Local, Regional and Global Production Networks : Reintegration of the Hungarian Automotive Industry

Investment activities across borders have significantly intensified in recent years in an attempt to cut costs via re-location of production, and to get closer to the ultimate customers in emerging markets. Central Europe, the immediate neighbourhood of Hungary is no exception either: the region has moved again onto the global stage. These intensified investment activities have had crucial bearings on the Hungarian automotive industry: after a half-a-century interval – imposed by the CMEA-wide division of labour – car production has re-emerged in Hungary in the early 1990s. Suppliers have also invested heavily in Hungary. These strategic moves have radically re-structured the indigenous suppliers, too.From a policy point of view, however, it is necessary to take into account the differences between various types of suppliers. Therefore a taxonomy has been developed, and applied when discussing the prospects for Hungarian companies.A brief comparison of production paradigms shows the crucial importance of innovation, R&D and engineering skills. The chapter argues it is more fruitful to create an attractive, favourable environment for R&D and innovation than offer ear-marked automotive R&D grants. It is also of crucial importance to co-ordinate investment, trade, competition, regional development, employment, education and innovation policy aims and tools.The successful re-structuring of the Hungarian automotive industry is not only due to some ‘push' factors, i.e. the fierce competition among automotive companies and hence the pursuit of cost-cutting via re-location of their production, but it also thanks to ‘pull' factors, i.e. the attractions of the Hungarian economic environment, broadly defined. Given the ever changing, and global, nature of the automotive industry, no country can be complacent, on the contrary, continuously renewed, concerted efforts and well-devised policy measures are needed to achieve further results