In some 70 years of car making, Toyota has never shut a major manufacturing plant – until now. But the automaker last night confirmed what had been expected for a couple of months – it would pull the plug on New United Motor Manufacturing, Inc (NUMMI), its joint venture with General Motors in Fremont, California, site of its first foray into vehicle manufacturing in the US.
“New United Motor Manufacturing today announced it has received notice that Toyota will not order vehicles from NUMMI beyond March 2010,” the factory management said in a statement.
NUMMI ended production of GM’s Pontiac Vibe earlier this month after the restructured ‘new GM’ said it would axe the Pontiac brand and pull out of the joint venture to focus on its own plants.
NUMMI will build the Corolla sedan and Tacoma mid-size pickup truck models for Toyota until the end of March 2010. Tacoma production will then be moved to the underutilsed new San Antonio, Texas, plant built to make the full-size Tundra. Corolla production will go to both Japan and Toyota’s Canadian plant in Ontario.
The Texas plant was furloughed for about three months last year after the credit crisis hit demand for its vehicles so Toyota could reduce finished vehicle inventory. The automaker also has a brand new, but unfinished plant in Mississippi, originally slated to make Highlander SUVs.
Newly appointed Toyota Motor America president and COO and Toyota Motor Sales USA CEO Yoshimi Inaba last month said Toyota was not currently profitable in North America despite cost cutting and added he was reviewing all operations there.
NUMMI said it expects about 4,600 jobs to be “impacted” after March.
Plant president and CEO Kunihiko (Kent) Ogura said: “NUMMI has enjoyed a very positive and mutually beneficial relationship with our suppliers, customers and community for the past 25 years, and we can all take great pride in the substantial achievements of this pioneering venture. We are deeply saddened that we will no longer have vehicle orders after March 2010.”
Ogura added: “We particularly regret the impact that this will have on our valued NUMMI team members. The contract between the UAW and NUMMI emphasises the philosophy of mutual trust and respect, and we are committed to making every effort to ensure the best possible transition for NUMMI team members.”
“We will continue to work in close collaboration with our suppliers,” added Ogura. “We will also work closely with all appropriate stakeholders to identify ways to ease the transition for the local community.”
In a report headlined ‘The end of the line for California automaking’, the Los Angeles Times said Toyota’s decision to abandon its assembly line in Fremont marked the end of large-scale auto manufacturing in California, which over the years boasted a dozen or more plants building vehicles ranging from Studebakers to Chevrolet Camaro muscle cars.
The paper said the decision was another hard blow for California, a state already grappling with an 11.9% unemployment rate – its highest since World War II and the fourth-worst in the nation.
Closing the plant could cost more than 40,000 jobs overall, state Democratic senator Dianne Feinstein, who has worked with other public officials to try to keep the plant open, told the paper. But communications with Toyota eventually broke down, she said.
According to Kyodo News, Atsushi Niimi, Toyota’s executive vice president for North America, called the decision ”most unfortunate,” but noted it would mark one of Toyota’s first steps in departing from an expansionist policy that has led to overcapacity, especially during a global auto slump.
”In view of the market downturn since last year and with the exit of GM’s production vehicles, it would not be economically viable over the mid- to long-term to continue,” Niimi said in Toyota’s home city of Nagoya. ”We deeply regret having to take this action.”
Niimi emphasised that Toyota remained committed to maintaining production in the United States and other parts of North America and wanted to bring back the Corolla production in Japan to North America ”as soon as possible” in line with market conditions.
Including GM’s vehicle capacity at NUMMI, Toyota said the pull-out would lead to a loss of around 400,000 units out of the 2m unit production capacity the company has in North America.
The move is also part of Toyota’s wider global plan to scale down production as it scrambles to deal with two consecutive years of huge losses.
Officials said earlier that the company is considering cutting its annual group global production capacity by around 700,000 units from the current 10m vehicles amid plummeting auto demand.
California governor Arnold Schwarzenegger and other lawmakers had made various offers to prevent Toyota from shutting the factory.
”Today is a sad day in the history of Fremont as California joins the ranks of states adversely affected by the bankruptcy of General Motors and the worldwide collapse in demand for automobiles,” Schwarzenegger said in a statement.
Kyodo News said Toyota likely would hold negotiations with GM and other parties on liquidating the factory, but Niimi left open the possibility of hiring NUMMI employees at Toyota’s other factories in North America, adding they would not be prioritised over other applicants.
The decision was made also in view of ageing facilities, and high logistics and labour costs in California, the report added.
UAW president Ron Gettelfinger in a statement criticised Toyota’s decision as ”devastating news for thousands of workers in California.”
”It’s unfortunate the company chose to close a US facility after benefiting so greatly from the federal ‘cash-for-clunkers’ programme, which is funded by US taxpayers,” he said.
The widely expected move came under fire particularly at a time when Toyota’s Corolla was the most popular vehicle bought under the CARS rebate programme intended to promote sales of the fuel-efficient cars Japanese automakers specialise in.
Analysts have said the decision was unavoidable and economically rational, though still a politically sensitive and drastic move on the part of Toyota in view of the symbolic status of NUMMI.
”Toyota will continue to have very strong market competitiveness in terms of the fuel efficiency of its cars,” an auto analyst at a medium-sized Japanese brokerage house told Kyodo News.
”But the reputation of cutting off a factory with a very strong union will likely spread, so there are worries about the possible negative impact on public sentiment as GM and Chrysler Group begin to recover,” he added.