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GM leaves Nummi, the hot potato is in Toyota’s hands

30 Jun

DETROIT — General Motors said Monday that it was pulling out of its joint venture with Toyota, a longstanding partnership between two of the auto industry’s biggest rivals that exposed G.M. to more efficient Japanese manufacturing techniques and produced Toyota’s first American-made vehicles.

Roger B. Smith, right, former G.M. chairman, with Eiji Toyoda, the former chairman of Toyota, at the Nummi plant in 1985.

The joint venture, known as New United Motor Manufacturing Inc., or Nummi, has built more than six million vehicles at a plant in Fremont, Calif., since 1984. The plant builds two Toyota models, the Corolla sedan and Tacoma pickup truck, and a small crossover vehicle for G.M., the Pontiac Vibe.

G.M. is eliminating the Pontiac brand next year and plans to discontinue the Vibe in August. It said Monday that it was unable to reach an agreement with Toyota “on a future product plant that made sense for all parties” and that its stake in the Nummi plant would not be part of the company after emerging from bankruptcy later this summer.

“It’s the end of a remarkable educational experiment,” said James P. Womack, the chairman of the Lean Enterprise Institute, an organization in Cambridge, Mass., that promotes efficiency in manufacturing and commerce.

“The product was never the point at this plant,” Mr. Womack said. “It was a way for Toyota to figure out how to apply its system in the United States and for G.M. to try to figure out how Toyota was doing the things it was doing.”

G.M.’s withdrawal from the venture, which is half owned by each of the companies, creates an uncertain future for the Fremont plant, which has more than 4,700 employees in five million square feet of assembly space. It is the last auto plant operating in California and Toyota’s only plant represented by the United Automobile Workers.

Toyota said in a statement that it was sorry G.M. was pulling out and that it had not decided what to do with the plant.

“We will consider alternatives by taking into account various factors, including the current distressed market conditions, our overall North American manufacturing capacity, and the viability of the facility as a stand-alone operation without G.M. production,” the statement said.

Nummi has been running well below capacity for some time. Now, analysts say the deep industry downturn, coupled with G.M.’s decision to cut its ties, gives Toyota an opportunity to shut the plant. However, Toyota executives are sensitive to the American political climate, and the company could choose to keep the plant open in some fashion rather than risk the heat of shutting it down and eliminating jobs held by U.A.W. members.

Toyota recently denied reports that it might build its hybrid sedan, the Prius, at Nummi.

Both of the vehicles that Toyota builds in Fremont are also assembled elsewhere: the Corolla in Canada and the Tacoma in Mexico. (By producing the small Tacoma in California, Toyota avoids a tariff that the United States imposes on imported compact pickup trucks.)

When Nummi was formed, Toyota was a comparatively small but rapidly growing player in the United States while G.M. had a firm grip on its title as the world’s largest automaker. Toyota unseated G.M. at the industry’s pinnacle last year, aided by what it learned from Nummi.

G.M., meanwhile, was a slow learner and only recently began successfully applying the techniques it gained from working with Toyota, Mr. Womack said. Now, Nummi has outlived its usefulness for G.M. and is far away from all of the company’s other manufacturing locations.

“They learned a great deal in theory but nothing in practice for about 15 years,” he said. “G.M. has learned what they could and they don’t need that capacity anymore.”

By NICK BUNKLEY
Micheline Maynard contributed reporting.

Read the full story at New York Times

 
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Posted by on June 30, 2009 in Lean Manufacturing, Toyota

 

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