More than 1,000 people turned out for a demonstration organized by the United Auto Workers at the New United Motor Manufacturing Inc. plant in Fremont, California yesterday, as the fight to save the state’s last automotive assembly plant continued to escalate.
Toyota Motor Corporation is considering closing down the NUMMI plant, which employs more than 5,300 people, including more than 4,500 UAW members. The UAW’s contract with NUMMI expired last week, but it has been extended indefinitely, although either party can terminate it with 5-days notice.
There has not been a decision yet on the status of what will happen to Toyota’s 50% share of NUMMI, Toyota officials have said repeatedly in recent weeks. NUMMI has been a model of US-Japan industry collaboration for as long as 25 years, but the decision by General Motors to abandon its half of NUMMI and discontinue the production of the Pontiac Vibe has prompted a set of difficult and complex decisions for Toyota.
Toyota, which lost money for the first time in 60 years during its last fiscal year and is facing another huge loss during this fiscal year, is also under pressure to cut production capacity in the US. CSM, the forecasting firm, now estimates that Toyota’s capacity utilization has now dropped to only 60%. It takes running at more than 80% of capacity to breakeven in the capital intensive auto manufacturing business as a rough rule.
GM announced it was dropping out of the NUMMI venture in June during its bankruptcy proceedings and assigned its share of the NUMMI contract to the “old ” GM, which also is known as liquidation motors. At some point that share will be sold off if there are any bidders. The bankruptcy also shields GM from any liability for plant closings costs and for the environmental cleanup around the Fremont. These costs could easily run into the hundreds of millions of dollars.
The split over the NUMMI venture after 25 years also appears to have chilled any chance for the further development of a long-term GM-Toyota alliance that would rule the automotive world. Pundits have long speculated such an alliance was in the offing since GM and Toyota have long cooperated on various ventures.
However, Toyota executives have not been satisfied with the way GM terminated the NUMMI contract with help of the bankruptcy court.
Toyota is also concerned about the political and public relations fallout from any move to close the plant.
California’s unemployment rate is more than 11% and the state’s financial woes have been steadily mounting. Closing the Fremont plant would be a major blow to the state’s economy. “I think it could be real problem for them,” said a senior executive at another Japanese automaker.