NUMMI: Things Are Looking Gloomy

In a recent post, “GM’s Failure: What Happened to Lean,”  I wrote about the origins of lean at GM and the NUMMI partnership with Toyota. Now, it seems that NUMMI is on Toyota’s chopping block and that Toyota seriously considering shutting down the plant. The NUMMI venture, begun in 1984, helped Toyota make a beach head in the U.S. and also was an incubator of sorts for lean manufacturing à la TPS (Toyota Production System). Toyota was trying to import TPS into its U.S. plants, and through NUMMI GM was learning about lean and trying to adopt it as well. Since then, GM has essentially pulled out of the NUMMI venture and makes only the Pontiac Vibe there, not for very much longer as it closes down the Pontiac brand. Toyota makes Corollas and Tundras at this plant. So NUMMI is now a Toyota plant with UAW workers (an anomaly for Toyota).

So why would Toyota even consider shutting down this flagship plant? Higher wage costs than its other plants are the main reason — in fact, the highest labor cost facility of any automotive plant in the automotive industry. Associates’ wages here are much higher than at Toyota’s other plants in part because of its San Francisco Bay area location also because of its UAW workforce.  The plant is losing money. Also, the plant is much farther from most of its suppliers, which adversely impacts costs. Even though Toyota has pledged not to close plants, it is on track to lose even more money this fiscal year than last and may feel forced to close NUMMI. At this point, the only production left in the plant will be Toyota’s, giving the UAW less leverage. This apparently has prompted the UAW to be more amenable to wage concessions in order to keep the plant open, despite trying to organize workers at Toyota’s other non-UAW plants. As one of the biggest employers in the area, NUMMI’s closure would be devastating to the already suffering local economy.

It will be interesting to see if losing money trumps pledges to keep production facilities open. Toyota management is under enormous pressure right now due to its unprecedented financial losses. Will the symbolic value of NUMMI help it avoid closure? UAW wage concessions may make it more likely to remain open. Corporate America usually opts for not losing money. But I’m not going to guess what Toyota will decide to do in this complicated situation.

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