Globalization and restructuring in the auto industry: the impact on the West Midlands automobile cluster

This paper examines the form of the auto cluster in the West Midlands in the context of the structural changes unfolding in the industry. These include greater pressure on firms to recover costs when technological change has been intensifying, driving up the costs of new model development, increased international sourcing of modular components and a shift of assembly operations towards lower-cost locations. Add in recent exchange rate volatility and maintaining manufacturing operations, and the West Midlands cluster has become increasingly challenging for firms and policy-makers, as witnessed by recent plant closures at MG Rover, Jaguar and Peugeot. The paper considers to what extent public policy can assist, suggesting that policy needs to do all it can to retain capacity whilst also helping firms to use their competencies and to apply them in new ways. These will have to be in higher value added activities such as engines and drivetrains, R&D, consultancy and in other sectors such as the growing aeronautics industry. Copyright (C) 2007 John Wiley & Sons, Ltd.