Introduction
The 'received wisdom' about the history of the automobile industry is common to those who study it and those who work in it. Between 1920 and 1950, following a primarily 'craft' -based phase, both American and European automobile companies are said to have adopted the mass production system, characterized by a search for economies of scale, a sequential and segmented organization of design and production, and the utilization of an unskilled workforce. Because of this system's inherent rigidity, it is said to have been thrown into crisis by the transition to a diversified and unstable replacement market increasingly open to international competition. Conversely, Japanese companies are deemed to have learned early how to rapidly adapt design and production to market changes and make profits in any conditions, thanks to a trained workforce who participate in cost reduction and quality improvement. Accordingly, the Japanese are purported to have invented an industrial model that can succeed in the market conditions which all automobile companies now share. Systematized under the name 'lean production' by the authors of The Machine that Changed the World, ( Womack et al. 1990), this system-said to have proved its universality with the success of Japanese transplants in the USA and United Kingdom--is now supposedly obligatory for all American and European companies if they wish to survive into the twenty-first century. They are all said to be trying to adopt it, as revealed by the borrowing of 'Japanese methods': notwithstanding delays, resistance, and mistakes, the production systems of these companies will therefore converge towards 'lean production', just as they converged on mass production during the first half of the twentieth century.

Historical simplifications are useful and legitimate when they reveal the underlying essentials. They are dangerous in theory as in practice when they support widespread prejudices. The claim summarized above is problematic precisely because of the presuppositions upon which it is based, the conceptual ambiguities it supports, the facts it overlooks, the observational and analytical methods it encourages, and lastly the errors it can lead to on the part of company managers and union leaders alike.

In the first place, it presupposes that the market has evolved, and has, in the main, evolved along similar lines throughout the world: that is to say, from an elite market into a replacement market by way of a mass market. It overlooks the fact that the volume and structure of the automobile market depends upon the forms of mobility characteristic of each country, and the way national income is redistributed among social groups, which in turn is influenced by incomes policies and by the economic significance of the automobile industry in the countries in which it is located. Lastly, it implies that there is only a single viable solution when conditions are similar. The three supposedly successive production systems, craft, mass production, and lean production, are actually the result of historic amalgams and conceptual ambiguities. The so-called craft system includes craft-based companies, but also genuine industrial companies,...

Intersecting Trajectories and Model Changes
Has there been one, or have there been several successful industrial models in the period since the 1974 oil crisis, and, if so, which? The aim of this chapter is to identify and characterize the successful model or models and to investigate the conditions under which it or they are viable and function well. It is clear from the trajectories of the automobile manufacturers examined in this book that they have certainly pursued different profit strategies; some have emphasized volume, some product diversity, others quality, and so forth. Analysis of these strategies reveals that they in fact represent combinations of the five fundamental sources of company profits: scale effects, scope effects, quality, product innovation, and the reduction of costs at constant volume. Each strategy combines these sources of profit in precise proportions to make them structurally compatible. Accordingly, it appears to be impossible for a firm to simultaneously attain, and maintain over the long term, maximum volume, maximum diversity, perfect quality, permanent innovation, and the reduction of costs at constant volume. This finding stands in stark contrast to the assertions made in The Machine that Changed the World ( Womack et al. 1990), with its presentation of 'lean production' as the optimal industrial model; one which, moreover, also apparently guarantees the fulfilment of employees, the satisfaction of consumers, and economic development worldwide!

Empirical analysis of the world's automobile producers reveals that five profit strategies were pursued during the period between 1974 and 1990-2. We have labelled these strategies 'volume and diversity', 'continuous reduction of costs at constant volume', 'innovation and flexibility', 'quality and specialization', and 'volume'. For these strategies to be profitable they had to fit their external environments and be implemented by industrial models that were consistent with them. Of the manufacturers studied in this book, only three entirely met these twin criteria during the period in question: Volkswagen, Toyota, and Honda. All three also maintained break-even points below their added value. This is an important indicator, since it not only reveals the profitability of automotive sector activities (by excluding financial activities, which distort the real situation in one direction or another), but also show the behaviour of profit margins when demand falls. Volkswagen, Toyota, and Honda adopted strategies respectively based on 'volume and diversity', 'continuous reduction of costs at constant volume', and 'innovation and flexibility', and each was based in a country where the growth and redistribution of national income was already based on competitiveness in export markets. Volkswagen was able to adapt the Sloanist model to the new...