The geography of the automotive industry has changed in recent years. This article focuses on the changes that are associated with ‘modular production‘, whose diffusion has reinforced the need for proximity between auto–makers and parts–makers. The new geographical configurations that have cropped up, especially in the field of assembly operations, are based on spatial contiguity. On one hand, this spatial and organizational contiguity comprises a move away from former methods for managing vertical relationships; on the other hand, it has transformed the role that geographical proximity plays in the coordination of such activities. Such a co–evolution needs to be interpreted. Following a brief description of recent experimentation in this area, we try to determine how geographic proximity can drive the emergence of new methods for coordinating vertical relationships by highlighting some of the opportunities for organizational innovation that can result from proximity. Several factors will be discussed: the management of the logistical constraint; the convergence of representations; the site specificity by which vertical relationships can be stabilized; the different ways in which employment relationships can be managed; and the limits of all of these factors. We highlight both the benefits and the shortcomings of geographical proximity by drawing certain conclusions from the first experiments that the automobile industry has conducted.