ABSTRACT
INTRODUCTION Most work on the competitive status of the USA and European auto industries of late has concluded that, relative to Japan, these industries are operating at a competitive disadvantage.1 Moreover, at least one lesson from Japan’s competitive success seems to be that greater cooperation between managers, engineers, production workers, suppliers and even financers in design and decision making has salutary effects on productivity and competitiveness (Abegglen and Stalk 1985; Dore 1986; Aoki 1990; Best 1990; Cowling 1990; Cowling and Sugden 1990). Hence, it has become fashionable to consider strategies to promote new forms of organization and decision making to restore competitiveness in the auto sector. This chapter will argue that competitiveness cannot be restored without a sectoral policy for auto. Several analytical propositions underlie a discussion of industrial policy for the auto sector which I shall discuss briefly before proceeding to a discussion of industrial policy: first, it has proven very difficult to transform the internal structure and decision-making process of the firm in the face of unstable markets, hence, growth and stability are central to relaxing constraints on the transformation of firms; second, the USA, like Britain, faces a balance of payments constraint which precludes the use of traditional Keynesian policies to stimulate growth; third, the balance of payments constraint is due to decades long neglect of the manufacturing sector which has rendered it uncompetitive vis-à-vis foreign competitors, most notably Japan; fourth, auto plays a central role in generating the balance of payments constraint and as such is central to its resolution.
