Spain's steel industry was located in the north at Vizcaya, Cantabria, and Asturias, and in the south at Sagunto, near Valencia. Though the steel industry had had an important presence in Spain since the second half of the nineteenth century, it had expanded greatly during the boom years of the 1960s and the early 1970s. Production had gone from 1.9 million tons in 1960 to 11.1 million tons in 1975, making the country the fifth largest steel producer in Europe and the thirteenth largest in the world. By the late 1970s, however, a worldwide glut in steelmaking capacity and the domestic economic slump had led to a severe crisis in the industry. Thereafter, the Spanish steel industry experienced an extensive contraction, not only in production capacity, but also in the size of its labor force.
Despite a 50 percent drop in domestic steel consumption, production remained at about 13 million tons per year during the early 1980s, and it reached a high of 14 million tons in 1985. High production levels were maintained through extensive exports; the two largest steel producers, the state firm ENSIDESA, and the Basque company, Altos Hornos de Vizcaya, were among the nation's most important exporters after the large automobile companies. Both of these companies and most other steel companies operated with heavy losses, however.
Membership in the EC and in the European Coal and Steel Community (ECSC) committed Spain to cutting back its iron and steel output and to reducing its overall capacity. Steel output declined almost 16 percent in 1986, to 11.8 million tons, and it fell to a slightly lower level in 1987. The government's efforts at restructuring the steel industry continued during the later 1980s with the creation of Acenor, which consolidated the producers of special grades of steel and became Western Europe's sixth largest firm of this kind. The large blast furnaces at Sagunta were shut down, and the government, which already controlled ENSIDESA and Altos Hornos del Mediterraneo, both INI firms, took a 40 percent interest in Altos Hornos de Vizcaya.
The greatest success story of Spain's economic expansion was the rise of its large motor vehicle assembly industry. Although it started up only in 1950, by the early 1970s it had become the country's second most important industry in the manufacturing sector, and in the mid-1980s it was the most important producer of exports. Automobile production reached 38,000 units in 1960 and increased sixfold between 1965 and 1976. By the 1980s, Spain manufactured an average of well over a million cars per year, and in 1987 it produced 1.4 million vehicles. A good part of this production was exported. In 1985, for example, about 800,000 vehicles, out of a total of 1.2 million, went abroad. By 1986 Spain's three largest exporters were Ford Espana, General Motors Espana, and SEAT. In addition to the manufacture of personal automobiles, Spain produced substantial numbers of commercial vehicles. In the mid-1980s, commercial vehicle production ranged from 130,000 to 300,000 units per year, and annual tractor production levels stood at about 16,000 units.
Spain's motor vehicle industry was located in many parts of the country. SEAT began its operations in Barcelona, while General Motors Espana was located in the Zaragoza and Cadiz areas, Ford Espana was near Valencia, and a number of companies were placed around Madrid.
Subsidiaries of foreign firms dominated the automobile industry. In 1986, Fabricacion de Automoviles, SA (FASA Renault), with about 20,000 employees, was Spain's largest automotive company, as measured by revenues. SEAT--at one time a Spanish firm, but, since the mid-1980s, owned by Volkswagen--ranked second, followed by Ford Espana, General Motors Espana, and Citröen Hispania. During the late 1970s and the early 1980s, both Ford and General Motors became major domestic automobile manufacturers. Other foreign firms involved in the motor vehicle industry included Peugeot, Mercedes Benz, Land Rover, and Japanese firms such as Nissan, Suzuki, and Yamaha.
In the late 1980s, Japanese investors sought to use Spain as a bridgehead to penetrate the West European market and to follow the example of Ford Espana and General Motors Espana, which exported about 75 percent of their output. Not all firms worked from this premise, however. Renault and Peugeot-Talbot began operations with the intention of catering to a highly protected Spanish home market.
The reviving economy of the second half of the 1980s was reflected by a strong growth in domestic demand, including that for consumer durables. Sales of new cars rose from 629,000 units in 1985 to 860,875 in 1987, an increase of about 37 percent. In accordance with the EC accession agreement, automobile imports were entering Spain in increasing numbers, and they were securing a large share of the market. In 1987, approximately 211,000 foreign-made cars were sold in Spain, an increase of 101 percent over 1986; imported automobiles increased their market share from 16 percent in 1986 to 25 percent in 1987.
Despite this increase in the sale of foreign cars, Spain's motor vehicle industry remained strong. Investments had been made in industrial robots in order to enhance productivity, and in the late 1980s labor costs were highly competitive with those of foreign producers. In late 1988, the Economist reported that a Spanish auto worker earned about half as much as his West German counterpart. Observers regarded Spain as well positioned to emerge as the EC's market leader in small car production.
During the economic expansion of the 1960s and the early 1970s, Spain became one of the world's leaders in shipbuilding, ranking third in 1974. Its shipbuilding industry was one of the few major industries in the country that made no use of foreign capital. Shipbuilding, both in Spain and among other shipbuilding nations, was however, one of the main casualties of the post-1974 energy crisis; following a sharp drop in orders in the late 1970s, the shipbuilding sector was in serious difficulty. Among Spain's leading industries, it was one of those most affected by production cutbacks, closings, and reductions in personnel. The number of shipbuilding yards able to build steel-hulled vessels declined from forty-three in 1975 to thirty, ten years later.
In the mid-1980s, more than half Spain's shipbuilding capacity was located in Cadiz; other major shipyards in the south were at Seville (Spanish, Sevilla) and Cartagena. In the north, important shipyards were located at El Ferrol del Caudillo and in the province of Vizcaya. The shipbuilding industry was dominated by two state-owned firms, both belonging to the INI group, and in 1986 each had about 12,000 employees. One company, Empresa Nacional Bazan de Construcciones Navales Militares (generally referred to as Bazan), constructed military vessels. The other, Astilleros Espanoles, SA (AESA), constructed civilian ships. The next three largest firms employed a total of 4,000 persons.
After years of decline and heavy losses, in 1987 the Spanish shipbuilding industry turned the corner, showing strong gains in the construction of vessels from small- to medium-size. In 1987 deliveries totaled 340,000 compensated gross registered tons, 90,000 tons more than in 1985 or 1986. Solid increases in foreign orders were exceeded by domestic demand. Rigorous restructuring measures undertaken in the 1980s were believed to have prepared the industry for the upsurge in orders on the world market that was expected in the early 1990s.
Since the 1970s, the chemical industry had been one of Spain's largest, and it continued to grow in the 1980s. By the mid-1980s, it accounted for about 7 percent of the Spanish work force and 8 percent of the country's total industrial production. With its share of exports at about 10 percent of the national total, it was the third-largest export industry. In 1985 chemical exports stood at US$1.8 billion, increasing by a further 16 percent in 1986. The Spanish chemical industry had received a substantial amount of foreign investment capital and new technology, and in 1987 about 30 percent of its output came from foreign-owned companies. Although many of it's raw materials, including those for petrochemical production, had to be imported, the industry benefited from Spain's deposits of pyrites, potash, and mercury. The largest components of the chemical industry were those producing plastics, petrochemicals, pharmaceuticals, rubber manufactures, fertilizers, paints, and dyes. All of these areas registered substantial gains in the 1980s.
As part of its policy of merging Spanish firms into larger entities better able to compete with foreign companies, the government prodded the country's largest chemical firm, Rio Tinto Explosives, to merge with the second-largest such enterprise, Cros, in 1988. By the time the merger occurred, sizable portions of both companies were controlled by the Kuwait Investment Office (KIO), which managed both public and private Kuwaiti funds. The fertilizer interests of the two companies were combined to form a new company, Fosforico Espanol, and Rio Tinto ceded its considerable defense interests.
Textiles and Footwear
Since the early nineteenth century, the Spanish textile industry has been concentrated in Catalonia. Though an established industry, it lacked the dynamism of many of the newer industries and had the least impressive growth rate among Spain's manufacturing industries. It was an industry that suffered from excessive fragmentation, and, although its operations were export-based, it depended on a protected domestic market. Spain's entry into the EC removed tariff barriers to textile imports, and the industry generally found itself in difficulty. Foreign investors showed little interest in the Spanish textile industry, and in the late 1980s it was being subjected to extensive industrial modernization for greater efficiency.
The Spanish shoe-manufacturing industry was concentrated chiefly in the Valencia area and in the Balearic Islands. According to a Spanish government study, 90 percent of the country's 2,100 shoe factories had fewer than 50 employees, and a large part of the industry operated in the underground economy.
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