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ILO Emerging economies hold key to future of work in the auto industry

What are the main future of work challenges the automotive industry faces around the globe? ILO News spoke with Tommaso Pardi, author of a research paper commissioned by the ILO through the France-ILO cooperation agreement, looking at the transformation currently taking place in both developed and developing countries.

 

ILO News: In the title of your report you refer to “The challenges of deglobalization”. Could you explain?

Tommaso Pardi: The automobile industry is now undergoing transformation which is driven by both, globalization but also by deglobalization, the process of diminishing interdependence and integration between certain production units around the world. Deglobalizing trends are not so much fuelled by protectionism but by the very nature of the product.

For example, an electric car can have a different CO2 impact depending on the type of energy used to produce electricity, which differs from one place to another. You also need to take into account the high levels of pollution in big cities, especially in developing countries, which can lead to the use of dedicated technologies. These are all factors that need to be taken into account if we analyse these trends - besides the traditional global considerations that are necessary to be a major player in the industry worldwide. One challenge is to strike a balance between these sometimes conflicting needs.

ILO News: your study suggests that major changes in the industry are actually happening in emerging countries. Can you tell us more?

TP: Emerging economies represented one-fourth of the total world auto production at the beginning of the years 2000. In 2015, they made up for more than half. So clearly the growth of the automobile industry took place in emerging economies such as China. In China less than 4 million cars were produced in 2000, now we are reaching almost 30 million. China has become the main car producer in the world and the main market. Everything that is happening in China has a strategic importance for the whole industry.

An automobile industry as big as the European and the American ones put together was born in China in just 15 years while it took more than a century to build it elsewhere. And we can expect this trend to continue also in countries such as India, Brazil and Russia. These car-making factories in emerging countries are often controlled by the main international brands. However, these subsidiaries can have more or less autonomy and new local players are also coming up, for example in China and India.

ILO News: What is the impact of these changes in emerging economies on working conditions?

TP: Since a lot of factories have been set up by international companies according to global standards of production, they have a very advanced system of production similar to the one in the western world. Because of this, working conditions in these factories can be considered as good most of the times.

However, you need to differentiate between permanent workers and temporary workers. The latter provide the flexibility to counterbalance the high structural costs to remain competitive and this situation is even worse for suppliers that often provide more than 80% of the value. It often leads to social tensions: so one challenge is to rebalance the system and improve conditions for all.

ILO News: The “greening” of cars is also one of the criteria which is often mentioned when talking about the future of the auto industry. Where do we stand here?


TP: There is a lot of regulatory pressure now. This is a consequence of the recent diesel scandal, but also the need to tackle global warming. Every oil crisis we have been through also led to an investment in research to reduce consumption. Yet, the car engine is still considered as “the bad guy” when it comes to pollution.

However, there are employment challenges connected to this. Traditional engines involve sophisticated technology and are mainly produced in the western world. However, engines for electric cars use batteries that can be manufactured in emerging economies at a lower cost. So we need public policies to step in, as well as other actors, including social partners in order to manage the transition.

One example is the fact that, while ecological standards have become very strict in Western Europe, there is little control on second-hand cars that are massively exported to Central and Eastern Europe. Car-makers invested in Eastern Europe with the objective of winning new markets. However, they were faced with an influx of second hand cars coming from Western European countries - with little attention paid to ecological standards. So since they opened those factories, they tend to export back most of the production to Western European countries. Four million cars are currently produced in Eastern and Central Europe while the local market absorbs only one million cars. This has obviously significant social and employment consequences that public national and European policies combined with union pressure could help mitigate.

ILO News: Another challenge that you mention is the digitalization of production. What is the scale of the current transformation in the automobile sector compared to other industries?

TP: Surprisingly, there is little prospect for further automation in the car industry. In fact, during the last fifteen years automation in assembly has been reduced because human beings are much more flexible and cost-effective in managing complex operations with a high variety of products and parts. Despite the hype risen by industrie 4.0 and factories of future phenomena, I don’t expect digitalization to have any massive effect on employment in the car industry over the next 10 to15 years. But this may change afterwards due to the diffusion of these new technologies in other sectors were flexible automated lines of production can be viable and cost-effective. In the next phase of our research we will study more in detail the impact of digitalization together with a team of international experts.

Tommaso Pardi is Director of GIS Gerpisa, an international network of the automobile, and a Research fellow at CNRS and IDHES in France.

 

source: www.ilo.org

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