Changing interorganizational patterns in the North American automotive supply chain

Abstract

The North American automotive industry is undergoing extensive change in its organization. This paper focuses on change in the automotive supply chain, that is, those firms in the industry such as Chrysler or Ford that assemble the vehicles, and those firms that are their suppliers. The data come from in-depth interviews with 26 senior executives in North American automotive companies, from a survey of 175 firms in the North American automotive industry, and from sessions with an advisory board of representatives of leading automotive industry companies. The particular topic in the research reported below is the differentiation of the supply chain into four broad categories, with on-going change in the proportion of all firms in each category. Emphasis is given to understanding the factors driving the differentiation. The changes are interpreted in terms of both firm-level and industry-level factors. At the firm level, explanations draw mainly upon agency theory and transaction cost economics. At the industry level, explanations are grounded primarily in the increasing competition and globalization among all the firms and in the types of networks that link firms in the industry. The changes and their underlying causes allow certain predictions: there will likely be few if any new automotive assemblers in North America in the near future, and only a few new suppliers of the first rank, known as system integrators. Of the two other types of firms, direct suppliers will decrease in number, and indirect suppliers will become more numerous. The process of differentiation will continue at least until 2005. Furthermore, the number of customers each type of supplier serves will decrease, and the type of relationship between the assemblers and both system integrators and direct suppliers is likely to become both more long-term and more complex.