call nowadays as badge engineering. Austin's model 7, was made in metric parts and left hand drive as the Dixi at Eisenach, Germany which was later acquired by BMW. The world's first multinational/global car company was Daimler Motoren Gesellschaft or DMG, which sold naming and engine making patents to the British Daimler Motor Car Co. , owned by F. R. Simms [Gottlieb's friend] and Paul [son of Gottlieb] Daimler's Austro-Daimler subsidiary in Austria. Today, DMG is Daimler AG is the maker of Mercedes Benz, Daimler Motor Cars is part of Jaguar-Land Rover and Austro-Daimler is part of Steyr-Daimler-Puch.

Still protectionist

The inter-war years was still marked by massively high tariff barriers between the world's few industrial nations, while the rest of the world, composed of commonwealth and colonies of aging empires, were captured markets, exclusive to the profit advantage of their colonial masters. The Philippines at this time was part of the American empire so 'globalization' at that time meant imports from 'Stateside', all 100% made in USA. GM was no stranger to globalization too, but unlike Ford, GM's growth was via the acquisition of many brands and factories. One of these was the Opel brand of Germany, which continued to remit profits to GM USA even during the hostilities of the 2nd World War.

People's car

By the close of the Thirties, current social and nationalist philosophies identified the car as a strategic ingredient in the making of an anti-aristocracy, anti-clerical Workers paradise. Adolph Hitler foresaw that to enhance the value of the automobile to society, the world would need a network of point-to-point limited access highways [autobahnen] so the People can have places to go to in their People's car [volkswagen]. Hitler's idea of globalization was the Third Reich, where if he succeeded, the whole of Europe would have been an ideal homogeneous society populated by the Aryan master race, criss-crossed by Autobahnen with everyone driving Volkswagens.

Cross border trade

An interesting twist on globalization during the War was that GM's Opel, commandeered by the German war effort to supply trucks for use of the Wehrmacht, continued to book royalty fees and payments to GM in Detroit. In the USA, all factories were commandeered by the Federal government to produce ships, planes, tanks and what would probably the 2nd World War's contribution to a global car, the Jeep. Even as an American Bantam design, 640,000 Jeeps were made in the factories of Ford and Willys-Overland, 30% given to its British and Russian allies, many of which lasted beyond V-E [Victory in Europe 1945] and V-J [Victory over Japan 1945] day.

Victor's largesse

The end of the war saw the US victors rushing back home to the only combatant nation that did not suffer war time damage. Militarily, the US's only rival was the USSR. The industrialized world then, composed of Europe, the Far East, China and Japan lay in ruins, leaving only the USA to fill in the world's demand for industrialized goods. Such was America's wealth that it preferred to dump their Jeeps to their allies than ship them back home. Soon France [Delahaye and Hotchkiss] and even American occupied Japan [Mitsubishi and Toyota] were making their version of the Jeep. The Jeep also inspired the British to create the Land Rover, another soon to be global vehicle.

Export or die

After the war, both the victors and the vanquished, wanted to rise up from the ashes and start their economies anew. All wanted to have their own home-grown car industries and all wanted to export. The target markets were easy pickings for countries with colonies. Britain can always export their cars to the Commonwealth and France to Francophone Africa. The Far East, Near East, Middle East or Asia was going to be where the Americans, French, British and soon, a reviving Germany, were to face off. By this time, all car producing countries, except for America, were out to produce small cars not only to make it affordable for the many but also to save on fuel, having experienced severe rationing during the war years.

Colonial upheaval

But the War also produced an upheaval in the aging empires. Many, if not all, wanted to break free from their colonial masters having seen them weakened by the war. As these colonies fought to become free democracies, they too wanted to be able to control their economies, no more subject to the whims and prejudices of their ejected colonial masters. And like all the industrialized countries, all of these newly born states wanted to have their own car industry. The quickest way to do this was to ban the import of CBUs and entice the foreign car makers to establish manufacturing or assembly plants with the promise of market domination. Naturally, the car makers were only too happy to oblige, sometimes sending complete kit making factories of soon to be obsolete models. Right hand drive countries were natural territory for British brands, while left hand drive countries were easy to penetrate for German, French, Italian, Swedish, Dutch and American brands.

Old cars never die

India was happy to call as its own obsolete Standard, Austin and FIAT models which are still produced to this day. The Hillman Hunter of the 70s is still made in Iran, alongside 80s Peugeots like the 309 and 405. It was only recently that some Latin American countries have slimmed down production of the original air-cooled VW Beetle and the go-anywhere Renault 4. Poland, Yugoslavia and Russia's Tolyatti plant still produce FIAT models that date back to the mid-60s. In Turkey, Egypt, South Africa, Tunisia, Brazil, Mexico and Argentina, you can still see newish old model American, French, German and Italian cars that have been made locally for decades. During the regime of Francisco Franco, Spain, devastated by its Civil War, wanted to jump start into a car making economy. FIAT of Italy supplied current models to be assembled and badged under the SEAT name. Citroen, Simca and Renault of France established Spanish subsidiaries to assemble cars for sale in Spain.

The Japanese century

By the late 60's the Western car makers were now faced with a potent challenger: Japan. Accused in its early years of copying Western cars, Japanese car companies were now out to export their cars extolling the virtues of value for money and bulletproof reliability. Japan Inc. would do anything to make sales. They built assembly plants in countries that banned car imports. They made left hand drive cars as uncompromised as the right hand drive variants. They installed as standard, extremely reliable transistor radios and air conditioning. Japan Inc. was a factory that had the global market in its sights.

Small car as the world car

Of the western world's car companies, it was Germany's Volkswagen that faced up to the challenge. But it was a only the Beetle against the multitude of models from Toyota, Datsun, Honda, Mazda, Isuzu, Daihatsu, Suzuki, Mitsubishi, etc. Realizing that American cars were only adaptable to the American continent, and having lost market share in Latin America vs. small cars, Ford, GM, and Chrysler embarked on selling and assembling small cars for the rest of the world.

America vs. Japan

The big American companies tapped the small car expertise of their European subsidiaries. Chrysler used the Rootes Group of Britain and Simca-Talbot of France. Ford had British and German factories. GM had Vauxhall and Bedford of Britain and Opel in Germany. Thus their first global cars were the Ford Escort, Ford Cortina, Ford Taunus, Opel Kadett, Vauxhall Victor, Hillman Hunter and Simca 1100. Britain's BMC, already an agglomeration of British makers of small cars were also doing their bit to launch their small MG, Austin, Standard and Triumph models as world cars. But by the beginning of the 70s, it was becoming clear that cars made by the Western world were no match to the Toyota Corona and the Datsun Bluebird.

Barriers to trade

During the 60s and 70s, the hurdles of making one global car for the world market were not just tariff barriers and protectionist duties. Countries had conflicting safety, emissions, glass and lighting standards so projected volumes had to justify the cost of retooling for specialized parts. Cultural quirks had to be accounted for too. For instance, the young Indian car market preferred plenty of head room in the back and all the power amenities there too because the turbaned sahib always sits in the back of a chauffeur. Different choices and levels of options were a juggle. Paint colors and paint work names, like model names, had to pass cultural scrutiny. To name a car that had offensive undertones meant ridicule and lost sales.

The Eighties

All the Economic, trade and oil crises of the 70s exorcised the world to try free trade. But to do so, meant the reduction of barriers to trade, which led to acceptance of more countries of American or European or Japanese standards for emissions and safety. With the ensuing homogeneity, more markets were made accessible plus quality standards started to rise. By now all the car companies were in some form of globalization, be it numerous assembly plants in many countries and/or numerous market penetrations. They tried cross ownerships like Mazda and Ford, Chrysler and Mitsubishi, GM, Suzuki and Isuzu, etc., all in the cause of spreading R&D, production and marketings costs over a bigger sales volume. At the same time, car companies sourced design and parts from all its outposts all across the globe.

Shifting strategies, shifting definitions

Over the past twenty years, global models have shifted from region/market specific to blanket universal models for all worldwide markets. In the Eighties, Ford had a different compact for Asia and Europe/America. The 1981 Ford Laser was designed in Ford Australia, but the platform and basic body was a Mazda 323 so instead of Asia getting the FWD Escort, code named Erika, it got the Laser instead. Meantime, Erika was to be the platform for the Yankee Escort. The Mazda 626 based Ford Tempo was the US mid-size car while the rear wheel drive Sierra served Europe. Toyota, which used to have the Corona and Corolla as global cars, changed tact for Europe. It sold the Carina and Camry for Europe, Asia got the Cressida and the US got the Camry. In contrast, the last rear wheel drive Opel Kadett platform was sold all over the world rebadged as the Chevette, Opala, Buick-Opel, Isuzu Gemini and Holden Gemini. If one defined a global car as one simplified global model of the entire world, GM got it right.

The Philippine experience

The Philippines went with the trend, establishing a car manufacturing program, assigning body stamping, engine block casting, chassis and wire harnesses to a handful of participants. The prevailing techniques then were for the participants to assemble left hand drive versions in limited variants solely for domestic sales so as to achieve economies of scale. Parts making were the participants' export commitment. Because of the weak growth of the middle class, car volume sales never reached viable levels as we were overtaken by our ASEAN neighbors. With their better economies, they could afford to further woo car company investment that we could not afford to match. At the turn of the century, the Philippines tried to compete and was able to bag Ford who proceeded to show the region that both right and left hand drive cars can be made in the Philippines and successfully exported. Having proven this, the other ASEAN car companies adopted this approach and are now supplying the markets with both left and right hand drive models made in the same factory. This, unfortunately, was the undoing of whatever was left of car assembly in the Philippines. Ford first withdrew, while the other Japanese companies chose to close their Philippine assembly lines as the model life cycle drew to a close, preferring to supply the Philippine market from other ASEAN factories. The Philippine's high cost of labor, power, flip flopping regulations and its relatively small middle class purchasing power compared to ASEAN was its undoing. A bright spot remains though. To this day, Toyota has successfully followed the script despite the conflicting changes throughout the years. It's locally made Innova and Vios are tops of the sales charts and their Philippine transmission factory supplies the world.

Adaptive globalization

Today Toyota sells the Auris in Europe, while it sells the Altis-Corolla in the USA and Asia. Toyota makes and sells the Sienna and Sequoia for the North American market only, while Asia keeps the Previa, Hi-Ace Grandia and Alphard. The Fortuner and Innova variants of the IMV platform are generally sold only in Asia, Latin America and the Middle East. Ford on the other hand used to have 2 kinds of Focus models and 2 kinds of Rangers for the USA and Asia-Europe. It used to have a European Mondeo which was different from the US Fusion. But now, Ford has globalized the Ranger, Fusion/Mondeo, Focus, Fiesta and even the Transit van, which used to be exclusive to Europe. Volkswagen used to have specific models for South Africa, Brazil and China but it is now integrating all its models to be made everywhere and available everywhere. Korea's Hyundai-Kia and China's Top Ten car makers are all aiming for globalization with similar strategies, keeping models as common as possible to all markets.

Variations on globalization

Despite the universality of the Civic, Honda offers a different version for Europe vis-a-vis the rest of the world. Honda's Odyssey is a minivan for the North American market, while in Japan, the Odyssey is a station wagon in the mould of the Mercedes R-class. Honda offers the 6-seat F-RV only in Britain and the Jazz based 7-seater Freed only in Thailand, Singapore and Japan, surely a reversed twist on globalization as Honda prefers to recognize and cater to the specialized tastes of markets. That's why Honda is leading to supplying 100% of the North American market from its North American factories, while Asia's models will be 100% supplied by Asian factories.

Globalization made specialization easier

Ironically, the ability to produce market specific versions and model families was made possible through globalization of standards, common platforms for parts modules and homogeneous/adaptive manufacturing systems. Another form of globalization is to focus global production of one type of vehicle in one country. The best example of this is Thailand, which is the world's supplier of compact pickup trucks. Every major pickup truck maker, save for VW are making everything - parts, modules, assembly - in Thailand.  The other is to transfer technology to recipient countries to expand market penetration. Suzuki's micro van, known in China as the Wuling and over here as the derivative Multi-cab have been instrumental in the fast growth of the thickly populated countries of India and China making Suzuki's micro vehicles major contributors in growing economies. The same Suzuki platform underpins the Wagon R, popular in the former Eastern European countries and also sold as an Opel in the early 21st century.

Global today

Now 'global' is on everyone's lips. PSA Peugeot Citroen keep launching global models [301 and 2008] one after another, even if PSA's production and markets are mainly in Europe, having only minimum presence in Asia and the Americas. PSA tried to reap globalization through JV's or joint ventures with FIAT for light vans, Mitsubishi for SUVs and electric vehicles, and recently Opel, not to mention engine making partnerships with BMW, but all this does not suffice for critical mass to be recognized as a global player much less a producer of global cars. Realizing that their costs are still too high to penetrate emerging markets, VW will develop a cheaper brand, since their Up model is still not quite a fit for the priorities of the emerging market consumers. VW has made no secret as it has observed Renault's success with the Dacia brand, an old Romanian brand that now makes cheap cars using Renault's parts bin. Renault's erstwhile other half, Nissan, is also resurrecting the Datsun brand as its inexpensive brand. The definition of what is a global car has evolved not only as the car evolved but also in adaptation to the upheavals in society and geo-politics. Starting with a single source, exported CBU and later assembled from one source CKD, the global car, whether GM's of Hyundai's, has evolved into design from many countries, parts-sourced from many countries and assembled in many countries just as efficiently as producing one kind of model in one country to supply the rest of the world.