Ford, Dow, The Hague

Between 1945 and 1985 the power relation between multinationals and national governments in the developed world evolved from a favorable bargaining position for the latter, to an equilibrium between the two parties from the 1970s onwards. The most notable reasons for this change were the rise of the service sector – which is not territorially bound – the deregulation of financial markets, liberalization of the economy, cheaper transport and communication, booming developing countries which could offer much cheaper labor and less regulations than developed countries could, and the subsequent transformation of multinational companies into transnational companies. Ford Motor Company (FMC) has been an excellent example of this development. The company followed the general pattern quite closely. Some of its subsidiaries felt this because they were located in countries with high labor costs and many regulations. Ford Netherlands, for example, had to close down in 1981 when headquarters in Detroit did not think the Dutch subsidiary could be very profitable to them anymore – it had been making losses for a number of years already. Rather FMC wanted to invest in countries with cheaper labor, like Spain, from where they could easily deliver their products to the Dutch market because of the European Common Market and ever declining transportation costs. Some multinationals did still see some use in the Dutch economy. The Dow Chemical Company designed the strategy for its Dutch subsidiary thirty years later than FMC. Therefore, they were able to take European integration and globalization into account, and were not bothered by the small Dutch consumer market. Rather, they saw many advantages in the Dutch stable political climate, its excellent (legal) infrastructure, high level of education, and favorable geographical position, to name but a few positive aspects. The result was that the Dutch Dow subsidiary was assigned a key role in Dow’s European strategy. This was definitely not the case for the Dutch Ford subsidiary, which was a relatively insignificant pawn, easily closed down. Besides the distinct corporate strategies, there were other factors which contributed to the very different power relations between Ford and the Dutch national government on the one hand, and Dow Chemical and The Hague on the other hand. These were location and sector. Dow’s most important Dutch site was in Terneuzen, a very rural part of the Netherlands with many employment problems, while Ford’s assembly plant was located in the capital of Amsterdam, which had much less employment issues. Being vital for the region’s economy strengthened the bargaining position of Dow, but being much less important for Amsterdam weakened Ford’s. A similar argument can be made concerning the role of sector. The automobile sector was very troubled throughout most of the period from 1945 until 1985, while the chemical sector was healthy and strong; it weakened Ford’s but strengthened Dow’s position. Other important factors influencing the power relations between these two multinationals and the The Hague were the nature of the subsidiary – a mere assembly factory (Ford) or a completely integrated production plant (Dow) – and the role of state-owned or state-backed competitors. How all the mentioned factors influenced the power relations between Ford, Dow Chemical, and The Hague between 1945 and 1985 has been assessed through six case studies – two for Ford, for four Dow – each concerned with a conflict between the particular multinational and the Dutch national government.