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Francisco Veloso Chris Henry Richard Roth Joel P. Clark

Francisco Veloso Chris Henry Richard Roth Joel P. Clark. December 1999. Students: Carlos Neves Tiago Ratinho. Contents. Objectives and Scope Analytical Approach Major Conclusions Critical Recommendations. Objectives and Scope. Automotive industry:

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Francisco Veloso Chris Henry Richard Roth Joel P. Clark

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  1. Francisco Veloso Chris Henry Richard Roth Joel P. Clark December 1999 Students: Carlos Neves Tiago Ratinho

  2. Contents • Objectives and Scope • Analytical Approach • Major Conclusions • Critical Recommendations

  3. Objectives and Scope • Automotive industry: • Massive generator of economic wealth and employment • Predictable demand for each country • Other sectors dependent, like rubber or steel • Highly dependent of government trade, safety and environmental regulations • Its impact depends crucially on the specific role • Governments look at automotive industry as an important industrial development opportunity

  4. Objectives and Scope • Portugal: • 1987-1997 the autoparts industry grew seven times • together with assembly industry leads the stock of FDI • 7% of GDP • How can parts and components produced in Portugal remain internationally competitive? • What strategies should national firms follow to move up the tier structure? • When it is necessary to internationalize production, and under which conditions should it be done? • What role should the government play?

  5. Analytical Approach (1) • Macroscopic: • Provides an understanding of the industry as a whole • Discusses the technical trends in the global automotive industry • Globalization and changes in the supply chains • Intermediate: • Macroscopic level, addressing common aspects across the supplier base in Portugal

  6. Analytical Approach (2)

  7. Analytical Approach (3) • Micro: • Technical cost modeling for: • -Stamping and molding processes • -Logistic • -Logistic strategies

  8. MAJOR THEMES OF THE PORTUGUESE AUTOPARTS INDUSTRY • Company size: product development capabilities; manufacturing should achieve minimum efficient scales; • Labour Market: labour considerations play a role in the manufacturing cost for higher value added products; engineering and development costs; • Geographical considerations: logistics cost penalty arising from its peripheral location; significant automotive manufacturing industry in place in Spain; investments in Brazil; • Manufacturing competencies: represents 7% of GDP; 20% of national exports and 20% of all foreign direct investment stock; presence of AutoEuropa and substantial commercial vehicle manufacturing sector; high levels of certification and quality practices;

  9. CRITICAL RECOMENDATIONS (1) • Cooperation: cooperation programmes among companies with complementary business objectives; specialization according to specificity of equipment; considerer mergers and acquisitions; • Development: higher value added products; companies working together; the area of cars interiors should be looked with particular attention; attracting engineering and research centers from major auto components corporation; research in logistics from Portugal, with the support of government funds; • Human Resources: low wages requiresa better-qualified workforce; creation of a technical vocational school for the auto;

  10. CRITICAL RECOMENDATIONS (2) • Internationalisation: depending on the types of components being produced and overall company strategy; investing abroad should be seen by the government as a positive evolution of the local industry (Brazil in particular); • Manufacturing Management: narrow product range; higher levels of worker education and responsibility; a balanced and adequate use of methods for manufacturing planning and control; careful equipment time management; choice of the appropriate equipment for the product being manufactured; • Supply Chain: disseminating the best practices of the supply chain capabilities • Overall Strategy: development of the auto parts companies; strong cooperative environment between local industry and public sector.

  11. Narrow array of high value products • Larger plants • Focus on integration of technologies • Full product engineering • JIT shipping logistics OVERALL STRATEGY Single Company Group of Firms 4 3 Higher Complexity Product Focused 1 2 Process Focused • Moderate array of low value products • Larger plants • Focus on manufacturing performance • JIT or distribution center • Full process engineering team • Very broad array of low value products • Small facilities • Lean business structure • Direct logistics strategy • No engineering Higher Growth

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