The automotive industry and european integration

EU expansion into SEE and a probable British exit Brexit, likely will again dramatically reshape the European car production map over the next ten years.2Whereas numerous works have chro

A J Jacobs

The Automotive Industry and

Integration

A. J. Jacobs The Automotive Industry and

European Integration The Divergent Paths of Belgium and Spain

ISBN 978-3-030-17430-9 ISBN 978-3-030-17431-6 (eBook)

The use of general descriptive names, registered names, trademarks, service marks, etc in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use The publisher, the authors and the editors are safe to assume that the advice and information

in this book are believed to be true and accurate at the date of publication Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

This Palgrave Macmillan imprint is published by the registered company Springer Nature Switzerland AG

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Department of Sociology

East Carolina University

Greenville, NC, USA

I would like to thank the Brussels Centre for Urban Studies at Vrije Universiteit Brussel for the research fellowship that laid the foundation for this book In particular, I must recognize Bas Van Heur and Elvira Haezendonck for their efforts during my stay in Brussels in 2017 Whereas

Dr Van Heur guided my path, it was Dr Haezendonck who unselfishly set

up my initial meetings with auto company officials I also want to edge the center’s Elena Solonia for her friendly logistical support, and Stefan DeCorte, Michael Ryckewaert, and Michel Van Meeteren for shar-ing their wisdom on the topic

acknowl-Next, I would like to recognize Andreas Cremer, Jo Declercq, Francis Luyckx, Ivo Van Hauten, Isabelle Van Looy, and Eric Van Landeghem for their invaluable insight, and Ezequiel Aviles-Munoz, Ivan Borovcanin, Mio Bosnic, Mark DeMey, Ron Dubois, Pepe Perez, Michael Retour, Marivi Ricart, Rafael and Lola Salas, Claudia Torres-Rivas, and Paul Waley for their assistance in gathering information Similarly, I want to offer spe-cial thanks to Marcus Ballenger at Palgrave for believing in my project, and Jacqui Young and Jazmine Robles for their editorial assistance.Finally, I send extra hugs to Shuko and Ruiko for their never-ending patience and support!

vii

8 Volvo and Other Foreign Carmakers in Belgium 157

Industry 175

Index 445

1989–2016 58

Table 10.2 Spain’s foreign car plants light vehicle production, 1989–2016 189

Table 19.1 Passenger car production in Three Areas of Europe,

1989–2017 406 Table 19.2 Labor costs among Expanded EU auto-producing nations,

2017 410 Table 19.3 Changes in number of major car plants in Expanded EU,

2019–2030 412

Overview and Background

or 17.68% less than in 1989 In contrast, CEE nations produced 4,147,740 in 2017 and in SEE to 632,865, for respective gains of 489.75% and 42.09% as compared with 1989 Moreover, unlike in 1989, all the cars assembled in CEE and SEE in 2017 were produced by private Western

Enhanced global competition, a major enlargement of the European Union (EU) into the former Eastern Bloc, significant labor cost discrep-ancies, European Commission-approved State subsidies promoting growth in Eastern European regions, and a related cost-cutting frenzy by global automakers have been among the many factors shaping these dis-similar growth paths These factors, within the context of another expected

1 Ward’s ( 1956 –2018); OICA ( 1999 –2018); Jacobs ( 2017 ); ACEA ( 2018 ) Whereas Czechoslovakia encompassed the current nations of Czechia and Slovakia, Yugoslavia tra- versed today’s Bosnia and Herzegovina, Croatia, Kosovo, Montenegro, North Macedonia, Serbia, and Slovenia.

EU expansion into SEE and a probable British exit (Brexit), likely will again dramatically reshape the European car production map over the next ten years.2

Whereas numerous works have chronicled the post-1989 eastward shift

of the European car industry, none have examined concurrent disparities

output in France, Italy, and Belgium was at least 50% lower in 2017 than

it was in 1989, final assemblies expanded by roughly 20% in Spain during this period The bulk of the former declines occurred after 2001 when car output contracted by 724,212 and 68.41% in Belgium, and by 2,614,028 and 17.56% overall, in WE. In the interim, car production expanded by 80,320 and 3.63% in Spain

This book helps to fill this gap by comparing/contrasting the historical development of foreign car plants in Belgium and Spain In the process, it reveals how European integration, high wages, labor strife, and the near demise of General Motors (GM) and Ford led to the closing of three car plants (Ford, GM-Opel, and Renault) and the major downsizing of a fourth (Volkswagen or VW) in Belgium between 1989 and 2017 It then chronicles how lower relative wages; more pliant government and labor; and the expansionist plans of VW, Renault, and PSA Peugeot Citroen (PSA) stimulated growth in Spanish car production during this same period.The discussions, findings, and future projections presented in the chapters to follow (summarized below) draw upon the author’s 25 years

of research on the auto industry and car-producing regions This has involved the following: (1) research questions grounded in scholarly lit-erature; (2) historical analyses car production data, particularly for nations

in WE, CEE, SEE, North America, and East Asia; (3) historical reviews of more than 150 car factories in these regions of the world, including con-tent reviews of hundreds of newspaper articles, annual reports, and related academic works, and the compiling of annual vehicle production and employment; (4) tours and/or in-person site visits of 60 car factories; (5) the collection of employment and other sociodemographic data on the regions in which these plants were situated as well as photographs docu-menting existing development patterns; and (6) in-person meetings and off-site communications (phone, email) with hundreds of government

2 See, for example, Havas ( 2000 ); Lung ( 2004 ); Carrillo et  al ( 2004 ): Domanski and Lung ( 2009 ); Galgoczi et al ( 2015 ); Jacobs ( 2017 ); and Pavlinek ( 2017 ).

3 Belgium ( 2017 –2018); Spain ( 2017 –2018).

and industry officials (anonymity always has been protected, and no one

is directly quoted in this book).4

The next sections of this chapter provide a brief overview of the events leading up to the creation of the European Economic Community (EEC)

The remainder of this introduction then offers short synopses of the book’s forthcoming chapters as well as some notes on frequently used terms

the FIrst steps toward a european unIon,

1946–1951

As has been well-documented in countless works, World War II (WWII) left Europe in physical, social, and economic ruins Fearing that Europe’s massive problems could serve as a crucible for the spread of Soviet-style socialism, in May 1947, the American Government began devising a strat-egy to rebuild Western Europe Concurrent to this, Winston Churchill was establishing the United European Movement, whose intent was to create a quasi-United States of Europe.5

America’s sentiments were crystallized in then-U.S. Secretary of State George Marshall’s historic speech at Harvard on June 5, 1947, in which

he laid the foundation for what would become the Marshall Plan Reading from a draft crafted by his special assistant Charles Bohlen, Marshall declared that since Europe was unable to produce or acquire its immedi-ate needs for food and other essentials, other nations, particularly America, had to help finance its industrial reconstruction This was because he believed that the economic vitality was the only way with which to create the stable politico-social institutions and conditions nec-essary to foster peace, democracy, and prosperity in the region He prom-ised that although the American Government would offer economic help,

it would not dictate or lead in the drafting of any European recovery program Instead, he stated that several, if not all European nations, should collaboratively devise a future course for the area, and then col-lectively support this agenda.6

To consider the feasibility of implementing these ideas, on June 22,

1947, America’s President Truman established three working committees: (1) the Council of Economic Advisors to study the potential impacts of

4 See, for example, Jacobs ( 1999 , 2004 , 2009 , 2013 , 2016 , 2017 ).

5 Kalijarvi ( 1947 ); Hogan ( 1989 ); Gilbert ( 2012 ); OECD ( 2018a ).

6 OECD ( 2018a ).

economic relief to European nations; (2) the Krug Committee, to study America’s ability to finance the Marshall Plan; and (3) the Harriman

Also responding to Marshall’s call for action, on July 3, 1947, Britain and France extended invitations to 22 nations for a conference to access interim needs and to formulate a comprehensive European recovery plan Leaders from the following 16 nations agreed to attend the July 12, 1947, meeting: Austria, Belgium, Czechoslovakia, Denmark, Greece, Iceland, Ireland, Italy, Luxembourg, the Netherlands, Norway, Poland, Portugal, Sweden, Switzerland (with Lichtenstein), and Turkey Czechoslovakia, Denmark, and Sweden declared that they would appear merely as observ-ers, the latter two in order to protect their political and economic neutral-ity The USA was also scheduled to present a report on conditions in occupied Germany’s Bizone, the American and British sections of the

Although invited, the Soviet Union (USSR) bypassed the conference in protest of the ideals of the Marshall Plan Bowing to the Soviets, Albania, Bulgaria, Finland, Hungary, Romania, and Yugoslavia also formally declined to attend The Kremlin also pressured Czechoslovakia and Poland

to rescind their acceptances On the other hand, Franco’s dictatorial Spain was not invited.9

At the July 12, 1947, conference in Paris, the U.K., France, and the 14 other pro-Western attending nations agreed to establish the Committee for European Economic Co-operation (CEEC) The CEEC was to include technical and economic committees comprising all participant nations The goals were to draft a program which at the very least set a course for advancing the most key sectors of the economy: food and agriculture; coal and steel; power generation; and transportation infrastructure Representatives of the 16 nations continued to meet in Paris through September 22, 1947, when the CEEC formally requested $22.4 billion in aid from America over a four-year period This was to include the follow-ing: $15.82 billion from the USA; $5.97 billion from the other nations of the Americas; and $3.12 billion from the World Bank Foreshadowing the future, the report also called for the reduction in trade barriers and even-tually the establishment of (1) a European customs union (free trade zone)

7 Kalijarvi ( 1947 ), p. 3.

8 Kalijarvi ( 1947 ); Hogan ( 1989 ); Gilbert ( 2012 ); CVCE ( 2018 ).

9 Ibid.

and (2) a stable international economic and monetary system in Western Europe, similar to what would become known as the European Bank and Euro currency.10

In the meantime, and over Soviet protests, on August 29, 1947, the Americans, British, and French agreed to allow the restarting of industrial production in Germany under the following conditions: (1) Germany’s recovery was not given priority over the democratic Western European nations; (2) Germany was to remain demilitarized; and (3) any plan

As the British- and French-dominated talks proceeded slowly, however, conditions in WE continued to deteriorate By the autumn of 1947, Britain had defaulted on its $4 billion loan from America and the French and Italian economies were staggering toward bankruptcy Moreover, unable to acquire them from their historical source, Germany and Western allies turned almost exclusively to America for the durable/capital goods (tools, buildings, machinery, and equipment) and manufactured products they needed to jump-start their economies The result was massive trade deficits with the USA: $1 billion for Britain; $956 million for France;

Meanwhile, by early 1948, East-West relations had become so frayed that it was clear that Europe was now divided into two political-economic and geographic blocs: Democratic Capitalist Western Europe and Totalitarian Socialist Eastern Europe This chasm was crystallized further

on March 17, 1948, when Belgium, Britain, France, Luxembourg, and the Netherlands signed the Treaty of Western Union (Brussels Pact) Both

a military and economic alliance, the pact was thought to be the first step toward closer ties among the respective nations These objectives were reinforced on April 3, 1948, when after passing both Houses of the American Congress by large majorities, U.S.  President Harry Truman signed into law the Foreign Assistance Act of 1948 and its accompanying Economic Cooperation Act of 1948 In all, the American Government approved up to $15 billion in aid to help finance the Marshall Plan’s

Within two weeks of the act’s enactment, on April 16, 1948, the conference

of 16 European nations signed a treaty establishing the Organisation for European Economic Co-operation (OEEC) Headquartered in Paris, the OEEC’s founding purposes were to (1) supervise the allocation of Marshall/Economic Recovery Plan aid and (2) establish a permanent col-laborative organization to help carry out Europe’s reconstruction Thereafter, the OEEC also hoped to serve as a vehicle for promoting international collaboration, economic growth, and barrier-free trade within Western Europe (create a common market) In addition to the aforementioned 16 nations, the Anglo-American Zone A within the Free Territory of Trieste also became an original member of the OEEC This lasted until October 5, 1954, when it was repatriated into Italy and Trieste

In the interim, on May 5, 1949, ten of the conference of 16 nations—Belgium, Denmark, France, Ireland, Italy, Luxembourg, the Netherlands, Norway, Sweden, and the U.K.—ratified the Treaty of St James in London This established the Council of Europe in Strasbourg, France, the forerunner to the European Parliament Eighteen days later, on May

23, 1949, the Bizone and the French occupation zone were merged to create the Federal Republic of Germany (West Germany), which was then welcomed into the OEEC Over the next two years, culminating on May

2, 1951, Greece, Turkey, Iceland, and West Germany also joined the

Reacting to the changing context in the West, the USSR forged a bloc

of its own Formalized on January 25, 1949, as the Council for Mutual Economic Assistance (CMEA or Comecon), the so-called Eastern Bloc initially encompassed the USSR, Bulgaria, Czechoslovakia, Hungary, Poland, and Romania The newly established German Democratic Republic (East Germany) became the USSR’s sixth satellite nation in

1950 Somewhat similar to America’s goals with the OEEC, the Soviets hoped to use the CMEA as a vehicle to promote economic growth and further its ideological agenda This was considered particularly important

at the time, following Yugoslavia’s 1948 declaration of its independence from any Soviet-controlled alliance and its President Tito’s request for American financial aid.16

14 Jacobs ( 2017 ); CVCE ( 2018 ); OECD ( 2018b ).

15 Gilbert ( 2012 ); CVCE ( 2018 ).

16 Wolchik and Curry ( 2011 ); Jacobs ( 2017 ).

Unlike the OEEC, however, a centralized, planned system was oped within the Eastern Bloc under the direction of the Kremlin in Moscow This entailed the nationalization of industrial enterprises and Soviet-devised division of labor among bloc nations governing both defense-related and civilian goods manufacturing Behind this Iron Curtain, the automobile production networks of Eastern and Western

the ecsc and the creatIon oF the eec, 1951–1958

As the Cold War continued to heat up, on April 18, 1951, four of the five Brussels Pact countries—Belgium, France, Luxembourg, and the Netherlands—plus Italy and West Germany, overcame a year of bitter debate to sign the European Coal and Steel Community (ECSC) Treaty

in Paris Although still the largest producers of coal and steel in Western Europe, Great Britain decided that it was not in its best political and eco-nomic interests to participate On the basis of the Schuman Declaration/Plan of May 9, 1950 (named after French Foreign Minister Robert Schuman), the ECSC initiative was ratified on May 27, 1952 It then came into force on July 23, 1952, when Jean Monnet of France began his term

The dual aims of the ECSC were to ensure the plentiful supply of coal and steel outputs and their free movement within the pact countries This was believed to be the best way by which to foster the following: (1) eco-nomic expansion and improved living standards through the growth in international trade and employment; (2) the modernization of, and equal access to, sources of production; and (3) deeper political solidarity within the six-nation community The ECSC also was to prohibit the following: (1) the implementation of discriminatory policies and practices; (2) the enacting of import or export levies and non-tariff barriers; (3) the development of national or international cartels; and (4) the offering of

17 Ibid.

18 Gilbert ( 2012 ); EC ( 2016 , 2018 ) The parallel six-nation European Defense Community Treaty of May 27, 1952, suffered a different fate, failing to win approval from the French National Assembly in August 1954.

19 Gilbert ( 2012 ); Eur-Lex ( 2017 ).

Meanwhile, the nine-member High Authority was charged with vising/monitoring of the following: (1) coal and steel markets; (2) redis-tribution policies intended to soften the social costs of plant modernization; and (3) compliance with the rules for competition governing the new common market area The six-member Council of Europe, a 78-member Common Assembly, and a seven-judge court were to serve as checks

With the ECSC in place, a greater emphasis placed on security through the creation of the North Atlantic Treaty Organization (NATO) on April

4, 1949, and an unexpected end of Marshall Plan aid (due to the Korean War), the influence of the OEEC greatly diminished In particular, Britain strongly favored NATO’s economic committee over the OEEC Nonetheless, the OEEC and ECSC would supply the foundation for the expanded European political integration and single market that would come to exist in the future In addition, as a result of the OEEC, more than 75% of all goods were freed of import quotas by the end of 1953,

Western European integration took another giant step forward on October 26, 1956, when delegates met in Brussels to discuss the creation

of two commissions, one on Atomic Energy and one on Economic Affairs

By March 25, 1957, these discussions had become a reality, when representatives from Belgium, France, Germany, Italy, Luxembourg, and the Netherlands signed two treaties in Rome that established the European Atomic Energy Community (Euratom) and the European Economic

20 Ibid.

21 New York Times (1956 ); Marjolin ( 1989 ); Gilbert ( 2012 ).

22 Gilbert ( 2012 ); Eur-Lex ( 2017 ); WEU ( 2012 , 2016 ).

Community After being rejected on its own proposal to create a free trade zone for manufacturing goods among the 17 nations in the OEEC Area,

The so-called Treaties of Rome creating the six-nation Euratom and EEC zones went into effect on January 1, 1958 This was followed by the inauguration of the EEC Commission on January 16 and the commis-sion’s first meeting on January 25, 1958 Encompassing an area of 160 million people, both communities essentially adhered to the same goals and measures as the ECSC. Most relevant here was the primary long-term objective of the EEC: to establish a barrier-free single market or customs union for all economic activities by January 1, 1970.24

overvIew oF the Book

The book that follows is organized in four parts ‘Part I: Overview and

and the Four Phases of European Integration, 1958–2017’ The latter chapter lays the groundwork for the book’s Belgian and Spanish case study chapters by examining the evolution of European car production through four phases of European integration: (1) The EEC-6 Years, 1958–1972, which outlines some of the major events occurring during the EEC’s ini-tial six-member nation years; (2) The EEC Expands and Evolves, 1973–1989, which chronicles the EEC’s enlargement to nine and then 12 members, and compares passenger car output in WE and the Soviet-led Eastern Bloc; (3) Reshaping the EU’s Car Production Footprint, 1989–2001, which contrasts output in WE with that in CEE in SEE dur-ing initial decade-plus following the fall of the Berlin Wall/breakup of the Eastern Bloc; and (4) The Eastward Shift of Europe’s Automobile Production Footprint, 2001–2017, which updates the comparison for the

‘Three Areas of Europe’ through 2017

‘Part II: Foreign Carmaker Assembly Plants in Belgium’ contains seven

‘Introduction to Part II: The Early Belgian Car Industry’, the first nent Belgian carmakers of the early twentieth century are discussed The chapter then explains how the Belgium Government’s decision to appease

promi-23 Gilbert ( 2012 ); EC ( 2016 ).

24 Chamberlin ( 1958 ); Cowan ( 1966 ); Gilbert ( 2012 ); EC ( 2014 , 2016 , 2018 ).

Ford and GM by dramatically cutting import duties on American nents, ultimately led to the demise of domestic brand car production in the country in 1949 For ease of use, frequently referenced tables in

this chapter

first Antwerp Plant, and its longer-lasting replacement, Ford Hoboken in Antwerp This is followed by a more extensive review of the massive Ford Genk, which launched in 1964 The latter survived until 2014, when its shuttering marked the end of Ford’s 92-year run producing cars in Belgium

Belgium beginning with its three small pre-WWII assembly warehouses near Antwerp’s city center It then focuses on the American automaker’s Noorderlaan-1 and Noorderlaan-2 factories, the latter of which unexpect-edly closed its doors at the Port of Antwerp’s Churchill Docks on December 15, 2010 The chapter concludes with a brief discussion of GM’s exiting of Europe through its sale of its Opel/Vauxhall assets to PSA Peugeot Citroen of France in 2017

history of Renault’s car plant near Brussels in Vilvoorde It begins by cussing its launch in 1935 and destruction during World War II. It then reviews the rebuilt plant’s most productive periods, building Ramblers for American Motors during the 1960s, and its modernization and expansion during the 1970s and 1980s The chapter then concludes with its most difficult period, the 1990s, leading to its closing in 1997

dis-Chapter 7, ‘The Multiple Roads to VW’s Audi Brussels in Forest’, examines the winding road that helped create VW’s present-day Audi Brussels factory

in Forest, Belgium It begins with a review of Citroen Belgium, the Town

of Forest’s first car plant, which in 1980 was annexed by an encroaching

VW Bruxelles Forest factory It then reviews the origins of Audi Brussels, from its launch as a D’Ieteren Brothers–Studebaker Plant, to VW’s partnership with D’Ieteren and takeover of the factory in 1971, to its near closure and transfer to VW’s Audi division in 2007 The final sections discuss the plant’s post-2007 highlights and speculate on its near future

the experiences of Volvo and four former other foreign-owned/licensed car plants in Belgium It begins with a terse review of Chrysler in Antwerp, before turning to two short-lived operations that eventually came under the control of British Leyland: Standard/Leyland-Triumph Malines in

Mechelen; and Austin Morris in Seneffe This is followed by a section on the Mechelen facility of Importer of Moteurs et d’Automobiles, which produced small lots of Saab and Mercedes-Benz between 1959 and 1978, and Brondeel of Antwerp, which built Saab between 1967 and 1971 The last half of the chapter and the conclusion then focus on the future of Audi Brussels and Volvo Car Gent, which is currently owned by Geely of China.

Belgian Car Industry’, which provides summary data on annual car duction in Belgium, focusing on its post-1989 decline due to the closure

pro-of the Renault, GM, and Ford factories The final section speculates on the country’s near-term prospects for car production (during the 2020s)

‘Part III: Foreign Carmaker Assembly Plants in Spain’ contains nine chapters (Chaps 10, 11, 12, 13, 14, 15, 16, 17, and 18), including brief introductory and summary essays, and seven chapters covering five auto-

Spanish Carmakers’, which focuses on the first prominent carmaker in Spain, Hispano-Suiza It discusses how the firm’s Barcelona plant was militarized during the country’s civil war (1936–1939), and ultimately nationalized for truck production by the government’s Instituto Nacional

de Industria in 1946 In the interim, Hispano-Suiza joined forces with local banks and industrialists to establish Sociedad Iberica de Automoviles

de Turismo (SIAT) in Barcelona Although SIAT never got off the ground,

it spawned Sociedad Espanola de Automoviles de Turismo SA (SEAT) in

1950, through an alliance with Fiat of Italy Again, for ease of use, quently referenced tables in Chaps 11, 12, 13, 14, 15, 16, and 17—Tables 10.1–10.3—are placed at the end of this chapter

beginning with its Complete Knock-Down operations in Cadiz and Barcelona The latter is notable because it helped beget Nissan Motor Iberica’s current Barcelona facility in the city’s Zona Franca area The remainder of the chapter focuses on Ford Valencia, a 400,000-capacity factory that ended the automaker’s 40-year absence in Spain in 1976 The conclusion speculates on the plant’s post-2017 future

small Pre-WWII Barcelona plant, which was captured during the Spanish Civil War in 1936 by anti-fascist forces The remainder of the chapter exam-ines GM’s Opel Zaragoza, which opened 46 years later The final section discusses the American automaker’s exit from Spain and Europe via its sale

of Opel/Vauxhall to PSA in 2017

Chapter 13, ‘Renault Valladolid and Palencia’, chronicles Renault of France’s two car assembly complexes in Spain It begins with a brief review

of the French automaker’s joint venture plant with Fabricacion de Automoviles SA in Valladolid, followed by a section chronicling the expan-sion of the complex to add bodywork and engine plants, and then a sec-ond assembly hall The discussion then turns to Renault’s building of an additional assembly works 30  minutes north of Valladolid in Palencia Province in 1978 Thereafter, sections review the progress of these facto-ries through 2016 and offer commentary regarding Renault’s near-term future in Spain

provides a brief history of VW’s current SEAT division through 1989 It begins by discussing the then Spanish automaker’s Barcelona Zona Franca factory tie-up with Fiat It then reviews the early history of British Leyland’s Authi Landaben joint venture plant in Pamplona, which SEAT absorbed in

1975 This is followed by sections reviewing SEAT’s breakup with Fiat and subsequent partnership with, and takeover by, VW of Germany VW’s post-

Spanish Car Plants, Part II: 1989–2018’ The latter examines VW SEAT’s newly constructed Martorell complex, the winding down of car output at Zona Franca, and the automaker’s spinning off its Pamplona plant from SEAT in 1993 The final sections offer post-2001 highlights for Seat Martorell and VW Pamplona and projections for their near-term futures

1951–1989’, covers the histories of PSA’s Vigo and Madrid car plants through 1989 It begins with Vigo’s origins as Citroen Hispania Balaidos, including Peugeot’s absorption of Citroen in 1974 It then reviews PSA Madrid’s beginnings as Barreiros Diesel in the capital city’s Villaverde dis-trict, its expansion to incorporate a Chrysler car plant in 1965, and PSA’s decision to acquire Chrysler’s European operations in 1978 The remain-der of this chapter focuses on PSA’s 1979–1989 efforts to integrate these two Spanish factories into its European production network This then

Spain Part II: 1989–2018’, which reviews PSA’s Spanish plants fate during the third and fourth phases of European integration, 1989–2018 This includes examinations of the parallel eastward shift of PSA’s production and the EU during the mid-2000s, its near collapse and rescue by Dongfeng Motors of China during the early 2010s, and how PSA’s take-over of GM’s Opel-Vauxhall and current ‘Push to Pass’ expansion plan will affect its Spanish plants

Part III closes with Chap 18, ‘Conclusion to Part III: The Future of the Spanish Car Industry’, which provides summary data on annual car production in Spain, focusing on its post-1989 growth induced by its lower-than-EU-average labor costs The final section speculates on the country’s prospects for car production during the 2020s.

In ‘Part IV: Future of Car Industry in an Expanding or Brexit EU’, a

European Car Plants’, concludes the book by asking how Europe’s car production footprint will change during the next decade of EU integra-tion (or disintegration)? Will it continue to shift to CEE or more south- eastward? Then, drawing upon the author’s research for this book and other works over the past 25  years, the chapter offers three possible answers to this query (Hard Brexit, Soft Brexit, and No Brexit) In the process, it offers 2025 and 2030 projections for passenger car plant open-ings and closing within each nation in a possible 34-member ‘Expanded EU’

Important notes

currency figures cited in the book for assembly plant investments, government subsidy packages, and company financial profits/losses were gleaned directly from news stories, annual reports, and other sources reporting at the time Since the euro was not in circulation until 2001, all figures reported throughout the book are quoted in U.S dollars Unless otherwise specified, exchange rates for figures prior to 1990 were obtained from Pacific Exchange

figures are based on the actual date on which the event occurred Conversely, since new investments and incentives arose at different points in time and were converted from specific dates of occurrence, in some cases, the total reported for a given investment or incentive may not always perfectly match exchange rates for the final date the sum was reported.25

It should be noted that the proposal for this book was drafted in March 2017 At that time, it was expected that the U.K would have already exited the EU by early 2019 The book’s final chapter was com-pleted on January 8, 2019, and its last words penned on March 3, 2019, with still no word on which Brexit will occur As such, the author used his professional judgment to predict how three different Brexit may affect the EU’s future car production footprint Hopefully, they will still prove valuable to some

25 Antweiler ( 2018 ); Oanda ( 2018 ).

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ACEA (2018) The Automobile Industry Pocket Guide 2018/2019 (Brussels:

European Automobile Manufacturers Association).

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Motor Vehicle Industry (London: Palgrave Macmillan).

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5 to November 5, 1947 Washington, DC: George C. Marshall Research Center Lung Y (2004) The Changing Geography of the European Automobile System

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(2), 96–113.

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for most annual reports.

OECD (2018a) The “Marshall Plan” Speech at Harvard University, 5 June 1947, http://www.oecd.org/general/themarshallplanspeechatharvarduniversi-

OECD (2018b) Organisation for European Economic Co-operation Home Page, http://www.oecd.org/general/organisationforeuropeaneconomicco-opera-

OICA (1999–2018) Annual Vehicle Production and Sales, and New Registrations Statistics by Nation and/or Manufacturer, 1998 to 2017 Paris: Organisation

31 January 2019.

Pavlinek, P (2017) Dependent Growth: Foreign Investment and the Development of

the Automotive Industry in East-Central Europe (Cham, Switzerland: Springer).

Spain (2017–2018) Author Site Visits, Car Factory Tours, and Correspondents with Firm Representatives in Spain, 28 March 2017 to 18 September 2018 USA (1948) U.S. Statute 2202, Public Law 472: Foreign Assistance Act of 1948 and Economic Cooperation Act of 1948 80th Congress, 2nd Session – Ch

169 – April 3, 1948, pp. 137–159.

Ward’s (1956–2018) Ward’s Automotive Yearbook, 1956 to 2018 (Detroit: Ward’s

Communications).

WEU (2012) Assembly of the Western Union WEU – Historical Archives of the

https://www.cvce.eu/en/obj/the_establishment_of_west-ern_european_union_weu-en-93ad0d9e-61f3-47eb-b895-e28e4c135751.

WEU (2016) Western European Union (Text), Historical Archives of the

https://www.cvce.eu/en/obj/the_establishment_of_west-ern_european_union_weu-en-93ad0d9e-61f3-47eb-b895-e28e4c135751.

Wolchik, S and J Curry, eds (2011) Central & East European Politics: From

Communism to Democracy (Lanham, MD: Rowman & Littlefield).

of the major events occurring during the European Economic Community’s (EEC’s) initial six-member nation years This is followed by ‘European Integration Phase II: The EEC Expands and Evolves, 1973–1989’, which examines the EEC’s enlargement to nine and then 12 members, and the passage of Single European Act The latter provided the framework for the establishment of the European Union (EU) and the Euro currency With this section, the chapter turns its focus more heavily on annual car produc-tion trends, beginning with a comparison of the EEC-12 with the Eastern Bloc nations that came to be organized under the Soviet-led Council for Mutual Economic Assistance (CMEA).

In the section entitled ‘European Integration Phase III: Reshaping the EU’s Car Production Footprint, 1989–2001’, car output in Western Europe (WE) during the initial decade-plus following the fall of the Berlin Wall/breakup of the Eastern Bloc, is contrasted against that in Central- Eastern Europe (CEE) and Southeastern Europe (SEE) This segment also highlights the launch of the EU on November 1, 1993, and the rapid ascent of car production in CEE

The final section, ‘European Integration IV: The Eastward Shift of Europe’s Automobile Production Footprint, 2001–2017’, updates these trends for the ‘Three Areas of Europe’ through 2017 In doing so, it fur-ther documents the parallel eastward shifts of the EU and European car production.

EuropEan IntEgratIon phasE I: thE EEc-6 YEars,

1958–1972

(WEU) of Belgium, France, Italy, Luxembourg, the Netherlands, and West Germany was governed by the following three pillars: (1) the European Coal and Steel Community (ECSC) Treaty; (2) the European Atomic Energy Community (Euratom); and (3) the European Economic Community (EEC) Whereas the ECSC was signed in Paris on April 18,

1951, and went into effect on February 1, 1953, the latter two treaties were endorsed in Rome on March 25, 1957, and went into force on January 1, 1958 In contrast, for various reasons, including the WEU’s rejection of its proposed 17-nation free trade zone for manufacturing goods, Britain was neither a member of the ECSC, Euratom, or the EEC (see Table 2.1)

Meanwhile, reacting to the closer ties among WE nations, the Soviets forged their own Eastern Bloc, encompassing the USSR and six satellite nations—Bulgaria, Czechoslovakia, East Germany, Hungary, Poland, and Romania—and formalized by (1) its CMEA which was established on January 25, 1949, and incorporated the newly established East Germany

in 1950 and (2) the Warsaw Pact defense alliance, signed on May 14,

1955 Whereas the Soviets viewed the CMEA as a counter to the EEC (and its precursor Organisation for European Economic Co-operation or OEEC), the Warsaw Pact paralleled America, Britain, and the WEU’s North Atlantic Treaty Organization promulgated on August 24, 1949 (see Chap 1)

With the two Blocs now formalized for all aspects of political-economic life, the EEC Commission was inaugurated on January 16, 1958, and held its first meeting that January 25 Both encompassing a six-nation area of 160-million people, the EEC and Euratom essentially adhered to the goals and measures established with the creation of the OEEC and the ECSC Most relevant here was the primary long-term objective of the EEC—to gradually achieve the complete elimination of tariffs, quotas, and other

Table 2.1 European Union accession dates and potential members

Nation Accession date Comments

1 Belgium November 1, 1993 EEC membership January 1, 1958

2 France November 1, 1993 EEC membership January 1, 1958

3 Germany November 1, 1993 EEC membership January 1, 1958

East Germany added upon German Reunification October 3, 1990

4 Italy November 1, 1993 EEC membership January 1, 1958

5 Luxembourg November 1, 1993 EEC membership January 1, 1958

6 Netherlands November 1, 1993 EEC membership January 1, 1958

7 Denmark November 1, 1993 EEC membership January 1, 1973

8 Ireland November 1, 1993 EEC membership January 1, 1973

9 United Kingdom November 1, 1993 EEC membership January 1, 1973

10 Greece November 1, 1993 EEC membership January 1, 1981

11 Portugal November 1, 1993 EEC membership January 1, 1986

12 Spain November 1, 1993 EEC membership January 1, 1986

13 Austria January 1, 1995 Western Europe-15

14 Finland January 1, 1995 Western Europe-15

15 Sweden January 1, 1995 Western Europe-15

16 Czechia May 1, 2004 Within former Czechoslovakia

17 Hungary May 1, 2004

18 Poland May 1, 2004

19 Slovakia May 1, 2004 Within former Czechoslovakia

20 Slovenia May 1, 2004 Within former Yugoslavia

21 Estonia May 1, 2004 Within former USSR

22 Latvia May 1, 2004 Within former USSR

23 Lithuania May 1, 2004 Within former USSR

Turkey EEC associate December 1, 1964; joined EU customs union

December 31, 1995; in negotiations since October 3, 2005 Montenegro In negotiations since June 29, 2012

Serbia In negotiations since January 21, 2014

North Macedonia Candidate status December 16, 2005

Albania Candidate status June 27, 2014

Bosnia- Herzegovina Applied February 15, 2016

Kosovo Stabilization Agreement April 1, 2016

trade barriers in the union by January 1, 1970 In addition, the group was

to harmonize regulations and standards not only within the six-nation area but also governing external trade with non-EEC nations The latter also announced that January 1 to be the date when the six nations would

The emergence of a six-nation EEC (EEC-6), however, exacerbated existing animosity not only with the Soviet Bloc, but also between France and the U.K. Led by President De Gaulle, seconded by Pierre Dreyfus, then chairman of the nationalized automaker, Renault, France objected to any expansion of the common market that would incorporate Britain In response, the U.K., along with Austria, Denmark, Norway, Portugal, Sweden, and Switzerland, signed a seven-nation European Free Trade Agreement (EFTA) in Stockholm on January 4, 1960 Coming into force

on May 3, 1960, EFTA did not preclude any of the ‘Outer Seven’ bers from attempting to join the EEC. As such, in 1961, Britain, Denmark, followed by Austria, Sweden, and Switzerland, all applied for membership The same was true for Ireland in 1961 and for Spain in February 1962,

In the interim, another separate step toward European integration occurred in September 1961, when the Organisation for Economic Co-operation and Development (OECD) was established as a replace-

countries of the OEEC plus Spain, West Germany, the USA, and Canada, the OECD was founded with one overarching purpose—the promotion of international intergovernmental cooperation on economic issues Encouraged by this step, the EEC-6 overcame rancorous negotiations to reach an accord on agricultural products on January 14, 1962 The new agreement called for the gradual reduction of levies between August 1,

Nonetheless, although the five other inaugural members of the EEC were willing to negotiate on good terms, France again vetoed any expan-sion of the common market; due to its non-democratic government, Spain was denied admission in April 1964 The EEC did, however, wel-come Greece as associate member on November 1, 1962, and Turkey on December 1, 1964 The rejection was particularly disheartening for British

carmakers, which planned to expand within the EEC At the time, whereas Leyland produced trucks and buses in Gouda, Netherlands, and its Standard-Triumph affiliate assembled cars in Mechelen, Belgium, British Motors’ (BMC) Austin Motors was planning to open an automobile plant

in Seneffe, Belgium.4

Sidestepping the U.K again, on March 2, 1965, the EEC-6 agreed to merge the Commissions of the ECSC, EEC, and Euratom into a single body to be situated in Brussels To accomplish this, the staff of all three bodies, including the 1500 connected to the ECSC in Luxembourg, were transferred to the Belgian capital Signed on April 8, 1965, in Brussels, the Merger Treaty was expected to be approved by national parliaments by the end of 1965 and go into effect on January 1, 1966 The new council was then scheduled to expand its mission to incorporate social policy, including standards for housing, medical care, employment, unemployment assis-tance, skills training, and technical education programs.5

Additionally, in reaction to France’s growing power and ten-day cott of most common market activities, on July 10, 1965, the five other member nations diminished the ability of one country stopping the prog-ress of a policy/decision agreed upon by all the others by increasing the number of issues that could pass with a qualified majority of 12 out of 17 votes Agricultural policy was the key issue here At the time, France, West Germany, and Italy had four representatives (votes) on the council,

Angry with the new policy, France decided to stop attending all WEU- related meetings Finally, after months more of posturing, its leaders decided

to meet with their common market partners on January 17, 1966 The called empty chair crisis was subsequently resolved through the Luxembourg Accord of January 29, 1966, which granted veto power to individual mem-ber-states in cases of very important national interest It would take another five months, until July 24, 1966, before all parties agreed on pricing for agricultural products, paving the way for farm-trade liberalization within the EEC. This was set for July 1, 1967, the revised date in which the Merger Treaty establishing the Commission of the European Communities (i.e.,

4 Linge ( 1963 ); Gilbert ( 2012 ); EC ( 2014a ); Belgium ( 2017 –2018); OECD ( 2018 ).

5 O’Toole ( 1965 ); Cowan ( 1965a); New York Times (1965a ); EC ( 2014a , 2016 ).

6 Cowan ( 1965b , c ); EC ( 2014a , 2016 ).

7 New York Times (1965b , 1966 ); Cowan ( 1965c , 1966 ); WSJ ( 1966 ); Farnsworth ( 1968 ); Gilbert ( 2012 ); EC ( 2014a , 2016 ).

Finally, and a full 18 months ahead of schedule, the full elimination of tariffs was achieved on July 1, 1968, creating a customs union within the EEC-6 It would take slightly longer for France to agree to drop all of its import quotas and export subsidies In the meantime, the U.K., Ireland, and Denmark submitted their second applications to join the EEC on May

2 and 11, 1967 This too would fail, with French President Charles De Galle again declaring his intentions to oppose any expansion including the U.K. A government-induced 15% devaluation of the British Pound against the U.S dollar that November and growing opposition from French Steel and industrialists in other member nations further fueled the anti-British sentiments As a result, although primarily favorable to Britain’s accession, the EEC Commission decided not to conduct a vote on the application at its meetings on December 18–19, 1967 This left Britain, Ireland, and Denmark’s applications in limbo It also scuttled Austria’s negotiations regarding possibly joining.8

The EEC-6 further closed ranks following the invasion of Czechoslovakia and seizure of Prague by Warsaw Pact forces on August 20–21, 1968 In response, the new Single Commission decided it was best to reduce its contacts with the Soviet-led Eastern Bloc In contrast, it decided to open trade relations with independent Yugoslavia and to establish stronger ties with southern Mediterranean nations The latter prompted the commis-

The climate for EEC expansion then changed dramatically on June 20,

1969, when the newly elected Georges Pompidou succeeded De Gaulle as France’s President Things further improved on June 19, 1970, when the Tories and their leader Edward Heath took control of the British Parliament Just 11 days later, on June 30, 1970, negotiations between the EEC and Britain, Ireland, and Denmark were reopened During that same calendar year, the EEC-6 nations produced 8.56 million passenger cars, an increase of nearly 60% from 5.44 million in 1965, and more than threefold expansion from 2.62 million in 1958 Even more impressive was the fact that the area’s combined output surpassed America’s total car production of 6.55 million for the first time in 1970 It also outpaced the U.S.-Canadian total of 7.49 million in that year.10

8 Hartley ( 1967 ); WSJ ( 1967a , ); Farnsworth ( 1968 ); Lee ( 1968 ); Gilbert ( 2012 ); EC

9 EC ( 2014a ).

10 Ward’s ( 1956 –2018); AP ( 1970 ); Kessler ( 1970 ); WSJ ( 1970 ); Gilbert ( 2012 ).

Equally important to a unified Europe’s future, on May 31, 1970, the EEC-6 nations agreed to expand their economic alliance by achieving the following by 1974: (1) better coordination on national budgets, particu-larly related to taxation and spending; (2) closer synchronization among national business policies; (3) the development of regionally and nationally consistent economic growth goals for three-to-five-year planning horizons based on actual data; (4) harmonization of national policies on credit, including interest rates; and (5) creating fixed-bands in which specific national currencies could fluctuate The long-term goal of the last policy was even more substantial—the establishment of a European Monetary

On March 22, 1971, the EEC Commission adopted a three-stage gram with which to achieve the EMU These measures were stalled, how-ever, by disagreements over proposed currency pegs and a world monetary crisis The latter was sparked when, on August 15, 1971, U.S. President Richard Nixon imposed a 10% surcharge on imports and then, floated the U.S dollar by removing from the gold standard By instituting tariffs and ending the fixed international exchange rates that were established, along with the International Monetary Fund, during the Bretton Woods Conference of 1944, Nixon’s goal was to devalue the greenback to (1) reduce America’s large trade deficit; (2) prevent a run on the dollar; (3) cut America’s rising unemployment; and (4) quell rising interest rates and infla-tion that were approaching their highest levels since the Korean War in 1953.12

pro-The so-called ‘Nixon Shock’ also steeled the Council of the EEC’s resolve that a single common currency was a necessary step in stabilizing Europe’s economic future Waiting for the proper time to act again, on March 2, 1972, the commission put forth a new proposal that called for the halving of the range in which a national currency could float, from 4.5% to 2.25% It also recommended the organizing of a coordination committee to insure relatively consistency among national economic poli-cies Unfortunately, a world energy crisis and other external factors would again delay the implementation of these policies for several years.13

Despite the turmoil, on July 22, 1972, the U.K., Ireland, Denmark, and Norway were finally able to sign treaties of accession into the EEC.  Norway would never join; however, as on that September 25 its

11 AP ( 1970 ); Kessler ( 1970 ); UPI ( 1972 ); Gilbert ( 2012 ); EC ( 2014a ).

12 Dale ( 1971 ); Farnsworth ( 1971 ); Gilbert ( 2012 ); EC ( 2014a ); Nixon Foundation ( 2014 ).

13 AP ( 1970); New York Times (1972 ; Gilbert ( 2012 ); EC ( 2014a ).

population would reject a national referendum on the measure Undeterred, more progress toward a full-fledged European Union was made when, at their Paris summit on October 21, 1972, the leaders of the EEC declared that they would broaden their arrangement to a political, economic, and monetary union by 1980 They also suggested they were open to more potential expansion by signing Free Trade Agreements (FTAs) with Austria, Switzerland, Sweden, Iceland, and Finland An

Overall, while the expansion was positive news, the success of the EEC-6  in relation to the European car industry can be best viewed as mixed Due to continued parochialism over trade, during its first 14 years the EEC had done little to lessen the dominance of Volkswagen (VW) in West Germany, Fiat in Italy, and Renault and Peugeot in France Conversely, the arrangement did encourage the ‘Big Three’ American automakers to enlarge their EEC production footprints Initially, through their European divisions, the two biggest carmakers had tried to cultivate market for their cars with big factories in West Germany (General Motors [GM]-Opel Russelsheim and Ford Cologne) and Britain (GM-Vauxhall Luton and Ford Dagenham), and via small Complete Knock-Down (CKD) port operations in smaller countries (e.g., both in Antwerp, Belgium, and Amsterdam, Netherlands) Both then greatly expanded their WE operations in the 1960s, with GM erecting large new plants in Antwerp and Bochum, West Germany and Ford launching in Genk, Belgium, and Halewood, U.K (see Chaps 4 and 5).15

In contrast, after absorbing Kaiser-Frazier and its Rotterdam plant, Chrysler closed its Antwerp CKD facility in 1958 It then expanded more forcefully in the EEC acquiring control interests in Societe Industrielle de Mecanique et Carrosserie Automobile (Simca) of France and Rootes of Britain These moves netted America’s #3 car factories in Poissy, France;

VW, Renault, and Citroen, along with Volvo of Sweden, also had plants

in Belgium during this period, which by then was devoid of native ers Additionally, Citroen had a small assembly facility in Amsterdam Although the Netherlands was home to the truckmaker DAF, it too no longer had a domestic producer On the other hand, British carmakers

carmak-14 Gilbert ( 2012 ); EC ( 2014a ).

15 Bloomfield ( 1978 ); Georgano ( 2000 ).

16 Ibid.

were essentially left out of the EEC-6 before 1972, with the exception of two small CKD facilities in Belgium launched during the early 1960s by the predecessor companies to the merged British Leyland—the aforemen-

Overall, in its last year with six members the EEC produced 9,240,578 passenger cars, led by West Germany’s 3,527,864 and France’s 2,457,981 units This total jumped to 11,161,889 in 1972 if the U.K.’s 1,921,311 units were included Another 58,000 were produced in Ireland

in that year The enlargement of the EEC to nine members was expected

to help further open up and grow its national auto markets Although it remained to be seen whether or not this would result in increased car pro-duction within the EEC-9, one thing was fairly certain by the end of 1972—the first phase of European integration had laid the groundwork for the establishment of a much broader EU

EuropEan IntEgratIon phasE II: thE EEc Expands and EvolvEs toward thE Eu, 1973–1989

Britain, Ireland, and Denmark officially became members of the EEC on

pro-duced 11,554,093 cars in 1973, including 9,734,728 in the former EEC-

6 The EEC-9 total was led by West Germany, which assembled 3,649,880 cars in that year, followed by France’s 3,202,391; Italy’s 1,823,333; and the U.K.’s 1,747,316 Belgium produced another 969,124 cars, trailed by the Netherlands’ 90,000; Ireland’s 60,000; and Denmark’s 12,049

In contrast, the seven-nation CMEA produced only 1,396,570 cars in

1973 This total was led by the USSR’s 917,000, followed by Czechoslovakia’s 166,170; East Germany’s 140,000; Poland’s 115,400; Romania’s 50,000; and Bulgaria’s 8000 Hungary built 10,000 heavy trucks and buses, but no cars in that year On the other hand, future EEC members Spain and Portugal assembled 706,422 and 72,337 cars, respec-tively, in 1973 Finally, three other outsider European nations produced more than 50,000 cars in that year: Sweden 341,503; Yugoslavia 124,993;

17 Rhys ( 1972 ); Hu ( 1973 ); Bloomfield ( 1978 ); Whisler ( 1999 ); Georgano ( 2000 ).

18 See Table  2.2 for references.

Nonetheless, as the EEC-9 was celebrating its first full-fledged bership expansion, countervailing forces were about to shake the very foundation of the world car industry The trouble began on the Jewish holy day of Yom Kippur, October 6, 1973, when Egyptian and Syrian troops crossed ceasefire lines and initiated a surprise attack on Israel In response, America sent military supplies to the Israelis Angered by the U.S action, the six largest Arab oil-producing nations voted on October

mem-Table 2.2 Passenger car production in EEC and Eastern Bloc, 1973–1989

1973–1989 1973–1989 % Change

EEC-12 12,332,863 14,492,206 2,159,343 17.51 EEC-9 11,554,093 12,522,052 967,959 8.38 EEC-6 9,734,728 11,222,970 1,488,242 15.29 Belgium 969,124 1,143,711 174,587 18.01 France 3,202,391 3,409,017 206,626 6.45 Italy 1,823,333 1,971,969 148,636 8.15

Netherlands 90,000 134,600 44,600 49.56 West Germany 3,649,880 4,563,673 913,793 25.04

Poland 115,400 306,492 191,092 165.59 Romania 50,000 160,000 110,000 220.00 USSR 917,000 1,217,000 300,000 32.72

Other Europe

Sweden 341,503 384,206 42,703 12.50 Yugoslavia 124,993 262,409 137,416 109.94

16 to raise the market price for standard light Arabian crude oil by 21%, or from $3.01 to $3.65 a barrel The price of other grades of oil also were increased by an average of 17% The Persian Gulf countries then decided

to increase the ‘posted price’ in which oil companies paid taxes on light crude from $3.01 to $5.11 a barrel This was most important, as petrol producers generally passed on any rise in the posted price to their customers.19

Over the next five days, Saudi Arabia, the Persian Gulf’s largest ducer, and Qatar, announced immediate production cutbacks of 10% per month, with other Arab nations declaring reductions of 5% Additionally, all 8 Arab members of the 12-nation Organization of the Petroleum Exporting Countries (OPEC) agreed to a complete embargo on oil ship-ments to America More extensive cuts soon followed and by the end of

pro-1973, six Persian Gulf nations had upped their posted price to $11.65 a barrel Two other OPEC members, Ecuador and Venezuela, went even further, increasing their posted prices to $13.70 and $14.08 a barrel, respectively The net result was shortages, rationing, soaring gasoline and heating prices, long lines at the pump, and a full-blown energy crisis that had a long and lasting negative impact on almost all national economies

In the midst of the OPEC oil crisis and ensuing economic stagnation, car production within the EEC-9 plunged by nearly 20% to 9.92 million

in 1974 and then 9.37 million in 1975 On a more positive note, two encouraging signs for the region’s future occurred on April 25, 1974, and November 20, 1975, when Portugal’s Salazar and Spain’s Franco dicta-torships, respectively, came to an end With both countries committing to democracies, this brought hope that both nations would soon be wel-

With oil prices finally leveling out at around $12–$13 a barrel, annual car output again surpassed 10.5 million in 1976 through 1979 The latter occurring in the midst of a second oil shock triggered by a January 7,

1978, newspaper story attacking the exiled Ayatollah Khomeini for his opposition to the Shah of Iran The article set off a chain of events that led

to the deposing of the Imperial Shah on February 11, 1979, and the ation of the Islamic Republic of Iran on April 1, 1979 The ensuing break with Western allies prompted gas shortages worldwide and sent crude oil

cre-19 AP ( 1973 ); Halloran ( 1973 ); Eder ( 1973 ); Reuters ( 1973 ); Smith ( 1973 ); Yergin ( 1992 ).

20 Ibid.

21 Gilbert ( 2012 ); EC ( 2014a , , 2016 , 2018 ).

prices again skyrocketing, from $12.70 per barrel during much of 1978 to

$24 in December 1979 The shivers from the early stages of the Iran-Iraq War (beginning on September 22, 1980), which removed almost four million barrels per day (or 15%) from the world’s supply, then pushed

With the world’s two largest car markets, America and WE, now reeling from stagflation (high inflation, high unemployment, and economic con-traction), demand for new cars sank Not surprising, these events lowered output in the EEC-9 to 9.8 million in 1980 and 9.3 million in 1981 In the meantime, after signing a treaty of accession on May 28, 1979, the EEC had grown to ten, adding Greece officially as a member on January

trucks, the southern European nation’s car market was 100% dependent upon car imports from other nations It would be another five years before Greek tariffs and quotas on imports from other EEC nations were com-pletely lifted (see Table 2.2).23

The outlook for EEC car production finally improved in 1983, when the ten nations built 10.4 million units Output then seesawed under 10 million units in 1984 and back to 10.33 million in 1985, before rebound-ing to 10.9 million in 1986 and finally to 1973 levels at 11.53 million in

1987 As the automobile industry was finally regaining its footing, the EEC was achieving significant changes of its own First, on June 12, 1985, Portugal and Spain signed treaties of accession to the EEC. Only two days later, on June 14, 1985, Belgium, Germany, France, Luxembourg, and the Netherlands signed an accord in Schengen, Luxembourg, eliminating border controls among the nations Gradually implemented over the next ten years, when fully implemented in 1995, the treaty entitled EU citizens

Next, at meetings in Luxembourg on December 2–3, 1985, the European Council reached a political agreement signaling the willingness among EEC nations to move toward the adoption of a broader, more comprehensive union A month later, on January 1, 1986, Spain and Portugal officially joined the EEC as its 11th and 12th members (see

February 25, 1986, in The Hague, by the signing of the Single European

22 Tanner and McCartney ( 1979 ); Tanner ( 1980 ); Yergin ( 1992 ).

23 Ward’s ( 1956 –2018); Gilbert ( 2012 ).

24 Ward’s ( 1956 –2018); Georgano, 2000 ; Gilbert ( 2012 ); EC ( 2014b , 2016 , 2018 ).

Act by the 12 nations Effective July 1, 1987, the act legally established not only a single common market for goods, but also enabled the free movement of persons, services, and capital within the EEC-12 Additionally, it broadened and strengthened the legal authority of the European Council Finally, it helped created the necessary politico- economic context for its members to move toward the long-hoped objec-

Overall, the Second Phase of European Integration finished primarily

on a positive note, with car production in the EEC-12 expanding to

of 2,159,343 units or 17.51% from 12,332,863 in 1973 Growth was led

by the newly integrated Spain, which saw its output rise by 1,190,540 from 706,533  in 1973 to 1,896,973  in 1989 Due primarily to West Germany’s increase of 913,793 or 25.04% to 4,563,673, car assemblies among the original EEC-6 nations rose by 1,488,242 or 15.29% during this period French, Belgian, and Italian output also grew by 148,600 or more after 1973, equivalent to gaining a new 150,000-capacity factory Perhaps more significantly, Spain’s accession and lower wages had vaulted

it from ranking as WE’s sixth-largest car producing nation to fourth in

1989 After having leapfrogged the U.K (1,299,082) and Belgium (1,143,711) during the period, it now only trailed the much higher-wage West Germany and France (3,409,017) It also was closing in on Italy for third (1,971,969).26

In contrast, and provoked by the near collapse of British Leyland (BL), car assemblies in the U.K declined by 448,234 or 25.65%, between 1973 and 1989 In addition, by 1989, car production had terminated in Denmark and Ireland Denmark output ended in October 1974, follow-ing GM’s shuttering of its historic, first ever European plant, Sydhavnen Assembly in Copenhagen On the other hand, car assembly continued in Ireland until 1987 In the interim, Ford ended output at its 67-year-old Cork Plant near the Celtic Sea on July 13, 1984, Renault and VW’s import partner Motor Distributors Ltd terminated their Dublin assembly opera-tions in 1984 and 1985, respectively, and TMC Costin of Wexford moth-balled its craft sports-car production in 1987.27

25 Gilbert ( 2012 ); EC ( 2014b , 2016 , 2018 ).

26 Ward’s ( 1956 –2018; 2014 ).

27 Ward’s ( 1956 –2018); Georgano ( 2000 ).

As these mostly positive trends were occurring in the West, car output was also growing in the CMEA Bloc Led by the USSR’s expansion of 300,000 or 32.72%, final assemblies increased in Eastern Europe by 706,735 or 50.61%, between 1973 and 1989 Outside of the USSR, production was up by 406,735 or 84.81% in the Bloc during this period,

way, with gains of 191,092 or 165.59% and 110,000 or 220.00%, tively Poland’s enlargement was buoyed by the ramping up of two joint venture plants between the state-run Fabryka Samochodow Malolitrazowych (FSM) and Fiat FSM Plant #1 opened in Bielsko-Biala in 1971, with FSM

respec-#2 launching in Tychy in September 1975 Meanwhile, Romania’s growth was led by the state-run Uzina de Autoturisme Pitesti, which assembled

Despite these advances, long-standing economic stagnation continued to provoke political and economic turmoil within the Eastern Bloc By March

1985, it had touched the Soviet Politburo, with Mikhail Gorbachev ing the late-Konstantin Chernenko as General Secretary of the Communist Party Gorbachev then called for major reforms, including, among other things, (1) the democratization of the political system, (2) the thawing of international relations with the West (aka Glasnost), (3) the restructuring and limited privatization of industrial sectors (i.e., perestroika), and (4) major capital investments in technological modernization and to improve industrial and agricultural productivity His hopes were that such measures would stimulate growth and enable the Soviet economy to begin to ‘catch-up’ with the West.29

replac-By the late 1980s, Gorbachev’s ideas had spread throughout the Eastern Bloc, where most nations were experiencing spiraling debt, ram-pant inflation, rising unemployment, major trade deficits, contracting industrial output, and declining wages These conditions were further complicated by the technological backwardness, excessive employment, and related production inefficiencies of their state-run enterprises Government policies, such as those promoting industrial restructuring and privatization, were implemented, but in most cases only served to worsen the conditions of average citizens and stoke further social unrest.30

This situation would spark dramatic change in Eastern Europe, ning on November 9, 1989, when East Germany announced it would

begin-28 Ward’s ( 1956 –2018); Jacobs ( 2017 ).

29 Wolchik and Curry ( 2011 ); Jacobs ( 2017 ).

30 Myant ( 1993 ); Jacobs ( 2017 ).

allow its citizens to travel abroad or emigrate into neighboring West Germany This decision would spur the tearing down of the Berlin Wall, the reunification of the two Germanys, and ultimately, the breakup of the Soviet’s Eastern Bloc.

EuropEan IntEgratIon phasE III: rEshapIng thE Eu’s

car productIon FootprInt, 1989–2001

As the tumultuous 1980s came to a close, a third phase of European gration was laying the groundwork for a major eastward shift in European car production Realizing that Eastern Bloc governments were desperate to save their industrial enterprises, Western automakers scooped up assets Fiat struck first, strengthening its long-standing ties in Poland by taking control state-led FSM’s car factories in Tychy and Bielsko-Biala General Motors of America and Suzuki of Japan followed, launching separate ventures in Szentgotthard and Esztergom, Hungary, respectively GM’s Opel division also established tie-ups with Automobilwerk Eisenach in East Germany and Fabryka Samochodow Osobowych of Warsaw, Poland Further south in independent Yugoslavia, Renault of France acquired control over Industrija

No carmaker, however, was more stealthy than VW, which by March

1991 had secured management control over the VEB Sachsenring

‘Trabant’ Plant in Mosel, East Germany; Automobilove Zavody Narodni Podnik’s three Skoda factories in Mlada Boleslav, Vrchlabi, and Kvasiny, and Bratislavske Automobilove Zavody in Czechoslovakia; and Fabryka Samochodow Rolniczych in Poznan, Poland A year later, its Audi division acquired an empty building in Gyor, Hungary, that it would turn into the group’s largest engine factory.32

Meanwhile, European integration achieved three major new stones The first transpired on October 3, 1990, when the reunification of East and West Germany became official The second was scaled on February 7, 1992, when the 12 EEC nations signed the Treaty of Maastricht, an accord that established the EU on November 1, 1993 The third was attained on January 1, 1993, when the European Common (sin-

mile-31 Pavlinek ( 2008 ); Thompson ( 2011 ); Jacobs ( 2017 ).

32 Ibid.