GM leaves NUMMI, Toyota is left holding the bag

Posted by: David Welch on June 29, 2009

The 25-year marriage between General Motors and Toyota is over. GM said today that it will pull out of New United Motor Manufacturing Inc., or NUMMI, the joint venture plant in Fremont, Calif. The plant’s 4,700 workers—-most of who are United Auto Workers union members—make the Toyota Tacoma pickup, Toyota Corolla compact and Pontiac Vibe.

Pontiac sold 46,000 Vibes last year and 17,000 of them through May of this year. That’s not massive production, but it helped keep NUMMI’s passenger car line running near full capacity in better times. Without it, NUMMI’s profitability will be under pressure.

That plant’s workforce will be feeling heat for other reasons. While it was founded to marry GM’s knowledge of the U.S. parts making network with Toyota’s factory smarts, now it has a nasty combination of GM and Toyota problems. It has UAW wages and Toyota’s cultural aversion to layoffs. Toyota is also wary of cutting jobs in the U.S. because it might hurt the company’s image as the kind of generous employer that doesn’t need a union in the shop to guarantee nice wages and job security.

So Toyota has a problem on its hands. The company went on an expansion binge when car sales were booming by building new plants in Texas, Canada and one in Mississippi that has not yet opened. But now many of its plants are underused and the company doesn’t know how much the U.S. market will really rebound. But the company has a lot of production, and GM’s latest move makes add to the excess. Without a sales rebound, Toyota will have to contemplate the politically stressful decision to cut workers at NUMMI or at its other plants.

Reader Comments

Ballbuster

June 30, 2009 3:12 AM

Not only is Welch dead wrong but his view is crock full of crap. At NUMMI, GM was the kiss-of-death. Without GM at NUMMI, Toyota will no longer have to water down its design and engineering to appease GM's agenda. The Matrix outsells the Vibe even though they are both produced under the same assembly line using almost identical parts. So much for GM's indispensable contribution. In his stupid arrogant voice, Welch claims Toyota needs GM's knowledge of US parts makers. His nonsense is same as those who persistently claim that Toyota learnt everything from the Americans. It is this kind of arrogant attitude as exemplied by Welch that ultimately destroyed the "Big3." With GM and Chrysler in bankruptcy and American consumers looking for domestic manufactured car, Toyota's excess production capacity in Mississippi and Texas will capture the market share lost by the two bankrupt car makers. This is ominous for GM as Americans who never would have consider buying a Toyota will now shift their brand loyalty. By the time GM fully recovers from bankruptcy, Toyota's will have eaten its lunch. As to Welch's prediction of worker layoff at NUMMI or its other plants, unless there is an economic collapse in America, there will be no lay-off of American autoworkers at NUMMI and other Toyota auto factories in America. However, BW maybe considering laying off Welch because of excessive capacity in its AutoBlog.

Writer's note: Welch here. Actually, it was a Toyota official who told me that GM's departure from NUMMI leaves the venture in the lurch. And new CEO Akio Toyoda said recently that the company has too much capacity.

g2_ok

June 30, 2009 11:23 AM

The best thing for Toyota to do in the current economic situation is go back to basics of making fuel-efficient, high quality cheaper cars. They need to introduce new models along with Corolla and Matrix that are under $15,000.

g2_ok

June 30, 2009 11:55 AM

This will make GM have one less small car in it's fleet that was of good quality. GM badly needs a Corolla variant in it's lineup.

jwkimba

June 30, 2009 12:07 PM

They will close the plany and state that GM pulling out was the reason. Its the only sane thing to do, UAW is too toxic for even Toyota to deal with!
It's now or never.

Brar

June 30, 2009 12:18 PM

The intent of NUMMI partnership was to learn Toyota culture and replicate it in Detroit. For quater of century GM failed to do, so this come as little surprise. It is also in news that Toyota may try to run prius thru this plant in future.

dorothea

June 30, 2009 2:19 PM

I want to believe that this end in contract is for Good.

Louis

June 30, 2009 4:23 PM

Instead they made car for Pontiac, they will make for Saturn. Saturn now has only 2 cars for next year: Outlook and Aura. Saturn really need the car like Matrix/Vibe for youth.

Norman

July 1, 2009 11:43 AM

I think Vibe and Matrix, though share most components (just like Caddy's next SRX with 2010 Chevy Equinox), are not built on the same line. NUMMI builds Toyota Corolla (which shares its platform with Matrix/Vibe) and Tacoma.
Toyota Matrix is built at a Canadian plant in Cambridge, Ontario, which also produces Corolla and Lexus RX.

A

July 1, 2009 5:44 PM

Norman you are right. The Vibe is made at NUMMI while the Matrix is made in Cambridge. The Canadian plant is running around 65% capacity, wouldn't be too hard bumping up production to handle more Corollas. Time will tell.

TM_is_a_business_not_welfare

July 2, 2009 12:11 PM

Toyota seems to make a lot of its business decisions with a "long-term" view of the repercussions. Does anybody see any long-term benefits for Toyota to keep this plant going on its own? Is there some manufacturing goal that they can only accomplish at NUMMI that they cannot do at any of their other North American plants? If there is none, best thing for Toyota to do would be to get out now and take advantage of the opportunity that GM gave them. As for Washington and Sacramento, the LAST thing that Nancy, Arnold, etc. should be thinking about now is ANOTHER BAILOUT --- this is a foreign company that has loads of cash, kids!!! The experiment is over, and as difficult as it may be, everybody involved should just think about moving on and going their separate ways.

scott bradley

July 2, 2009 7:27 PM

NUMMI can put out more Corolla's than the Canadian and Japanese plants combined. They also can do it with the same or better quality. So how are the other plants supposed to keep up if the orders suddenly increase? I think Toyota is between a rock and a hard place.

Phil Q

July 13, 2009 1:05 AM

I work at the Nummi plant and rumors are as rampant as they come. Its no secret that Toyota would like the Union out of the plant it is the only unionized plant that Toyota operates,and like Scott said we produce over 60% of the corollas sold in North America as well as 70% of the Tacomas we recently had a TEMA Audit where we out scored all Noth American Plants. Nummi also produced over 425,000 vehicles in previos years when the economy wasn't in a mess. I hope Tyota keeps the plant open they know what its capability is.

SmartBuster

July 13, 2009 2:51 PM

Hey Ballbuster,

After reading your post I see that you know nothing about the auto industry.

The Vibe is a re-badged Toyota not GM design so I don't know WTF you are talking in when you say, "watered down design and engineering".

There will be lay-offs and Toytota will most likely close NUMMI so that it can still say that IT, TOYOTA never lays off worker because NUMMI is a JV. Sort of playing word games but Toyota is good at that. Seeing as it has a second shift in TX not doing anything it saves them face to let go JV workers but again it's just a card game.

CMattson

July 14, 2009 7:28 AM

Quick note about quality:

Of all Pontiac vehicles, the Vibe had the MOST initial problems per hundred vehicles. I don't think this "marriage" was a good fit for either company (and it certainly throws out the idea that "GM have one less small car in it's fleet that was of good quality").

sdplayr

July 15, 2009 1:03 AM

hey ballbuster,
you really are stupid. you know nothing of the curernt economy and the auto industry??? ".......unless there is an economic collapse in America....." Are you serious???

acat

September 1, 2009 6:26 PM

I had bought two toys after having bough crappy american cars. I had planned to buy a third toy. Not anymore. They are not layoffing in thier minds. They are moving the jobs with a brand new plant in even higher priced Ont. Canada. Those union workers earn more than here in the US. The govt of Canada gave them a lot of money to move there. Do not buy any more corollas. Most Canadians do not drive Canadian cars. I lived there for a while. I am buying a newer ford this time aroud. They improved quality and mileage. I bought the toys knowing they had been hiring US workers. I have been by the huge plant in Fremont. Thanks Toyota for being souless.

Miguel

September 18, 2009 3:19 PM

Their is a solutoion!

It is called move the UAW away from the USA and move it to Japan and sell it to the Japanese government this will help expand Union plants for their companies and that those people that work in the US will have to pay their benifits to the Japanese government and that the workers in Japan will get more benefits than the US workers!

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