Globalisation and the reorganisation of Japan's auto parts industry

One prominent feature of Japanese automobile manufacturing in the postwar period was a system of sourcing parts from closely affiliated smaller firms in long-term, stable relations. Changes in the global automobile industry have made that system too expensive. Increasing competitive pressures resulting from global excess capacity in the early 2000s have forced a transformation in the business model of the automotive industry. Modularisation and a switch to 'global best sourcing' for standard parts have turned the previous logic of Japanese subcontracting on its head, as first-tier suppliers become even closer partners of large assemblers, while small firms become replaceable. Mergers and joint ventures have changed the structure of Japan's auto part industry, resulting in larger firms that compete globally. Undergoing a transformation toward cost-cutting and increased technological capabilities in the late 1990s and early 2000s has afforded these firms a fortuitous head start in preparing for the global auto crisis of 2008/2009, which is threatening to wipe out smaller parts markers around the globe.