PrintAugust 28, 2009
Closing the last auto factory
Toyota has announced the demise of the last remnant of auto manufacturing on the West Coast, the New United Motor (Nummi) plant in Fremont, California. When GM announced it was withdrawing from the joint venture in June, I predicted the plant was a goner.
Toyota has expanded capacity in the US beyond what the downsized market can support, and Nummi is in a high cost area, is the oldest among Toyota's US assembly facilities, and is the only plant organized by the UAW. Toyota originally used Nummi as its toe in the water in 1984, testing the concept of manufacturing cars in the United States. In a joint venture with GM, the company re-opened the closed GM plant in Fremont, extensively modernizing it, and managing the production process, using its own systems and practices. GM got to see first hand how Toyota built cars. And Toyota had the assistance of GM in learning the ropes of dealing with the American business environment -- government, unions, media, and everything else. It was a learning experience for both companies.
This will be a huge blow to the local economy. Local vendors employ a multiple of the nearly 5,000 direct jobs that will be lost at the factory itself. Many of these jobs are unionized. Half a century or more ago, the East Bay boasted a major manufacturing belt. Many of the major industrial firms built West Coast facilities to serve the growing local markets without the bother of shipping across the Rockies and deserts.
Predictably, the UAW plays class warfare:
The United Automobile Workers union, which represents the plant's hourly workers, called the decision "illogical" and "devastating." The U.A.W.'s president, Ron Gettelfinger, said he understood the need to reduce capacity, but he was more critical of Toyota's decision than of other recent cuts by the Detroit automakers.The Toyota workers "deserve better than to be abandoned by this company, which has profited so richly from their labor, their productivity and their commitment to quality," Mr. Gettelfinger said in a statement. "It's unfortunate the company chose to close a U.S. facility after benefiting so greatly from the federal cash-for-clunkers program."Toyota builds the Corolla compact sedan and a pickup truck, the Tacoma, at the plant, which is known as New United Motors Manufacturing, or Nummi. The Corolla was the most popular vehicle in the "clunkers" program, which ended this week. Toyota had to bring more workers into Nummi to keep up with demand.
It was certainly shrewd to wait until the gift from the American taxpayers expired. Toyota is spared the bother of dealing with the UAW now, but now also lacks a lifeline to a close ally of the president.
Full disclosure: For a number of years I served as a consultant to Toyota. The views here are my own and based exclusively on publicly available information.
