Posted by: David Welch on August 28, 2009
Toyota Motor Corp. said that it will shutter its New United Motor Manufacturing Inc. plant in Fremont, Calif, in 2010. The move came almost two months after General Motors decided to pull out of the 25-year-old joint venture. It should come as no surprise.
NUMMI already had everything going against it when GM decided to kill Pontiac and pull out of the venture in July. Its United Auto Workers contract guarantees workers $28 an hour compared with $24 an hour in other Toyota plants. Higher electric rates in California made it undesirable. Throw in shipping costs to get parts from the Midwest and to send finished Toyota Tacoma pickups and Corolla compacts across the U.S., and it was one of the Japanese giant’s most expensive factories, if not the most expensive. Without the Pontiac Vibe, keeping the plant running full tilt would have been an even bigger challenge for a Toyota that already has too much production.
Toyota will move Tacoma production to its underused Tundra pickup plant in San Antonio and the Corolla will go to Cambridge, Ontario. Both make strategic sense since the assembly lines can be quickly retooled to make the vehicles. But they also have cost advantages over a place like NUMMI. San Antonio has lower wages. It’s a newer plant, so not all of the workers are up to top wage scale. There are lower healthcare costs in Canada and both are near the I-75 corridor where the parts making infrastructure lies. Cambridge isn’t on I-75, but it’s just a jaunt down Canada’s 401 into Detroit to get on the highway.
There’s one bigger point to be made. Toyota doesn’t close plants. The company hasn’t had to in recent times despite rapidly falling sales. Toyota has kept the dust flying with new plants going up and even has a shell of a new factory in Mississippi that is waiting for something to build. Shuttering NUMMI is an acknowledgement that Toyota overbuilt during the good times and even an economic recovery won’t justify all of its factories. Now, Toyota has to hang tight like everyone else. Its big growth days appear to be in the rearview mirror.