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General Motors Abandons NUMMI this August. Toyota faces Tough Choice on Plant’s Future

Latest development comes as GM prepares for a vital bankruptcy sale hearing next week in New York.

by on Jun.29, 2009

Toyota Tacoma Access Cab 2009

"It may take some time before the future of NUMMI is determined." It won't be part of GM, though.

The longer term prospects for the survival of the NUMMI plant in California just diminished as GM has announced it intends to abandon the plant as part of its bankruptcy proceedings.

Troy Clarke, president, GM North America, has just issued the following statement: “As part of its long-term viability plan, General Motors has decided that its ownership stake in the New United Motor Manufacturing Incorporated (NUMMI) joint venture with Toyota will not be a part of the New GM.”

Insiders say that GM made Toyota an offer for a new product, but the Japanese company delayed and stalled. Then, Japanese executives were completely surprised when Fritz Henderson, GM’s CEO, made a decision to stop talking and move forward by stopping all GM production at what was already an under utilized plant.

“While we respect this decision by GM, the economic and business environment surrounding Toyota is also extremely severe, and so this decision by GM makes the situation even more difficult for Toyota. We will consider alternatives by taking into account various factors,” said Mike Goss of Toyota Motor Engineering & Manufacturing North America Incorporated.

The Pontiac Vibe termination was previously announced a little more than one week ago. However at that time both GM and NUMMI spokespersons said that the current intention of both Toyota and GM is to continue NUMMI as a 50/50 venture. That is now officially no longer the case, and it presents Toyota with a problem since NUMMI is the only UAW plant in North America that Toyota is dependent on.

Japanese makers almost universally prefer non-unionized facilities here. And if the GM bankruptcy goes as planned, contracts such as the one governing NUMMI will be invalidated and Toyota will have to decide whether to buy the  facility or shutter it,  and then what does it do with the union?

Delete this copy after inserting to retain outline box as in photos

If  Toyota buys NUMMI out of bankruptcy, the UAW contract governing the plant would presumably be invalid, allowing it to shed the union, but it is a potential political nightmare of the kind Japanese makers normally try to avoid. The existing workforce could strike and demand that the UAW still represent them.

It is expected that the Toyota Corolla built there, which is closely related to the Vibe that shares the same basic architecture with the Corolla, and the Tacoma pickup truck will continue for the time being, but ultimately the plant as part of the old GM will be liquidated and sold to the highest bidder. Worse, Toyota is on track for its second straight record-loss globally, and has excess production already. Picking up GM’s half of the output means that it would have to remove it from somewhere else.

“After extensive analysis, GM and Toyota could not reach an agreement on a future product plan that made sense for all parties. Accordingly, NUMMI will end production of vehicles for GM in August, and there are no future GM vehicles planned for the joint venture at this time,” said Clarke.

“Given that, GM believes it is in the best interest of the ‘New GM’ and its stakeholders that we place our ownership interest in NUMMI in ‘Old GM’. We have enjoyed a very positive and beneficial partnership with Toyota for the past 25 years, and we remain open to future opportunities of mutual interest,” Clarke said.

A NUMMI spokesperson said it is not granting interviews seeking clarification of Toyota’s position.

“We are sorry that GM has decided not to carry its interest in NUMMI forward to the New GM.  It may take some time before the future of NUMMI is determined.  In the meanwhile, we are focusing on building very high quality Corollas, Tacomas and Vibes, as well as reducing our operating costs,” a statement said.

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One Response to “General Motors Abandons NUMMI this August. Toyota faces Tough Choice on Plant’s Future”

  1. frank says:

    toyota, you will continue to grow here in the bay area and hope you can continue to keep the work force you have now.lets work together and make it happen.