The New York Times recently reported that Toyota is in talks to close one of its plants, the NUMMI facility in Fremont, CA. The reporting of this event completely misses the point. New United Motors Manufacturing Inc. (NUMMI) was created when Toyota was much weaker and GM was strong. It was used by both companies to learn from the other’s manufacturing engineering technology.
Forty years ago GM decided on, and published a prediction, that the US car market would grow to 28 million units a year by 2000. Then GM and the rest of the world’s OEM automotive industry began to try to build the capacity to fit this fantasy.
The collapse of the US OEM automotive industry’s market is the story not the collapse of its so-called iconic former world’s largest OEM automotive assembler, General Motors Corporation.
The article says:
“…the plant, which made as many as 420,000 cars and pickups each year, has long lost money, in part because of higher labor costs in California. The predominance of United Automobile Workers union members at the plant has also added to the labor bills, as have California’s strict environmental standards.”
Toyota actually learned from its NUMMI venture with GM, never to build cars in a state with closed (union only) shops and environmentalists who value toads more than humans.
California looked like a good location to Toyota 25 years ago, because it was as close to Japan as a US manufacturing site could be. Toyota both utilized just-in-time manufacturing better than anyone else, shipping a lot of components and assemblies from Japan, and had a loyal market in California. Also, which is often overlooked, California’s mild climate and good roads does not only not shorten the life of cars and trucks it dramatically extends their lives and appearance, thus inflating their residual value.
GM, desperate in 1984 to maintain a presence in California, where it once had 3 manufacturing sites, eagerly agreed to let Toyota share its Fremont plant rather than shut it down. No one believed the hype and nonsense put out then, or now, about a new beginning and a partnership; it was always a marriage of convenience.
Now it is Toyota that wants to save face. Toyota doesn’t want to leave the California market, which has been very very good to the company, entirely to its Japanese and other Asian rivals. But neither does Toyota want to bring its halo car, the Prius, to the tender mercies of inflated and poorly educated labor or environmental nuts, who would rather that Toyota buy the rare earth metals used in their Prius batteries from Chinese mines with little environmental management, instead of a clean modern safe mine in southern California.
There is no way that Toyota would ever consider engineering or building hybrids in a place like California. I doubt that anyone will build anything much for much longer in California.
Is it a coincidence that the Fremont, NUMMI, plant is the only Toyota plant in the US that is a unionized plant? Is it a coincidence that the UAW contract for NUMMI comes up for renewal next week?