Winners and Losers - ‘The Tiering’ of Component Suppliers in the UK Automotive Industry

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WINNER AND LOSERS - THE 'TIERING' OF COMPONENT SUPPLIERS
IN THE UK AUTOMOTIVE INDUSTRY
Peter Turnbull, Rick Delbridge, Nick Oliver and Barry Wilkinson.
Turnbull, P., Delbridge, R., Oliver, N. and Wilkinson, B. '(1993) 'Winners and losers - the
'tiering' of components suppliers in the UK automotive industry'. Journal of General
Management. Vol 19, No 1, pp 48-63.

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WINNER AND LOSERS - THE 'TIERING' OF COMPONENT SUPPLIERS IN THE UK
AUTOMOTIVE INDUSTRY
This paper describes recent developments in the UK auto components industry, focusing
particularly on the nature of the relationship between the car makers and their suppliers. The
findings of a study of 56 component makers are reported, which demonstrate the emergence
of a model of supplier relations similar in some respects to that found in Japan. The arrival of
the Japanese car makers and their impact on the UK component industry's dynamics are
discussed.
During the twentieth century the automotive industry has experienced several phases
of development or 'transformations'. These include the breakthrough from custom building to
mass production in 1910 and the combination of mass production and product differentiation in
the 1950s [1]. The 1990s are likely to prove to be a period of unprecedented change, in terms
of both product and production technology and organisational changes within and between
firms. Changes in the relationship between motor manufacturers and their suppliers are likely
to have a particularly profound effect on the automotive industry in the UK and the rest of
Europe. According to Hoffman & Kaplinsky [2], 'altered contractual relations represent the
most thorough-going organizational change the industry has yet seen since (sic) Sloan's
reforms in GM (General Motors) in the early 1920s'. In the UK, these changes coincide with
major investments by Toyota, Nissan and Honda, the three major Japanese motor
manufacturers to whom the current transformation of the industry can be largely attributed.
Collectively, Japanese manufacturers are projected to produce around 500,000 cars
per annum in the UK by the mid-1990s. This presents indigenous component suppliers with a
unique opportunity for growth over the next decade. For example, in 1989 UK car production
stood at just under 1.3 million units, the fifth consecutive year of growth and the highest level
since 1977. However, domestic production still accounted for less than half the total UK sales
and the trade imbalance in cars in 1989 was £5.1bn, representing a quarter of the total trading
deficit for the UK (which was the worst on record). With a large proportion of the British-based
Japanese car production destined for the European market, the UK motor industry looks set to
improve both its volume base and overseas trading performance, leading some analysts to
suggest that, 'The revival of British car manufacturing owes little enough to its own efforts,
virtually everything to the Japanese' [3]. But the influence of the Japanese will not be
restricted solely (or even mainly) to the effect of direct investment on production and trade
(im)balances. A central conclusion of the International Motor Vehicle Programme [4] is that the
West will only close the competitive gap on the Japanese car makers when exposed to direct

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competition, as happened in the United States in the 1980s (although the American auto
manufacturers still fall short of Japanese performance levels). The UK automotive industry is
thus likely to be the focus of intense competitive pressure and the centre of restructuring within
the European motor industry during the 1990s.
For the indigenous components industry, however, the challenge posed by these
developments is even greater. Suppliers will need to conform to the more exacting standards
of Japanese manufacturers in respect of quality, price, delivery, engineering, and R&D, either
to secure direct business with the Japanese motor manufacturers or to maintain their business
with existing customers who will be forced to adopt similar standards in order to compete. In
addition, they will face the challenge of both Japanese and European component suppliers
setting up in the UK, through acquisitions, joint ventures or greenfield sites). Moreover, it is
already clear that the Japanese assemblers are prepared to source pan-European in order to
achieve their required supply standards. The 1990s will therefore present component
suppliers with a golden opportunity for growth but at the same time subject them to the most
competitive environment they have ever faced.
It is likely that many suppliers will not have the resources (human, technical, financial or
otherwise) to survive in the next decade. Others will become 'second tier' suppliers of low(er)
value parts and materials. Only a select few suppliers are likely to survive as 'preferred
suppliers' in the 1990s and beyond. The new model of supplier relations, based on
collaborative 'partnerships' between vehicle assemblers and component manufacturers, with
shared detailed cost analyses in a search for 'continuous' improvement, represents a sharp
break from traditional practice in the UK. In the section which follows, old and new models of
supplier relations are contrasted.
BUYER-SUPPLIER RELATIONS IN THE UK AUTOMOTIVE INDUSTRY
The early 1980s brought a crisis of both production volumes and profitability in the UK
component industry in the wake of world-wide economic recession. Only two of the largest
sixty-six component companies experienced any growth of sales between 1979-82, and in
1981 the largest one hundred component companies (who between them account for 80 per
cent of the market) recorded an overall loss on over £2bn of sales. By 1982 almost half these
companies were loss-making [5]. Gradually, the motor manufacturers began to realise the
disadvantages of the competitive buyer-supplier relations characteristic of the late 1970s [6]
and introduced a series of ad hoc changes in an attempt to resolve the problems of poor

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quality, unreliable delivery, excessive stock holding, and inadequate data exchange. The new
relationship developed with suppliers was supposedly based on a 'partnership', characterised
by single sourcing for individual parts, longer (and larger) supply contracts for the model life,
greater collaboration on R&D, a drive on quality standards, and sub-assembly performed off-
line by suppliers who were now responsible for the delivery of component systems rather than
individual parts. This inevitably entailed a reduction in the number of direct suppliers to each
of the motor manufacturers, typically in the order of 1,000 per model to (a target of) around 300
[7].
As these developments progressed there were suggestions that the Western vehicle
industry was beginning to replicate some aspects of Japanese buyer-supplier relations.
Following Lamming [8], the central features of the emerging model are summarised below:
(i) fewer, larger and more 'talented' suppliers who are the single source of supply for
component systems
(ii) a tiered structure in which a smaller number of large 'preferred suppliers' develop a
closer partnership with the major motor manufacturers and in turn develop their own
second tier of component suppliers who no longer supply direct to the motor
manufacturers
(iii) collaboration on design and R&D between motor manufacturers and preferred
suppliers, starting at the stage of initial product conception
(iv) stronger vertical relationships between the tiers and stronger horizontal
relationships with other suppliers to share expertise, R&D and other costs
(v) a multi-market presence, both in the automotive industry itself (in the original and
replacement markets) and other industrial sectors (to avoid the problems
associated with the cyclical nature of car production, to increase the scope and
scale of production, and to develop expertise from other areas which might then be
applied to the automotive industry)
(vi) global sourcing and operations to support the world-wide manufacturing operations
of the major motor manufacturers and to supply components on a just-in-time basis
to local markets
(vii) the pursuit of competitive advantage through the adoption of new working practices,
new production techniques and technologies, and the deployment of skilled and
flexible workforces
The evolution of the industry to date, from traditional through to emerging practice, has been
succinctly summarised [8]. Emerging practice is being driven heavily by the Japanese
approach to supplier relations.

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In Japan, the actual contract between motor manufacturer and supplier is based on co-
operation, a full exchange of information, a commitment to improve quality, and a recognition
(and acceptance) that prices can (and will) be reduced each year. Superficially this appears to
conform to the model developing in the West, but the terms of the supply contract in Japan
turn Western practice on its head - bargaining is not simply focused on price per se, but how to
reach the target price while maintaining a reasonable level of profit for the supplier [4]. For
example, the initial selection of suppliers by Japanese car firms such as Honda is undertaken
by engineers. It is only after the production and other manufacturing capabilities of the
supplier have been evaluated and accepted that the purchasing department enters
negotiations on price. Through collaboration, production costs fall over the life of production as
a result of continuous improvement programmes and learning curve economies. By agreeing
to a price reduction curve the two parties can allocate cost savings on a known and acceptable
basis, with any reduction below the curve going to the supplier, which thereby creates
conditions for co-operation. As a result, a virtuous circle of trust and collaboration replaces a
vicious circle of mistrust and antagonism. However, mistakes cannot be made - with just-in-
time production and delivery, a 'zero defects' quality programme, and minimum inventory the
supplier simply cannot afford to make mistakes. Equally, the motor manufacturer cannot afford
to contract with an unreliable supplier. The situation of a Japanese supplier has been likened
to that of a tight-rope walker without a safety net [4].
In the light of these developments the study reported here set out to document
developments in the UK components sector in the 1990s. Fifty six component makers were
surveyed in early 1990. All were visited by the authors and an interview of one to three hours
duration was conducted, usually with the Managing Director. The fifty six suppliers collectively
employed almost 17,500 workers and had a combined turnover in excess of £600m. The
customer list of the sample included every major car manufacturer in the UK and all the major
European assemblers. Nearly half the sample also cited other UK component manufacturers
among their major customers and 10 per cent supplied foreign-based parts manufacturers.
The parts and materials supplied to the automotive industry by the sample were diverse,
ranging from sophisticated electronics and braking systems to simple pressings, fasteners, and
forgings. In the section which follows, the main findings from the survey are analysed in terms
of the impact of changes on the structure of the industry, and changes in the context, nature
and content of the buyer-supplier relationship itself.

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Industry Structure
The development of a tiered structure of component supply in the automotive industry,
with fewer direct suppliers to the major motor manufacturers, suggests the development of a
pyramid structure with the vehicle manufacturers at the apex, a first tier of large and 'talented'
suppliers, and then a numerically much larger second and possibly third tier of sub-contractors
who no longer supply direct to the motor manufacturers. This structure implies that while the
total number of suppliers may remain constant, most of the higher value-added activity takes
place among the first tier suppliers. These are the firms who are likely to share the benefits of
partnership sourcing in the 1990s [9].
To be a first tier preferred supplier it is widely believed that the component maker must
be sufficiently well capitalised to support R&D and other activities [7]. In fact, a 'cut-off' point of
£10m per annum sales turnover is believed to be essential to retain viability, 'otherwise,
financially, the minimum range of activities and investment cannot be supported' [10]. Sixty
such companies have been identified in the UK, and eight of these had manufacturing plants in
Wales. However, eighteen firms in the sample had a turnover in excess of £10m per annum,
indicating the strength of the components sector in Wales.
A detailed analysis of these firms, summarised in Table 1, revealed that they were not
only the more 'talented' suppliers, but were more likely to have achieved 'preferred supplier
status' - all but one of the large firms had PSS. As expected, the larger firms were also more
likely to be the single source of supply for some, if not all, of the parts they produced. Only two
of the suppliers with a turnover in excess of £10m per annum were not a single source of
supply on any components, compared with over a third of those with a turnover below £6m per
annum.
Table 1: Indicators of 'Talent'
N
Percentage of firms with:
CAD/CAM
CNC
BS5750
EDI
Firms with a turnover in excess of £10m
per annum
59
50
59
56
59
Firms with a turnover below £10m per
annum
16
19
32
40
34
CAD/CAM Computer Aided Design/Computer Aided Manufacture
CNC Computer Numerically Controlled machine tools
BS5750 British Standard 5750 (quality standard)
EDI Electronic Data Interchange

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These results clearly demonstrate the development of a tiered structure of component
suppliers in the automotive industry, which was confirmed through an analysis of major
customers by supplier turnover. This analysis indicated that larger component makers were
much more likely to be direct suppliers to the major vehicle manufacturers than the smaller
suppliers. For example, of those firms with annual sales in excess of £10m, 65 per cent
supplied direct to Ford whereas only 48 per cent with a turnover below £0m were direct Ford
suppliers. In contrast, almost 60 per cent of the smaller firms supplied parts or materials to
other UK component makers, compared with only 35 per cent of the larger firms. These and
other examples are given in Table 2.
Table 2: Major Customers by Sales Group
Percentage of suppliers with
turnover below £10m per
annum
Percentage of suppliers with
turnover above
£10m per annum
Direct Supplier
No business
Direct Supplier
No business
Rover
46
28
69
19
Ford
48
38
65
29
Nissan
11
62
27
47
Jaguar
25
71
47
47
Commercial vehicles
32
64
40
53
Other UK component co's
59
38
35
65
While larger firms were more likely to be direct suppliers, a considerable number of
smaller firms had retained direct contracts with major motor manufacturers. These firms may
well represent the 'tail' of a (positively skewed) distribution of suppliers in which a large number
of suppliers still account for only a small percentage of the motor manufacturers total
components purchases. As such they may bear the brunt of further rationalisation in the
1990s, although it must be acknowledged that many of these firms are more flexible and
responsive to customer requirements and some have grown rapidly in recent years (especially
suppliers of electronic equipment). Nevertheless, while there may still be room in the first tier
for several smaller, high quality specialist suppliers, the overwhelming evidence suggests that
the smaller firms are most likely to be 'relegated' to the 'second division' of sub-contractors to
the major (proprietary) component manufacturers. This is nowhere more evident than in the
development of what the vehicle assemblers now call 'partnership sourcing'.
Buyer-Supplier Relations
As previously argued, the key dimensions of the new 'Japanese' (or 'post-Japanese') model of
buyer-supplier relations are collaborative R&D, quality and reliability of (more frequent)

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supplies, and a new collaborative 'partnership' based on 'sharing gains' in the never ending
quest for perfection (zero defects, stockless production, and so on). Of the fifty-six firms in the
sample, ten are proprietary component makers providing 'black box' technology for the motor
manufacturers. These parts are designed by the component maker with only the 'dimensional
space' and performance criteria for the part(s) in question specified by the customer. The
extent of collaboration between vehicle manufacturers and the component makers in the study
illustrates the move towards joint development work by supplier and customer. This was
especially evident at the first tier level, with only one of the larger firms (turnover in excess of
£10m per annum) reporting that R&D was undertaken solely to customer specification. As one
supplier put it: 'We operate as an extension of Ford's design office'. This contrasts with the
experience of the smaller firms, 27 per cent of whom reported working to customer
specification on R&D. In fact, 72 per cent of the sample reported stable or increasing levels of
R&D spend over the past 5 years, and this activity was predominantly (59 per cent) based at
the plant level. The pressure to increase R&D activity was particularly strong among the
preferred suppliers, and this was again predominantly undertaken at the plant level. Where
firms were the single source of supply for at least some products, 86 per cent reported
collaborative activity on R&D. One manager reported,
They [an assembler] are moving to increase the supplier's design responsibility
and in return are giving longer term contracts. This means I can invest in new
equipment, for instance, and they expect a share in the benefit. Likewise, there
is a sharing of technical knowledge.
Another supplier commented that,
We're now more likely to be involved in development from the beginning with
the new partnership system ... Before we just used to get a blueprint.
Although R&D was seen by many firms to be increasingly important both to secure and
retain automotive business, quality was the single most important criterion to win business, as
Table 3 illustrates. The drive on quality began in earnest in the early to mid 1980s and
standards have become ever more stringent. As one manager said: 'At first we did a fair bit of
window dressing just to convince the assemblers. Now we can't, they know.' Another
commented that now:
The systems they put in place penalise suppliers who don't live up to
expectations. The Ford system in particular is especially punitive. Poor quality
or wrong quantity means you quickly lose your status and Ford come and crawl
all over you.

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Table 3: Primary Factor in Gaining New Business
Number
Percentage
Reporting
Quality
27
48
Price
13
23
Quality & Price
6
11
Quality, Price & Delivery
6
11
Technological Capabilities
2
4
Service
1
2
Missing
1
2
As major customers such as Ford and Rover have forced their suppliers through
stringent quality audits, more and more suppliers have felt the force of this quality drive, and
have in turn forced their own suppliers to improve product and process quality. Large firms in
particular were developing longer term relationships with their own suppliers, and the vast
majority (94 per cent) were actively encouraging (and in some cases teaching) their suppliers
to operate SPC. It is clearly essential for first tier suppliers to safeguard the quality of parts
and materials from their own suppliers if they are to meet the requirements of the major motor
manufacturers, especially as the demand for better quality was virtually ubiquitous. The drive
on quality has gradually, but inexorably, intensified over the past decade, and is now part and
parcel of doing (and staying in) business. In more recent years other criteria have come to the
fore, most notably delivery and R&D, as Tables 4 and 5 clearly demonstrate. Many of these
criteria must be met to remain on the preferred supplier list. In fact, over 60 per cent of the
firms stated that the three criteria of price, quality and delivery are now preconditions to
securing any new sales agreement or even to maintain current business. This was particularly
true of the larger firms, of whom 78 per cent reported the tripos of price, quality and delivery to
be preconditions compared with 58 per cent of those with a turnover below £10m per annum.
Table 4: New Demands From Customers
Number
Percentage
Quality
54
96
Supply reliability
48
86
Delivery patterns
46
82
JIT delivery
44
79
Price
32
57
R&D
29
52
New technology
18
32
JIT manufacture
11
20

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Table 5: Period of New Demands From Customers (percentages)
0-3 years
4-6 years
7-10 years
Quality
27
51
22
Reliability & supply
45
47
8
R&D
80
13
7
JIT delivery
67
26
7
While these data indicate a change in the nature of buyer-supplier relations, at least to
the extent that major customers are clearly pushing the onus onto the supplier for quality, R&D
and the like, this does not necessarily imply a 'partnership' or stronger vertical relationships
between the tiers. Some suppliers were in fact very critical of their major customers when it
came to the subject of a new 'partnership' between buyer and supplier, suggesting that
adversarialism dies hard. On the whole, suppliers certainly believed their major customers to
be the main beneficiaries of these new demands - 79 per cent believed their customers
benefited 'greatly' from the changes and a further 11 per cent believed they derived 'some'
positive benefits. However, the majority of suppliers (61 per cent) also felt that they
themselves secured significant benefits, although this related mainly to quality control in many
cases. Many more respondents were more pragmatic on this issue, pointing out that failure to
meet the requirements would leave them without any automotive business, and as such their
'benefit' was survival. As one respondent put it,
The changes mean we have a long term future, without these changes we
would be dead and buried. They've given our customers a longer term
confidence in us as suppliers.
Yet again a marked divergence was evident between the first and second tier. Of the
larger firms, 89 per cent felt that they had benefited significantly from the drive on quality, JIT
delivery, greater collaboration on R&D, inter alia, compared with only 56 per cent of the smaller
firms. Of the smaller firms, 15 per cent reported no benefits to themselves or even significantly
detrimental effects. These companies were also more likely to believe that their customers
were significant beneficiaries (89 per cent) compared with 78 per cent of the larger firms who
reported that their customers gain significantly.
One very notable area of benefit from the so-called 'partnership' was longer term
contracts from major customers. Again, the divergence of experience between large and small
firms was very pronounced. Of the larger firms, 71 per cent reported that contracts with major
customers, either formally or informally, would be maintained for the entire production life of a
specific vehicle model, compared with only 46 per cent of those with a turnover below £10m
per annum. This is consistent with the fact that the larger firms are predominantly 'black box'
suppliers who manufacture systems rather than individual components. As such they are

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responsible for co-ordinating the delivery of parts from several suppliers, sub-assembling those
parts, and then delivering the component system on a just-in-time basis to the major vehicle
assemblers. While the pressure to deliver on a JIT basis was widespread (80 per cent of the
sample), only fifteen firms operated a JIT manufacturing system (although a further six
reported plans to adopt a JIT system and six more were in the process of actually
implementing JIT). These firms were predominantly the larger (first tier) suppliers, with 83 per
cent of those with a turnover in excess of £10m per annum operating, or planning to operate
JIT, compared with only 26 per cent of the smaller firms. There was also evidence that some
product group manufacturers are more likely to have switched to JIT than others - 73 per cent
of bulky, non-mechanical component suppliers and 75 per cent of electro-mechanical and
systems makers had adopted JIT compared to 25 per cent of 'generic' components (such as
nuts, bolts and fasteners) suppliers and 17 per cent of trim and wiring manufacturers.
The advantages of JIT were perceived to be set-up time reductions, the ability to
manufacture smaller batches, closer working relations with their own suppliers (81 per cent of
the companies operating JIT reported this), and ultimately greater flexibility and ability to meet
the (changing) schedules of major customers. Furthermore, fewer JIT manufacturers were
required to hold finished goods stocks. Nearly one-third of the companies implementing JIT
reported that finished goods stock had decreased as a proportion of the total stocks carried
compared with less than 10 per cent of companies not using JIT production. The comment of
one of these suppliers was fairly typical of this group:We're expected to deliver just-in-time but
haven't changed our manufacturing processes. Just-in-time means we have to have stocks
available so we can deliver ... Holding stocks is not demanded, but we couldn't deliver on
demand if we didn't.
In total, 59 per cent reported holding finished goods stocks to protect their major
customer from any short-fall in production or major changes to schedules, and as Table 6
illustrates the level of stock holding was often substantial.
Table 6: Level of Finished Goods Stock Required By Customers
Number
Percentage
None*
22
39
Less than 1 week
10
18
1-2 weeks
6
11
2 weeks to one month
4
7
Over one month
5
9
Missing
9
16
Total
(56)
(100)

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* i.e. no stock required by customer (supplier may still hold a 'safety stock').
Many suppliers reported making deliveries to warehouses located in the vicinity of the
major vehicle assembly plants, a development which is clearly not in keeping with the spirit of
JIT, as suppliers carry the costs of stockholding. One manager described his experience of
JIT thus:
Nissan and Honda organise their own warehousing and distribute the products
from there, the same as Rover. We deliver to Nissan once or twice a week but
Nissan can draw from that stock hourly as required.
Nevertheless, a third made daily or more frequent deliveries to major customers, and a further
quarter more than one delivery per week (see Table 7). These figures compare favourably with
European manufacturers as a whole but are still a long way off the Japanese average of
almost eight deliveries per day [11].
Table 7: Frequency Of Delivery To Major Customer(s)
Number
Percentage
Multi per day
2
4
Daily
16
29
2-3 per week
14
25
Weekly
14
25
Less frequently
3
5
Varied by customer
5
9
Missing
2
4
Total
56
100
In the face of demands to move to JIT delivery, the supplier essentially faces two
options: to either hold finished stocks to allow JIT call off, or adopt JIT production to facilitate
synchronous production and delivery with the assembly schedule of the firm's major
customer(s). The smaller firms have been forced down the former road, while the larger firms
have moved progressively towards JIT production to facilitate JIT delivery. Overall, however,
there was little hard evidence of new 'partnership' arrangements between assemblers and
suppliers to support the JIT regime. For example, only 14 per cent of the sample reported an
absence of schedule fluctuations, while 25 per cent reported daily or even hourly changes to
the original schedule. One company told us, 'We get a fax telling us to ignore a schedule that
only arrived two hours earlier.' The larger firms in fact appear to bear the brunt of revisions to
the final assembly schedule at the vehicle assembly plants, with 54 per cent reporting
substantial fluctuations in schedules (compared with only 22 per cent of the firms with a
turnover below £10m per annum). This may be just one of the costs of preferred supplier
status. But as one supplier pointed out, 'At least we've still got the business'.

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CONCLUSIONS - WINNERS AND LOSERS
The evidence from this study suggests that the UK automotive industry is now beginning to
display many of the distinguishing features of what has been labelled the 'post-Japanese
model' of buyer-supplier relations [8], in particular fewer, larger and more 'talented' suppliers
who are the sole source of supply for component systems and a tiered structure of component
manufacturers. But the Japanese model is not simply based on having fewer direct suppliers
and several subsequent tiers of sub-contractors, nor is the relationship with suppliers based
simply on trust or 'partnership' (as Western motor manufacturers currently define that term).
The key factor is mutual interdependence (or obligation) enshrined in an agreed set of 'rules'
which establish both target prices and how these are reduced over time. In particular, these
'rules' provide an adequate profit for both the motor manufacturer and the supplier, with any
cost savings below the agreed 'price reduction curve' going to the supplier (thereby providing
the incentive for continuous improvement). As in an earlier survey of the West Midlands [5],
the profitability of many of the companies in this study was poor, with 60 per cent of the sample
reporting profits to be small or worse than break-even, a situation in many cases attributed to
the procurement policies of their major customers.
There is a marked divergence of views about the likely outcomes of contemporary
developments in the sector, a debate which ultimately concerns models of industrial
development and/or decline. The optimistic view is that the arrival of the Japanese car
manufacturers will have a rejuvenating effect on the UK components industry, by forcing the
existing car makers to improve their efficiencies, including the competence with which they
manage their supply bases. In addition, this view maintains that the Japanese car makers will
act as 'educators' to local suppliers, thereby setting in motion a virtuous circle of improvement.
The observation that 'through joint ventures with Japanese suppliers and experience in
supplying parts to incoming Japanese assemblers, the European suppliers could ... lead the
assemblers towards lean production in Europe' [emphasis added] is an example of this view
[4].
The alternative view suggests a less rosy picture. Under this scenario the inability of
many UK firms to retain 'preferred supplier status', and the poor financial position of many
more (exacerbated by the current recession) does not bode well for the indigenous supplier
base in Britain. From this perspective, the net effect of the arrival of Nissan, Toyota and
Honda with their exacting standards in terms of quality, delivery and price is likely to be an
increase in foreign investment into the UK autocomponents sector. Certainly, component

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imports increased markedly in the 1980s [5], and this looks likely to be matched by the import
of European capital in the 1990s as the major continental suppliers look to invest in new plants
in the UK to supply Japanese motor manufacturers, or take over badly managed and under-
capitalised component makers. Critics of Japanese investment into the North American car
industry have made much of this point, arguing that the Japanese keiretsu system, where each
vehicle assembler has its own 'family' of suppliers, has meant that many Japanese transplant
car plants are now heavily supplied by Japanese transplant components suppliers, thereby
weakening the indigenous industry. The validity of this claim is hotly debated. As the
Japanese move into Europe, the 1990s look set to provide a fascinating set of dynamics as far
as the UK car industry is concerned.
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