GLOBAL FINANCE

as components built for one market could not be used in others,
leading to local oversupply and shortages because of minor regulatory
changes. To solve this, Ford has developed a sophisticated strategy of
``homologation'' in its engineering process to address these problems.
All components are evaluated against all relevant regulations globally
to ensure that components from one region can be used in any other
on the same platform as often as possible. The impact of this and
other standardization procedures for fasteners and connectors alone
frees significant amounts of capital for the company to use in more
productive ways.

One of the problems of introducing environmentally-friendly vehi-

cles is that they are more expensive for the consumer, at least until a
mass market can be created. As was mentioned earlier, Ford suggested
that its electric/internal combustion engine hybrid should attract a
tax credit to offset its higher retail price. In effect it is arguing that
governments should help to pay for creating a world of environmen-
tally sound vehicles. Lobbying of this kind is generally done through
trade associations such as the AAMA in the US, ASAA in Europe, and
Working Party 29, a world forum for harmonizing regulations through
the United Nations.

``It is tough because governments guard their prerogative to set

standards. Outside groups have also been suspicious that we're trying
to lower standards when we're really not. We're just trying to harmonize
them, saying you choose the right thing. Certainly let's do the research
jointly, so that we all can say, `here are the results,' and we agree on
that. But there has been some opposition. . . we've made some progress,
in terms of trying to get some simple standards harmonized between
Europe and the US,'' says Martin Zimmerman, Executive Director,
Government Relations and Corporate Economics at Ford.

KEY INSIGHTS

» Technical change often leads to increased worker productivity

and lower costs, leading to increased output and economic
growth without adding new resources. Henry Ford's creation of
mass production techniques in the early twentieth century is a
well-known example of this.