Toyota Motor Corporation’s board of directors has decided to close the New United Motor Manufacturing Inc. plant in Fremont, California despite some last minute pleas by political figures in California.
The plant is now scheduled to close in March, according to new reports on the West Coast, which quoted city officials in Fremont, California.
“Toyota’s announcement that it will close the NUMMI plant is devastating news for thousands of workers in California,” said UAW President Ron Gettelfinger.
Friends of NUMMI, a group recently organized in California to oppose the shutdown, also declined to comment on the reports.
Nonetheless, the reports were consistent with the news leaking out of Japan for the past week, which said the plant was doomed. Ironically, the plant had been the source of the Toyota Corollas that were the top car sold through the “Cash for Clunkers” program that ended earlier this week.
The shut down of the plant will wipe out 5,300 jobs and could lead to the loss of more than 30,000 other jobs across California, where the unemployment rate just passed 12%.
Up until now, Toyota has never closed a factory in Japan or anywhere in the world. But the Japanese automaker’s long-standing commitment to a stable employment has been erased by the company’s recent, staggering, and billion dollar losses.
The recession and the drop in auto sales in the U.S. also have left Toyota too much production capacity in the U.S., says David Cole of the Center for Automotive Research in Ann Arbor, Michigan. Shutting down NUMMI was the one easiest ways to trim capacity, he claims.
However, the cost of the shutdown could easily run into the hundreds of millions of dollars and virtually all of the cost will have to be borne by Toyota because the “old” GM that owns a 50% share of NUMMI is bankrupt.
Toyota executives are reportedly furious over GM’s decision to abandon the plant. Insiders at GM say an offer was made to keep the plant going but Toyota stalled hoping for a more favorable deal. When Fritz Henderson, GM’s CEO, pulled out only days after the proposal, Toyota executives were taken by surprise. The rift over NUMMI also has effectively killed talk of any future GM-Toyota alliance, which were still alive last fall when then GM chairman Rick Wagoner visited Japan, looking for investment capital.