Technological Change and Output-Mix Optimisation at Fiat, 1960-1987
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Managerial Culture and Company Survival: Technological Change and Output-mix Optimisation at Fiat, 1960-1987 Giuliano Maielli PhD Dissertation Economic History Department The London School of Economics and Political Science 2003 1 UMI Number: U615832 All rights reserved INFORMATION TO ALL USERS The quality of this reproduction is dependent upon the quality of the copy submitted. In the unlikely event that the author did not send a complete manuscript and there are missing pages, these will be noted. Also, if material had to be removed, a note will indicate the deletion. Dissertation Publishing UMI U615832 Published by ProQuest LLC 2014. Copyright in the Dissertation held by the Author. Microform Edition © ProQuest LLC. All rights reserved. This work is protected against unauthorized copying under Title 17, United States Code. ProQuest LLC 789 East Eisenhower Parkway P.O. Box 1346 Ann Arbor, Ml 48106-1346 I H t S t S h SI Z Abstract This dissertation contributes to the debate on the decline and transformation of mass production in the 1970s and 1980s by analysing the case of the Italian car manufacturer Fiat. In particular, the thesis addresses the question whether the company's restructuring led to a discontinuity in management. The established literature on Fiat depicts the company as one of the first movers in the development of flexible manufacturing systems, and traces the move towards flexible mass production back to the late 1970s. In doing so, the literature implies a discontinuity between the group of managers who had developed Fordist production at Fiat in the 195Os and 1960s and the set of managers who gradually came to dominate the company after 1973. Crucially, the established literature on Fiat is locked in a circular argument. Firstly, it explains the deployment of robotics as a move in the quest for production flexibility, and then uses the deployment of robotics as compelling evidence that the Fiat production setting during the 1980s was flexible. This dissertation breaks this circularity by testing the flexibility of Fiat production system during the 1980s against an independent variable, namely the rate of capacity utilisation of the production lines. This dissertation demonstrates that during the 1980s, Fiat production remained inflexible. It also shows that Fiat did not maximise flexibility because the output-mix optimisation strategy pursued by the management did not require the maximisation of flexibility. The new contribution of the thesis to the international literature emerges from three key elements. Firstly, the thesis departs from common wisdom by showing that the managerial culture underpinning the restructuring of the company and its recovery from the crisis of the 1970s was essentially “Fordist”. Secondly, the thesis investigates flexibility by analysing the behaviour of the utilisation rate of both robotised and traditional lines. The methodology has been implemented for the first time, thanks to a set of unpublished data discovered during extensive fieldwork in the Fiat Archives, and is based on the assumption that the main drive for investment in flexible manufacturing systems is the stabilisation of the utilization of production lines at about the optimal rate. Finally, the thesis underlines the complex relationship between technological change, product development and output-mix optimisation, which has been often overlooked by the post-Fordism debate. 2 T a b l e o f c o n t e n t s L is t o f t a b l e s p - 6 L is t o f f ig u r e s p. 7 L is t o f c h a r t s p. 8 A cknowledgments p. 9 C h a p t e r 1. I ntroduction p. io Technological change at Fiat 1960-1987 p. 13 Output-mix optimisation and the regime of competition p. 15 The structure of the thesis p . 21 Archives and sources p. 26 C h a pte r 2. Interpreting Fiat restructuring : C o n t in u it y VERSUS DISCONTINUITY P. 30 Introduction P. 30 Section one: Fordism, post-Fordism and discontinuity P. 31 The problem of discontinuity p. 31 Specifying Fordism p. 36 Regulatory framework p . 40 Section two: The paradigm of post-Fordism P. 43 Long wave theory (LWT) p. 44 Flexible specialisation p. 45 The Regulation approach p. 47 Fordism and Toyotism p . 49 Flexibility and discontinuity p. 53 Section three: The paradigm of continuity P. 55 Firms and the accumulation of intangible capital p. 55 Section four: The Literature on Fiat P. 59 The Italian literature on Fiat:An overview p. 59 The Industrial Relations literature p. 61 The Business Management literature p. 65 Section five: Demand and discontinuity in management P. 71 The discontinuity paradigm, and market maturation p. 71 Conclusions P. 77 C h a pte r 3. F r o m g r o w t h t o c risis , and fro m c risis to r e c o v e r y : F ia t , 1960-1987 p. 79 Introduction p. 79 Section one: Fiat and the paradigm of discontinuity P. 80 Fiat growth, 1950-1990. An overview p. 80 Market maturation and new registrations, 1950-1990 p. 83 Market Maturation and Managerial Turnover p. 86 Section two: Fiat’s managerial structure, 1946-1987 p. 90 1945-60: From the end of the War to the Growth of the 1960s p. 90 After Valletta: The search for a new structure p. 96 The strategy of growth p. 103 3 Managerial turnover and Fiat restructuring, 1973-1983 p. 107 Section three: Crisis and recovery of Fiat, 1973-1983 p. 113 The crisis of the 1970s and the problem of labour Productivity p. 113 The Fiat financial crisis p. 118 Out of the crisis p. 121 Conclusions p. 124 C h a p t e r 4. Robotics at Fiat, 1970-1987: A S t r a t e g y f o r Product Mix Flexibility? p. 125 Introduction p. 125 Section one: The context of the debate p. 127 Technological change and “managerial culture” p. 127 Defining flexibility p. 129 Robotics at Fiat: an overview p. 131 Section two: Technological change at Fiat in monocoque welding, 1960s to the1980s p. 133 Monocoque assembly: The process segmentation p. 134 Spot-welding technology at Fiat before automation (1950s) p. 136 The “hard automation” of the 1960s p. 137 The 1970s and the early stages of robotics p. 143 The Robogate system, 1976-1987 p. 147 The production sequence p. 150 Some considerations on the Robogate system p. 152 Section three: The Robogate and product-mix flexibility p. 153 The Robogate and cycle-time minimisation p. 154 Plant flexibility and production allocation p. 156 Model scale of production and capacity utilisation p. 158 Conclusions p. 169 C h a p t e r 5. Industrial R elations at Fiat, 1960-1987 p. 172 Introduction p. 172 Section one: The political sphere: The relationship between management, Government, and political parties 1950-1987 p. 173 1953-1963: The years of the “pax politica” p. 174 1963-1973: The end of the co-operation between the political establishment and Fiat p. 176 Agnelli and the search for a new political equilibrium p. 180 The dialogue with the Communist Party (PCI) p. 182 1973-1983: The crisis of the Christian Democrat Party (DC) p. 184 Section two: Industrial relations 1960-1987 p. 186 1953-1963: From union defeat to resurgence p. 187 The “Hot Autumn” and the “permanent industrial conflict” p. 191 1973-1983: From the oil crisis to the end of the permanent conflict p. 195 The intrinsic weakness of the unions and the heroic defeat of 1980 p. 199 The “Heroic Defeat” p. 202 Section three: Technological change and industrial relations p. 205 The unconvincing relationship between technological change and agents’ bargaining power p. 205 From theory to practice: Macro- and micro-conflicts p. 208 Conclusions p. 214 4 C h a pte r 6. O u tpu t M ix O ptimisation Stra teg ies a t F ia t , 1960-1987 p . 216 Introduction P. 216 Section one: The economic rationale for linking output-mix decision making to the regime of competition P. 220 Output-mix optimisation and the established literature p. 220 Competition and output-mix modelling p . 223 The historical background: Infra-EC tariff abolition and collusive behaviours in the 1970s p. 228 Price leadership in price competition versus price leadership in non-price competition p. 233 Section two: Output-mix decision making in the 1960s P. 236 Giacosa versus Minola: Product-mix decision making at Fiat in the 1960s p. 236 New ideas and old routines: The false shift towards market-oriented competition p. 240 Weight, pricing and competition p. 243 Cost monitoring at Fiat during the 1960s p. 245 Section three: Competition and output-mix decision making during the 1970s P. 251 The predictability of competitors’ pricing and output-mix decision making p. 252 Giammario Rossignolo and market-oriented management at Fiat P. 257 Conclusions P. 261 Chapter 7.Output-mix decision making at Fiat in the 1980s p.263 Introduction P. 263 Section one: A time for colluding and a time for competing: The late 1970s and the end of the “price truce” P. 264 Management expectations and the dynamic factors underpinning collusion in the late 1970s p. 264 The “Barker effect” and Fiat market shares, 1965-1987 p. 266 Section two: Competition during the 1980s P. 271 Price analysis: A comparison between the 1970s and the 1980s p. 271 Section three: Economies of scale: Fiat’s output structure and typical European volumes P. 275 Output-mix optimisation and the problem of data p. 276 The relevant output-mix range p.