Toyota Motors and GM have lost a lot of money on their joint California car assembly plant since 1984, when New United Motor Manufacturing Inc. was created to defuse anti-Japan sentiment (Toyota’s motive) and learn lean manufacturing (GM’s.) No wonder GM and Toyota are ditching it amid the unprecedented global auto-industry crisis. GM announced its intention to walk away from Nummi earlier this summer, and today Toyota did, too. The Japanese car maker will shift production of Corolla compact cars and small Tacoma trucks to other factories in North America, where there’s idle capacity, WSJ colleague Kate Linebaugh writes. Toyota’s spare capacity is a global problem for the company; indeed earlier this week DJN reported the company will suspend a production line in Japan and may make similar moves in the U.K. next year. As DJN collague Yoshio Takahashi wrote, the company is avoiding shutting factories altogether so it can “quickly return to its current capacity in the event of a recovery in demand in the coming years.” That said, “the current outlook for auto demand remains pessimistic,” Yoshio noted. With the exception of a few hot markets – most notably China, where car sales are growing robustly – most other economies are likely to recover from the downturn slowly, with consumers clinging to old cars as long as they last. Layoffs are rare in Japan, where jobs are for life, according to social norms – so Toyota’s ability to cut costs is rather constrained. Sounds familiar? Labor-related limitations – many of them self-inflicted – damaged the U.S. auto industry, and now could slow Toyota’s own recovery.
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For auto industry geeks, a sad bit of history was made today as General Motors Corp. said it’s walking away from its 25-year-old joint venture with Toyota Motor Corp. Known as NUMMI (New United Motor Manufacturing Inc.), the JV was in Fremont, Calif. There, in 1984, a stodgy GM signed up to learn how to make profitable, desirable fuel-efficient cars. For Toyota, NUMMI was a way to demonstrate goodwill to an American political and business establishment wary (to say the least) of Japan Inc.’s lean-manufacturing prowess. The plant wasn’t hugely important to Toyota’s American ambitions, especially as it began dotting the southern landscape with factories employing a non-union workforce. Somewhat ironically, however, GM’s decision to end the JV creates a burden for Toyota, which has to figure out what to do about the Corolla car and Tacoma pickup capacity it will retain at Fremont. GM is killing its Pontiac brand (part of the bankruptcy diet it’s on) and so no longer needs to make the Vibe car at the NUMMI facility. As DJN colleague Sharon Terlep reports, Toyota is scrambling to right-size its American operations as part of a broader turn-around program; the end of the JV complicates matters. For NUMMI’s official history, check out the official website here: http://www.nummi.com/co_info.php
Also today comes news that GM is advising Roger Penske’s company on how to market the Saturn brand it now owns. GM is worried that tying Saturn to the Penske name will distract or turn off consumers. My advice to Penske Automotive Group Inc.: The last company you should take advice from is GM, which single-handledly turned Saturn into a stale commodity from the fresh-faced upstart it had been. Here’s the WSJ story:http://online.wsj.com/article/SB124623102240666083.html#mod=testMod.
Back to NUMMI: Auto industry expert and former colleague Paul Ingrassia once wrote that the creation of NUMMI “rocked the auto industry: For the first time, an American and a Japanese auto maker would build cars together on American soil.” As Paul recounted in a 1992 WSJ piece, the JV talks kicked off in 1982 when GM was the No. 1 U.S. auto maker and Toyota, No. 1 in Japan. Leading GM’s effort was an up-and-coming executive called John F. “Jack” Smith; a decade later, he became GM’s CEO and Chairman. As Paul wrote, “the NUMMI talks were a crucial lesson in the power of the rival GM faced. Mr. Smith got a close look at Toyota’s efficient methods of product development, manufacturing and purchasing management. Those methods, often called ‘lean production,’ propelled Toyota ahead of GM in profitability, quality and product success in the 1980s.”