Regional assets and value capture trajectories: the growth and demise of an Australian automotive supplier

Abstract

This article examines the relationship between regional assets and value capture with a focus on knowledge and intellectual property assets. It traces, over an extended time horizon, the upgrading and later downgrading path of a single supplier firm in a peripheral location to illuminate the degree to which value capture trajectories are shaped by the power geometries of regional, network, and macroeconomic forces. The analysis suggests that functional upgrading does not insulate firms from the risk of downgrading and exclusion, but rather that it changes the nature of their vulnerabilities. In this case, functional upgrading was associated with ownership changes, a progressive disassociation of intellectual property assets from their underlying regional knowledge resources, the relocation of production activities to hubs in global networks, and eventually to the redirection of captured value from the region. The analysis contends that regional assets are assets that capture value in the region, and that when knowledge-based regional assets are created by interactions within firms, firms should be considered as regional assets. The conclusion considers the implications for regional development.

Keywords:

• Regional assets
• value capture trajectories
• intellectual property
• upgrading

Introduction

This article contributes to scholarship investigating the ‘dark side’ of disengagement from Global Value Chains (GVC) and Global Production Networks (GPN) in the negative processes—known variously as rupture, decoupling or disarticulation—that undo associations, devalue regional assets, and downgrade the global positioning of firms and regions (Bair & Werner, 2011a; Blažek, 2016; Coe & Hess, 2010; Coe & Yeung, 2015; MacKinnon, 2012; Phelps et al., 2018). The article explores the nexus between the three core analytical categories of regional assets, embeddedness and value capture (Coe et al., 2004; MacKinnon, 2012), with reference to the type of regional asset most often associated with successful upgrading—knowledge, know-how and its codification in intellectual property. To highlight how the evolution of these interactions is conditioned by the changing nature of the articulation or coupling between the region and lead firms in global production networks, it examines the eighty year history of a single firm. The analysis questions the proposition that upgrading value capture trajectories insulates firms and regions from vulnerability to downgrading.

Empirically, the article examines the long-term value capture trajectory of a supplier firm in an isolated location—an Australian automotive supplier named PBR—that succeeded, by virtue of knowledge assets generated in a supportive policy context, in upgrading its position to Tier 2 status in the global automotive production system. During the automotive industry’s consolidation in the global financial crisis, however, it was taken over by a more powerful firm, then sold, and eventually closed down. This firm provides an illuminating case study for both theoretical and practical reasons. Theoretically, PBR is interesting because its trajectory is exceptional: it was an inventive firm that accrued significant intellectual property assets, linked into global networks, and ‘functionally’ upgraded from its home location in Melbourne, Australia. The practical advantage of selecting this firm is that, as a once publicly listed company with a published company history, information about it is relatively abundant. PBR’s long history creates the opportunity to examine the evolution of the intertwining of regional assets, embeddedness and value capture over an extended time frame during which Australia’s form of global engagement progressed from protectionist to developmental to market-based settings. Attention to the wider context reveals the importance of the Australian state’s strategic policies, the evolution of the global production system, and the changing global macro-economic context in shaping the firm’s trajectory. We show that the possession of knowledge assets can enable firms to upgrade their position in production networks when policy settings are supportive, when the firm holds an asset valued by network leaders, and when the firm has access to the capital required to exploit its assets. However, upgrading also generates new vulnerabilities. As the firm gravitates to global production hubs, partners with lead firms, and relies increasingly on revenue derived from rents, it becomes more vulnerable to predatory take-over.

The article makes four contributions to improving understandings of decoupling/disarticulation processes. First, we identify the ambiguity and fragility of the notion of regional assets. Most extant discussion focuses on assets like natural resources that are fixed in place and therefore have a relatively straightforward association with regional value capture. But a focus on knowledge assets—assets that are potentially mobile, and therefore vulnerable to capture—exposes the uncertain nature of the relationship among valuable assets, value capture and regional development. We suggest that treating regional assets as an undifferentiated category tends to blur awareness of where created value is captured and of who benefits from value creation. We propose that assets are regional assets only when they facilitate significant regional value capture, and conversely, that assets found ‘in’ the region and accessed by global firms, but with minimal local value capture, should not be described as regional assets. We see this as the basis of the distinction between development ‘in’ but not ‘of’ the region. Second, we suggest that the contribution of supplier firms to knowledge production means they do more than merely mediate access to regional assets. Intangible assets like knowledge and know-how are produced and reproduced in practices within organizations, so the labour process is of crucial importance to their existence. Therefore, the firm, as the organization nurturing knowledge, must be considered to itself be a regional asset. Third, we show that decoupling from production networks is not necessarily a single strategic move, but rather can be an unintended outcome, the culmination of a series of moves among multiple actors embroiled in complex geometries of power, that ends up leaving less powerful firms without alternatives despite doing everything right in terms of upgrading. Fourth, we add to understandings of the conditioning role of geopolitical and macroeconomic changes in decoupling processes, a topic often neglected in the GPN literature (Bair, 2005; MacKinnon, 2012; Phelps et al., 2018), by showing that shifts in the value capture trajectories of firms are associated with shifts in the positioning of regions in global macroeconomic arrangements. We contend that macroeconomic changes influence the configuration of networks by effectively revaluing regional assets and triggering changes in firm ownership as firms maneuver to avoid devaluation or to capture value opportunities. We see the revaluation of regional assets as the central mechanism through which macroeconomic forces have effect in production networks.

To develop these arguments, the next section provides a critical review of the literature on upgrading, regional assets and value capture and their influence in shaping production networks and regional development outcomes. The third empirical section describes the development, growth, and demise of our case study firm, PBR Brakes. This is followed by a discussion of the relationship between regional assets, value capture trajectories and firms. The conclusion reiterates the key points and flags the implications for regional development.

Upgrading, downgrading and value capture trajectories

The continuing research challenge across research on global production systems is to understand how processes of firm upgrading and downgrading (in GVC), or the changing patterns of value capture trajectories (in GPN) contribute to uneven development as they ‘reflect, reproduce and transform the territorial and social unevenness that defines the capitalist world economy’ (Werner & Bair, 2019, p. 190). Responding to the ‘inclusionary bias’ of earlier accounts (Bair & Werner, 2011a), contemporary research in both GVC and GPN has focused increasingly on the negative or ‘dark side’ of these processes, known in GVC as disarticulation and in GPN as decoupling (see Bair & Werner, 2011a; Blažek, 2016; Coe & Hess, 2010; Coe & Yeung, 2015; Dawley, 2011; MacKinnon, 2012; Phelps et al., 2018). This article is concerned mainly with disinvestment, which is one of the three modes of disarticulation identified by Werner and Bair (2019).¹ Regional disinvestment is the expulsion or delinking of a region (that is, of firms in a region) from value chains, either because the elements that attracted the GVC initially have eroded, or because other locations offer more advantages. The parallel notion of de-coupling in GPN describes the set of processes through which production networks and regions disengage from one another when their prior coupling no longer accords with contemporary strategies (Coe & Yeung, 2015). Both agree the disinvestment/decoupling is more likely in contexts marked by pronounced power asymmetries (MacKinnon, 2012, Blažek, 2016; Werner & Bair, 2019). This section introduces the literature on upgrading and value capture trajectories, explains the core concepts of regional assets and value capture, then raises questions about their status in relation to the trajectories of individual firms.

In the policy oriented GVC literature, upgrading is seen as the key driver of economic development. Upgrading is the process of ‘improving a firm’s position within the chain’, which is ‘generally associated with increased competitiveness that allows for the capture of greater value-added through the production process’ (Bair, 2005, p. 165). Humphrey and Schmitz (2002) identified four types of upgrading: product upgrading to produce more complex products, process upgrading to more technologically sophisticated or efficient production processes, functional upgrading to higher value activities such as design, and intra-sectoral upgrading into related sectors. Gereffi et al. (2005, p. 177) broadened the definition to include ‘the process by which economic actors—nations, firms and workers—move from low-value to relatively high-value activities in global production networks’. Upgrading not only enables supplier firms to capture a greater share of the production surplus, but it is also expected to insulate them from the threat of devaluation, disinvestment or exclusion.

The problem is that whilst the upgrading of products and processes is relatively commonplace, rarely are supplier firms able to expand into the lucrative and knowledge-intensive design, brand and marketing activities associated with functional upgrading (Azmeh & Nadvi, 2014; Barrientos, 2019; Ponte & Ewert, 2009). This is especially true in developing country contexts, where local firms rely on knowledge and learning being transmitted ‘down’ the chain, but knowledge-rich firms rarely share their commercially valuable knowledge. Nonetheless, policymakers informed by Schumpeterian logics continue to encourage firms and governments in peripheral places to develop knowledge resources, effectively positioning knowledge as the key to improving firms’ positions in production networks, to improving firm and regional value capture, and to achieving regional development outcomes (Foray, 2014).

In addition to not adequately addressing the barriers to upgrading (Bair, 2005; Giuliani et al., 2005), the upgrading literature has been criticized for being too firm-centric, linear, and unidirectional (Coe & Yeung, 2015), for ignoring the dispersed effects of networked forms of power (Hughes, 2000), for failing to recognize that industrial upgrading and regional upgrading are not necessarily parallel or complementary processes (Tokatli, 2013), and for losing sight of the foundational role of the underlying value relations between capital and labor (Baglioni et al., 2021; Werner, 2012). Crucially, it overlooks questions about why and how firms and places are downgraded or excluded from GPN (Werner & Bair, 2019).

The GPN approach responds to these criticisms by replacing the expectation of upgrading with the more flexible notion of value capture trajectories. Thinking in terms of trajectories allows for a range of outcomes, both positive and negative, and is better able to incorporate the networked complexity of production arrangements (Coe & Yeung, 2015). Trajectories reflect the changing character of the processes that link production networks with regions, processes GPN calls strategic coupling, re-coupling and de-coupling (Coe & Yeung, 2015). Strategic coupling’s three modalities—indigenous, functional, and structural—have different implications for control, dependency, and value capture. The indigenous form describes the deep embeddedness of firms in a local context. The functional mode includes strategic associations of various types, such as partnerships and joint ventures, while the structural mode describes arms-length market-based associations. Echoing the upgrading literature, Coe and Yeung (2015, p. 188) anticipate that places might upgrade the form of their coupling over time—from structural to functional to indigenous—to improve regional value capture. They see structural forms of coupling as the most vulnerable to decoupling and indigenous couplings as the least vulnerable.

From this perspective, regional assets are the key underlying determinant of any region’s enrolment in global production arrangements (Coe et al., 2004; MacKinnon, 2012). Regional assets include inter alia natural resources, knowledge and skills, infrastructure, policy settings, and institutional arrangements. These are not equivalent to Porter’s (2011) competitive advantages because what matters is ‘not their mere presence’ but rather their ‘appropriateness and complementarity’ to the needs of lead firms in production networks (Coe et al., 2004, p. 475). Regional institutions ‘mediate’ access to assets in ways that ‘complement the strategic needs of trans-local actors situated within global production networks’ (Coe et al., 2004, p. 470). The spatial selectivity of state strategies is also important in privileging some regional assets—and therefore some developmental options—over others (Yang, 2013). Importantly, GPN sees regional assets as ‘embodied’ in local firms (Yeung, 2015, p. 6), and local firms as the ‘glue’ holding strategic couplings together (Coe & Yeung, 2015, p. 222), but it does not see supplier firms as regional assets in their own right.

Regional assets generate value by working in combination to ‘create economies of scale or scope’ (Coe & Yeung, 2015, p. 19), which means that the coupling relies on these interactional effects rather than on the inherent qualities of the regional assets. Effectively then, regional assets are defined as anything in a region that can be made to ‘fit the needs of lead firms in GPNs’ (MacKinnon, 2012, p. 230). As relationships evolve over time, regional assets might sometimes offer more resources to lead firms, and at other times facilitate more local value capture: how the distribution plays out depends on the institutional context and the exact nature of the coupling relationship. In decoupling and disarticulation, these processes reverse, and things that were once regional assets are devalued and discarded, abolished, or stranded.

The capture of value is the principal determinant of developmental outcomes in regions (Coe & Yeung, 2015, p.171). Value capture—defined as the ‘value retained in firms, or their units, located in a given region’ (Blažek et al., 2021, p. 2107)—derives from three principal sources. First is value captured from production activities, such as from internal efficiencies, an outcome often achieved by increasing the rate of exploitation of workers (Bair & Werner, 2011b; Selwyn, 2015). Second is value captured from bargaining power in network relations, which establishes the distribution of surplus across a chain or network, and which is a function of governance arrangements and the modalities of power available to firms (Dallas et al., 2019). This makes production networks in essence ‘vehicles for transferring the value captured between different places and regions’ (Yeung, 2015, p. 2). Third is rents. These can be derived from multiple sources including regulatory arrangements, monopolistic markets, and proprietary technologies (Kaplinsky, 1998). The capacity of firms to acquire rents is conditioned by their positioning within networks (Dedrick et al., 2009), which leads firms to strategically ‘micro-position’ in networks to maximize their value capture opportunities (Blažek et al., 2021, p. 2117). At the same time, regional institutions adjust the social and regulatory context to improve the conditions for regional value creation and capture. Decoupling and disinvestment occurs when regional sources of value erode or devalue, when markets shift or contract, or when better opportunities for lead firms emerge elsewhere.

Overall, the literature’s understanding of decoupling and disinvestment as a reversal of the processes of coupling and investment has multiple deficiencies. First is the tendency to separate coupling from decoupling and isolate both from their context. Regional development appears as the straightforward outcome of regional firms’ strategies and their value capture trajectories, rather than as the product of complexly political interactions of states and firms and non-government organisations in the context of a plethora of macroeconomic and geopolitical tensions. The account underplays the capacity of regions to capture more value by instituting regulatory arrangements that lock profits and rents in place (Dawley et al., 2019).

Second is the tendency in GPN to underestimate the significance of firm ownership in conditioning value capture potentials. GPN assumes that captured value is shared among regional, network and external stakeholders, depending on power dynamics (Coe & Yeung, 2015). Both GPN and policy-oriented versions of GVC have a positive view of Foreign Direct Investment (FDI), seeing it as a means by which firms in less developed locations can access knowledge assets, lift employment, develop skills, earn tax revenues, generate multiplier effects, and survive crises (Pavlínek & Ženka, 2011; 2016; Smith et al., 2014). Neither dwell on the distributional struggle that was central to earlier commodity chain analysis (Hopkins & Wallerstein, 1986), nor on the risk of ‘institutional capture’ transferring the benefits of local resources to transnational firms (Dawley, 2011; Phelps, 2008; Werner et al., 2014). Aggressive firm strategies—like take-overs, acquisitions and forced mergers—are barely mentioned and seem incompatible with GPN’s expectation of coupling’s ‘mutual complementarity’ (Yeung, 2015, p.5).

Third, research in both GVC and GPN is concentrated on contexts where the regional assets being accessed by leading firms are either relatively inexpensive labour (Azmeh & Nadvi, 2014; Bair & Werner, 2011b; Barrientos, 2019; Pavlínek & Ženka, 2016) or natural resources (Bridge & Dodge, 2022; Havice & Campling, 2013; MacKinnon, 2013). Both these asset forms are relatively immobile, and unerringly associated with their region, so there is always likely to be some degree of regional value capture associated with the regional asset. Assets such as regulatory arrangements, relational knowledge and know-how, institutional frameworks, market access, social infrastructure and inter-firm synergies are embedded in local institutional frameworks but are not durable and could evaporate with a change of policy or institutional realignment. Knowledge and know-how are often embedded in firms, but GPN analysis has tended to treat firms as a black box (MacKinnon, 2012, p. 235), rarely interrogating how internal labour processes contribute to the formation of regional assets and therefore to network positioning (but see Starosta, 2010; Newsome et al., 2015; Baglioni et al., 2021).

Assets like technologies, intellectual property and financial capital, on the other hand, are potentially highly mobile and might be located in a region without being tied to it in the sense implied by the notion of embeddedness. Since intellectual property is mobile, it can be relocated to regions with more attractive regulatory arrangements (Weller, 2007). Intellectual property is interesting from a regional asset perspective because it is a codification of the underlying value created by innovation in products and processes, firm organization or the labour process. The capture of rents from intellectual property relies on protective legal frameworks that establish the intellectual, technical and organizational effort of workers (the underlying regional asset) as the property of firms. The capacity of an inventive firm to retain the benefits of innovation depend on what Teece (1986, p. 287) calls the appropriability context—or ‘the environmental factors … that govern an innovator’s ability to capture profits generated by an innovation’—which in turn depends on the regulatory context and complementary assets (Dedrick et al., 2009; Sako & Zylberberg, 2019). Intellectual property assets are particularly attractive to lead firms in GPNs by virtue of their capacity to deliver monopoly rents over extended time periods (Durand & Milberg, 2020). The possession of intellectual property has implications for the configuration of production networks because it encourages firms to retain production in-house to protect their advantage and tilts the distributional equation in favor of the owners, usually large firms at core sites (Dedrick et al., 2009).

Firms might also obtain intellectual property by purchasing it, by renting access in licensing arrangements, or by taking over the firms that own it (see Hansen et al., 2016). The strategies of large firms seeking to control intellectual property include the predatory capture of knowledge assets by the take-over of smaller, less powerful firms (Rikap, 2020), especially when smaller firms are perceived to be encroaching on the larger firm’s core area of competence (Serfati, 2011). There is a growing awareness that firms functioning as ‘intellectual monopolies’ have the capacity to extract more value from productive firms, and from the regions in which value is generated, and to deliver wealth to destinations beyond the production chain (Birch, 2017; Durand & Milberg, 2020; Rikap, 2020; Seabrooke & Wigan, 2017).

The tension between tacit and embedded know-how and mobile and codified intellectual property exposes the inadequacy of GPN’s explanation of the internal workings of firms. GPN views supplier firms as mediating access to regional assets which are conceived as being external to firms. It does not see the firms as assets in their own right. But in the case of know-how activated in the labour process, the ‘asset’ is created in the firm from the resources (skills) it employs. Value is created by the embedded asset (know-how), but value capture depends on its codification and mobilization as property, that is, on its standardization (see Baglioni et al., 2021). To explore this further, the case study below examines the role of a supplier firm in relation to regional assets, focussing on know-how, knowledge and intellectual property. It traces the micro-dynamics of the firm’s evolving value capture trajectory to identify the relationships between regional assets, embeddedness and value capture. Understanding these micro-dynamics, we suggest, can contribute to a better understanding of both upgrading and downgrading processes and their implications for regional development.

The evolution of PBR brakes

This section provides a contextualized case study tracing the evolution of the automotive brake component maker PBR Brakes, a firm which operated in the Australian automotive industry from the 1920s until the Australian industry’s closure in 2019. Australia is a prosperous, high wage and knowledge-rich nation with a market-based economy that now relies on mining and agricultural exports. However, in the years after World War II, Australia had pursued national infant industry policies supporting the growth of local manufacturing. In the 1990s, the policy regime switched to promoting competitive advantage, global engagement and encouraging advanced manufactures (after Porter, 2011). After 1996, with a change of government, policies switched again to favor market-based comparative advantage, in effect prioritizing primary exports. This history creates three phases of development with different constellations of policy settings, which for this article we understand as sets of regulatory regional assets. Australia’s developmental options have also been shaped by its positioning as peripheral to the production side of global manufacturing networks and peripheral to the world’s logistics corridors. Australia is considered ‘semi-peripheral’ in World-Systems terminology.

The story of PBR emerged from a larger project examining the regional impacts of the closure of Australia’s automotive sector and was selected for detailed study for the reasons outlined in the introduction. Case studies of specific firms are a proven means of expanding theoretical knowledge of industrial change processes (Pike, 2011; Tokatli, 2015). The narrative describes the changing character of PBR’s value creation and value-capture trajectories over its eighty year history in the context of the evolution of Australia’s policy frameworks, the changing character of the global automotive sector, and the vagaries of the macroeconomic context. The data collection methods varied with the phases of development. The description of the early history of the firm relies on secondary sources, in particular a company history written by a former manager (Valenta, 2018). In the period from 1998 to 2007, when PBR was a publicly listed company, the account also draws on archived company reports, announcements, and submissions to government inquiries as well as a systematic search of media reports in the Proquest Australian Newspapers database. Such documentary evidence is crucial in retrospective work spanning long time periods (Ezzy, 2002). Interviews with six former PBR managers and engineers filled in gaps in the story and facilitated interpretation of the archival material (Mason, 2002). Interviews and newspaper reports were the main source of information in recent times, when a return to private ownership reduced the volume of information available in the public sphere.

In the account below, the story of PBR is told in three parts relating to the three phases of Australia’s policy regime. In the first phase (pre-1983), it was a privately owned and ‘indigenous’ firm in a stand-alone national industry, gradually building a near monopoly position in a then-protected local market. In the second phase (1983–2000), during Australia’s restructuring for global engagement, PBR upgraded, expanded through technical innovation and internationalization, and grew to the status of a global Tier 2 supplier. Its principal asset at that time was intellectual property. The third phase traces PBR’s demise as Australia’s open market settings after 2000 intersected with the consolidation of the global automotive sector. In each stage the narrative seeks to identify the principal regional assets attracting global networks, the ownership of automotive firms operating in Australia, and the relationship between value creation and value capture. To guide the discussion, the history of PBR’s changes in name and ownership are summarized in Table 1.

Table 1. Changes in PBR ownership.

Years	Company Name	Owned by
1927–1947	Paton’s Brake Replacements Pty Ltd	Independent supplier (AU, private)
1947–1986	PBR	Repco Group (AU, listed)
1986–1989	BCIA (Brake & Clutch Industries)	Automotive Products Ltd (BBA Grp, UK)
1989–1997	PBR Automotive Pty Ltd	Pacifica BBA Limited (AU, listed)
1997–2008	PBR International	Pacifica Group Ltd (AU, listed)
2008–2012	Bosch Chassis Systems Aust. Pty Ltd	Robert Bosch GmbH (GDR, private)
2012–2018	Chassis Brakes International (Aust.) Pty Ltd	KPK (Netherlands, Private Equity)

An indigenous firm in a nation-building industry

The brake supplier firm, Paton’s Brake Replacements, was first established in Melbourne in 1927 as a suburban vehicle maintenance workshop. In a then rapidly growing domestic automotive market, it acquired other supplier firms, in the process diversifying its product range and initiating the local manufacture of brake components. By the mid-1930s it was supplying brake components for most locally-available vehicle brands, which were then assembled in Australia from imported ‘knock-down’ kits (Beruldsen, 1989). Before WWII, Paton’s was one of a group of local repairers and component manufacturers lobbying the national government for the establishment of a local vehicle industry (Valenta, 2018). Innovative from the outset, Paton’s pioneered the development of new braking technologies for heavy vehicles. During the Second World War, when small Australian firms like Paton’s were deployed to service equipment for the Allied forces in the Pacific, Paton’s vacuum brakes were used in Australian and US military vehicles. The war created a local workforce with advanced automotive skills.

After the war, the nation-building Australian government sought to build on these emerging regional assets while developing closer economic ties, and maintaining security ties, with the United States. The Australian government invited leading US automotive firms to set up assembly plants in Australia to anchor the development of a domestic manufacturing industry.² With the world’s automotive industry structure then organized around national nodes, the Ford Motor Company and General Motors took up the offer (Conlon & Perkins, 2001).

The Australian government’s developmental strategy then sought to nurture industrialization via the three pillars of border protection, wage regulation and migration (Kelly, 1992). It offered an array of incentives—or regional assets—to sweeten the deal. It protected the local market with high import tariffs and quotas that discouraged the importation of other firms’ makes and models, so enabling the incoming anchor firms to reap monopoly rents. A system of regulation—including an Import Licensing System (1952–60), Local Content Plans (1964–71) and Market Sharing Arrangements (1974–84)—sustained near-monopoly conditions for the local manufacturing supplier sector (Conlon & Perkins, 1995). An accompanying dowry of regional resources included subsidized energy supplies, state-sponsored provision of supporting industries (aluminum smelters and oil refining), and government-funded training services to build the skilled automotive labour force. From these regional assets, the firms could extract complementary rents. In return the firms were required to facilitate local value capture by nurturing the growth of the local supplier industry, paying (high and regulated) wages to employees, paying taxes, and cooperating with government policy strategies. This support was justified by appeals to the anticipated spillovers of knowledge and expertise to other sectors.

The government’s strategic ambition from the outset had been to domesticate and ‘embed’ the focal firms. Initially, the cars built in Australia were designed in the United States, obliging local suppliers to manufacture components to US specifications (Valenta, 2018). To build the capacity of the domestic supplier industry, the Australian government incentivized the focal firms to design and manufacture vehicles tailored for Australian conditions (Conlon & Perkins, 2001). This provided opportunities for firms like Paton’s Brakes to consolidate their design capacities—to functionally upgrade—by working in partnership with the increasingly autonomous local focal firms. The outcome—in the context of a rapidly expanding local product market—was an extended period, through the 1950s and 1960s, of collaborative and mutually beneficial relations between industrial policy institutions, multinational firms, and a growing privately-owned indigenous manufacturing sector. Over the ensuing years, regular reviews of the national industry by the Federal government’s Tariff Board calibrated border settings to guarantee the lead firms an adequate return on investment (Bell, 1993; Rattigan, 1969). In Kaplinsky’s (1998) terms, in this era the focal firms and local suppliers reaped monopoly rents through entry barriers, protected markets and restricted price competition. Under this regime, much of the value being created in the region was also captured in the region.

This context enabled PBR to upgrade in process, product, and functional terms to the point where it dominated the Australian brake component sector. Its growth had been enabled by incorporation into the large diversified and listed Australian firm REPCO Ltd (in 1947, at the retirement of the original owners), which then owned multiple local automotive components suppliers (Valenta, 2018). This arrangement provided Paton’s—now renamed PBR—with access to capital for expansion. In 1948, a license agreement with Bendix Corporation (USA) enabled PBR to produce the brakes fitted to the first GM-Holden models produced in Australia. Under the trade rules of the time, license agreements with local suppliers were the principal means by which overseas intellectual property assets were incorporated into locally made vehicles. PBR also designed brake components for local models, leading in 1957 to the launch of its power brake system for passenger vehicles. The new system was made from aluminum, for which PBR established a dedicated aluminum foundry and leveraged the complementary asset of aluminum produced at Australia’s first aluminum smelter, which had been established as a public sector joint venture between the Australian and Tasmanian (State) governments. Expertise with aluminum components would later become a central source of PBR’s international competitiveness. In the 1960s, PBR developed exporting capacity in automotive aftermarkets and formed an additional partnership with Dunlop (UK) to enable it to manufacture disc brake calipers for multiple models in the Australian market. PBR had by this time developed into a relatively large firm by Australian standards.

To summarize, this developmental phase ‘embedded’ the US-owned focal firms in a protected national industry where they anchored the expansion of local supplier firms. In this period there was a strong articulation of interests and outlook between the focal firms and the Australian government and mutually beneficial relationships between locally-owned suppliers and overseas-owned assemblers. The local supplier firms organized the asset of local skills and were the principal conduits through which the region captured value from automotive production. Their position was secured by regulations mandating the use of local components in locally-assembled vehicles. From the perspective of the overseas-owned assembler firms, the central asset was a protected and growing consumer market (Conlon & Perkins, 1995), where value was captured from consumer sales and from the production cost savings enabled by government-subsidized infrastructure and complementary industries. The focal firms were probably more profitable than they appeared on paper due to transfer pricing and payments for access to intellectual property (Productivity Commission, 2002; see also Crough & Wheelwright, 1982; Uren, 2015). In this era, then, the local industry perfected ‘mass production on a small scale’ (Lansbury & Bamber, 1997), but with few linkages to automotive production in other places (Conlon & Perkins, 1995).

Functional upgrading in an internationalizing industry

By the late 1960s, as Japanese firms supported by export-oriented industrialization policies began producing inexpensive small vehicles, it was becoming more difficult to isolate the Australian market (Rattigan, 1969). This put the central regional asset sustaining the industry—monopoly access to Australian consumers—at risk. Australia’s protectionist strategy became unsustainable when the US Nixon government’s suspension of the Bretton Woods agreement in 1971 ended currency controls (see Weller & O’Neill, 2014). In 1973, the incoming Whitlam government in Australia stabilized the macroeconomy by cutting import tariffs by 25% across-the-board. In the automotive sector, this move triggered a flood of imports of small cars from Japan and led to a first round of local automotive job losses as the focal firms adjusted their production volumes (Bell, 1993). PBR responded to the new conditions by entering licensing arrangements with Akebono and JKC to supply brake replacements for Japanese-made vehicles, and, with the support of government export incentives, simultaneously expanded its exports of locally-made aluminum brake calipers. Both these moves reduced PBR’s dependence on the local focal firms and enabled it to continue to grow beyond Australia’s borders. At its peak in 1980, PBR employed over 2,500 people at its Melbourne production plant. However, PBR’s association with REPCO was becoming a constraint—PBR perceived REPCO’s then priority of delivering shareholder value as starving it of capital for research and expansion (Valenta, 2018)

Australia’s protectionist settlement ended in 1983 when the incoming Hawke government opened the economy to global forces by floating the exchange rate, winding back tariff protection, and marketizing the internal regulatory regime. Industry policy reoriented to improving efficiency, productivity, and international competitiveness. The liberalization of Australia’s economy revalued Australian assets on global markets and increased global interest in Australian firms. A flurry of merger and acquisition activity followed as firms repositioned for the new context. For PBR—and for many other larger manufacturing firms in Australia—the change in state strategy was experienced first as a change in firm ownership. In 1984, REPCO purchased PBR’s main local competitor, Girlock (Aust.), which had previously been a subsidiary of UK automotive supplier BAI.³ As well as delivering near monopoly control of the domestic market, the purchase captured Girlock’s established local research and development (R&D) capacities and its export foothold in the US market. In other words, PBR took over a competitor that threatened its core competencies. Then, in 1985, REPCO—which was by this time undervalued in the share market relative to the value of its component assets—was purchased by the corporate raider Ariadne (Sykes, 1996). In Ariadne’s subsequent breaking up of REPCO, Girlock was merged into PBR to form a new entity called Brake and Clutch Industries Australia (BCIA). BCIA was then sold in 1986 to the UK firm Automotive Products Ltd, which was already an internationalized business manufacturing a variety of automotive products including clutches and brakes. From PBR’s perspective, this was a friendly takeover enabling it to access the European market. Then, in 1989, Automotive Products Ltd was acquired by the BBA Group PLC (UK). Soon after, a 42% stake in BCIA was floated on the Australian Stock Exchange. Australian and US banks, as well as institutional investors, became minority shareholders. Renamed Pacific BBA Limited, this capital raising enabled BBA to expand and diversify its local holdings—and to upgrade inter-sectorally—by adding automotive plastics and fiberglass businesses. This internationalization of ownership was the second step in PBR’s dis-embedding from the local context.

By 1988, the Australian government was intensifying its strategy to modernize and internationalize the local automotive sector. The government’s Automotive Industry Plan (‘the Button Plan’) sponsored technological upgrading, labour market flexibilization, and improved efficiency (Conlon & Perkins, 1995, Lansbury & Bamber, 1997). It aimed to generate economies of scale in local production by promoting cooperation among the lead focal firms, streamlining the number of models produced locally and upgrading technologies for just-in-time production. This increased the interdependencies among the local focal firms and between focal firms and the main local suppliers. To increase the rate of change, the government accelerated the tariff reduction schedule in 1988 and abandoned local content rules in 1989. Thereafter, local suppliers were encouraged to move labour intensive production activities offshore to low wage sites and were offered incentives to build export markets (DIST, 1998; Industry Commission, 1997).

With the government assistance, PBR upgraded machinery, improved manufacturing processes, established a quality control department, and expanded research and development activities. It also expanded exports and established offshore production capacity (Valenta, 2018). In 1991, PBR established Pacific Brake and Clutch Industries (Malaysia) and retrenched 600 workers from its Melbourne plant. This switch increased the firm’s value capture by reducing production costs and reducing the share of value distributed to the workforce. Now, its ‘eyes were firmly fixed on the huge original equipment markets of North America and Asia’ (Valenta, 2018, p. 34), and PBR sought to build design capacity and control a supplier network from its Australian home base. Up to this point, PBR was internationalizing with full vertical control of its business activities.

In 1992 PBR launched a revolutionary new product, the ‘Banksia’ park brake. This invention reputedly emerged as the outcome of a close working relationship between PBR’s research and development team and production workers, who together designed products for ease of assembly and reduced production time. Now PBR had an asset that the global industry wanted. This advanced technology was quickly incorporated into the production of the world’s leading carmakers, including Korean models and most General Motors products. Soon after, PBR entered an arrangement with the US GM subsidiary Delco to produce the Banksia in the US for the US market.

The escalation of the value of PBR’s knowledge assets quickly led to further changes in ownership. In 1993, BBA PLC (UK)—which was itself challenged at the time—divested its remaining interest in Pacifica BBA so that Pacifica was owned entirely by Australian stockholders. The parent firm was renamed Pacifica Group Ltd, and BCIA reverted to its original name, PBR Automotive. The change meant that the intellectual property rents generated by the Banksia brake would accrue to PBR Automotive and its (mainly Australian) shareholders. In 1994, now producing a million units per annum, PBR Automotive won Australia’s ‘Exporter of the Year’ award (Valenta, 2018). In effect, PBR had functionally upgraded and linked to global networks through a combination of internationalization, exploiting labour in production subsidiaries in Asia, and production partnerships in the core economies through which it earned rents on intellectual property. PBR and its shareholders were now capturing value from other parts of the world.

However, in this upgraded position, PBR was obliged to follow the global lead firms to their production hubs and to align with lead firms’ production standards and just-in-time production arrangements. In 1996, PBR signed a license agreement with Japan Brake and Industrial Co Ltd (JBI) to manufacture the Banksia brake in Japan. In 1997, it set up a plant in Rayong Thailand, to supply the growing production node there, and then established a $100 million North American brake plant in Knoxville, Tennessee. The latter deepened PBR’s relationship with General Motors—and leapfrogged the Australian focal firms—through a preferred joint-venture partnership with Delphi Automotive Systems, which purchased a 49% share of the Knoxville plant. In 1999 a second US plant was established in South Carolina. PBR renamed again, to PBR International, and now had a market capitalization of about AU$700 million (Korporaal, 2009). Although the 1998 Asian crisis depressed PBR’s sales in the Asian market, and caused a sharp fall in its share price, the effects were offset by its growing US presence.

During this period the region (Australia) revised the nature of its strategic relationships with the automotive industry, in the process altering the character of inter-firm relationships, regional assets and value capture. The regional assets of most value to the Australian-domiciled lead firms in the previous era—the exclusive and growing consumer market, subsidized infrastructure, and complementary industries—were withdrawn or wound back. These losses were offset by the expansion of direct assistance to firms to help them modernize, innovate, and develop export markets. Internationally, the automotive industry was globalizing, and it made sense, strategically, for Australian firms to aim to be a part of that shift.

Direct financial assistance was a regional asset, and attractive to firms, but it differs qualitatively from the earlier assets because it no longer sought to ‘embed’ the firms in the fabric of the rest of the economy. Moving from subsidized and dedicated electricity supplies to paying market prices for energy, for example, is tantamount—in GPN terms—to downgrading to structural coupling. The changes disrupted the ‘articulation’ inherent to the pre-1983 shared developmental project. As imported vehicles from multiple sources increased their market share, the revised arrangements also altered the local value capture proposition for the focal lead firms. In 2003, for example, Ford Motor Company’s reported after tax profit was just $154 million from $3.8 billion in sales (Singh et al., 2005). The local focal firms responded with more scrutiny of input costs, actively squeezing the margins of local suppliers (Singh et al., 2005), while the suppliers attempted to offset the effects by increasing aftermarket prices.

Overall, this period saw both a revision of the form of regional assets and a decline in Australia’s ‘regional’ value capture from automotive production as imported vehicles increased their local market share. Local value capture was compromised by declining tariff revenues on imports, declining taxation from faltering local firms, the closure of less competitive supplier firms, the loss of the wage income of displaced workers, and the cost of industry assistance measures. While the profitability of the local focal firms fell with declining production volumes (keeping in mind the uncertainty about their true position), the fortunes of local suppliers varied. They tended to be more profitable than the assemblers (Industries Assistance Commission, 1990; Productivity Commission, 2002), and PBR was the most profitable of the local suppliers (Productivity Commission, 2002).

Downgrading in a contracting global context

The seeds of the downgrading process were sown around 2000, when Australia joined the World Trade Organization, embraced comparative advantage-based free trade policies, and abandoned automotive industry export market development incentives. Since a change of government in 1996, the national strategy had been prepared to sacrifice manufacturing—where Australian production was disadvantaged by high labour and transport costs—to build industries in which Australia had a clear comparative advantage. The new regime still subsidized automotive production, but only enough to make it worthwhile for firms to continue to conduct their activities ‘in’ the region. Furthermore, by the turn of the century China’s expanding manufacturing capacity was putting the automotive sector across the advanced economies under increasing stress (Stanford, 2010). Concurrently, as reliance on mining exports grew, Australia’s terms of trade declined, and the value of the Australian currency began inflating (Weller & O’Neill, 2014). This had the effect of further reducing the competitiveness of Australian manufactures. Around this time, most of Australia’s larger automotive supplier firms were purchased by global Tier 1 and 2 firms, and the import share of components increased accordingly. With stalled progress on global trade liberalization, the Australian government began negotiating bilateral trade deals to gain market access for resources and agricultural exports.

In 2000, and responding to this new context, Pacifica announced its intention to transform into an industrial technology company (Pacifica, 2000). It began divesting its non-core assets, concentrating on inhouse research and development, and forging strategic alliances with manufacturers, research institutions and universities. Pacifica Group Technologies was established in 2001 to further develop intellectual property assets. This led, with the support of an AU$4.73 million grant from the Victorian (State) government, to the commercialization of an electronic (brake-by-wire) version of the Banksia brake and to the development of a new rear braking system. This new strategy reweighted functions to concentrate on those parts of the business generating higher returns—that is, the control of intellectual property.

Continuing its global expansion, in 2002, PBR entered an exclusive agreement with the German automotive supplier Robert Bosch—one of the US sector’s largest components suppliers and a long-standing ally of Bendix (US)—to supply aluminum calipers and Banksia brakes through Bosch’s GPN. This partnership enabled PBR to supply a wide range of companies in America, Canada, and Mexico, culminating in its products being fitted in 4.1 million new vehicles (Valenta, 2018, p. 47). PBR’s internationalization made it less dependent on activities in Australia and on Australia’s focal firms, both of which had been made vulnerable by the recalibration of Australia’s global position. By 2001, barely AU$200 million of PBR’s total sales of AU$900 million were generated in Australia (PBR International, 2002). PBR set up a new plant in China, to supply General Motors plants (in China and the US) and to maintain supplies to Australia’s focal firms (Robinson et al., 2005). It entered the European market through the acquisition of AP Italia and the establishment of production facilities in Germany.

Then, the beginning of the end. Australia’s free trade deals with Thailand and the United States, which were negotiated from 2000 to 2004 and came into effect at the start of 2005, made it easier for global Tier 1 and 2 suppliers to import automotive products to Australia. The year after the Thailand–Australia Free Trade Agreement (TAFTA) came into effect, automotive imports increased by $AU819 million and automotive exports by $AU19 million (FAPM, 2006), a more than forty-fold difference. In this context, in March 2005, Citibank released a report identifying Pacifica as a takeover target (Maiden, 2005). In April 2005, PBR downgraded its profit forecast citing lower demand in North American markets, high input costs, and adverse currency exchange rates (AAP, 2005). Pacifica shares dropped by 25% in one day as banks sold off their shareholdings. Then PBR’s US partner Delphi Corporation entered Chapter 11 protection in October 2005, leaving PBR with a US$2.8 million impairment. In a press release, Pacifica acknowledged that demand for its products would decline as GM moved to a new production platform (Pacifica, 2005).

Bosch—which was already PBR’s main buyer—made an informal takeover bid for PBR in late 2005. The PBR Board rejected the bid. Bosch made a formal offer in October 2006, although at a lower price than offered in 2005, with an accompanying threat that it would source components elsewhere if PBR again refused (Porter, 2006). PBR again rejected the offer (Business News, 2006). In February 2007, in the context of worsening global trading conditions, Bosch made an even lower offer. In March 2007 it purchased a controlling 75.3 per cent stake in PBR for $AU310 million, less than half of PBR’s book value 10 years earlier.⁴ After the purchase, PBR became a subsidiary of Bosch.

Bosch now owned PBR’s principal asset, its intellectual property. Bosch terminated the employment of most of PBR’s Australian managers and downgraded the jewel in PBR’s crown—its Melbourne-based research and development center—to troubleshooting existing products (Pacifica, 2008; interviews). This expertise was dispersed. PBR’s Australian plants were integrated into Bosch’s global framework—meaning that apart from a small manufacturing capacity to supply unique products to Australian focal firms, the Australian brake plants became warehouses for products made in low-wage sites. Compared to the PBR management, Bosch adopted a more authoritarian style and a more adversarial industrial relations posture (Auer et al., 2012). PBR’s Asian plants were integrated into Bosch Asia and the AP Italia plant was sold. Bosch announced it would close the PBR Knoxville brake caliper plant and reduce employment at the South Carolina plant. As the global financial crisis crippled the automotive sector in the United States (Cattaneo et al., 2010; Stanford, 2010), the failure of General Motors (US) resulted in Bosch’s PBR reporting a $AU242 million loss in the 2008 calendar year. Market value crashed to $22.5 million (Korporaal, 2009). There were retrenchments at Bosch’s Melbourne plant (that is, the former PBR) in August 2008 and February 2009, but some production continued thanks to the incoming Labor government providing the local focal firms with a $AU6.2 billion assistance package (Goods, 2014). In June 2012, the entire global brakes division of Bosch was sold to KPS Capital Partners, a private equity firm based in the Netherlands, forming Chassis Brakes International, one of the three largest brake system and brake components manufacturers in the world (Bosch, 2012). The diminished Melbourne PBR plant was thereafter known as Chassis Brakes. The new owner’s revitalization strategy involved vertical integration of input aluminum casting supplies and the aggressive suppression of wage costs (FWC, 2013).

In May 2013, the first of the Australian focal firms—Ford Motor Company—announced it would close its Australian assembly operations. The interdependencies among the Australian automotive firms and suppliers meant that Ford’s announcement triggered similar decisions by the other local focal firms. It was inevitable, then, that the PBR plant in Australia would also close. A liquidator was appointed in March 2018, and in 2019 the automotive division of Hitachi purchased its remaining assets (Bosch, 2017). Many of the overseas plants of this once-Australian firm continue to operate under Chassis Brakes ownership. The withdrawal of the focal firms from Australia triggered the closure of many dependent supplier firms, and led to the loss of thousands of jobs, mainly in the formerly industrial cities of Adelaide and Melbourne (Beer, 2018).⁵

Nonetheless, the Productivity Commission (2014) assessed Australian automotive production to have been a drain on Australia’s development overall on the grounds that the costs of assistance outweighed the benefits in terms of regional value capture. The automotive sector’s skilled labour force has subsequently dispersed, with many research and development engineers relocating overseas. Whilst the timing of the closures points to the effects of the global financial crisis, and to the reshoring policies that were conditions of the US government’s bailout of automotive firms (Vanchan et al., 2018), region-specific factors included the appreciation of the Australian currency, which compromised Australian manufacturing exports, escalating energy costs, and the election in late 2012 of a market-oriented Australian government opposed to industry assistance. According to the ‘Atlas’ global index (Atlas, n.d.), Australia’s economic complexity score declined from 55 in 1995 to 86 (of 133) in 2019, one of the most rapid declines of any nation globally.

The place of firms and regional assets

The story of this single firm illuminates how firm strategies are shaped by a complex combination of lead firm strategies, competitive threats, regulatory changes, and macroeconomic trends. When viewed from PBR’s perspective, its upgrading and expansion strategies flowed from its ambition to capture the value created by the revolutionary Banksia brake system and to avoid being brought down by an increasingly unviable Australian domestic industry. To do this in a way that retained control of intellectual property meant establishing in production hubs in the United States, China, and Thailand, where it was exposed to the increasingly unsustainable position of the General Motors network. In the end, it had nowhere to go. Examining the microprocesses over a long period of time reduces the significance of the final decoupling event, revealing an apparent inevitability produced by complexly networked constellations of power, challenging the proposition that any single agent’s strategies can dominate. The story highlights the many gaps in knowledge about the relationships among regional assets, value capture and local embeddedness.

First is the question of firm ownership, and of the impact of changes in ownership on value capture and the capacity for upgrading. The history of PBR shows a direct association between shifts in Australia’s macro-economic status in the world economy and the value of local firms. Each shift in state strategy revalued firms and led to take-overs and mergers. However, this story deviates from the accepted wisdom that attracting FDI is the foundation of regional growth and value capture. PBR entered into a series of cooperative arrangements to increase access to different types of assets. These were mainly motivated by the imperative to access capital to fuel expansion or access markets for products. Access to capital was a problem for PBR, as it is for growing firms in non-core regions more generally. For research-oriented firms like PBR, FDI is attractive because stock market investors tend to demand returns, and often lack the patience to support the uneven gains of research and development (as evidenced by the REPCO experience). But FDI also appears to have been a mixed blessing. Each time PBR found itself in a strong competitive position, it moved to free itself from an FDI-dependent arrangement, suggesting that when it no longer needed capital it had little inclination to share value capture. Later, overseas ownership of PBR was associated with the downgrading of research capacity, employment conditions and workplace cooperation, and the erosion of both local value capture and regional assets.⁶

Second is the positioning of local firms in relation to regional assets. From a GPN perspective, PBR mediated access to the regional asset of skilled engineers. But what made PBR exceptional was the productive relationship between the research engineers and the shopfloor workforce, and the form of organization within PBR that made it possible to maintain that relationship over a long period of time. The intangible assets of skills, expertise and know-how were reproduced in relational practices within the firm, in its labour process and its tacit understandings, elements tied to the organizational form of the firm. The outcome of those assets—the invention of the Banksia brake—was able to be codified and valued as intellectual property, but the underlying relationships remained opaque and not formally valued. The intellectual property owned by PBR, as a result of its workforces’ inventiveness, is effectively a codification of this tacit knowledge. This reinforces the importance of the role of, and developments in, the labour process for sustainable industry (Newsome et al., 2015). The problem is that ownership of intellectual property attracted the take-over by a larger firm, which disbanded the research in a peripheral location to concentrate knowledge in its existing R&D centers at core sites. The underlying relational knowledge assets within PBR were abolished, and the skills of the engineers devalued. This suggests that, in the absence of a suitable institutional container, the regional asset of knowledge and know-how is easily lost. In this sense, then, the firm becomes more than a mediator of access to assets. If the firm is crucial to the existence of the asset it must be a part of the asset.

This in turn highlights the ambiguity created by the double meaning of regional asset. As a form of property, intellectual property is mobile, an asset detached from the underlying local relationships. In contrast to the workforce’s– including its managers—commitments to the firm, place and community, intellectual property as property has no allegiances. Technically a regional asset is something of use to lead firms, something that actors in places make available to lead firms, and something from which lead firms create and capture value from the region. But a regional asset is also conceived of as an asset residing in, perhaps with some sense of belonging to, the region, something from which the region can capture value by engaging with networks. This ambiguity matters because it elides the question of who benefits from the exploitation of an asset. Value may be created in a region but realized elsewhere, reflecting decisions over which local actors may have little or no control. If the region is conceived as more than simply a site for value creation, but rather is a community that cares about employment and skill development, then what matters is not only value capture but also the potential for value capture to contribute to sustainable social development. Herein lies the importance of insisting—as does the GVC concept of articulation—on a broader and deeper concept of what a regional economy might comprise.

Concluding remarks

This article’s exploration of the rise and fall of an exceptional firm from a peripheral location has questioned the notion that functional upgrading will reduce supplier firms’ vulnerability to downgrading and disinvestment. The story of PBR demonstrates that in networks characterized by uneven power relations, upgrading does not erase vulnerability, but rather it alters the nature of the vulnerability. In this case, the upgrading firm’s ownership of valuable intellectual property assets made it vulnerable to hostile take-over, resulting in the absorption of its assets by firms located in other places. We have explained this outcome as the culmination of a long-term process in which the rational strategies of the firm—in the context of complex global power dynamics—progressively painted it into a corner from which there was no escape. On reflection, we have raised questions about the status of regional assets and the position of individual firms in the coupling relationship between regions and GPNs. These questions beg for further research.

The final point concerns the implications for uneven development. If functional upgrading based on knowledge assets does not guarantee firm survival, then we must question the proposition that firms and regions can upgrade their way to prosperity. Moreover, when the predatory actions of large firms relocate knowledge assets to global hubs, the effect is to increase the centralization of valuable resources and further limit the developmental potentials of peripheral places. This calls into question the utility, in peripheral places, of the Schumpeterian understanding of industrial evolution.

Disclosure statement

No potential conflict of interest was reported by the authors.

Additional information

Funding

The authors acknowledge the support of the Australian Research Council (Grants SR200200446 and LP170100940).

Notes on contributors

Sally Weller

Sally Weller is an economic geographer working in the fields of industrial restructuring, regional transformations, and labour market change in the Australian context. She currently works in the Business School at the University of South Australia.

Alistair Rainnie

Alistair Rainnie specializes in labour-oriented analyses of global production systems and is the author of numerous books and articles on this and related subjects. He works in the Business School of the University of South Australia.

Notes

1 The other two are devaluation and constitutive exclusion (Werner & Bair, 2019).

2 The associated threat was that Australia would set up a national (public sector) automotive industry (Rich, 2007).

3 The opening of the Australian economy enabled local firms, for the first time, to borrow capital on global markets.

4 A former manager remarked that he had felt as though Bosch had been ‘circling’ PBR from the outset of their relationship.

5 Australia is still a part of the production networks of these firms by virtue of their continuing presence in consumer markets. Ford was the first to announce its exit from vehicle assembly, then General Motors. Toyota was forced to close by their withdrawal. Mitsubishi had exited production in Australia in 2007.

6 That this is the reverse of the expectation in Eastern Europe (Pavlínek & Ženka, 2016; Smith et al., 2014;) reflects Australia’s position as a high wage economy. In Marxian terms, production costs in Australia exceed the ‘socially necessary’ sector-wide norm.